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Social Cohesion Policy Review of Viet Nam

image of Social Cohesion Policy Review of Viet Nam

This report examines the effects of recent economic growth in Viet Nam on social cohesion. It finds that recent rapid economic growth in Viet Nam has not resulted in an increase in overall inequality, but the level of inequality was already high. Growth was not particularly inclusive, benefiting most the middle class and the richest households, and favouring less households in the bottom 20th percentile. Income mobility was also high, and while a majority of households experienced upward income mobility, downward absolute income mobility affected one in five households. Economic growth was not particularly job rich with employment growth lagging behind economic expansion.

In particular, important challenges were identified in the area of education and skills policies relating to fast-changing labour market needs. Minimum wage policies had a small but positive effect on employment, but concerns were highlighted over partial coverage and weak compliance. Tax policy and specifically personal income tax had only a small impact on reducing inequality, but transfers from central to local governments produced an equalising effect, albeit with mixed results in terms of satisfaction with public services. Finally, social protection systems have been extended, but important coverage gaps remain among the poor and ethnic minority groups, and informality remains a key challenge for universal extension.

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Assessment and recommendations

OECD Development Centre

The sustained growth achieved by Viet Nam over the past decade was accompanied by impressive poverty reduction and the emergence of a large middle class. This progress is largely attributed to the Doi Moi (or renovation) process, initiated in 1986, which launched a series of economic reforms that transformed the country into one of the fastest growing economies in the world. The country achieved an average annual GDP growth rate of 7% over the past decade, doubling the median income of middle-class households. Poverty headcounts fell from 58% in 1993 to 14.5% in 2008. The Doi Moi aimed to transition from a centrally-planned economy to a socialist-oriented market economy, encouraging private sector development and foreign investments.

English

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