Development, Poverty and Inequality in Vietnam

A model for pro-poor growth in South-East Asia?

Hausarbeit, 2008

15 Seiten


Table of Contents

1 Introduction

2 Development record of Vietnam and its neighbor states
2.1 Macro-economic development record
2.2 Human development

3 Comparative Analysis of Poverty and Inequality Regional Disparities in Vietnam

4 Key Issues of inclusive and pro-poor growth
4.1 Reforms for inclusive growth
4.2 Policies for pro-poor growth
4.2.1 Egalitarian land reform
4.2.2 Investments in public goods and human capital
4.2.3 Targeted Aid to the Poor
4.3 Remaining Challenges
4.3.1 Tackling ethnicity-based and regional inequality
4.3.2 Improvements in the financial sector
4.3.3 Private sector development

5 Conclusion


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1 Introduction

The Bertelsmann Foundation states that Vietnam, much like China, shows the tendency of delinking economic development from the transformation towards more democracy. They stress the fact that the responsible elites avoid “political openness” while aiming at swift transformation towards a market economy. Furthermore, they claim that these developments are “symptomatic” for the region and that their economic success makes this style of polity and politics attractive to others (Bertelsmann Foundation 2008). This typical euro-centrist view of the Asian developing economies has the idea of input-legitimacy at its center. However, the legitimacy of politics and policies in low-income countries is much more dependent on their outcomes in terms of inclusive growth and poverty alleviation. The leading question is therefore: is Vietnam able to significantly improve the income and consequently, the well-being of the majority of its population, and can its development be a model for the region?

This paper will explore Vietnam’s record of development, poverty reduction and inequality in comparison to its neighbor states. The following part will examine key policies and underlying reforms that were conductive to pro-poor growth in Vietnam as well as remaining challenges.

2 Development record of Vietnam and its neighbor states

2.1 Macro-economic development record

According to the International Monetary Fund, gross domestic product (GDP) is the most commonly used single measure of a country's overall economic activity. It represents the total value at constant prices of final goods and services produced within a country during a specified time period, such as one year. Purchasing Power Parity (PPP) is a concept which relates changes in the nominal exchange rate between two countries’ currencies to changes in the countries' price levels.

Vietnam is one of the fastest growing economies in Asia with average annual growth rates from 5 to 8 percent over the last 20 years (see Table 1). This success is largely due to the doi moi reforms introduced in 1986 whose implementation transformed the once planned economy into market socialism. The nominal GDP more than doubled from 34 (1986) to 71 billion US dollars in 2007. The GDP based on PPP rose from 31 to 221 billion US dollars in this period. That represents an increase of more than 700% in 20 years.

In order to benchmark economic development, Vietnam is compared to a peer group of its East and Southeast Asian neighbor countries. It becomes clear how Vietnam, China, Laos and Cambodia were on a comparable level in terms of GDP based on PPP per capita in the mid 1980s. Over the next 20 years Vietnam took an intermediary rank between the better developing China and Lao as well as Cambodia whose income per capita developed much slower. Thailand showed a steady growth of income per capita in the same period but on a much higher level than the other countries in the group.

Table 1: Real GDP growth (Average annual change in percent)

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Source of data: World Economic Outlook (October 2008)

It is also remarkable that in this group Thailand was the only country that was affected by the Asian financial crisis that caused its growth and income per capita to plunge by the end of the 1990s. Despite being an export-oriented country, Vietnam seems to be only slightly affected by the crisis, showing in a lowered growth rate. That is likely due to its openness to foreign direct investments and regulated capital markets that do not allow for short term speculations – as opposed to Thailand but much like China and India who also weathered the crisis quite well (Stiglitz 2000).

Overall Vietnam has shown a steady growth at impressive rates similar to its direct neighbors and much steadier than the Philippines and Indonesia, for example. It has proven its stability to external shocks deriving from short-term capital flows. It remains to be seen, however, what effects the current global economic crisis will have since its impacts are more intense and profoundly affect not only financial markets but also the real economy. Recent developments “are likely to reduce FDI and remittance inflows, as well as further crimp exports, foreign portfolio investment inflows, and overall growth.“ (ADB 2009: 264)


Ende der Leseprobe aus 15 Seiten


Development, Poverty and Inequality in Vietnam
A model for pro-poor growth in South-East Asia?
Westfälische Wilhelms-Universität Münster  (Institut für Politikwissenschaft)
Democratic Peace Theory
ISBN (eBook)
ISBN (Buch)
593 KB
Development, Poverty, Inequality, Vietnam, South-East, Asia
Arbeit zitieren
Sven Grantz (Autor:in), 2008, Development, Poverty and Inequality in Vietnam, München, GRIN Verlag,


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