The Macroeconomics of Poverty Reduction: The Case Study of Viet Nam - Seeking Equity within Growth

The Macroeconomics of Poverty Reduction: The Case Study of Viet Nam - Seeking Equity within Growth

June 20, 2013

This report is part of the United Nations Development Programme’s Regional Programme for Asia on the macroeconomics of poverty reduction. The programme is on-going, and at the time this report was published on the UNDP website seven case studies had been completed (Bangladesh, Cambodia, China, Indonesia, Mongolia, Nepal and Viet Nam), all under the supervision of Dr. Terry McKinley of the Bureau for Development Policy of the UNDP. 
  
The primary focus of this and the other case studies is macroeconomic policy and its impact of the poor. The case studies seek to identify macro policies that would generate a pattern of growth which is ‘pro-poor’ in the specific sense that the increment in growth becomes more equally distributed than initial income (implying a reduction in income inequality). Given the focus of the study, it does not treat all issues related to poverty 
reduction. For example, poverty reduction among Viet Nam’s ethnic minorities and in disadvantaged regions enters our discussion if it is affected by macro policies and national programmes. The sparse treatment of this aspect of poverty, which has been addressed in detail in other studies, does not reflect an implicit view of its importance, but rather the judgement that the ‘value added’ of the study lies in its presentation of pro-poor macro policies. 
  
The international community recognises the importance of equity and distribution as essential parts of a programme to rid the world of the scourge of poverty. This report is part of a regional UNDP project to place considerations of equity at the centre of the poverty reduction agenda. Even in Viet Nam, a low-income country, distribution matters. As we show in this report, the distribution of income has become more unequal over the last fifteen years. Thus, how society divides the benefits of growth is not a natural, inexorable process insensitive to policy. On the contrary, distribution is a dynamic process that governments can influence, to the benefit of society as a whole. Increases in income and wealth inequality have and will continue to accompany Viet Nam’s growth unless policies are put in place to alter this growth pattern. The central message of this report is that in Viet Nam increased inequality is the single most important constraint to sustainable poverty reduction, and perhaps political and social stability.

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