Are Socio-Economic Disparities Threatening Sustainable Economic Growth in Vietnam?

A country’s sustainable development relies on many different factors and with the rapid economic growth, socio-economic disparities are an obstacle that prevents a well-rounded development of our society. While the definition of socio-economic disparity is broad, parsing these multidimensional characteristics can make it even more difficult to resolve. Disparities are most obvious in incomes, creating economic inequality between individuals. This is the outcome of social disparities due to the differences in access to education, healthcare, information, and technologies between individuals. As a result, socio-economic disparities widen the gap between social classes causing disadvantaged groups to be systematically excluded from the overall development and economic growth of the country. 

Vietnam is one of the fastest growing economies in the world since the 1986 Đổi Mới economic reforms. In 2014, according to the World Bank, Vietnam had a modest increase in income inequality, which differs itself from other fast-growing economies such as China or Thailand. 

Source: World Bank, 2018. Graph showing Gini coefficient, a measure of income inequality where the higher the % the greater the inequality in that country, from 1995-2015 in Vietnam.

Source: World Bank, 2018. Graph showing GDP growth rate in Vietnam from 2010-2016 across the population (grey) and in the bottom earning 40% (blue).

This modest increase was measured over the 1990s , when Vietnam relied heavily on agriculture as the main source of development until 2012. The increase in income inequality can be explained as the country was still in the early stages of development, which is similar to other countries like Taiwan and South Korea. However, the income gap between the bottom 40% and the top 60%, in particular, increased significantly every year. Taking into account factors such as globalisation and urban migrants, we can expect the socio-economic disparities to widen in the upcoming years. 

Globalisation, along with rapid economic growth, contributes to income inequality. While the global economy constantly demands a highly-skilled labor force, people living in rural areas with little or no access to information, facilities, and higher education often struggle to narrow the disparities or escape the cycle of poverty. Vietnam is currently in the beginning stages of development and aiming to achieve the high-income status by 2045. More international investors have come with more attractive jobs to offer in metropolitan areas in the past years. Thus, internal migration has become a norm as people move to urban areas for better opportunities. Although at the moment the majority of the population still resides in rural areas, 13% are migrants and 68% of these migrants move to urban areas. Migrants tend to have better education and qualifications compared with those who remain in rural areas. It can be expected that the proportion will continue to rise due to the constant economic growth and the socio-economic disparities will continue to grow while Vietnam’s economy is in its blooming period.

In 2018, Vietnam was ranked 48 out of 157 by the World Bank in Human Capital Index (HCI), which evaluates the country’s ability in mobilizing the economic and professional potential of its citizens. While Vietnam ranked very high among middle-income countries, significant disparities and exclusions still exist. More than 70% of the poor in Vietnam is ethnic minorities and one in every five children is deprived of education, health, or social inclusion. Compared with the ethnic majority group, the Kinh people, the enrolment rate of ethnic minorities in post-secondary education is extremely low.

Source: Vietnam Investment Review, 2019. Graph showing youth net enrolment rate (NER) in various stages of education for Kinh majority and ethnic minority (EM) in Vietnam. Significantly lower NER at all stages of education.

Being well-aware of the inevitability of inequality, the government has adopted several policies to narrow the disparities, particularly towards poor communities and ethnic minorities. However, the effectiveness of such measures was limited since they only temporarily supported low-income families but could not directly tackle inequality. Hence, socio-economic disparities created this exclusion that does not allow all citizens to benefit from the country’s economic growth. Although there are many challenges to address, the government can still work on many areas to tackle inequality and narrow the gaps of socio-economic disparities, including public spending on education and health or improvements in labor policies. By building efficient and practical frameworks to tackle the existing socio-economic disparities, Vietnam has the potential to maintain a modest index in inequality and secure a sustainable economy.

AMELIA NGUYEN LUU