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Poverty Reduction Programs In Hanoi Area Economics Essay

This paper will examine the causes, nature, and consequences of the poverty problem and also examine urban policies aimed at alleviating poverty in Hanoi area. Firstly, I explained Vietnam’s situation in general and Hanoi in particular. Secondly, I explored the poverty reductions program efficiency by looking at poverty line and statistics of poverty rate which were undated by the government through years. The result showed that poverty reduction programs are working efficiently and effectively. I discussed current policies and programs in detail to find out what made it works and what lessons could be learn from Hanoi’s case.

Introduction

The Socialist Republic of Vietnam is a new country of which was found only 36 years ago, in 1975. After being destroyed in the long wars with France and The United States, and being in communist economic for 11 years. Vietnam was struggling from famine and those are the two main reasons why Vietnam had too many people living in poverty. Poverty reduction is always one of the most priorities of the government. Vietnam nowadays not only got out of the famine but also becomes the second most export rice country in the world with 6 million tons annually after Thailand (Fan 2004). However, Vietnam is still a developing country and considered a poor country. The United Nation and other international organizations such as International Monetary Fund (IMF), World Bank (WB), United Nation Development Program (UNDP), and Asian Development Bank (ADB) . . . are trying to work together with Vietnamese government in the poverty war.

Vietnam is a centralized government. The country is divided into 60 provinces. Each province has its own central city with towns and villages around. There is no clear border between down-town and city’s neighbourhood, between neighbourhood and villages. Offices and companies are not centralized in the city centre, they could be anywhere in the urban areas and mix with residential.

The city of Hanoi is the capital. Hanoi is not belonging to any province. All the towns and villages surrounding are belong to the city of Hanoi. The city’s economy is growing so fast that city council now is considering taking some adjacent towns and villages and put them inside the city’s official border to widen the city. Workers and farmers who live in the area are going into the city everyday looking for jobs or selling their farm product. Poverty in Hanoi is a mixed by urban poverty, peri-urban poverty, immigration from surrounding towns and its problems. Although Hanoi is the second biggest city but there are still many poor people and households inside the city.

Please note that Vietnamese currency (VND) and USD’s the current exchange rate is roughly VND 21,000 = USD 1 and basic living expenses in Hanoi is approximately from one tenth to one fifteenth of Boston. I also noted all the different rates between VND and USD through years because it has changed much.

Poverty Definition and Poverty line – Hanoi’s situation.

“Poverty is pronounced deprivation in well-being, and comprises many dimensions. It includes low incomes and the inability to acquire the basic goods and services necessary for survival with dignity. Poverty also encompasses low levels of health and education, poor access to clean water and sanitation, inadequate physical security, lack of voice, and insufficient capacity and opportunity to better one’s life” (World Bank)

“Fundamentally, poverty is a denial of choices and opportunities, a violation of human dignity. It means lack of basic capacity to participate effectively in society. It means not having enough to feed and clothe a family, not having a school or clinic to go to; not having the land on which to grow one’s food or a job to earn one’s living, not having access to credit. It means insecurity, powerlessness and exclusion of individuals, households and communities. It means susceptibility to violence, and it often implies living in marginal or fragile environments, without access to clean water or sanitation” (United Nations).

In the world, nations and organizations could use the poverty line of USD 1 or USD 2 per day per person to calculate poverty rate of under USD 1 or USD 2 per person per day. While the US government measures poverty according to a simple formula devised by a Social Security Administration statistician named Mollie Orshansky in 1963; estimating that food expenses accounted for roughly one third of the total family budget, the poverty line is at three times the money required to pay for an emergency diet (Euchner, Charles and Mc Govern 2003), in Vietnam, poverty line is determinate by General Statistics Office (GSO) and Ministry of Labor – Invalid and Social Affairs (MOLISA). MOLISA defined poverty line by the definition of World Bank with two type of poverty:

Absolute poverty:  based on basic need of human being for food every day, approximately 2.0 – 2.5k calories per person.

Relative poverty: approximately spend 70% income for food, 30% for other needs.

Poverty line of Vietnam used to be published by MOLISA (based on the Living Standards Measurement Survey done by GSO), and World Bank use to have their own poverty line to apply their funding for Vietnam’s poverty programs. But actually how many people or households get benefit from poverty reduction programs depends on how much money Vietnamese Government and World Bank have and they sometimes considered that is the poverty line.

Vietnam and World Bank’s poverty line - Income per person per month

Vietnam

World Bank

Rate

VND

Urban area

Rural area

2004

218.000 (USD 14.1)

168.000 (USD 10.8)

173.000 (USD 11.2)

USD 1=15.500 VND

2006

260.000 (USD 16.4)

200.000 (USD 12.6)

213.000 (USD 13.4)

USD 1=15.900 VND

2008

270.000 (USD 15)

290.000 (USD 16.1)

280.000 (USD 15.6)

USD 1=18.000 VND

(Source: GSO and MOLISA)

In 2005, poverty line in Hanoi was 270.000 VND (USD 17.2)/person/month in peri-urban and 350.000 (USD 22.3) VND in urban area. In urban area it was equal to USD 268/year lower than the international poverty line of USD 360/year. Based on the Living Standards Measurement Survey done by GSO annually, percentage of poor households from 2004 to 2008 is going down. While in 2004 there were 18.1% households under the poverty line nationwide, in 2009 it was only 12.3%, average down 1.2% annually. However there were differences between areas. The Hong River Delta, which Hanoi is in, had poverty rate decreased from 12.7% to 7.7% from 2004 to 2008. In general, Vietnam was successful in poverty reduction. Relative poverty decreased from 37.4% in 1998 to 14.5% in 2008 (GSO). Poverty rate in urban area decreased three times faster than in rural area and poverty rate is only one sixth of rural area in 2008. From those statistics, percentage of poverty households in Hanoi is lower and decreased faster than nationwide. Despite that fact, the improvement of living standard between classes is unequal. A large part of private and small businesses’ employees are the urban poor. They are low wage and unstable jobs (IMF 2004). The economic and ownership restructure from state to private sector forced those people to accept lower wage and more difficult working conditions. Moreover, redundant state employees were unable to find a job and joined the rank of unemployed. The urban poor live in poor infrastructure areas and limited access to basic services such as clean water, hygienic and sanitary environment, adequate water drainage, lighting and garbage collection, etc. They are totally dependent on cash income and almost have no ability to save, or even meet many difficulties in getting loans. The movement to industrialization and urbanization has created the flow of migrants from peri-urban and rural areas without registration to the government. Those immigrants mostly are in their working age or children. As the result of the registration problem, at this time there is no statistics on migrated workers or any number available on urban poverty reports. It is usually very difficult for migrants to register a temporary or permanent residence because of the citizenship policy so consequently they encountered difficulties in finding a stable job with acceptable wage. They also have very limited access to basic social service like healthcare or education for themselves and their children that provided for registered residences. The poverty rate in much higher in this group and they are targeted for unemployed, homeless and prey for social evils.

Moving in to the year of 2011, Prime Minister signed Document number 09/2011/QĐ-TTg on 01/30/2011 defined new poverty line for five years period 2011-2015. According to the new law, poverty line in rural area is VND 400,000 (USD20)/person/month and in urban area is VND 500,000 (USD25)/person/month about twice compare to VND 270,000 and VND 290,000 in 2008. This raise followed the raise of basic goods, healthcare fees, and inflation (CPRGS 2011). In particular, MOLISA has built individual poverty line for Hanoi with VND 750,000 (USD 37.5per person per month. As a result, at this time Hanoi has 148,148 poor households, equal to 9.6% total households. Compare to the poverty line of 2009-2013 period, in the beginning of 2009 Hanoi has 117,825 poor households, equal to 8.43%, in the end of 2009 poverty rate decreased to 6.09%, and in the end of 2010 decreased to 4.48% with 22,500 poor households. According to the city mayor, to archive the goal of under 2% poor household in 2015 Hanoi need VND 5,000 billion (USD 250 million) for poverty reduction program.

Urban Policy in poverty war

According to Office of High Commissioner for Human Right - United Nation Human Right (UNHR 2008) the government of Vietnam has implemented different programs, including the construction of basic infrastructure, provision of production capital, free healthcare and education with a view to enabling the poor to rise over their difficulties. Poverty reduction programs in Vietnam are normally comprehensive, long-term and successive, integrated in other socio-economic development programs like those on education, health and culture.

Beneficiaries: poor people and households, with priority given to female heads of households. A screening of poor households is conducted annually for the purpose of categorization, for example of those rising over poverty, those relapsing into poverty, and new poor households. Households that have risen over poverty will be excluded from the programs. In case, due to different reasons, they relapse into poverty, they will be entitled to the same incentives as poor households (CPRGS 2003)

Policies and projects to help poor people in production and income generation:

Policies on preferential credits: provide preferential loans for poor people who are able to work and in need of capital to develop production, generate income and drive them out of poverty. Each loan ranges between VND 4 and 7 million and not over VND 15 million (USD 200 and USD 350 and not over USD 750) (MOLISA 2008). The loan period should not exceed 5 years. Both the loan and period should conform to the business and production cycles. The loan could be in cash or kind depending on each area and individual need.

Training projects: provide poor people with necessary skills to have stable jobs and increase income. Through short-term training courses, they can get employment in enterprises, or self-employed jobs, or to work abroad, thus sustainably reducing poverty (AID 2002).

Policies and projects to create opportunities and access to fundamental social services for poor people:

Policies on medical assistance: to provide more convenient and equal access to medical services for the poor, thus minimizing difficulties and risks to them.

Policies on educational assistance: to provide equal access to school for poor children in order to improve the educational qualification of the poor.

Policies on clean water and housing: provide poor people access to land, houses and clean water to stabilize their lives and sustainably reduce poverty.

Policies on legal assistance: protect the legitimate rights and interests of poor people ensure justice and equality in access to legal services; increase their awareness and knowledge on legal issues to observe the law and regulations, participate in economic development, reduce poverty and practice grassroots democracy. (Balisacan 2003)

The Project on Building Capacity for Poverty Reduction has two components:

Training for staffs to build their capacity on poverty reduction, thus increasing the effectiveness of poverty reduction programs.

Communication activities to enhance social awareness on the importance of poverty reduction as well as the Party’s and State’s goals and policies on poverty reduction (CPRGS 2003)

Hanoi will invest around VND 4.600 billion (220 million USD) to archive the goals I mentioned above to decrease the city's poverty rate to less than 2% by the end of .The poverty reduction plan during 2011-15 was signed by the municipal People's Committee Deputy Chairman. According to the plan, the city is trying to lowdown the households’ poverty rate by 1.5% - 1.8% per year and minimizes the number of families falling back into poverty (CPRGS 2011). By 2015, the plan will have eliminated poor communes, where poor households account for a minimum of 25 percent of the population.  The city will offer local residents more soft loans, with priority given to districts or communes with 15 percent of their population living below the poverty line. It is estimated that between from 75,000 to 85,000 poor households annually will be given loans for doing business, joining training classes or becoming guest workers abroad. Residents would also be able to access loans for buying a herd of 1,000 cattles. Also short-term annual vocational training courses will be organized for around 2,300 poor people especially the disabled. Between 80,000 and 100,000 thousand households will be helped in applying advanced techniques for farming or aqua-culture. The city also plans to provide free health insurance cards for all poor people, elderly people aged over 90, poor blind and patients with leprosy. Those who are categorized as living near poverty line will also receive a subsidy of 50 percent to buy health insurance. The city also wants to mobilize more funding from various sources to improve housing conditions. A lack of capital for trading and production; land, and unemployment are described as being the largest contributory factor to household poverty. Annually Hanoi created average 100,000 jobs, provided job training for over 100,000 workers, built thousands homes for poor households. All those actions’ aim is to reduce poverty. However, poverty reduction is a long-term process which requires all actions are taken at the same time and sustainable (Le 2010).

Findings and discussion

Although the poverty line is going up every year but the poverty rate is going down with more poor people and poor households going above it. It showed that poverty reduction programs in Vietnam are working very well. That success came from the government’s priority of getting out of poverty with help from the UN and international NGOs. Programs and policies really focus on training; creating jobs and families’ small business are supported by flexible loans with very low interest rate. Especially poverty reduction programs in Vietnam targeted women because women tend to spend more money on families’ needs and children’s education than men (Minot 2006). The program also helps decrease gender inequality. Vietnamese women are very successful in doing families’ small business to go above poverty line and use their experience to help others (Epprecht 2006). Helping people get out of poverty is also Vietnamese culture. October 17th is national day for the poor and every year on December 31st night is a huge national live television program of donation for building house for the poor who are living in bad housing condition. That one night collected millions of USD and the year after thousands of new home were built all over the country. In general Vietnam has a very tight budget so it is more difficult to fund poverty reduction programs. Most of the money came from donations of private firms, companies, individuals . For the last decades; the government was successful in creating the trend of Vietnamese people helping each other by many different means such as donation, sharing small business experience or agriculture techniques and new technologies.

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