Income Diversification and Poverty Income Diversification and Poverty

CHAPTER ONE
INTRODUCTION
1.1 Introduction
In many ways, Vietnam is in an enviable position among developing countries. Since the
mid-1990s, it has enjoyed macro-economic stability and sustained high rates of economic growth.
According to the Vietnam Living Standards Surveys, the incidence of poverty fell from 58 percent in
1993 to 37 percent in 1998 (Joint Working Group, 2000). Vietnam has benefited from trade
liberalization and the rapid growth of the region, but was able to avoid the worst effects of the 1997-
98 Asian financial crisis. From a situation of chronic rice shortages in the 1980s, it has transformed
itself into one of the three largest rice exporters in the world. Similarly, it has dramatically expanded
exports of coffee, seafood, and fruits and vegetables.
At the same time, Vietnam faces serious development challenges. In spite of the rapid pace of
economic growth, Vietnam remains among the 30 poorest countries in the world 1 . Furthermore, there
is concern that the process of market liberalization, while unleashing the economic potential of the
country, may also have exacerbated the disparities between urban and rural areas, between north and
south, and between delta regions and upland regions.
Poverty and under-employment are particularly serious problems in the rural Northern Upland
region. According to a recent study, the ten poorest provinces of Vietnam are in this region, with
poverty rates ranging from 55 to 78 percent (Minot and Baulch, 2002). In addition to the high
incidence of poverty, this region is characterized by:
• Rugged upland terrain
• Poor infrastructure
• A large ethnic minority population
• Low population density and low levels of urbanization
• Importance of the agricultural sector.
Although economic growth will not necessarily solve all the problems of the Northern Uplands, there
is little doubt that sustained and widespread growth in household incomes is a necessary component
of any successful development strategy for the region.
Income growth in an agricultural economy can come from various sources. First, we can
distinguish between growth in crop income, non-crop agricultural income (livestock, fisheries, and
forestry), and non-agricultural income. Given that semi-subsistence farmers often focus on the
1
This is based on per capita gross national product using market exchange rates. If the exchange rates
are adjusted to reflect purchasing power parity, Vietnam’s relative position improves, but it is still ranked 164
out of 210 countries (World Bank, 2000: 231).
Page 1