Causes of poverty a case study of Loc Thanh Village

MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS, HO CHI MINH CITY BUI NHU DIEU CAUSES OF POVERTY A CASE STUDY OF LOC THANH VILLAGE MASTER OF PUBLIC POLICY THESIS HO CHI MINH CITY, 2013 MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS, HO CHI MINH CITY FULBRIGHT ECONOMIC TEACHING PROGRAM BUI NHU DIEU CAUSES OF POVERTY A CASE STUDY OF LOC THANH VILLAGE PUBLIC POLICY MAJOR Code: 60340402 MASTER OF PUBLIC POLICY THESIS SUPERVISOR DR JOHNATHAN R PINCUS HO CHI MINH CITY, 2013 i CERTIFICATION I certify that this thesis has not been submitted or being submitted for any degrees I certify that I have acknowledged all information sources as well as reference document The study does not necessarily reflect the views of the Ho Chi Minh Economics University or Fulbright Economics Teaching Program Author Bui Nhu Dieu ii ACKNOWLEDGEMENT I would like to express deeply appreciation to my supervisor, Dr Jonathan R Pincus, who has helped me in performing the thesis With rich knowledge, experience, thoughtful and patient, he has provided me a huge encourages to finish my thesis I would like to thank all my teachers and friend in Fulbright Economics Teaching Program for wonderful time in this school iii ABSTRACT The thesis focuses on finding the causes of poverty and the factors helping people escape from it The causes of poverty in Loc Thanh village are unstable jobs, low returns from land and high dependency ratios Failed investments in pepper farms and high interest debt are two main factor of decline On the contrary, high returns from land are the factor that helps a majority escape from poverty Good jobs are another path to exit poverty Diversification of income sources not only helps household reduce the risks associated with agricultural markets but also helps them have a stable and reasonable income Therefore, policies should focus on increasing farming investment and job opportunity creation iv TABLE OF CONTENTS ACKNOWLEDGEMENT ii ABSTRACT iii TABLE OF CONTENTS iv ABBREVIATIONS vi LIST OF TABLES vii LIST OF FIGURES vii LIST OF BOXES vii CHAPTER 1: INTRODUCTION 1.1 Problem Statement 1.2 Thesis Objective 1.3 Research Question 1.4 Structure of the Study CHAPTER 2: THEORETICAL BACKGROUND 2.1 The Concept of Poverty 2.2 Causes of poverty 2.3 Poverty Reduction 2.4 Data Collection CHAPTER 3: FINDINGS 3.1 Loc Thanh– a snap shot 3.2 The poor – who are they? 13 3.3 Why are they poor? 19 3.3.1 Unstable jobs 19 3.3.2 Low returns to land 20 3.3.3 Poverty and Dependents 21 3.3.4 Getting old and becoming poor 22 3.3.5 Failed investment in pepper farms 23 3.3.6 Poverty and debt 24 3.4 Escaping from poverty 25 3.4.1 Intensive farming 25 3.4.2 Diversification 27 v 3.4.3 Good jobs 27 CHAPTER 4: CONCLUSION AND RECOMMENDATION 29 4.1 Conclusion 29 4.2 Policy Recommendations 30 4.2.1 Review the poor household list 30 4.2.2 Help farmers improve their farming skills, increase investment on their farms and diversify their income source 30 4.2.3 Create job opportunities 31 4.2.4 Prevent people from taking on high interest debt 32 Limitation of this research 32 REFERENCES 33 APPENDICES 36 vi ABBREVIATIONS AusAID Australian Agency for International Development GSO General Statistics Office PCA Principle Components Analysis SES Socio- economic status VASS Vietnam Academy of Social Science VBSP Vietnam Bank of Social Policy VND Vietnam Dong vii LIST OF TABLES Table 3.1: Housing character by ethnic group 14 Table 3.2: Housing character by ethnic group 14 Table 3.3: Percentage of respondents not have listed durable goods by ethnic group 15 Table 3.4: Frequency of having meat per week by ethnic group (respondents,%) 16 Table 3.5 : Frequency of having fish per week by ethnic group (respondents,%) 16 Table 3.6: Access to sanitation facility by ethnic group ( respondents, %) 17 Table 3.7: Indicators use to build PCA score 17 Table 3.8: PCA score by ethnic group 18 Table 3.9: Occupation of poor householders by ethnic (respondents) 19 Table 3.10: Education of poor wage labor 20 Table 3.11: Main crop of poor farmers (respondents) 20 LIST OF FIGURES Figure 1.1: Poverty proportion from 1993-2010 Figure 3.1: Poverty rate in Loc Thanh Village 10 Figure 3.2: Poverty rate of Kinh versus local tribes 12 Figure 3.3: Distribution of PCA score 18 LIST OF BOXES Box 3.1: Out of the poor list 11 Box 3.2: Getting old, becoming poor 22 Box 3.3: Health care and debt 11 CHAPTER 1: INTRODUCTION 1.1 Problem Statement Historically, poverty has always been a major concern of governments Most countries – regardless of location or political regime - consider improving residents’ living conditions as an important objective Hence, reducing the incidence of poverty is the first target of the Millennium Development Goals (MDGs) established by United Nations in 2000 In retrospect, Vietnam has achieved remarkable progress in poverty reduction From 19932008, about 30 million people escaped from poverty (VASS, 2011) This has helped Vietnam accomplish the first goal of the MDGs and the country has been widely applauded by the international community Figure 1.1: Poverty proportion from 1993-2010 70% 60% 58.1% 50% 37.4% 40% 28.9% 30% 18.1% 20% 15.5% 13.4% 14.2% 10% 10.7% 0% 1993 1998 2002 2004 2006 2008 2010 Source: VASS (2011) and GSO (2010) The percentage of the population living in poverty decreased quickly from 58.1 percent in 1993 to 18.1 percent in 2004, dropping by 3.6 percent every year Broad-based economic growth was the main cause of improvements in living standards “In turn, rapid and propoor growth is explained by a series of far reaching market reforms undertaken in the 1990s and the early 2000s” (VASS, 2006, p.15) From 2004-2010, the proportion declined slightly about 0.7 percent every year, from 18.1 percent to 10.7 percent In 2010, the number climbed up to 14.2 percent if the poverty line