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 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 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. PINCUS HO CHI MINH CITY, 2013 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 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 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com ii ACKNOWLEDGEMENT I would like to express deeply appreciation to my supervisor, Dr. 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.
LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 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. LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com iv TABLE OF CONTENTS ACKNOWLEDGEMENT .iii TABLE OF CONTENTS.
vi LIST OF TABLES. vii LIST OF FIGURES. vii LIST OF BOXES. vii CHAPTER 1: INTRODUCTION .4 Structure of the Study.
4 CHAPTER 2: THEORETICAL BACKGROUND .1 The Concept of Poverty.2 Causes of poverty .1 Loc Thanh– a snap shot.2 The poor – who are they? .3 Why are they poor? .2 Low returns to land .3 Poverty and Dependents .4 Getting old and becoming poor .5 Failed investment in pepper farms .6 Poverty and debt .4 Escaping from poverty. 27 LUAN VAN CHAT LUONG download : add luanvanchat@agmail. 27 CHAPTER 4: CONCLUSION AND RECOMMENDATION .1 Review the poor household list .2 Help farmers improve their farming skills, increase investment on their farms and diversify their income source .3 Create job opportunities .4 Prevent people from taking on high interest debt. 3 Limitation of this research.
36 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 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 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com vii LIST OF TABLES Table 3.1: Housing character by ethnic group .2: Housing character by ethnic group .3: Percentage of respondents do not have listed durable goods by ethnic group .4: Frequency of having meat per week by ethnic group (respondents,%) .5 : Frequency of having fish per week by ethnic group (respondents,%) .6: Access to sanitation facility by ethnic group ( respondents, %) .7: Indicators use to build PCA score .8: PCA score by ethnic group .9: Occupation of poor householders by ethnic (respondents) .10: Education of poor wage labor .11: Main crop of poor farmers (respondents). 20 LIST OF FIGURES Figure 1.1: Poverty proportion from 1993-2010 .1: Poverty rate in Loc Thanh Village .2: Poverty rate of Kinh versus local tribes .3: Distribution of PCA score. 18 LIST OF BOXES Box 3.1: Out of the poor list .2: Getting old, becoming poor.3: Health care and debt. 11 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 1 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 1993- 2008, 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.1: Poverty proportion from 1993-2010 70% 60% 58.7% 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 pro- poor growth is explained by a series of far reaching market reforms undertaken in the 1990s and the early 2000s” (VASS, 2006, p. From 2004-2010, the proportion declined slightly about 0.7 percent every year, from 18.
In 2010, the number climbed up to 14.2 percent if the poverty line LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 2 of period 2011-2015 is applied.1 This increase reflects the fact that there are many people living around the margins of poverty. A slight rise in the poverty line or fall in their incomes could send them back below the poverty line. Economic growth is good for the poor but all of the poor do not benefit from growth, especially individuals and households whose incomes are very far below the median income (Pincus, 2012). The VASS report also agrees with this idea “….
despite the general impressive achievements, progress in poverty reduction has been uneven across different groups of the population” (VASS, 2011, p. Still, the poverty rate in rural areas is higher than that in urban areas. While the number in urban areas is only 5.1 percent, it was still 13.2 percent in rural areas. Poverty tends to be higher in rural than urban areas because of the lack of access to employment opportunities and lower average labor productivity in rural areas.
There are fewer ways to earn income, less education, health care and even more vulnerability to the weather and forces of nature (Perkins, 2006, pp. This proportion is not only different by area but also by ethnic group: As reflected in the changed poverty profile, the largest difference in the progress made in poverty reduction was between the Kinh/Hoa group and ethnic minorities, with poverty rate rapidly falling for the former (from 53.9 percent in 1993 to only 9 percent in 2008) but only modestly declining for the latter (from 86.4 percent in 1993 to 50.3 percent in 2008) (VASS, 2011, p. As a matter of fact, a deep understanding of why some people can exit from poverty and some fall deeper into it, or stay in that difficult situation needs to be revealed. Studying the causes of poverty and economic strategies of poor households provides a solid basis on which to formulate policy.
“A common and clear understanding of poverty helps build a common agenda with development partners, linking specific causes of poverty in each setting with suitable policies and actions (OECD, 2001, p. Hence, identifying the main causes of poverty is the first step to constructing a sustainable poverty reduction program. In addition, the poor themselves are not waiting for the benefits of economic growth or government programs but also apply many strategies to generate income and find their way 1. The official poverty line for period 2011-2015 is VND 400,000 per person per month in rural and VND 500,000 per person per month in urban area.
The official poverty line in 2010 is VND 350,000 per person per month in rural and VND 440,000 per person per month in urban area LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 3 out of difficult situations. A deep understanding of why people fall into poverty and what they are doing to exit will provide a solid basis on which to build reasonable poverty reduction policies. Therefore, this thesis will study the causes of poverty and strategies applied by poor households to escape poverty. In view of limitations of time and data, the author was not in a position to address the question on the national or regional level.
Instead, the author has carried out a case study of one village, Loc Thanh Village, to explore the dynamics of poverty. This border village has similar characteristics to other locations in Binh Phuoc. Fifty percent of the population consists of ethnic minorities including the two main local groups in Binh Phuoc: Khmer and S’Tieng. The location also has a high percentage of residents living in poverty.
The three main crops of Binh Phuoc are cashew, rubber and pepper, and all are cultivated in this village. Thus the location was viewed as a suitable place to study the causes of poverty and households strategies in Binh Phuoc province. Of course the results of a case study cannot be generalized to the province as a whole, but case studies do help identify issues and processes that can be explored on a larger scale in future research.2 Thesis Objective This research is written as a case study so the immediate relevance of the findings is limited to the research area. However, it is hoped that the study contributes to an in-depth understanding about the main causes of poverty and economic activities that poor people are adopting.
This research also looks at non-poor households’ economic strategies to find out core factors that help them to escape from poverty. Based on the results, the study suggests policies that assist poor families exit from poverty, and also point to future avenues for productive policy research.3 Research Question As stated above, this research will attempt to answer the following questions: - Why do some people fall into poverty and others do not? - What are people doing to escape from poverty? LUAN VAN CHAT LUONG download : add luanvanchat@agmail.4 Structure of the Study The thesis has four chapters. Following this introduction, Chapter Two presents the theoretical background, including the concept of poverty and studies concerning poverty and poverty reduction. It also describes the research methodology and data collection method.
Chapter Three discusses the findings. In this chapter, the interesting story of why people are poor and how they escape from poverty will be told. The last chapter concludes and summarizes the thesis and policy recommendations. LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 5 CHAPTER 2: THEORETICAL BACKGROUND 2.1 The Concept of Poverty Poverty is widely understood as income or consumption below a minimum accepted standard as represented by a poverty line.
There is no universally accepted poverty line, and richer countries adhere to a higher standard. However, the World Bank has regularly provided poverty headcount rates for the $1.25 per day poverty line as measured in purchasing power parity terms. However, many countries have their own levels. In Vietnam, the official poverty lines are VND 400,000 per person per month for rural areas and VND 500,000 per person per month for urban regions (Decision No.
09/2011/QĐ-TTg issued by Prime Minister on 31/10/2011). Collecting expenditure information requires much information about consumption. This information is built up in a long questionnaire, which takes several hours to administer. In addition, people hardly remember exactly what they buy and the price of each good or service.