Development Centre

Fast growth has contributed to an impressive reduction in poverty but much remains to be done to preserve social cohesion in Viet Nam, says OECD Development Centre

 

Viet Nam achieved sustained growth over the past decade accompanied by impressive progress in poverty reduction and the emergence of a large middle class, according to the latest OECD Development Centre’ Social Cohesion Policy Review of Viet Nam.

 

These achievements largely attributed to the Doi Moi economic reform process, launched a series of structural changes that transformed the country into one of the fastest growing economies in the world.

However challenges to reach social cohesion and well-being remain important, the poor benefited less from the recent growth spell, the prevalence of skills mismatch in the labour market doubled within a decade reaching 51% in 2012.

The report shows that there were both winners and losers in Viet Nam’s transformation process: income mobility is high in Viet Nam: 59% of households experienced an income increase of more than 20%. Still, 18% of the households saw their income decrease over time.

Targeted policy interventions can help decrease the impact of factors driving downward mobility, such as being in own-account agriculture, having a high number of children and disabled household members.

Fostering social mobility is identified as a key concern as the prospects of upward inter-generational mobility may be also limited, especially for poorer children, those from households with a low education background, or from ethnic minorities.

According to the Social Cohesion Policy Review of Viet Nam, the social protection system in Viet Nam has been instrumental in mitigating risks throughout the life cycle, while narrowing inequalities. Programmes specific for vulnerable groups are successful in reaching the targeted population, such as the universal health care coverage for ethnic minorities. Still, efforts in creating a comprehensive social safety net have to be intensified,  67% of people who belong to the “middle classes” do not have any form of social insurance. Low pension coverage is also a growing concern as Viet Nam enters into an ageing population.

The Review identifies the personal income tax (PIT) regime has potential to reduce inequality, if well enforced. To foster social cohesion, national policy makers need to work across sectors and develop a multi-pronged approach to fill policy gaps that put social cohesion at risk.

 

The findings of the Social Cohesion Policy Review of Viet Nam constitute technical inputs to the on-going discussions led by the Ministry of Labour, Invalids and Social Affairs of Vietnam (MOLISA) to set new social targets in the framework of the Socio-Economic Development Strategy 2011-20.

 

For more information or requests for a copy of the report, journalists are invited to contact the OECD Development Centre’s press office (dev.media@oecd.org; +33 145 24 82 96).