Growth with Equality

Apr 9, 2007

Viet Nam has seen great progress in economic and social development, but still enormous disparities are emerging. In this phase of Viet Nam’s development – recent accession to WTO, impressive human development progress, ever-increasing GDP and a goal to reach middle income status by 2010 – now is the time to ensure this progress is as inclusive as possible. UN Resident Coordinator, John Hendra discusses the multidimensional nature of inequality and how to tackle these issues in Viet Nam if it is going to reach the MDGs in every province, district and commune.
First it is important to recognize that inequality has many dimensions including:

- An income or consumption dimension, which is what we measure with gini coefficients;
- An asset dimension, which means that some people have greater control over valuable assets like land, capital or even knowledge and education, which gives them different choices in life;
- A geographical dimension, both in terms of differences in life chances of people between provinces or between districts, and between urban and rural areas;
- A gender dimension, with women earning less per working day, suffering exclusion from better paid jobs and coping with the double burden of domestic work and work for pay; and
- An ethnic dimension, when certain ethnic groups do not enjoy the same opportunities for human development as others.

Viet Nam entered the reform period with very low levels of inequality across nearly all of these dimensions. Income was evenly distributed, largely because almost everyone was poor. This was not an acceptable situation, and was bound to change with economic growth as the market rewarded people with certain skills, or those who provided goods and services to the market that were in demand. While some inequality is inevitable in a market economy, it is important that people do not enrich themselves on the basis of political connections, misuse of public office or unfair business practices.

Land was not a source of inequality at the onset of reform, as the transition from collective to household farming left Viet Nam with a relatively equal pattern of land distribution. This is important, since inequality in other parts of the world, for example Latin America, is driven by polarization in rural areas, under which a small number of landlords control most of the land, while nearly everyone else is landless. Land is now becoming a more complicated issue and a source of inequality, as speculation has pushed up land prices and some people have become very wealthy almost overnight as a result.  Addressing inequality in Viet Nam will depend to a large extent on ensuring that the land market is governed by the rule of law.

Viet Nam has also done a good job in comparison to many other developing countries of redistributing resources across regions. Viet Nam’s public investment programme and anti-poverty programmes favor poor regions, and regions in which ethnic minority groups live. The Government’s political commitment to helping poor regions helps keep geographical inequality in check. The United Nations is proud to have worked closely with the Government on Programme 135 to develop infrastructure in remote regions and the Government’s National Targeted Programmes since their inception.

We hear a lot about the growing inequality between urban and rural areas. Some of this too is inevitable as urban incomes rise more quickly than rural incomes. But the Government can do a lot to ensure that people living in rural areas have access to high quality education and health services, so that they have equal chances in life as city dwellers. The cost of health care is now a major cause of households falling back into poverty in Viet Nam. In the United Nations we see this as a key challenge for the future.

Gender inequality is also lower in Viet Nam than in many other developing countries. Female participation in the labour force is high, and increasingly women are found in top management positions. But more needs to be done to break down the gender division of labour that blocks women from taking up more lucrative employment, and to close the wage gap between men and women. Access to quality childcare is an important demand of Vietnamese women as they struggle to manage the double burden of work at home and for pay.

In short, Viet Nam is in a good position to achieve growth with equity. Managing land markets, providing high quality health and education for all, better addressing gender disparities through recent legislation and ensuring that economic life is governed by the rule of law are key to ensuring that continued economic growth does not generate  inequality over the coming years.

(More from VET interview)