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Impacts of Price Hikes on the
Lives and Livelihoods
of Poor People in Viet Nam
and the poverty rate declines slightly because poorer households in Viet Nam tend to be net producers.
Scenarios with larger price increases yield similar results: there are more losers than gainers, but average
welfare increases because average gains are larger than average losses. Poverty rates decrease slightly or
do not change at all.
The World Bank (2008) 9 , using data from the above study by Linh V and Paul Glewwe, describes a typical
household in Viet Nam as producing about VND 15.4 million and consuming VND 10.2 million worth of
food products each year. The household produces 1247 kg of rice and consumes only 582 kg each year.
In this context, the suggestion of recent studies that average welfare in Viet Nam increases slightly when rice
and other food prices of increase is reasonable. However, when analyzing the distributional effect of such
an impact it is necessary to take into consideration households with different living standards, in different
regions and with different production and consumption patterns. One scenario assumes an increase in the
farm-gate price of rice by 15.5 percent and of the retail price by 11.2 percent. In this scenario, welfare
increases by 4.3 percent for the average household and by 6.3 percent in rural areas. Increases are larger
for richer households. Conversely, welfare falls by 1.6 percent in urban areas, with the negative impact
largest on households towards the middle of the distribution. But despite improvements in overall welfare,
51 percent of all households and 86 percent of urban households are worse off following a price rise. The
proportion of households who are worse off is highest in the Northwest region (76 percent).
ILSSA (2008) 10 also conducted a study on the impact of rising food prices on the poor using VHLSS 2008
data. The conclusions of the study are similar to those by Linh V and Paul Glewwe (2008), in that rising
food prices have different distributional effects on poverty and household welfare. Not only non-farming
(including both poor and non-poor households) but also farming households (including both poor and nonpoor
households with incomes from farming less than food expenditures) become worse-off.
2.4 Production, Export and Import of Agricultural Products and Inputs
Viet Nam has more than 9.4 million ha of agricultural land and 61 million people living in rural areas as of
January 1, 2007. This indicates with an average of only 1,500 m 2 / head (or 0.7 ha/farming household) 11
most households engage in small scale production. Agricultural land is also distributed unevenly by region.
VHLSS 2006 data show that the average acreage per household is largest in the Mekong River Delta, which
is six times more than in the Red River Delta.
Paddy/ Rice. Viet Nam’s paddy productivity has increased from 4.24 ton/ha in 2000 to 4.98 ton/ha in
2007. As of 2007, the national paddy output reached 35.8 million tons, an increase of 3.3 million tons
compared to 2000 despite a reduction of total paddy acreage by 450.000 ha. 12
In each of the last five years Viet Nam has exported 4-4.5 million tons of rice. In the first six months of 2008,
the country exported 2.5 million tons at more than USD 600/ton, twice as much as the average price of
USD 295 USD/ton in 2007. Increased export prices plus crop failures due to unusual weather conditions
and diseases have raised both farm-gate prices and retail prices in the domestic market. Farm-gate prices
increased by 40 percent in the first half of 2008 (or VND 4500 VND/kg, compared to VND 3200 VND/kg
in 2007).
Given concerns that rice price hikes were affecting efforts to rein in inflation and ensure food security, the
Government decided to hold off rice exporting contracts between April and June 2008. In the following
months the Government continued to allow new contracts to be signed in order to sell the Summer-Autumn
2008 crop. The Government also imposed a fixed tariff on each ton of rice exported. However, due to falling
prices of export rice, the Government has not imposed the tariff on contracts below 800 USD/ton. At the
end of April 2008 there was a “virtual hike” of rice prices which pushed up rice prices in the domestic
market by more than 50 percent (most likely because of speculation) for two days. Concerned Government
agencies are developing a plan to set up a “National Rice Fund” in order to stabilize the domestic markets
against major market fluctuations. The Fund is expected to store some 100,000 tons of rice to be managed
by two State-owned food corporations.
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9 The World Bank, “Taking Stock: An Update on Viet Nam’s Recent Economic Developments”, Mid-Year Consultative Group Meeting, Sapa, June 5-6, 2008.
10 ILSSA, “Impacts of Rising Food Prices on Poverty in Viet Nam”, Presentation at the East Asia Poverty Analysis and Data Initiative (PADI) Consultation Meeting and
Regional Policy Seminar, Kuala Lumpur, Malaysia, 9-12 June 2008.
11 GSO, “Statistical Data updated as of Jan 1,/2007”, www.gso.gov.vn
12 GSO, “Summary of Statistical Year Book 2007”, www.gso.gov.vn