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Cover ImageIFPRI Forum
December 2006



Income Diversification, Poverty, and Inequality in Vietnam

Since the mid-1990s, Vietnam has sustained high rates of economic growth and has reduced poverty from 58 percent in 1993 to 37 percent in 1998. Despite these gains, Vietnam is among the 30 poorest countries in the world. As a result, the government has embarked upon a series of efforts to reduce rural poverty and raise rural incomes.

Recent efforts have involved income diversification, especially into high-value crops. A recent IFPRI research report by Nicholas Minot, Michael Epprecht,Tran Thi Tram Anh, and Le Quang Trung (www.ifpri.org/pubs/abstract/rr145.asp) has found that farmers in the Northern Uplands—the poorest region of the country—have gradually shifted from rice and cassava cultivation to fruits and tea production. This is due to changes in domestic demand and trade liberalization, facilitated by various programs to promote the adoption of new crops. However, crop diversification accounts for just 6 percent of the crop income growth over 1993-98. Yield increases are the most important source of income growth, particularly among the poor. In contrast, crop diversification accounts for a much larger share of income growth in the commercially oriented Southeast region. This suggests that in the poorest areas, increasing productivity should take priority over crop diversification.

Because many of Vietnam's antipoverty programs are geographically targeted, improving the targeting of these programs by adopting more precise estimates of poverty at the district and commune level could provide significant benefits. Another IFPRI research report by Nicholas Minot, Bob Baulch, and Michael Epprecht (www.ifpri.org/pubs/abstract/rr148.asp) using "small area estimation" has determined that the poverty rate in Vietnam is greatest in the upland areas of the country—mostly because of low agricultural potential and lack of market access—but that most of the country's poor actually live in the Red River Delta and the Mekong River Delta areas. The study also found that poverty increases with distance to urban centers, but proximity to small district centers is a stronger predictor of poverty rates than is distance to large cities or distance to roads. Thus, rural-urban linkages at the local level matter a great deal for poverty reduction.


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