Vietnam: Day for the Poor - Time to Think of the Future

October 17, 2014

Gabriel Demombynes VOV News

Today is the United Nations’ International Day for the Eradication of Poverty, which provides an occasion to reflect on Vietnam’s record and its long-term agenda for poverty reduction and inclusive growth. Few countries in the world can match Vietnam’s record of poverty reduction over the 25 years.
Since the start of Doi Moi (Renewal), the country has sustained high growth without substantial increases in inequality, a feat few countries at any level of development have managed.  Tens of millions have been lifted out of poverty. Extreme poverty—as measured by those living on less than US$1.25-a-day—has been all but eradicated.

The country has also made impressive improvements in health status, with huge gains in life expectancy and healthy years of life, dramatic reductions in communicable disease incidence, and significant expansion of health insurance coverage.
The vast majority of children are now in school, and their international test results surpass those of a number of OECD countries.  The country has also put in place a nascent pension and social safety net system.  These accomplishments have made for a remarkable record of inclusion as Vietnam has launched itself out of the ranks of low income countries.  

The question today for Vietnam is how social policy and institutions can play an equally crucial role in achieving the country’s aspirations over the next 20 years.  Doing more of the same will not be sufficient to ensure that Vietnam remains an inclusive and high growth society.

Vietnam now faces the complex demands required for a transition from a lower-middle income to a modern industrialized country. Moreover, Vietnam faces a changing domestic and external environment, including a rapid demographic transition, a labor market exposed to increased global competition, new health challenges from non-communicable diseases, and shifting societal expectations of the state. All these challenges will require new approaches.
The Vietnamese government is now leading a major study, with the World Bank as a partner, which will offer a long-term vision for the next 20 years as the country moves towards high-income status. In crafting this vision, Vietnam can draw lessons from other countries that have made the same journey, particularly those within East Asia.
Advanced economies like Korea and Taiwan (China), during their transition, have shifted focus from moving people out of absolute poverty and providing basic services towards promoting equality of opportunity for all. This means higher quality and wider coverage social services, better job opportunities, and adequate and sustainable social protection. Inclusion will mean not just a concern for the poor but also ensuring opportunity for the growing middle class.

What, specifically, should be the priority initiatives to help Vietnam have an inclusive society in 2035? Preliminary discussions around the study point to several ideas: 

  • Phased reform of the ho khau (household) system, separating its registration function from access to public services.  This would stimulate needed labor mobility provide equal opportunity to urban migrants. 
  • The evolution of labor market institutions which are responsive to the needs for greater factor mobility of a competitive and aspiring high income country. This will mean developing robust labor dispute resolution mechanisms to sustain workplace harmony, and policies which protect workers without impeding their mobility.
  • A school system that ensures that all children complete secondary school, with relevant skills to become life-long learners, and a higher education system with the autonomy to deliver high quality, relevant education to foster a generation of innovators.  
  • A health care system shifted away from a hospital-focused model. This will mean putting primary care in the drivers’ seat of a system of coordinated care. The country will need to tackle this challenge while also achieving its commitment to universal health coverage. 
  • An expanded and reformed social insurance system. Vietnam’s insurance-only pension model is incapable of achieving high pension coverage and can discourage dynamism in the labor market. Failing to reform the current system threatens to leave no effective safety net for most elderly people as the country begins to age rapidly.
  • Continued efforts to tackle the chronic poverty and poor social outcomes of ethnic minorities. While many ethnic minorities have shared in Vietnam’s success, the strategy is likely shift from protective approaches to ensuring that minorities are linked to and prepared to take advantage of economic opportunity.

The World Bank will be exploring these and other aspects of inclusion as we work with Vietnamese colleagues on developing the study over the next several months.
Vietnam is at a critical juncture. At this stage of development, many countries have made bold decisions to move forward, while others lag behind. What do you see as the priorities to ensure that Vietnam continues to be an inclusive society in 20 years time?