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Vietnam’s Development Strategy: Social Welfare and Policy Issues- Le Anh-Tu Packard

1.       Introduction


The social welfare and policy ramifications of Vietnam’s transition from war to peace, from a centrally planned to a market-oriented economy, and from international economic isolation to rapid integration with the global economy, is -- not surprisingly --an issue of great concern to the government, international donors, non-government organizations (NGOs), and, of course, the Vietnamese people.

This concern is expressed in many forms.  Tripartite “partnership groups” with Government, donor and NGO representation have been set up to study and address the economic, social, educational, health and institutional factors that reinforce the cycle of poverty.  Notable examples are activities of the Poverty Task Force, countrywide community level and regional level consultative meetings to collect input on poverty reduction strategies and policies, and committees to study reform of the legal system and ways to strengthen governance. 


Information about the government’s stated goals and values may be found in the array of regional, sectoral and industrial development strategies (health care, population, nutrition, children, women, rural clean water supply and sanitation, transport, education, technology, environmental protection, public administration reform, health, telecommunication, agriculture, etc.), targeted poverty reduction and job creation programs, the Ten Year Socio-Economic Development Strategy 2001-2010, and the Comprehensive Poverty Reduction and Growth Strategy (CPRGS).


The good news is that these development strategies are basically on target in their analysis of the dimensions and causes of poverty, and the overall strategy needed to make significant progress in reducing poverty and promoting economic growth (see Chart describing the CPRGS).  The bad news is that Vietnam does not have much time left to implement necessary reforms in many spheres (legal, institutional, education, health, agricultural, industrial, environmental, etc.) to enable households and enterprises to survive and to develop the capacity to effectively compete by 2006, the deadline for trade barriers to be dismantled in compliance with international trade commitments, including those made to establish the ASEAN Free Trade Area (AFTA), the Bilateral Trade Agreement with the United States, and as part of the process of joining the World Trade Organization (WTO).  


This article is organized as follows: Section 2 reviews social welfare trends and developments in Vietnam during the past decade of sweeping economic and structural reforms.  Section 3 describes the process of formulating and implementing social welfare policies by key institutional players (government, donors, NGOs, community groupings) using as an example the recent experience of putting together the CPRGS.  Section 4 proposes what should be the important next steps to attain the social welfare objectives outlined in the Ten Year Socio-Economic Development Strategy and the CPRGS.


2.      Social Welfare Trends


It is generally acknowledged that Vietnam has made impressive gains in poverty reduction, health, child malnutrition, education and other aspects of social welfare during the 1990s.  As measured by the UNDP’s Human Development Index (HDI), the HDI for Vietnam rose to 0.696 in 2000 (ranking 101st out of 162 countries) from 0.456 in 1990 (ranking 120th).  Hunger has been largely eliminated in many parts of the country, thanks in part to infrastructure development, diversification of the rural economy, and the sharp rise in per capita food production (from 303 kg in 1990 to 444 kg in 2000) thanks to the rural reforms (decollectivization of agriculture, return to self-managed family farms, granting of long term leases to farmers). 


The following table tracks the evolution of key social indicators in Vietnam and compares it to the average in East Asia as well as to the group of low-income countries (of which Vietnam is a member):



Unit of Measure




East Asia

Low Income























       Infant mortality

Per thousand live birth






       Under 5 mortality

Per thousand live birth














Percent of age group







Percent of age group






   Child malnutrition







   Life expectancy







       Female advantage








Source: Vietnam Statistical Yearbook (various years); GSO Vietnam Living Standards Survey 1997-1998.


These achievements in social welfare can be attributed in part to the government’s longstanding commitment to providing social services, which is reflected in the significant share of the budget allocated to social spending.  Public expenditure on education as a share of GDP rose steadily from 1.3% of GDP in the 1990-93 period to 2.1% in the 1994-97 period to 2.2% in the 1998-2000 period, while public expenditure on health as a share of GDP rose and then fell, from 1.0% in 1990-93 to 1.1% in 1994-97 to 0.8% in 1998-2000.


At the same time, these positive indicators should be put in perspective.  For example, the trend rise in spending on education from a very low base is reflected in Vietnam’s actual performance, which is marked by good progress that continues to be threatened by significant institutional weaknesses.  For example, a joint Government-Donor review of public expenditure determined that Vietnam has made considerable progress in increasing enrollments and improving the efficiency and equity of education expenditures.  The primary school net enrollment ratio (NER) rose from 87% in 1993 to 91% in 1998, while the lower secondary school NER rose from 30% to 62% and the upper secondary school NER rose from 7% to 29%.  However, despite the high enrollment rate, it should be noted that about 30% do not complete the five grades of primary education.  Moreover, the quality of education varies considerably between different income groups, between urban and rural areas, and between geographical regions.  Children from poor families are unable to obtain quality education because they can barely afford to pay regular school fees, let alone the extra cost of private lessons from poorly paid teachers [1].  Girl children in particular are more likely to drop out because they must do housework, farm, and take care of their younger siblings.  Malnutrition and poor health create additional hurdles for poor children in general.  Ethnic minority children have a disproportionately high repetition and dropout rate (UN Vietnam 1999), the regional variation in student educational attainment is substantial (PER 2000), and the number of instructional hours for primary school students is very low -- about 660 hours compared to a world average of 880 hours (UN Vietnam 1999).


The story with respect to health spending and health outcomes is similar.  Vietnam’s achievements in health have been remarkable and involved a major epidemiological change: the share of communicable diseases in mortality and morbidity dropped sharply from 59 percent in 1986 to 27 percent in 1997.  This is due in part to the Expanded Program of Immunization (EPI), which lowered the prevalence rate of polio from 2.6 per 100,000 persons in 1986 to 0.6 in 1996.  Similarly, the prevalence of diphtheria in 1996 was only 5% of its level in 1986.  Neonatal tetanus has been virtually eliminated in 591 out of 610 districts, and death from measles has fallen dramatically.  As a result, the infant mortality rate also has fallen steeply from 75 per 1,000 live births in 1983, to 45 in 1989, to about 28.2 during the 1992-96 period, with a similar even steeper decline in the child mortality rate.  Indeed, with the important exception of child malnutrition, Vietnam’s health indicators are much better than expected considering its per capita income level and in comparison with other low- income countries.  Also, international health experts consider Vietnam’s TB and malaria control programs to be among the best in the developing world.


At the same time, reflecting rising inequalities that have accompanied the transition to the market economy, there is a growing disparity in the health profile of non-poor households compared to poor households (Wagstaff and Nga 2001).  During the period from 1983 to 1992, there was little difference between the survival prospects of poor and better-off children in Vietnam. However, the household survey data indicate that the impressive national reductions in child mortality achieved under Doi Moi have not been evenly spread, but were instead heavily concentrated among the better-off.  The higher income groups saw a large drop in the child mortality rate, but the lower income groups saw little change in their children’s survival prospects.  Wagstaff and Nga (2001) also find that these inequalities appear to be a recent phenomenon, since it showed up in the 1997-98 national household survey dataset but not in the 1992-93 one.    According to the authors, the rising inequality could be explained by (a) differences in immunization and antenatal coverage between rich and poor, (b) declining access to satisfactory sanitation in the 1993-98 period among the poorest quartile, (c) declining proportion of newborns delivered by medical professionals in medical facilities among the poorest quartile, and (d) faster growth of access to safe drinking water among the better-off.   Not surprisingly, the burden of disease among the rural poor was found to be four times greater than among urban dwellers.  According to Dunlop (1999), the Disability Adjusted Life Years (DALYs) [2] lost per thousand people was 1,062 for the rural poor, and only 229 for the urban population.  Among children 4 years and under the gap was even more dramatic: 4,170 for the rural poor, 150 for urban children. 


It also is important to call attention to the causal links between poverty and poor health.  The poor tend to suffer more from ill health.  According to findings from the 1997-98 national household survey, the annual average number of sick days of the poorest quintile is 3.1 compared to about 2.4 for the richest quintile.  Sadly, the bad health of the poor drives them deeper into poverty because they are doubly hit, first by a loss of income because they are unable to work due to illness, and second by the very high cost (relative to their assets) of medical treatment.  According to the June 2002 Poverty Task Force report on Improving Health Status and Reducing Inequalities, a single contact with a public hospital may absorb as much as 22% of a poor person’s annual expenditure on non-food items; for this reason, 3 million people each year fall below the poverty line due to medical costs.


Large disparities in health status between different geographical regions also have been noted.  The Central Highlands and Northern Mountainous region have an infant mortality rate of 56/1,000 live births, and the maternal mortality rate in the latter region is four times higher than in the lowlands (UN Vietnam 1999).  The incidence of non-communicable diseases also have risen, while traffic accidents account for 21.6% of total mortality in 1997, a big jump from its 1976 level of 2.2% (UN Vietnam 1999).  Another telling side-effect of the transition to market deserves mention: there has been a sharp rise in self-medication and widespread purchase of drugs without a prescription due to aggressive marketing by the pharmaceuticals, the easier availability of drugs, and falling drug prices (the medicine price index relative to CPI declined significantly from 1993 to 1997).  Antibiotics are among the most commonly dispensed drugs; as a result, antibiotic resistance levels have spread at an alarming rate due to unnecessary consumption, irrational (broad instead of narrow spectrum) and ineffective (short course instead of full course) use, and threatens to undermine Vietnam’s ability to control and prevent the spread of many infectious diseases (Tornquist 1999, World Bank et al., 2001).


2. The Process of Formulating and Implementing Social Welfare Policies


Remarkably, there is broad consensus among the key institutional players as regards the dimensions and causes of poverty in Vietnam, and the overall strategy to reduce poverty and improve social welfare.  This was in part achieved thanks to the availability of credible information on household social welfare made possible by donor-assisted national surveys, which produced very rich datasets to monitor and analyze the dimensions and causes of poverty. 


Detailed and nationally representative data were gathered from the 1992-93 and the 1997-98 Vietnam Living Standards Survey (VLSS) conducted by the General Statistical Office with assistance from the UNDP, Sweden and the World Bank, covering 4800 and 6000 households respectively.  Qualitative information to supplement the quantitative surveys came from in-depth participatory poverty assessments (PPAs) conducted in 1999 by NGOs (Vietnam-Sweden Mountain Rural Development Program, Action Aid Vietnam, Oxfam GB and Save the Children Fund UK) with follow-up community-level consultations in 2001 on the government’s strategic direction [3].  Reports on the PPAs and community views of the government’s proposed poverty reduction and growth strategy can be found on the World Bank website in Vietnam (www.worldbank.org.vn). 


The significance of the participatory process involved in formulating the CPRGS and its precursor, the Interim Poverty Reduction Strategy Paper (I-PRSP), is that it helps to promote civil society and encourages grassroots participation in local development programs including infrastructure projects.  Indeed, it is asserted in the CPRGS that the “widely consultative and consensus-building process of formulating the Comprehensive Poverty Reduction and Growth Strategy (CPRGS) reflects the government’s commitment to strengthening participatory and democratic governance at all government levels, especially at the grassroots.” 


The value of this iterative process also lies in the framework that it provides for shared thinking and vigorous dialogue about Vietnam’s evolving development strategy.   For example, the commitment to obtain local input at the regional consultations on the CPRGS is worth mentioning.  At breakout sessions on specific issues, facilitators actively encouraged local participants to express their views.  Many were shy at first, but once they got going, the discussions became lively and frank.  Thus, in the breakout session held in Can Tho and Ho Chi Minh City on public expenditure and governance, the need to simplify administrative procedures and paperwork was emphasized many times over.  One official noted that commune officials in many areas were unable to tap available funding for poverty reduction projects because they did not know how to do the paperwork and found the forms too difficult to fill.  Moreover, even though the original form issued by the central administration may be simple, as it is transmitted down, provincial and district officials make additions to the forms and make them so complicated that they become very difficult to fill out.  At the same time, other participants pointed out that the procedures were necessary to ensure accountability, and that it was a matter of achieving the right balance between simplifying procedures and ensuring proper fiscal management.


The government’s overall development objective is to promote rapid, sustainable and equitable growth.  The CPRGS spells out policies on macroeconomic, structural and sectoral issues to attain this goal (for details, see the Appendices of the CPRGS which are included at the end of this article.  Vietnam’s development objectives, including social and poverty reduction objectives, are covered in Appendix I.  Appendix II outlines key assumptions regarding the medium term macroeconomic framework.  Appendix III lists the policy matrix, measures, and timetable for implementation.)  Key elements of this strategy include a focus on developing agriculture and rural areas, job creation, creating a fair business environment for all types of enterprises, continuing with structural reforms, improving grassroots participation in planning and implementing community development programs and projects, and making the budget process more transparent.  Notable features are the attention given to governance, the identification of outcome targets (listed in Appendix I of the CPRGS), first efforts to set priorities and to estimate the resource requirements in order to achieve these targets, and the establishment of a system of intermediate and final indicators to monitor and evaluate progress in implementing the CPRGS.  


3. Important Next Steps to Attain Social Welfare Objectives


As noted in the previous section, the broad consensus achieved regarding Vietnam’s strategy to reduce poverty and improve social welfare can be attributed in part to the rich and credible datasets (household and enterprise surveys, etc.) that made possible analysis of the dimensions and causes of poverty and the factors that enabled households and communities to improve their living conditions.  The nationally representative household surveys produced high quality information that laid the foundations for transparent, persuasive and consensus-building policy analysis, and makes it more difficult to justify policies and government expenditures that only benefit special interests.  The process of formulating the CPRGS helps to reinforce the framework for continued informed consultations to refine and adjust the strategy, as new information emerges from the periodic surveys tracking progress in implementing the social welfare policies and programs. 


An important next step is to undertake an audit of Vietnam’s physical, human, and social capital resources, so that it can be effectively utilized to achieve the development and social welfare targets outlined in the CPRGS.  To understand what is involved in taking stock of these diverse capital resources, it should be noted that activities in sectors such as health, education, irrigation and even road transport play a vital role in building the three different types of capital.  Physical capital, in the form of roads, harbors, irrigation systems, power generating plants, and other physical structures, is a straightforward concept whose contribution to development is easily appreciated.  Human capital strengthens and enlarges the capacity of individuals to perform the tasks needed to improve their welfare, generate income, and become productive citizens, and is augmented by sound education, health, and environmental policies and programs. 


Social capital is a newer, but critical, concept.  It has to do with the capacity of the community to cooperate together to perform tasks that improves the welfare of the whole community and its individual members.  It is the existence of social capital that enables the whole to be greater than the sum of its parts.  It is documented in international studies that the economic performance of villages and communities that are rich in social capital is significantly better that those poorer in social capital.  Rich “deposits” of social capital already exist in many communities throughout Vietnam, and much can be done in the form of efforts to mobilize grassroots participation in community development programs and projects to enhance and strengthen that existing stock of social capital at local and regional levels.  The next important task is to identify the social capital that already exists, and to nurture and deepen that capital. 


Village level consultations provide a useful forum to learn more about the existing infrastructure of social capital and the governance skills of the community, and the potential of poverty reduction efforts to build on these existing strengths. For example, at a village consultation of the CPRGS in December 2001, the women of a village in Ha Tinh province were asked to describe the set-up of their rotating credit organizations (“ho” or “hui”), which had a long history of being well run.  They explained that membership in each circle was determined by the number of children in the family.  For example, one ho/hui was restricted to families with one child, another to families with two children, another to families with three, and so on.  They had a simple rationale: in a commune like theirs the number of children broadly determines family income level.  They also reported that there was no problem with effectively managing the ho/hui, which may have been related to income homogeneity within each ho/hui.  More research is needed to understand the nature of the social capital embedded in these credit circles, and their specific regional characteristics, especially since the success of the Ha Tinh organizations stands in sharp contrast to the notorious scandals involving massive fraud by individuals running credit circles in the South.  


Another important next step, within the context of existing efforts to study reform of the legal system and to carry out a legal system needs assessment (LNA), and with a view to building up the nation’s social capital, is to research the legal needs of poor people and what should be included in a pro-poor legal agenda.  There should be a two-fold focus, first, to determine what help poor people need to make the current law work for them, and second, to study what additional laws and legal institutions are needed to create a favorable environment for them to escape from poverty. 


In conclusion, the important next steps should be to identify and take stock of the country’s capital resources, especially its social capital infrastructure, and to formulate a pro-poor legal agenda, for these are powerful tools to help Vietnam achieve its social welfare objectives.




1.        Government of Vietnam, World Bank and other donors.  2000.  Vietnam Public Expenditure Review.  Hanoi.  (PER 2000)

2.        Tornquist, Sam.  1999.  “Vietnam-Sweden Health Cooperation in the Area of Drug Policy and Control.”  Project Document.  Hanoi: Ministry of Health.  April 24.   Mimeo.

3.        United Nations Vietnam.  1999.  Looking Ahead.  A United Nations Common Country Assessment of Vietnam.  Hanoi.  December 1999.

4.        Wagstaff, Adam and Nguyen Nguyet Nga.  2001. “Poverty and Survival Prospects of Vietnamese Children Under Doi Moi,”.  September 2001.

5.        World Bank et al.  2001.  Growing Healthy: A Review of Vietnam’s Health Sector.  May 2001.

6.       Appendixes: http://www.imf.org/External/NP/prsp/2002/vnm/01/index.htm

[1]  Many parents claim that the “real teaching” does not take place during regular school hours, but during private sessions organized after regular school hours.  This phenomenon, unheard of during the “subsidy” period, has become widespread during the transition to market period.


[2]  The Disability Adjusted Life Year (DALY), a measure of the sickness burden, is the number of years lost due to premature death or sickness.


[3]  The IMF-World Bank Joint Staff Assessment of the CPRGS reported that “Poor communities were consulted on the main policy measures proposed in the strategy …  More than 1,800 people were involved in this exercise, in which poor people and local officials prioritized policy measures and public actions to reduce poverty. Though there was general support in the consulted communities for the overall policy direction, there were real concerns about the ability of the local institutions to convert the statements into reality and many constructive suggestions about how the actions could be made to work best for the poor. “


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