QUOTE
Michael Richardson: Vietnam miracle may be near end
05.07.2004
COMMENT
HANOI - The Vietnamese capital is humming with economic activity.
In a country still run by a communist party, the signs of private enterprise and increasing disposable income are on open display in shops, restaurants and on billboards advertising the latest motorbikes, cars, mobile phones and television sets.
This growth helps to explain why Vietnam has done remarkably well in reducing deprivation. Almost a third of the total population of 80 million was lifted out of poverty in less than a decade, with the proportion of those living below the poverty line falling from 58 per cent in 1993 to 29 per cent in 2002.
The World Bank describes this as "one of the greatest success stories in economic development". Only China, Ireland and a few countries recovering from civil war or economic havoc have seen faster growth of GDP per capita than Vietnam in recent years.
Indonesia, too, did well in raising living standards in the 1980s. What were the keys? Clearly the political complexion of the government wasn't one of them. Ireland is a democracy while Vietnam, China and Indonesia had authoritarian regimes for all or much of the time that poverty fell fastest.
The Asian trio also had weak legal systems, only partly open markets and dubious human rights records. Yet under Bush Administration guidelines, United States foreign aid is to go mainly to poor nations that support human rights, have strong systems of law and open markets.
On June 23 President George W. Bush announced that Vietnam would become the 15th nation to benefit from the US emergency plan for Aids relief. Announced last year, the plan commits America to spend US$15 billion ($23 billion) over five years to combat HIV-Aids around the world.
When asked why Vietnam had been chosen, instead of democratic India, a senior US official replied: "Vietnam is the place where we believe we can address our money and our attention and really make the greatest impact.
"One other factor we considered was the degree of commitment that existed in Vietnam today, where it is spending about US$36 ($56) a person infected with Aids, as compared to India, that's spending about US$6 ($9) a person."
Two factors in raising living standards were common to Ireland, Vietnam, China and Indonesia: sustained rapid economic growth and governance that worked to alleviate poverty.
In Vietnam, for example, the economy expanded by an average of 6 per cent each year between 1993 and 2002, despite the East Asian financial crisis.
The household measure of poverty in Vietnam is based on a per capita income of US$128 ($198) a year, enough for a person to consume 2100 calories of food a day and have US$36 ($56) left over for other essentials such as clothes and housing.
By another, perhaps more realistic, guideline - purchasing power parity, which measures what a dollar actually buys in different countries - the poverty rate in Vietnam fell to 11 per cent of the population in 2003, from 51 per cent in 1990.
Vietnamese and foreign officials attribute Vietnam's success in cutting poverty to a combination of factors. They came into play after the Government made the strategic decision in the late 1980s to relax the command economy and open the market.
Early gains in alleviating poverty were linked to the national distribution of agricultural land to rural households.
In a country where most people were farmers, this land reform was an incentive to increase farm production even though it did not include the right of freehold land ownership.
By the late 1990s, job creation by a burgeoning private sector and increased integration of agriculture in the market economy, as farmers produced more for sale than subsistence, were the driving forces behind reducing poverty.
Other factors included the commitment of Vietnam's governing Communist Party to improve the lot of the poor, an administration able to deliver services such as primary education, healthcare and electricity down to village level, high literacy rates and a relatively low birth rate.
The rate of population increase in Vietnam is 1.8 per cent. In developing countries that have rates of population increase of well over 2 per cent a year, such as the Philippines, Pakistan, Cambodia, Laos, Nepal and Papua New Guinea, it is more difficult to raise living standards even when growth picks up.
The Vietnamese Government says that more than nine out of 10 adults are literate, more than 80 per cent of all preschool children are in kindergarten and 91 per cent of older children attend primary schools. Lower secondary school enrolment is reported to be 62 per cent.
Vietnam's high literacy rate helps to reduce poverty, by making it easier for young people to find jobs.
Will this egalitarian success story continue? A World Bank projection of Vietnam's household poverty rate puts it at 21 per cent by 2010, down by 8 per cent from 2002.
But the Government may be in danger of losing its pro-poor focus. "While the pro-poor nature of economic growth in Vietnam over the last decade provides good reason to be optimistic, there are also clear signs that development is becoming less inclusive," the World Bank warns in this year's Vietnam Development Report.
Vietnam's programme to alleviate poverty has been less successful in remote areas than in urban centres, and among ethnic minorities, who make up about 13 per cent of the population and have a higher than average birth rate.
Official corruption and abuse of power at all levels is common. As business leaders in Vietnam become more influential in politics and government, there is a growing risk of crony capitalism emerging - as it did in Indonesia and other East Asian countries.
The Vietnamese Government is wary of freeing the economy completely to spark competitive growth, partly because it fears worsening inequality, but also because it wants to maintain its grip on economic power.
Government spending accounts for almost a fifth of Vietnam's GDP. There are nearly 5000 state-owned firms, which get priority in loans and land from from the State.
As a result, unpaid credits have accumulated to a level that some foreign economists are now warning could cripple the state-dominated banking system.
05.07.2004
COMMENT
HANOI - The Vietnamese capital is humming with economic activity.
In a country still run by a communist party, the signs of private enterprise and increasing disposable income are on open display in shops, restaurants and on billboards advertising the latest motorbikes, cars, mobile phones and television sets.
This growth helps to explain why Vietnam has done remarkably well in reducing deprivation. Almost a third of the total population of 80 million was lifted out of poverty in less than a decade, with the proportion of those living below the poverty line falling from 58 per cent in 1993 to 29 per cent in 2002.
The World Bank describes this as "one of the greatest success stories in economic development". Only China, Ireland and a few countries recovering from civil war or economic havoc have seen faster growth of GDP per capita than Vietnam in recent years.
Indonesia, too, did well in raising living standards in the 1980s. What were the keys? Clearly the political complexion of the government wasn't one of them. Ireland is a democracy while Vietnam, China and Indonesia had authoritarian regimes for all or much of the time that poverty fell fastest.
The Asian trio also had weak legal systems, only partly open markets and dubious human rights records. Yet under Bush Administration guidelines, United States foreign aid is to go mainly to poor nations that support human rights, have strong systems of law and open markets.
On June 23 President George W. Bush announced that Vietnam would become the 15th nation to benefit from the US emergency plan for Aids relief. Announced last year, the plan commits America to spend US$15 billion ($23 billion) over five years to combat HIV-Aids around the world.
When asked why Vietnam had been chosen, instead of democratic India, a senior US official replied: "Vietnam is the place where we believe we can address our money and our attention and really make the greatest impact.
"One other factor we considered was the degree of commitment that existed in Vietnam today, where it is spending about US$36 ($56) a person infected with Aids, as compared to India, that's spending about US$6 ($9) a person."
Two factors in raising living standards were common to Ireland, Vietnam, China and Indonesia: sustained rapid economic growth and governance that worked to alleviate poverty.
In Vietnam, for example, the economy expanded by an average of 6 per cent each year between 1993 and 2002, despite the East Asian financial crisis.
The household measure of poverty in Vietnam is based on a per capita income of US$128 ($198) a year, enough for a person to consume 2100 calories of food a day and have US$36 ($56) left over for other essentials such as clothes and housing.
By another, perhaps more realistic, guideline - purchasing power parity, which measures what a dollar actually buys in different countries - the poverty rate in Vietnam fell to 11 per cent of the population in 2003, from 51 per cent in 1990.
Vietnamese and foreign officials attribute Vietnam's success in cutting poverty to a combination of factors. They came into play after the Government made the strategic decision in the late 1980s to relax the command economy and open the market.
Early gains in alleviating poverty were linked to the national distribution of agricultural land to rural households.
In a country where most people were farmers, this land reform was an incentive to increase farm production even though it did not include the right of freehold land ownership.
By the late 1990s, job creation by a burgeoning private sector and increased integration of agriculture in the market economy, as farmers produced more for sale than subsistence, were the driving forces behind reducing poverty.
Other factors included the commitment of Vietnam's governing Communist Party to improve the lot of the poor, an administration able to deliver services such as primary education, healthcare and electricity down to village level, high literacy rates and a relatively low birth rate.
The rate of population increase in Vietnam is 1.8 per cent. In developing countries that have rates of population increase of well over 2 per cent a year, such as the Philippines, Pakistan, Cambodia, Laos, Nepal and Papua New Guinea, it is more difficult to raise living standards even when growth picks up.
The Vietnamese Government says that more than nine out of 10 adults are literate, more than 80 per cent of all preschool children are in kindergarten and 91 per cent of older children attend primary schools. Lower secondary school enrolment is reported to be 62 per cent.
Vietnam's high literacy rate helps to reduce poverty, by making it easier for young people to find jobs.
Will this egalitarian success story continue? A World Bank projection of Vietnam's household poverty rate puts it at 21 per cent by 2010, down by 8 per cent from 2002.
But the Government may be in danger of losing its pro-poor focus. "While the pro-poor nature of economic growth in Vietnam over the last decade provides good reason to be optimistic, there are also clear signs that development is becoming less inclusive," the World Bank warns in this year's Vietnam Development Report.
Vietnam's programme to alleviate poverty has been less successful in remote areas than in urban centres, and among ethnic minorities, who make up about 13 per cent of the population and have a higher than average birth rate.
Official corruption and abuse of power at all levels is common. As business leaders in Vietnam become more influential in politics and government, there is a growing risk of crony capitalism emerging - as it did in Indonesia and other East Asian countries.
The Vietnamese Government is wary of freeing the economy completely to spark competitive growth, partly because it fears worsening inequality, but also because it wants to maintain its grip on economic power.
Government spending accounts for almost a fifth of Vietnam's GDP. There are nearly 5000 state-owned firms, which get priority in loans and land from from the State.
As a result, unpaid credits have accumulated to a level that some foreign economists are now warning could cripple the state-dominated banking system.
