Research Essay

Topic: Discussion of the factors which pertain to poverty in Vietnam.

Written by: Ho Mai Huong ,

Date: November, 2007

Poverty is defined as a state or condition of having little or no money, goods or means of support (Dictionary: 1993: 1352- 1253). Vietnam is a South Eastern Asian country where the poor make up 14.7% of the national population in 2007 (Author Unknown: 2007: 3). Even though there have been a number of Hunger Eradication and Poverty Reduction Programs being implemented, poverty still remains a major issue. There are many factors that pertain to the current situation which include unemployment, the inflation rate, government corruption and its geographical location.

There is a direct relationship between the rate of poverty and the unemployment rate. In other words, as the unemployment rate increases, the rate of poverty also tends to increase. Unemployment rate also accounts for the uneven income distribution of the country as it brings about the loss of income for those who do not have a job to earn a living or their jobs are unable to provide them enough money to survive. In general. Unemployment has a negative impact on the living standard, as well as the poor.

One of the factors related to unemployment is the mismatch of skills amongst laborers from rural areas, laborers in urban areas and laborers who are students graduated from universities. Firstly, for those who are laborers from rural areas, they face the problems incurred by urbanization. Urbanization causes people to move form rural areas to urban areas unwillingly and voluntarily. People who are forced to leave their hometowns to immigrate to urban areas are left landless. For those who are moving to the urban areas voluntarily to look for better job opportunities as the jobs they had in their hometowns could be very unreliable and dependable solely on the seasonal factors , particularly farming activities. Since their skills mainly focus on farming activities, they are disqualified for the required professional business and technological skills in the urban areas. Therefore, they are left unemployed. Secondly, due to the improvement of technology in many fields, technological machineries are installed in various fields of production and manufacturing, in which high- technological skilled labors are wanted. However, it is difficult for those who have limited education and skills to get such jobs, so that they have to suffer from being unemployed. Thirdly, people who have just graduated from universities also face the problem of unemployment because they are only equipped with theoretical knowledge, not practical skills that needed by enterprises. In a recent World Economic Forum Survey, it is said to have 63% of university graduates who cannot find a job while 37% of those with jobs that are not related to their training (Author Unknown: 2007: 1).

A further factor relating to unemployment is the high inflation rate. A high inflation rate can impinge on the market prices of products and production resources such as materials, land and labor. According to a recent report by representative Vu Van Ninh in the 12th National Assembly Session 2, the consumer price index has increased to 7.32% this September (Author Unknown: 2007: 1). As the market prices of all final goods and services increase, psychologically, fewer consumers would want to buy them. Simultaneously, an increase in the price of production resources will increase the costs of production for business enterprises, whilst suffering a decrease in sales and therefore less total revenue earned (Fraser, Ian et al: 2005: 30 and 46). Consequently, some firms may go bankrupt due to the debts they have to bear as to cover their losses and costs, hence, their workers will be left without a job. Alternatively, a high inflation rate also affects the prices and sales of imported and exported goods. While the market prices of Vietnamese local products increase as explained above, the prices of other imported products will become comparatively cheaper which leads consumers to switch from purchasing local products to imported goods. Moreover, this high inflation rate does not only increase the price of Vietnamese local products, but also increases the prices of Vietnamese exported goods. These exported goods will become more expensive that the local alternatives of the destination countries. Consumers from these countries, therefore, would prefer to purchase their local goods instead of those imported from Vietnam. Exported suppliers in Vietnam are forced to close their businesses due to the losses of sales they face as well as high trade taxes. High inflation rate is, hence, indirectly related to the increased in unemployment rate.

The last factor which relates to unemployment is due to high birth rate. According to the Vietnam Poverty Analysis, in 1998, 80% of the poor in Vietnam worked in the farms to earn their living (2002: 10). These households tend to have more children in the family, with the unstable jobs; parents could not afford to provide enough education for their children. As a result, the children grow up with a low level of education and limited working skills that reduce their job opportunities. Additionally, when Vietnam experiences a high birth rate in its population growth, its Gross Domestic Product per head decreases while the size of its labor force increases. Since job opportunities are scarce, many workers are unable to find a job.

Not only high inflation rate is a factor related to unemployment in Vietnam, but it is also a factor that is prolonging poverty in the country. An increase in the inflation rate leads to an increase in the market prices of most products as explained above (2), it also decreases the relative monetary value which leads to a reduction in the disposable income[1]. These two factors lead to a reduction in the consumers’ purchasing power, which means buyers cannot purchase as many products as they could before this period. Consequently, those who lie near and below the poverty line will suffer the most (Author Unknown: 2007: 3).

Furthermore, another factor which pertains poverty in Vietnam is due to the corruption in the government bodies. In the 12th National Assembly Session 2, representative Dang Ngoc Tung from Ho Chi Minh City stated that the overall quality of infrastructure such as sealed roads links and hydroelectricity stations have not met the demand. According to representative Le Van Cuong from Thanh Hoa Province, the main reason leads to the above situation is due to government corruption (Author Unknown: 2007: 2). Government corruption stops the progress of the country’s economic development as it gives a negative view of the country to the foreign investors, which stops their investments in various projects. Corruption leads to a degradation in the quality of these projects, particularly transportation infrastructure. In many cases, the funding and investment in these projects are lost leading to many crucial roads not being built, and results in the isolation of many villages from the rest of the country. Such isolation makes the residents living in these regions have no access to the markets and social services. Poverty is highly likely to be prolonged due to these reasons (National Human Development Report: 2001:2).

Geography location is the last factor to pertain poverty in Vietnam. In fact, the Northern Central regions of Vietnam are prone to very frequent severe storms and floods due to the geographical location. The residents living in these areas are highly vulnerable to these unanticipated disasters. Within the fortnights of this November 2007, there were three continuous floods that have affected these regions, damaging crops and food reserves, postponing production which were the main source of income for most households living in these regions. Flooding and landslides also frequently damage the transportation links between these regions and the rest of Vietnam, aiding the isolation to the villages (Author Unknown: 2007: 1). As a result, poverty and hunger is an inevitable problem that the people living in these areas have to face.

In conclusion, the main factors that perpetuate poverty in Vietnam are unemployment, the inflation rate, government corruption and lastly, its geographical location. Currently, these factors have impacted massively on the economic development and its standard of living. For Vietnam to raise its standard of living and maintain a sustainable economic development, it is crucial that more resources be redirected to dealing with these key factors.

[1] Disposable income refers to the income earned less the income taxes.