THE FOURTH VDF-TOKYO CONFERENCE ON THE DEVELOPMENT OF VIETNAM PROCEEDINGS Saturday, 9 August 2008 Conference Room 3C GRIPS, Tokyo Organized by Vietnam Development Forum (VDF) Tokyo http://www.grips.ac.jp/vietnam/VDFTokyo/index.html Supported by Vietnam Development Forum (VDF) Hanoi http://www.vdf.org.vn National Graduate Institute for Policy Studies (GRIPS) http://www.grips.ac.jp GRIPS Development Forum http://www.grips.ac.jp/forum/ Vietnam Development Forum (VDF)-TOKYO CONTENTS About VDF-Tokyo1 List of Publications by VDF 3 Program of the Conference6 MORNING SESSION [1]IndustrialStrategyforVietnam'sNewEra:PolicyContentand Formulation Method Dr. Kenichi Ohno (Professor, GRIPS & Research Director, VDF) 8 [2]Finance and Enterprise Sector Reform in Vietnam Mr. oritaka Akamatsu (Finance&PrivateSectorProgramManagerforVietnam,RegionalAdvisor for Capital Market Development, East Asia & Pacific, The World Bank) 23 AFTERNOON SESSION [1]Poverty, Inequality and Ethnic Minorities in VietnamDr. Katsushi Imai (Assistant Professor, University of Manchester, UK) 34 [2]Demographic Changes and the Pension Finances in Vietnam: A Long-term Stochastic Actuarial Assessment Dr. Wade D. Pfau (Associate Professor, GRIPS, Japan) 60 [3]TheEconomicsofNotUsingtheHealthInsuranceCard:ACaseStudyof Vietnam Mr. guyen Trong Ha (Lecturer, NEU, Vietnam; PhD candidate, ANU, Australia) 85 [4]The Revolution of Vietnamese Distribution System Dr. Le Viet Trung (Postdoctoral Fellow, Kobe University, Japan) 113 ONE-PAGE PRESENTATIONS (1)EfficiencyEstimatesfortheAgriculturalSectorinVietnam:AComparisonof Parametric and Non-parametric Approaches(Nguyen Khac Minh & Giang Thanh Long) 127 (2)TheVulnerabilityofElderlytoPoverty:DeterminantsandPolicyImplicationsfor Vietnam(Giang Thanh Long & Wade Donald Pfau) 128 (3)An Inquiry into the Transformation Process of Village-based Industrial Clusters: The Case of Iron and Steel Cluster in Northern Vietnam(Vu Hoang Nam) 129 (4)SimulatingthePotentialImpactsandCostsofanExtendedSocialPensionin Vietnam(Giang Thanh Long & Wade Donald Pfau) 130 (5)Development of Corporate Bond Market in Vietnam(Tran Thi Thanh Tu) 131 (6)TheInterrelationshipbetweenGrowth,PovertyandInequalityinVietnam:An Empirical Analysis(Le Quoc Hoi) 132 (7)University-Industry Linkages for Improving Industrial Human Resource(Nguyen Thi Xuan Thuy) 133 (8)EndogenousDevelopmentintheEraofGlobalization:Analysisofinteractions betweenLocalGovernmentsandLocalEnterprisesintheVietnameseCentralFocal Economic Zone(Do My Hien) 134 (9)IsaGovernmentalMicro-CreditProgramforthePoorReallyPro-Poor?Evidence from Vietnam(Nguyen Viet Cuong) 135 (10)TechnicalEfficiencyandProductivityinVietnamElectronicIndustry:AComparison between Foreign AffiliatedFirms andDomesticFirmswith Applicationof Parametric and Non-Parametric Analysis (Tran Hoai Vu) 136 CONTRIBUTION PAPERS (1)Modeling Economic Transformation in Vietnam Using Smooth Transaction Method(Nguyen Khac Minh, Nguyen Manh Hung & Nguyen Viet Hung) 137 (2)DoestheReproductiveHealthProjectinNgheAnProvince,VietnamHaveGood Impacts on the Community? (Pham Thi Thu Huong) 153 (3)Using Vietnams I-O Table 2000 to Identify the Key Economic Sectors (Dinh Hoang Yen & Hiroshi Osada) 168 (4)TourismDestinationImage:VietnamasaTourismDestinationforJapanese Travelers (Le Tuan Anh) 180 (5)The Vietnamese Automobile Industry and Globalization (Nguyen Bich Thuy) 197 1 About Vietnam Development Forum Who Are We? VietnamDevelopmentForum(VDF)wasestablishedin2004asajointresearch project between the National Graduate Institute for Policy Studies (GRIPS) in Tokyo and the National Economics University (NEU) in Hanoi. VDF-Tokyo is a branch office of VDF in Tokyo, which was established in October 2004,supersedingtheJapan-VietnamEconomistClub(JVEC)aninformal volunteer group set up in 2003 by Professor Kenichi Ohno (GRIPS), Professor Tran VanTho(WasedaUniv.)andVietnamesegraduatestudentsstudyinginJapanin order to promote research on Vietnamese economy. VDF aims at innovating research methodology and dissemination for policy impact. For this purpose, young talented Vietnamese people are mobilized. VDF bridges the gaps between academic research and policy formulation. We build open networks where researchers and policy makers can meet, discuss and help each other. VDFinitiatesandcoordinatesstudiesonVietnamsdevelopment.Wealsohappily publicize excellent research produced by scholars and organization outside the VDF. VDF is an academic unit and not a consulting business. It is financially supported by the Japanese government. How Can We Help? PolicyMakers:Wewilllistentoyouanddiscusswithyouconcretepolicyissuesrelatedto Vietnams development, and explore ways to solve them together. Researchers: We will offer opportunities to development and present your ideas, interact with other researchers and policy makers, and publish your output (subject to review). Everyone: We are happy to work with you and help you build an intellectual network. Principal Project Areas VDFispreparedtosupportanyresearchtopicrelevanttoVietnamsdevelopmentand conducted by capable researchers. Our research portfolio includes: Formulationofindustrialstrategiesandmasterplansunderintegration(withthe Ministry of Industry). Sectorstudiesincludingelectronics,motorbike,automobile,steel,electricityand supporting industries. 2 Socialissuesundermarket-orientationandglobalization,suchassocialsecurity, street children, and drug addiction. Trade and environmental analysis using input-output tables and other data. Aid partnership and modality. Activities Continuous networking and cooperation with MOI, MOLISA, MPI, ADB, Japanese government,domesticandforeignbusinesscommunitiesandotherresearch organizations. ResearchcompetitioninwhichtalentedVietnameseresearchersaresupported academically and financially. Logistic and financial supports for visits by Vietnamese and foreign researchers. VDF-organized research trips to HCMC, Japan, Thailand, Malaysia, etc. Hostingmanyconferences,includingthreeinternationalconferences(withADB, MOI,andVIES),anationalconferencewithHanoisPeopleCommittee.Sofar, VDF-Hanoi held 91 workshops, while VDF-Tokyo held 45 workshops. VDFhaspublished12books,20working/discussionpapers,2policynotes,and many issue papers and drafts.Frequent appearance and contribution to newspapers, press and broadcasting media. How to Contact? VDF-Hanoi: Suite 401, Melia Central Office Building 44B Ly Thuong Kiet Street, Hoan Kiem District, Hanoi, Vietnam Tel: +84-4-936 2633Fax: +84-4-936 2634 Website: http://www.vdf.org.vn VDF-Tokyo: Room E404, National Graduate Institute for Policy Studies (GRIPS) 7-22-1 Roppongi, Minato-ku, Tokyo 106-8677 Tel: +81-3-6439 6337 Fax: +81-3-6439 6010 Website: http://www.grips.ac.jp/vietnam/VDFTokyo/index.html 3 Vietnam Development Forum List of Publications PublicationTitleAuthor(s)LanguageDownload * No.1 Designing a comprehensive and realistic industrial strategy Kenichi OhnoE, VVDF No.2 The pension scheme in Vietnam: Current status and challenges in a aging society Giang Thanh LongE, VVDF No.3 A comparative study on production efficiency in manufacturing industries of Hanoi and Ho Chi Minh City Nguyen Khac MinhE, VVDF No.4 Cong nghiep Viet Nam: Danh gia co cau, hoat dong, nhung co hoi va thach thuc den nam 2020 Ministry of Industry VVDF No.5 Xuat nhap khau Viet Nam: Danh gia co cau, hoat dong, co hoi va thach thuc Ministry of Industry VVDF No.6 Street children in Vietnam: Interactions of old and new causes in a growing economy Duong Kim Hong & Kenichi Ohno E, VVDF No.7 US technical barriers to trade and Vietnamese seafood exports Tran Van NamE, VVDF No.8 From material zone development to rural industrialization Pham Quang Dieu & Nguyen Trung Kien EVDF Discussion Papers No. 9 Iron and steel industry in Vietnam: A new phase and policy shift Nozomu KawabataE, VVDF No.1Vietnam at the crossroadsKenichi OhnoE, VVDF Policy

otes No.2 Supporting industries in Vietnam from the perspective ofJapanese manufacturing firms VDFE, J, VVDF Tokyo Reconsidering Vietnam's exchange rate mechanism: A preliminary discussion Kenichi Ohno &Nguyen Chi Thanh E, VVDF Dollarization in Vietnam by economic sectors Nguyen Thi HongE, VVDF Rural finance in VietnamYoichi IzumidaE, VVDF Institutional arrangements for long-term growth Do Duc Dinh, Kenichi Ohno &Nguyen ThiThanh Huyen E, VVDF Issue Papers & Drafts Is there a developmental threshold for democracy? Endogenous factors in the democratization of South Korea Nguyen ThiThanh Huyen E, VVDF 4 Chinas steel market and implications for Vietnam Nozomi KawabataE, VVDF Electronics SCMJunichi MoriE, VVDF The economic development of Japan: The path traveled by Japan as a developing countryKenichi OhnoE, V VDF/VDF Tokyo Improving industrial policy formulation Kenichi Ohno &Nguyen Van Thuong (eds.) E, VVDF Which institutions are critical to sustain long-term growth in Vietnam? ADB&VDF (eds.) E, VVDF Tang truong kinh te Viet Nam: Nhung rao can can phai vuot qua Nguyen Van Thuong (ed.) Vn.a Industrial policy formulation in Thailand, Malaysia, and Japan Kenichi Ohno (ed.)E, VVDF Business Environment and Policies in Hanoi Kenichi Ohno & Nguyen Van Thuong (eds.) E, VVDF Lich su nhin tu quan diem sinh thai hoc: Van minh Nhat Ban trong boi canh the gioi Nguyen Duc Thanh & Bui Nguyen Anh Tuan (translated) VVDF Technical efficiency and productivity growth in Vietnam: Parametric and non-parametric analyses Nguyen Khac Minh & Giang Thanh Long (eds.) EVDF Building supporting industries in Vietnam (Volume 1) Kenichi Ohno (ed.)E, V VDF/ VDF Tokyo Social issues under economic transformation and integration in Vietnam (Volume 1) Giang Thanh Long & Duong Kim Hong (eds.) E, V VDF/ VDF Tokyo Social issues under economic transformation and integration in Vietnam (Volume 2) Giang Thanh Long (ed.)EVDF For sound development of the motorbike industry in Vietnam Motorbike Joint Working Group E, VVDF Master plan of Vietnam motorcycle industry for the period of 2006-2015 vision towards 2020 MOIT, ISPE, VVDF Books Quan ly, day nghe va giao duc, phuc hoi nhan cach cho nguoi sau cai nghien: Van de va kinh nghiem o TP. Ho Chi Minh Tran Nhu &Ho Ba Tham (eds.) VVDF No.1 VAR analysis of the monetary transmission mechanism in Vietnam Le Viet Hung &Wade D. Pfau EVDF No.2 Abnormal returns after large stock pice changes: Evidence from the Vietnamese stock marketPham Vu Thang LongEVDF Working Papers No.3Do stock prices in Ho Chi Minh City trading center have unit roots? A discussion on power of ADF F test Tran Viet HaEVDF 5 with unexpected initial value No.4 Empirical analysis of stock return volatility with regime change using GARCH model: The case of Vietnam stock market Vuong Thanh LongEVDF No.5 Technology spillovers from foreign direct investment in Vietnam: Horizontal or vertical spillovers? Le Quoc Hoi &Richard Promfret EVDF No.6 The difference in development stages and the costs of monetary union A new open economy macroeconomics model Vu Tuan KhaiEVDF No.7 The vulnerability of the elderly households to poverty: Determinants and policy implications for Vietnam Giang Thanh Long & Wade D. Pfau EVDF No.8 Diversification of finance resources for transport development in Vietnam Luu Hoai SonEVDF No.9 The effects of ODA in infrastructure on FDI inflowsin provinces of Vietnam, 2002-2004 Pham Thu HienEVDF No.10 Industrial policy as determinant of localization: The case of Vietnamese automobile industryNguyen Bich ThuyEVDF No.11 The impact of a common currency on East Asian production networks and China's export behavior Mizanur RahmanEVDF * VDF: http://www.vdf.org.vn/download.html VDF-Tokyo: http://www.grips.ac.jp/vietnam/VDFTokyo/download.html Note: E English; J Japan; V Vietnamese 6 The Fourth VDF-Tokyo Conference on the Development of Vietnam Tokyo, Saturday 9 August 2008 PROGRAM TimeEventPresenterVenue 09:00 - 09:45Registration 09:45 -10:00 OpeningandIntroducingVDFand VDF-Tokyo Mr. Giang Thanh Long (GRIPS/ VDF)

Room 3C

MORNING SESSION 10:00 - 11:00 IndustrialStrategyforVietnam'sNew Era:PolicyContentandFormulation Method Prof. Kenichi Ohno (GRIPS/VDF)11:00 - 12:00 FinanceandEnterpriseSectorReform in Vietnam Mr. oritaka Akamatsu (The World Bank, Vietnam) Room3C 12:00 - 13:15Lunch Reception1F Canteen AFTERNOON SESSION Chairperson: Prof. Kenichi Ohno (GRIPS/VDF)13:30 - 14:15 Poverty,InequalityandEthnic Minorities in Vietnam Dr. Katsushi Imai (University of Manchester) 14:15 - 15:00 DemographicChangesandthePension FinancesinVietnam:ALong-term Stochastic Actuarial Assessment Prof. Wade D. Pfau (GRIPS)

Room3C

15:00 - 15:20Tea break and one-page presentation display3rd floor corridor Vietnam Development Forum TOKYO 7 15:20 - 16:05 The Economics of Not Using the Health InsuranceCard:ACaseStudyof Vietnam Mr. guyen Trong Ha (Australian National Univ.) 16:05 - 16:50 TheRevolutionofVietnamese Distribution System Dr. Le Viet Trung (Kobe University) 16:50 - 17:25 General Exchange of Ideas and Information

17:25 - 17:30Closing Remarks Prof. Kenichi Ohno (GRIPS/VDF) Room3C MORNING SESSION Industrial Strategy for Industrial Strategy forVietnam Vietnam s New Era: s New Era:Policy Content & Formulation Method Policy Content & Formulation MethodKenichi Ohno (VDF/GRIPS) Kenichi Ohno (VDF/GRIPS)August 2008 August 2008Topics Vietnams challenge creating internal value in manufacturing A proposal for the Vietnam-Japan strategic partnership for joint monozukuri A need for serious reform in policy formulationVietnams New Challenge Vietnam is entering a new era where productivity breakthrough and value creation are needed. Opening up and receiving FDI can attain middle income ($1,000+), but higher income ($10,000+) requires good policyand private dynamism. Vietnams future depends on:--Creation of internal source of growth--Coping with new social problems--New macroeconomic managementPer Capita GDP in 2004 ( PPP) World Bank data0 5000 10000 15000 20000 25000 30000 35000Hong KongJapanTaiwanSingaporeBruneiS KoreaMalaysiaThailandChinaPhilippinesIndonesiaVietnamCambodiaPNGMongoliaLaosN KoreaMyanmarEast TimorGreen: participants in East Asian production network0100200300400500600100 1000 10000 100000Governance, WGI 2005 Governance, WGI 2005 Governance, WGI 2005 Governance, WGI 2005Per capita income ($PPP2004, log scale) Per capita income ($PPP2004, log scale) Per capita income ($PPP2004, log scale) Per capita income ($PPP2004, log scale)Sin HkgJpnTwnS KorBruMalThaiMongPhilChinaVNE TimorIndo CambPNGLaoN KorMyaDiversity in Governance and Economic DevelopmentSources: Compiled from World Bank, Worldwide Governance Indicators, Sep. 2006; and World Bank, World Development Indicators, 2006. High correlation (0.90) but causality cannot be argued from this diagramOnly circled economies participate in regional dynamismDifferent Speed of Catching Up0%20%40%60%80%100%195019551960196519701975198019851990199520002005JapanTaiwanS. KoreaMalaysiaThailandIndonesiaPhilippinesVietnamPer capita real income relative to US(Measured by the 1990 international Geary-Khamis dollars)Sources: Angus Maddison, The World Economy: A Millennium Perspective, OECD Development Centre, 2001; the Central Bank of the Republic of China; and IMF International Financial Statistics (for updating 1998-2006).STAGE ONESimple manufacturing under foreign guidanceSTAGE TWOHave supporting industries, but still under foreign guidanceSTAGE THREETechnology & management mastered, can produce high quality goodsSTAGE FOURFull capability in innovation and product design as global leaderVietnamThailand, MalaysiaKorea, TaiwanJapan, US, EUAgglomerationCreativityGlass ceiling for ASEAN countries(Middle income trap)Catching Up ProcessInitial FDI absorptionInternalizing parts and componentsTechnology absorptionInternalizing skills and technologyInternalizing innovationLessons fromThailand and Malaysia Success Impressive industrialization and growth led by FDI and reasonable policy Failure Domestic private-sector capability is still weak after many decades Foreign dependencyinability to send foreign managers home Value and capability are not internalizedmiddle income trap Risk of wage pressure and FDI shift to China/India/VietnamVietnams Changing Sources of Growth Doimoi to mid 1990sliberalization effect Mid 1990s to nowexternally driven growth with large inflows of investment, capital and aid From nowcreation of internal value!-2-10123456719901991199219931994199519961997199819992000200120022003200420052006ICORTFP change (%)Proposed Strategy for 2020Building 3 pillars of industrial strength-Supporting industries-Industrial human resource-Efficient logisticsSolvingsocial issuesProper macromanagementConcrete targetsand action plansReform of industrialpolicy formulationLearning integralmanufacturingEffective use ofcapital inflows & ODAPreconditions for industrializationInternal Sources of Manufacturing Strength Supporting industriesSME promotion (HRD, technology, management, finance), inviting FDI parts makers, industrial standards, quality standards and testing, factory doctors, FDI-local matching service, promoting SME networking, trade fairs & reverse trade fairs, database Industrial human resourceVocational schools & training centers, Meister system, curriculum reform, overseas education & training, incentive for brain return Efficient logisticsTransport & telecom infrastructure, efficient ports & airports, trucking service, cargo handling centers, trading companies, modern distribution network, warehouse, customs and tariff systemsMalaysias Manufacturing++Malaysias IMP3 (1996-2005) aimed at raising and broadening the value chainLeveling up of each industrial cluster-Core production-Supporting industries-Supporting services-Human resources-Logistics-R&DEndless pursuit of quality Quick results and flexibility MeritsLong-term relations, building internal skills & knowledgeOpenness, quick decision making, flexible outsourcingInstitutionalrequirementsIt takes much energy and time to achieve resultsNo differentiation, excess entry, low profit, lack of R&DDemeritsEach product has unique parts, specifically designedParts are common and can be used for any modelParts interfaceIntegral manufacturingModular manufacturingPerformanceTime TimePartnership PossibilitiesFrom the Viewpoint of Business ArchitectureSource: compiled from Prof. Takahiro Fujimotos explanation to the Joint VDF-MOI mission, June 2005.Japan=ASEAN (integral) and USA=China (modular) can form effective partnershipVietnam-Japan Monozukuri Partnership for Supporting IndustriesFor Leveling Up Vietnams Competitiveness in the Age of Deepening IntegrationA VDF Proposal This proposal is based on VDFs past studies on specific industrial sectors, supporting industries, and policy formulation methodology. It was drafted in June 2008 at the request of Japanese Ambassador Mitsuo Sakaba (still confidential). It is one of the ideas guiding the new bilateral program, which is in the formation stage.Vietnam-Japan Cooperationin the Past Japan has contributed to VNs industrialization through trade, FDI, ODA and policy dialogue Contribution of Japanese ODAInfrastructure (esp. transport & power)Skills and human resourcesInstitutional reformsImproving business environmentUrban & regional planningRemoving negative impacts of growthPoverty reduction Action-oriented bilateral policy dialogueIshikawa Project (1995-2001)New Miyazawa Plan (1999)VN-Japan Joint Initiative Phase 1, 2, 3 (2003-09)New Direction of Vietnam-Japan Cooperation Vietnam is no longer a low-income transition country. Bilateral cooperation should be more equal and strategic. Cooperation should gradually shift from removing negatives and providing basic conditions to proactive creation of the new source of competitiveness. VDF proposes Vietnam-Japan strategic partnership for internal value creation. Sakichi Toyota1867-1930Konosuke Matsushita1894-1989Soichiro Honda1906-1991Akio Morita (Sonys co-founder)1921-1999 Monozukuri literally means making things in native Japanese. Pursuit of high quality and customer satisfaction as the primary goal, with pride and dedication. Many of Japans excellent companies were founded by engineers full of monozukuri spirit.The Concept of MonozukuriJapanese Style Skill-based ManufacturingMonozukuri cont. Long-term relationship and skill & knowledge building within companies and among companies (assemblers-suppliers). Strong demand for 5S, QCD (quality-cost-delivery), kaizen, just-in-time, quality control, and other efforts for constant improvement.The Purpose Establish bilateral partnership to jointly produce high skill products through division of labor:Japan capital- & knowledge-intensive monozukuri processesVietnam labor-intensive monozukuri processes- Over time, as Vietnams skill improves, transfer more knowledge from Japan to Vietnam- The foreign partner (Vietnam) should work closely with Japan, rather than just copying Japanese products or infringing on IPR.Vietnams Challenge Large inflow of ASEAN products (esp. Japanese brands) may destroy VNsindustrial base including FDI producers (Daihatsu, Sony). The risk of becoming a low-value, simple product producer, or losing FDI to cheap labor countries. In the near future, VNs wage too high for labor-intensive industries, but technology too low for knowledge-intensive industries? Vietnam needs a strategic alliance to level up internal capability.Japans Challenge Japan has high technology, but faces high wages and ageing population. The 2007 Problem - Postwar baby boomers (born 1947-49) with high skills began to retire in 2007. Young workers are in shortage. Situation will only get worse as time goes by. Japan needs a young developing country as a reliable partner in integral manufacturing The inheritors of monozukuri tradition must be found both domestically and abroad.Proposed Features ofMonozukuri Partnership Resetting the mindset Vietnamese managers and workers must be more aggressive in learning and marketing Technology transfer and capacity building Commitment to international standards quality, safety, environment, intellectual property Positioning in the global value chain jointly specializing high skilled processes and outsourcing other inputs Reforming policy methodology Non-exclusivity (win-win-win) other countries can also enjoy the benefits of this partnershipImportance ofSupporting Industries Supporting industry promotion is the first important step to realize the vision of monozukuri partnership. Assembly-type manufactured products large part cost (80-90%) vs. small assembly labor cost (5-10%). Without quick access to domestic suppliers with QCD, assemblers cannot compete (added transport cost + long lead time). ASEAN4 have been promoting supporting industries for a long time, but with limited success in creating non-FDI suppliers.The Concept and Scope of Supporting IndustriesMITI 1985 First official use of the term supporting industries (susono sangyo)Ichikawa 2005 Survey and scope of SI (included in VDFs Industry Book)VDF survey on VNs supporting industries (2006)Thuy 2007 Concepts, scope, international experiences (included in VDFs SI Book vol.1) Sectoral vs. horizontal definition (by industry or by process)? VDFs working definition a group of industrial activities which supply intermediate inputs (i.e., parts, components, and tools to produce these parts and components) for assembly-type or processing industries (Thuy 2007, p.38E)Mr. Kyoshiro Ichikawas Memo(JICA Expert at MPI) Definition - Supporting industries include (i) production of parts for final products; (ii) processing and treatment of such parts; and (iii) processing and treatment of materials for producing such parts.Promotion measures Supporting industry producersPrivate SMEsEduc. & training of managers; tech. transfer (subsidies); SME financeSOEs VietnameseTaiwanese & othersFDI promotion, tax incentives, industrial parks (for SI)Japanese FDI Human resource common issue for FDI and local firms: (i) top management; (ii) middle managers;(iii) workersThe Concept of Supporting IndustriesSuggested Policy Menu The following policy menu is constructed from:- ASEAN4 experiences (MITIs New Aid Plan 1980s, Mizutani Report for Thailand 1999, UrataReport for Indonesia 2000)- Vietnams Supporting Industry M/P 2007, Motorbike M/P 2007- Opinions of Japanese and Vietnamese experts This list is intended to be a reference for further discussion only.Policy Menu for Supporting Industry Promotion(A tentative list for discussion)Policy areaMeasures 1. Capacity building (for specific firms) - Shindanshi (enterprise evaluation) system - TA for management and technology - Large-scale mobilization of retired Japanese engineers - Intensive support for limited sectors (e.g., die & mold) - Awards, PR and intense support for excellent suppliers 2. Human resource (general or institutional) - Management/technical centers and programs - Large-scale mobilization of retired Japanese engineers - Alliance between FDI firms and local universities/centers - Monozukuri school (to be upgraded to university) - Meister certification system 3. Finance- Credit guarantee - SME finance institutions - Two-step loans 4. Incentives- Exemption or reduction of taxes and custom duties - Grants or loans for specified actions Policy Menu (cont.)5. Linkage- Database and matching service - FDI-vendor linkage program - Parts Industry Association and Business Study Meetings - Trade fairs and reverse trade fairs - Linkage with Taiwanese suppliers (motorcycles, electronics) - Improving logistics between Hanoi and HCMC 6. FDI marketing- Creation of strategic industrial clusters - Industrial parks and rental factories - Efficient logistics and infrastructure - FDI marketing targeted to specific sectors or companies 7. Policy framework- Supporting industry master plan - SME law - SME ministry - Business associations and industry-specific institutes - Quality standards and testing centers Next Steps Proposed by the Japanese SideJapan (EoJ, JICA, JETRO, experts) and Vietnam (DPM Hai, MOIT, VCCI) will set and implement concrete action plans. VDF will support both sides. Sep.2008 Kick-off Meeting for Supporting Industry Action Plans (Hanoi, hosted by VCCI) - agreed Jan.2009 Finalization of Action Plans and initiation of implementation - agreed Action Plan time scope:End 2009 Short-term actions2013 Medium-term actions2020 Long-term actions Action Plan also linked with:- Vietnam-Japan Joint Initiative Phase 3 (2008-09)- Bilateral cooperation after the conclusion of Vietnam-Japan EPA (soon?)Serious Reform in Policy Formulation Needed For continued industrialization for higher income, Vietnam needs a fundamental reform in policy formulation. Minor changes of the current system are not enough. Government trap low efficiency, low morale, low salarybrain drain from the public sectorlow-quality policies Strong political will and risk-taking at the top level (Prime Minister) is needed to initiate such reform.VNs Policy Process Is One and OnlyK OhnoVietnamNet Interview (May 13&15, 2008) VNs high growth owing to good location and good workers; not because of good policy. Industrial strategies are (i) not based on private sector voices; and (ii) not implemented because details are not given. These are unique weaknesses in VN not seen in other countries. The same people from planning years are still in charge. I propose a technocrat group directly under PM, as seen in many E Asian countries. There are too many public-sector research institutes which fail to produce useful policy analyses. There should be competition among policy-oriented research institutes to convince policy makers and general public.Vietnam: Traditional M/P Drafting Process Prime MinisterMinisterDraftingTeamMPI & otherMinistriesInter-ministerial reviewInternal reviewOrderSubmitReview for approvalSubmitBusiness CommunityInternationalexpertsTechnical assistance(sometimes)No permanent channel for continuous policy dialogue(case-by-case, temporary, ad hoc)Appeal letter to Prime Minister when problems ariseContact Ministry when necessaryInterviews, symposiums (sometimes)GovernmentMPI & otherMinistriesDataPolicy Formulation for Vietnam:A Proposal- Elite technocrat group under strong leadership of Prime Minister- Choose young, well educated officials and experts- Simplify policy authority and procedurePrime MinisterTechnocrat Group(Policy Maker)Direction, full authority for policy makingFaithful execution and reportingPolicy, guidance and monitoringFaithful execution and reportingMinistries (Policy Implementers)ExpertsDonorsMulti-layered ModelMalaysiaOrganization for drafting Industrial Master PlanMalaysia:Drafting of Industrial Master Plan 2006-2020 (IMP3)Business opinions reflected through TRGs and brainstormingIPC: Industrial Planning Committee (headed by MITI Minister)SC: Steering Committee (headed by MITI high official)TRGs: Technical Resource Groups (headed by various experts)Central Coordination Model: Thailand under Thaksin 2001-06StrongPrime MinisterPolicy directionto be concretizedRelevantMinistryExpertsPrivateSectorIndustry-specificInstituteDirectinputsIndustry-specificCommitteesOrder Master plans Policy actionsPowerful & Intelligent Top Leader Ethiopia under PM Meles Zenawi (1991-now)StrongPrime Minister

Vision - ADLI 1991 (Agri.Dev. Led Industrialization)Agricultural Strategy 2002Industrial Strategy 2003Other sectoral strategiesMedium-term strategies3-year budget frameworksLeather M/P (UNIDO, Italy)Garment M/P (UNIDO)Flower M/P (Dutch support)Annual budgets & reviewsAdvising PM: EDRI, Economic Ministers?Ministries as implementing bodiesUsing Individual donors to execute specific projectsUNIDO Italy Nether.MoTI MARD-Advice by Stiglitz-Doing PhD in UK-Writing books?Top-down DecisionsMoFEDUnder New Policy StructureVietnam Should Achieve: Strong top-down visions from PM; sufficient authority for technocrats to execute orders Action-oriented policy making with speed and flexibility Removal of bureaucratic formalism & inaction, nepotism, corruption, secrecy Public sector - competitive recruitment, sufficient salary, internal promotion mechanism, pride to serve the countrySummary of Policy Advice Reform policy formulation greatly, by creating a technocrat group under Prime Minister. Draft an overall industrial master plan with concrete goals and action plans up to 2020. Vietnam-Japan Monozukuri Partnership should be an important part of this 2020 vision.Financial and Enterprise Reform in VietnamAugust 2008Tokyo, JapanNoritaka AkamatsuThe World BankAgenda Landscape of Vietnams financial sector Banking sector reform and development Landscape of the banking sector Enhanced banking environment WTO commitments in the banking industry Outstanding issues and challenges Capital market development and SOE Equitization Stock market development SOE equitization and SCIC Institutional investors and bond market Recent macroeconomic turbulences, policy responses and challenges aheadLandscape of Vietnams financial sector Bank assets 150% of GDP (VND 1,872 trillion) of which credits are 90~95%. 5 state-owned commercial banks (SOCBs) with 4 large ones occupying 55% of the banking sector in credits; 36 joint stock banks (JSBs) with 30% market share, 5 joint venture banks, and 37 foreign bank branches. 12 finance companies and 13 leasing companies Stock market capitalization 20% of GDP with 300 listed companies.About 3,000 unlisted public companies. 124 securities companies (84 in operation) and 34 asset management companies managing VND 51 trillion. Market cap surpassed 40% of GDP in mid 2007 but subsequently declined to the half despite continued listing. 22 lifes and 9 non-lifes with total assets VND 58 trillion.Banking sector reform and developmentSnapshot of the banking sector in Vietnam 5 SOCBs with 4 large ones including Vietcombank.The asset size varies VND 170 ~ 320 trillion. The asset quality and capital adequacy vary. 36 JSBs.The asset quality appeared good, and capital, adequate. But since 2007, they grew unreasonably fast. The asset size of leading JSBs up to VND 80 trillion. Minimum cap: VND 1 trillion, and VND 3 trillion by end 2009. 15 new applications by major enterprise groups. 37 foreign bank branches and 5 J/V banks.100% foreign-owned subsidiary permitted but approved slowly. 30% credit growth till 2006.But from April 07, 63%, with much flowing into the real estate.SBV is tightening the liquidity and credit growth to cool the inflation.Enhanced banking environment Inter-bank payments system (IBPS) Core banking systems adopted by 13 banks Fast spreading ATMs (5,000), networks being integrated. Smartlink and Banknetvn connection signed. Card switching center/clearing house in preparation. Gradual de-dollarization and increasing non-cash payments Government trying to use non-cash payments. Deposit insurance Credit Information Center Gradually leveled playing field for foreign and domestic banks High growth of JSBs and gradual restructuring of SOCBsWTO commitments in the Banking industry Leveling the playing field between foreign and domestic banks. Already open for cross-border services and consumption. Gradual liberalization of commercial presence / FDI: A 100% foreign-owned subsidiary (from April 2007) or a J/V bank can be created by foreign banks with more than $10 billion assets. A branch can be created by foreign banks with more than $20 billion assets. Foreign equity participation in a local bank (SOCB or JSB) is permitted up to only 30%. Foreign bank branch is now permitted to have ATMs and other transaction points outside the branch itself ? Foreign banks are allowed to issue credit cards. Foreign bank branches are allowed to take VND deposits only gradually (full national treatment from January 2011).100% foreign-owned subsidiaries will not be subject to this rule.Outstanding issues and challenges Still under-banked population (10%) particularly in rural areas. Slow SOCBs equitization, NPL resolution and lack of transparency. Too high growth of JSBs with exposure to real estate market and likely generation of new NPLs. Still low rate of adoption of core banking systems. Need to monitor the performance of individual loans to apply Article 7 of Decision 493 and Decision 457. Under-developed and volatile money market, resulting skewed allocation of liquidity and high service charges. Financial conglomeration, and attempts to establish new banks by major SOE groups. Need consolidation (M&A) and growth to compete and survive. Lack of skilled human resources.SOCB equitization NPL resolution & recapitalization Vietcombank, 14.4% (2007); BIDV, 3.6% (2007); Agribank, 7~16% (2006); and Vietinbank, ?? Clean up the balance sheet (sale of NPLs, provisioning, writing off, etc.) and recapitalize them before equitization (with governmentbonds, convertible bonds/subordinate debt, new equity, etc.). The single foreign investor cap at 15% (20% with PMs approval).Total foreign investment cap at 30%.The State will retain 51%. Land use rights not included in the balance sheet of SOCBs whilebuildings already depreciated (i.e., modest fixed assets). Manageable fiscal cost, but dont allow moral hazard. Restructuring & institutional capacity building Enhance the corporate governance. Centralize the credit decision making. Upgrade MIS and train staff.SOCB equitization continued Vietcombank failed to attract strategic investors. Too aggressive valuation. BIDV, Incombank and VBARD have been given recap of VND 11 trillion while issuing subordinate debt and writing off bad loans. Issued sub-debt in 2006 and 2007 (Vietcombank issued convertible debt in 2005). BIDV: VND 3.4 trillion; Vietinbank: VND 3 trillion, in government bonds/cash.VBARD will need more. Land use rights not included in the value of SOCBs. Except BIDV (and Vietcombank after IPO), other SOCBs have not disclosed IFRS-audited financial statements. Core banking system is needed to enable loan classification according to Art. 7 of Decision 493.Otherwise, it will continue to be difficult to value for equitization. Incombank and VBARD are behind the schedule.Strategy of some foreign banks Different types of strategic foreign investors Long-term partner vs. return-focused medium-term investor Wholesale banking-focused (i.e., branch-based) vs. retail-focused (i.e., investing in JSB or SOCB) For equitization, should SOCB find a long-term partner or return-focused medium-term investors?Need to avoid a loan buyback provision, and to do so, clean up the balance sheet. ANZ has a stake in Sacombank, HSBC in Techcombank, Standard Chartered in ACB, Sumitomo Mitsui in Eximbank, Deutsche in Habubank, Societe Generale in SeA Bank, OCBC in VP Bank, UOB in Southern Bank, Maybank in An Binh Bank, Many have applied for establishing a 100% subsidiary. Many have two branches, in Hanoi and HCMC. Are they also interested in investing in SOCBs?Seemingly, yes.Why? Valuable options.JSB development Two types: Larger and competitive JSBs, 9 with foreign participation. State controlled or small regional JSBs. Can the former grow to survive by aggressive capital increase and expansion? Too aggressive credit growth though good capital. What if their foreign partners want to establish a 100% owned subsidiary instead? ANZ, HSBC, Standard Chartered and more? How will the latter survive? Already in liquidity shortage amid SBVs tight monetary policy. Consolidation through merger with larger banks?Partnership with foreign banks? SOE groups (EGs and GCs) are trying to establish banks.Are more JSBs needed?Bindings on SOEs creation of banks Bank governance rules (Decision 24, June 7, 2007) 20% maximum for a single institutional shareholder. Minimum of 100 shareholders including three with at least VND 2 trillion in assets=>a public company required to disclose audited financial statements periodically. Shareholders are not allowed to sell their stakes in the first three years (founding shareholders, five years). Prudential rules Connected lending limit Single borrower exposure limit Competition law Limit on excessive concentration of economic power. Transparency requirement for affiliated party transactions and transfer pricing. SBV should be able to reject an application on the ground of lack of necessity or inadequate business plan.ButSOE Equitization and Capital marketsCapital markets and their participants Stock market capitalization jumped from 2% of GDP at 3Q 2006 to 40% in mid 2007 before it declined to 20% today. Massive listing toward the end of 2006.Listing continued throughout 2007 to reach nearly 300 now. Equitization produced over 3,000 public companies. The number of securities companies jumped from 14 in 3Q 2006 to 124 (84 of which are in operation) in 1Q 2008. 34 investment management companies managing 4 closed end public funds, 16 membership funds and hundreds of private customer funds (VND 51 trillion in total). 22 life insurance companies, 9 non-lifes and 1 reinsurance company (and 8 insurance brokers) manages VND 58 trillion assets.Market infrastructure and institutions Securities Law issued in June 2006 and became effective in January 2007 to replace Decree 144. Re-established the State Securities Commission as part of MOF. Required all public companies to disclose audited financial statements annually. State Securities Commission (SSC) The regulatory and supervisory authority. Currently registers unlisted public companies but has not been able to capture all (about 1,000 out of 3,000). Ho Chi Minh Stock Exchange (HoSE) and Hanoi Stock Trading Center (HaSTC). HoSE for larger companies and HaSTC for smaller companies and bonds.But HaSTC lists some important companies. Does Vietnam need two stock markets??Market infrastructure and institutions continued Vietnam Securities Depository (VSD) Houses all publicly traded securities including both stocks and bonds (incl. government bonds). BIDV has been serving as the settlement bank. Risky for both market participants and BIDV if BIDV has to take the settlement risk or counterparty credit/liquidity risk. Investors are required to submit securities / payments ahead of trading.It eliminates the risk of default but at large cost / inconvenience for investors. Government bond market needs to move to real time gross DVP settlement (preferably CPSS Model 1). The money settlement function needs to be transferred from BIDV to SBV, and VSD needs to be linked with Inter-Bank Payments System (IBPS) for real time gross DVP. The SBV needs to provide a flexible / inexpensive intraday overdraft facility.=>Need coordination with Monetary Policy.Challenges ahead Enforcement of Securities Law and regulation. Information disclosure by public companies.The capacity and expertise of the auditing industry cannot meet the demand of thepublic companies while the latter lacks awareness of the need tocomply with this rule. Transfer of public company registry from the SSC to VSD. E-disclosure system to reduce the compliance cost for public companies. Consolidation of small securities companies into larger, well capitalized ones capable of underwriting large scale public offerings. Need to permit securities companies to offer short-selling, securities lending and margin account services but only after consolidation. Need strong corporate governance and Chinese WallChallenges ahead continued Time to revisit the Securities Law and the status of the SSC. Should the SSC be made an independent agency? Should there be two exchanges? Rudimentary market infrastructure needs fundamental upgrading to cope with the increased volume and support investment needs of market participants. HoSE needs remote access and continuous auction market. VSD needs to support securities lending, repo clearing, collateral management with mark-to-market valuation. Integrated supervisory infrastructure required (e.g., automated market surveillance system, e-disclosure system for public companies, e-registration system for licensed market professionals, etc.) New instruments, new trading rules, etc.: Derivatives (index, FX, interest rate/Government bonds) Short-selling, securities lending, margin account SecuritizationEquitization Nearly 4,000 SOEs have been equitized, leaving about 1,500 in the hands of the State. Yet, the State assets privatized are only about 20%, leaving about 80% in the hands of the State.I.e., mostly smaller SOEs have so far been equitized (exceptions, Bao Minh, Vietcombank) In order for a business to be listed in the exchanges, It must be a public company under Securities Law It must have sold at least 20% shares to the public. Equitization does not provide full clarity as to what assets will be included in the balance sheet (particularly with respect to real estate). Causing a loss to the State through a sale of State assets is a crime under Vietnamese law.Vietcombank equitization Failed to attract strategic investors ahead of IPO Reportedly, the asking price was too high (VND 100,000?). VAS-based financial statement made valuation difficult (e.g., NPLs based on Art. 6 of SBV Decision 493) while assets to be included in the balance sheet were not made fully clear. IPO set a very high price (VND 107,680).According to HSBC, the price represented PER of 87. Vietnams regulation requires that strategic sale after IPO not be priced below IPO price. Few strategic investors, if any, would be willing to pay. Many JSBs, which eagerly awaited to follow after a successful equitization of Vietcombank, postponed IPOs and listing.Set an awkward precedent for other SOCBs.Role of SCIC State holding company having state stakes in equitized enterprises. Have State stakes of about 1,000 equitized enterprises and is expected to have about 1,500. Most of those are controlling stakes, which makes SCIC different from a conventional portfolio investor. Modeling after Temasek of Singapore or Khazanah of Malaysia but also bearing characteristics of privatization funds in Eastern Europe and former Soviet states. Optimize the value of the strategic assets of the State. Sell non-strategic assets, contract the portfolio size in terms of number of enterprises and focus on building the value of strategic ones Participate in the corporate governance of enterprises, promote sound corporate governance and restructuring.A challenging task.Equitization and challenges ahead Vietnams investor base is thin. Small institutional investors and contractual savings institutions. Offering of large SOEs would put a sell pressure on the market, depressing the price and causing indigestion. Need traffic control in IPOs. Need to sell to strategic investors, and to do so, need to create conditions friendly for them. Strategic placement before IPO. IFRS-based financial statement. Negotiated sale, even if its price turns out to be lower than subsequent IPO, should not be viewed as a loss made to the Sate and, therefore, a crime.Recent macroeconomic turbulences, policy responses and challenges aheadRecent macroeconomic turbulences Accelerating inflation (27%) and suddenly large trade/ current account deficits (latter 10% of GDP). The global inflation in commodities including oil, steel, cement, food and agricultural products fueled by the domestic demand and chronic excess liquidity in 2007. Aggressive public sector investment through SOEs in infrastructure fueled local demand amid deteriorating investment efficiency (ICOR).Q. Surprising?? SEDP aims to invest 41% of GDP while Vietnams gross domestic savings have been around 32%.Vietnam was by design expected to have a current account deficit worth 9% of GDP despite expected strong remittances.=>The trade deficit was expected to be substantially larger than the current account deficit.Inflation and capital flows Despite the massive trade account deficit, Vietnam has been accumulating FX reserves due to massive capital inflows since 2006 (due to the anticipation of WTO accession?). Remittances (reducing the current account deficit). FDI, FPI, ODA, global bond issue, cross border borrowings by FDI firms and foreign banks. Particularly FDI (USD 21 billion in 2007, USD 44.5 billion through July 2008) for the economy of USD 70 billion GDP (although disbursement is less and comes with a time lag). VND exchange rate peg to USD created Impossible Trinity. The strong expansionary pressure on VND liquidity fueled the massive credit growth (63% in 1Q 2008). SOCBs, 24%.JSBs, over 100% (crazy!) The credits had flown into the real estate market.Policy responses and challenges ahead Monetary tightening Contractionary monetary policy since early 2007 Tightening of the prudential rules (SBV Decision 457) and Directive 03 of 2007 to limit the credit flow into stock market. Tight liquidity with interest rate cap (lending rate 21%). Fiscal austerity measures Cut inefficient projects while postponing not urgent ones. But must avoid over-killing Real estate market is said to have declined by 60% (Really?).Likely under collateralization. Critical infrastructure service providers, export sector Banking sector making barely any money if not losing money with the tight interest rate spread. Interest cost could dent corporate earnings while causing NPLs in the banking sector.Policy responses and challenges ahead continued Currency crisis unlikely (NDF not a good indicator).But some pressure on VND possible to continue due to the inflation and strong imports. In short-run, FDI inflows will be key. In long-run, The export sector must be strengthened while import substitution needs to be promoted; and The domestic long-term savings must be mobilized with institutional investors and contractual savings. Bond market (as well as the stock market) must be developed.Thank you. AFTERNOON SESSION 34 Poverty, Inequality and Ethnic Minorities in Vietnam* Katsushi Imai Department of Economics, School of Social Sciences, University of Manchester, UK E-mail: Katsushi.Imai@manchester.ac.uk Raghav Gaiha Faculty of Management Studies, University of Delhi, India E-mail: rgaiha@camail.harvard.edu Corresponding Author: Katsushi Imai (Dr) Economics, School of Social Sciences University of Manchester Oxford Road, Manchester M13 9PL, UK Phone: +44-(0)161-275-4827; Fax: +44-(0)161-275-4928; E-mail: Katsushi.Imai@manchester.ac.uk Abstract Thepresentstudyexamineshowandwhyethnicminoritiesarepoorerthanethnic majoritiesinVietnamusingtheVHLSSdatafor2002and2004.First,theanalysis confirms that households belonging to theethnicminority groups are not only poorer but alsomorevulnerabletovariousshocksthanthoseintheethnicmajoritygroups,namely theKinhandtheChinese.Second,householdcomposition(e.g.dependencyburden), education,landholding,andlocationareimportantdeterminantsofexpenditureand poverty,whilstthereissomediversityamongdifferentethnicgroups.Finally,the decompositionanalysesrevealthattheethnicminoritiesarepoorernotnecessarily becausetheyhavemoredisadvantagedhouseholdcharacteristics(e.g.educational attainmentorlocation),but,moreimportantly,becausethereturnstothecharacteristics aremuchlowerforethnicminoritiesthanformajorities.Governmentpoliciestoreduce structuraldifferencesbetweenethnicmajoritiesandminoritiesareimperativetoaddress the disparities in returns to endowments between them. * This paper is based on the project authors carried out for the Asia and Pacific Division of the IFAD, under the overall supervision of Dr. Ganesh Thapa, Regional Economist for Asia and the Pacific region. The first author acknowledges the support from the University of Manchester and from Doshisha University to carry out this research. However, only the authors are responsible for any errors. 35 1.Introduction Vietnamisamulti-ethniccountrywith54ethnicgroups,eachhasitsownlanguage, lifestyleandculturalheritage.ThemostdominantgroupiscalledVietorKinh,which accountsfor86% ofthepopulationofabout84 millionandisconcentratedininlanddeltas andcoastalareas.Theyaregenerallyricherthanminoritygroups,witheasyaccessto infrastructure,healthservices,andeducation.HoaorChineseisanotherrelativelyrich groupthatalsoinhabitsmainlyininlanddeltasandcoastalareas.Inthepresentstudy,we defineethnicmajoritiesastheKinhandtheChinese,andethnicminoritiesastheethnic groups other than these, following van de Walle and Gunewardena (2001). Many studies have shownthatethnicminoritiesareconcentratedinuplandandmountainareaswhereaccessto infrastructure or health and educationalfacilitiesis limited and they are much poorer thanthe ethnicmajorities (e.g. van deWalle and Gunewardena,2001;ADB 2002;World Bank, 2004; Gaiha and Thapa, 2006; Imai, Gaiha and Kang, 2007). Indeed, the issue of poverty in Vietnam cannotbeaddressedwithoutanalysingthepovertyofethnicminorities,astheirpoverty headcountratiowas64.3%in2002,almostthreetimeslargerthanthatofethnicmajorities (22.3%) (see Table 1). The share of ethnic minorities among the poor in the whole nation rose from20%in1993to30%in2002duetopovertyreductioninethnicmajoritygroupsand poverty stagnation in the minority groups (World Bank, 2004). While the national poverty rate fellfrom58.1%in1993to37.4%in1998andto28.9%in20021,andVietnamhadalready achievedtheMillenniumDevelopmentGoalofhalvingincomepovertyby1998,poverty reduction of the ethnic minority groups is still an important policy concern. Whydisparitiesinwell-beingandinpovertyratespersistbetweentheethnicmajorities and minorities is far from obvious. It may be asked, for example, whether ethnic minorities are poorersimplybecausetheyarelocatedinremoteareasorbecausetheydonothaveenough human or physical capitals, such as education or land, or because of any structural constraints (e.g.socialexclusion)?Toaddressthisquestion,vandeWalleandGunewardena(2001) appliedtheOaxaca-Blinderdecompositionofwageinequalityintotwocomponents:onedue todifferencesinsocio-economiccharacteristicsandtheotherduetostructuralfactorsor differences in the returns to these characteristics (Oaxaca, 1973; Blinder, 1973). Their analysis wasconfinedtoexpenditureofhouseholdsmainlyinNorthernVietnamusingtheVietNam LivingStandardsMeasurementSurveys(VNLSS)in1992-1993.Theyshowthat,without communefixedeffects,aboutone-halfoftheexpenditureinequalitybetweentheethnic majorities and minoritiesis explained by the characteristic component and another half by the structuralcomponent,whilstmostoftheexpenditureinequalitycomesfromthestructural factor oncecommunefixedeffectsare takeninto accountforselectedcommuneswhereboth majorityandminoritygroupsarefound2.WeextendvandeWalleandGunewardena(2001) usingmorerecentandlargerhouseholddatasets,namely,VietnamHouseholdLiving StandardsSurvey(VHLSS)for2002and2004.First,giventhepossiblediversityamongthe ethnicminoritygroups,wewillestimatetheexpenditurefunctionseparatelyforeachethnic group. Second,we will use some recent decompositionmethods appliedto analyse persistent 1Poverty rates used here are based on the international poverty line which was devised by the Vietnamese GeneralStatisticsOffice(GSO)toreflectfoodexpenditureforanintakeof2100caloriesadayand correspondingnon-foodexpenditure.Thebasketoffoodandnon-fooditemsisdeterminedbythe consumptionpatternsofthethirdquintileofhouseholdsintermsofpercapitaexpenditure.Thepoverty lines were VND 1.16 million per person per year in 1993, VND 1.79 million in 1998 and VND 1.92 million in2002.Inthepresentstudy,weusethesamenationalpovertylineandadjustitfor2004,basedonthe annualCPI. WehavenotusedthepovertylinesdevelopedbytheMinistryofLabour,InvalidsandSocial Affairs (MOLISA), which reflect the regional disparity in rice consumption. 2They selected those communes to avoid the problem of missing regressors. We do not take this approach as we can find the same set of regressors inour largerdata (i.e. VHLSS in 2002 and 2004) for communes where either an ethnic majority group or a minority group is found 36 povertyamongthescheduledcasteandtribesinIndia(e.g.Borooah,2005;Kijima,2006; Gang,Sen,andYun,2008;Gaihaetal.,2007).Forexample,wewillcarryoutthe decomposition analysisnot onlyforexpenditureinequalitybut alsofor differencesin poverty levelsofethnicmajoritiesandminorities.Moreover,wewilldisaggregatethedecomposition of expenditure inequality and poverty differences into the effects of each explanatory variable. Ouranalysisisthusdesignedtothrowadditionallightonpersistentethnicpovertyand inequality. The rest of the paper is organised as follows. In the next section, we will first review the data,andthencommentontheestimatesofpovertyandvulnerability,andtheircorrelates. Section3discussesthemethodologyusedtoanalysepovertyofethnicminorities,including the decomposition methods. Detailed econometric results are discussed in Section 4. The final section offers some concluding remarks. 2.Data and Descriptive Statistics 2.1. Data3 MostofthepovertyassessmentsinVietnamarebasedonVietnamLivingStandards Surveys(VLSS)in1992/3and1997/8,whichcovered4,800and6,000households, respectively.Ofthese,about4,300householdsconstituteapaneldataset.Thesurveyswere designed to collect detailed data on households, communities, and market prices. While VLSS were widely recognised as high quality, they required additional surveys, called Multi-Purpose HouseholdSurveys(MPHS),toprovideestimatesatprovinciallevelduetotherelatively small sample size of VLSS. In 2002, VLSS and MPHS were merged into Vietnam Household LivingStandardsSurvey(VHLSS)tocoverthelargersampleofhouseholdswithsome simplification of the questionnaires to minimize measurement errors. VHLSS is planned to be carried out every two years until 2010. VHLSSissupposedtohavetwomodules:thecoremoduleincludestopicswhichare important and change rapidly over time, while the rotated module focuses on those that change less often. However, VHLSS in 2002 contains only the core module. It covers a wide range of data,includinghouseholdcompositionandcharacteristics(e.g.educationandhealth), expenditures on food, non-food items, health and education, income by source (e.g. wage and salary,farmornon-farmproduction),employmentandlabourforceparticipation,housing, ownership of assets and durable goods, localinfrastructure and commune characteristics. The samplesizeofVHLSS2002is75,000households,ofwhich30,000householdswere interviewed with all topics, and 45,000 with all topics except expenditure. Only theformeris used for the present study, as our focus is on income/expenditure poverty. Because of missing observations for some variables, the final sample size is 28,806. VHLSSin2004consistsofthecoremodulevirtuallyidenticaltothe2002survey,and therotatedmoduleonagriculturalactivitiesandnon-agriculturalhouseholdbusiness,and borrowingandlendingactivities.Thetotalnumberofhouseholdsis45,000,ofwhich9,000 householdswereinterviewedwithalltopics,and36,000householdswithalltopicsexcept expenditure.Weuseonly9000householdsinterviewedonalltopics.Duetomissing observations, thefinalsizeis6,473.Giventhelargersamplesizeofthesurveydatain2002, we will mainly use the data in 2002 and supplement them by the data in 2004. 3This sub-section draws upon Imai, Gaiha and Kang (2007). 37 2.2. Poverty among Ethnic Minorities Thissub-sectionfocusesonsocio-economiccharacteristicsofethnicmajoritiesand minorities as well as their sub-categories. Our comments are brief and selective. First, 57% of the ethnic majority groups, the Kinh and the Chinese, live in Inland Delta, whilethecorrespondingfigurefortheethnicminoritygroupsisjust10%.Theethnic minorities living in Inland Delta consists mainly of the Khmer, which is known as the Khmer Krom, whoinhabited the delta of the Mekonglong before the arrival of the Vietnamese. The ethnic majorities also live in low and high mountains (29%), coastal area (8%), and hills (7%). Few ethnic minority groups live in coastal area and hills- 62% of them inhabit high mountains and 27% are in low mountains. There are a few ethnic groups located mainly in low mountains, suchastheMuong,theSandiuandtheStieng,butmostoftheminoritygroupsarebased primarily in high mountain areas. Then we compare the measures of disadvantage of ethnic majorities and minorities. It is confirmedthat(i)amajorityoftheethnicminoritygroupsliveinremoteareas(defined subjectivelybythesurvey);(ii)about90%oftheethnicminoritypeopleliveinruralareas; (iii) the ethnicmajority groups do not haveeasy access to the market, ormedical care. While thedegreeofdisadvantagevariesacrossdifferentethnicminoritygroups,alltheminority groups are geographically more disadvantaged than the majorities in terms of market access or health services. Table 1 summarises poverty and vulnerability measures for ethnic majority and minority groups.Povertyheadcountratioisbasedonthenationalpovertyline,andtwoalternative caseswhere80%and120% ofthepovertylineareconsideredtocheckthesensitivityofthe results.Vulnerabilitymeasureisdefinedastheprobabilityoffallingintopovertyinthenext period,followingChaudhuri,Jalan,andSuryahadi(2002).4TheresultsforVHLSSdatafor 2004 are given in Table 2.5Only key findings from these tables are summarized below. (Table 1 and Table 2 to be inserted) First,thepovertyheadcountratiooftheethnicmajoritygroupsremainedmuchlower thanthat ofethnicminoritygroupsin2002and2004(22.3%in2002and20.2%in2004for themajority6,and64.3%in2002and62.1%in2004fortheminority).Second,thepoverty headcountratiovariesamongethnicminoritygroups,rangingfrom28.1%fortheKhmer, 50%fortheNung,to95.2%fortheBana.Thissuggeststhatpolicyeffortsarenecessaryto providemoreintensivesupportforthepoorestandthemostdisadvantagedethnicgroups. Third,thispatternislargelyunchangedif80%or120%ofthepovertylineisemployed. Finally, the difference in vulnerability of ethnic majority groups and minority groups is much higher (7.3% versus 62.1%) than the difference in poverty (22.3% versus 64.3%). This implies thatethnicminoritiesaremuchmorevulnerabletovariousshocks(e.g.suddenweather changesorillnessofhouseholdmembers)thanthemajoritygroups.7Thisimpliesthat governmentpoliciesdesignedtoaugmenthouseholdincomesalonearenotlikelytobe effective in reducing poverty among ethnic minorities in the long run. More attention needs to begiventosocialsafetynetsorinsurancetoprotectthevulnerableethnicminoritiesfrom shocks. Thenwecomparetheaveragehouseholdcharacteristicsoftheethnicmajorityand 4See Appendix for computational details of the vulnerability measures. 5As the sample size differs in the VHLSS for 2002 and 2004, some caution is required in comparisons of the results. 6A further disaggregation shows that poverty head- count ratio of the Kinh decreased from 23.2% to 20.2%, whilethatoftheChineseincreasedfrom14.6%to20.2%.However,thelattershouldbeinterpreted cautiously because of the small sample size of Chinese households (212 in 2002 and 63 in 2004). 7See Imai, Gaiha, and Kang (2007) for more details. 38 minority groups in 2002. The findings are briefly summarized below. First, the average age of household head is 5 years higher for the majority groups (48.2 years old) than for the minority groups(43.2).However,theKhmerisanexceptionastheaverageageoftheheadishigh (50.3). Second, the average household size of the minority groupsis larger (5.35) than that of themajoritygroups(4.34).Thisreflectstheheavierdependencyburdenamongtheethnic minoritygroups.7.8%ofthehouseholdsofethnicmajoritygroupshavememberswho completed higher education, while the corresponding figure of ethnic minoritiesis only 2.5%. The share of households with the educational level at upper secondary school is 18.3% for the former and 8.8% of the latter. Third, ethnicminority groups havelarger areas of land than do ethnicmajoritieswithoutanyexception.Disaggregationofthetotalareaoflandinto subcategoriesshowsthatethnicminoritiesholdlargerareasforallthecategoriesexceptfor aquaculturalwater(i.e.foragriculturalland,syvilculturallandandunusedland).Fourth, despitesomevariationacrossdifferentethnicminoritygroups,theyhavegenerallysimilar characteristics (e.g. large household size, low educational attainments). Recent anthropological and other related studiesfocusing on the disparities among different ethnic groups or different regionsaregenerallyconsistentwiththeabovefindings.8Forexample,McElwee (2006),focusingontherelationshipbetweenminoritygroupsandtheKinhintheAnnamite uplands,reportsthatsocialandeconomicinequalityworsenedduetounequalaccessto markets,governmentservicesandpoliticalrepresentation.ScottandChuyen(2004),onthe otherhand,demonstratethatregionaldisparitiesstemmedfromsomeregionslimitedaccess toresources,information,andsocialinfrastructureforentrepreneurialandotherdevelopment activities. In an important variation, Fforde (1998) draws attention to differences in capacities toworkinaprocessofadjustmentofstructureofhouseholdearningstochanging circumstances.Fromabroadermethodologicalperspective,hequestionsthehomogeneity assumptionthatunderliessomerecentcontributions(Fforde,2005).If,forexample,attitudes towardsrisksandinsurancevaryindifferentgroups-asillustratedbyFforde(1998)-itis necessary to go beyond physical and human capital endowments and market failures to reduce vulnerability.Specifically,morecarefulattentionmustbegiventocorrectingcommunity failures (e.g. in protecting the old, and orphans).We will address some of theseissues using econometric techniques. 3.Methodologies 3.1. Determinants of Consumption First,weestimate ijkW ln orlogofpercapitaexpenditureofthei-thhouseholdinthe j-th ethnic group (e.g. majority, minority, the Kinh, or the Khmer) living in the k-th commune takingintoaccountavectorofsocio-economiccharacteristics, ijkX ,commune-levelfixed effects, ijq ,andarandomerrorterm,ijkc ,whichisorthogonaltotheexplanatory variables;jo is a constant error term. n ..., , 1 j , K ,..., 1 k , N ..., , 1 i X W lnijk ij j ijk j ijk= = = c + q + | + o = ,(1) ijkX includesageofhouseholdhead,theshareoffemalehouseholdmembers,dependency burden(theshareofmemberswhoseageisbelow15yearsoldorabove65yearsold), whetherahouseholdheadismarried,themaximumeducationalattainmentofhousehold members,andareasofownedlandanditssquare(foragriculturalland,syvilculturalland, aquacultural water, unused land). 8This review draws upon Imai, Gaiha, and Kang (2007). 39 In an alternative specification, the commune fixed effects are dropped, as shown below: ij j 2 j j 1 ij j ijD X W ln c + | + | + o = ,(2) whereavectorofdummyvariables, jD ,namelyregionaldummyvariables(e.g.whethera householdislivinginHighMountains,CoastalAreaetc.)anddummyvariablesonreligion (e.g. whether the main religion for the commune is Buddhism) are added. 3.2. Determinants of Poverty Here the same set of explanatory variables is used to analyse the determinants of poverty basedonthelogitmodel.Thedependentvariableiswhetherahouseholdsexpenditureis below (=1) or above (=0) the national poverty line. Itissometimesasserted thatamodelthatanalysestheprobabilityofpercapitaincome falling within a giveninterval (say,below the povertyline)for a set of characteristics throws away data that will be used in a model of income determination in which income per capita is regressedonthecharacteristicsinquestion.Twoobservationsarepertinent.First,income distribution data typically contain non-negligible errors -especially in the lower and upper tails. These errors arise partlyfromimputation of prices to non-marketed inputs and outputs in the ruralareasandpartlyfromunder-reportingofhighincomes.Giventheseerrors,itissaferto analyse the probability of per capita income falling within a specified interval. Second, in case therearereasonstobelievethatpercapitaincomedistributionfollowsanon-normal distribution and depends on the characteristics in question in more complex ways than a mere location shift, it is conceivable that thelogit or probit model used here may yield more robust results than a direct regression of per capita income on these characteristics (Amemiya, 1981, and Gaiha, 1988). Totakeaccountofcommunefixedeffects,aconditionalfixed-effectslogisticmodelis applied as follows.9 ( )( )( )ikj ijikj ijj ij ikjX exp 1X exp, 1 y P+ q' ++ q'= |' q' = ,(3) ijq' isthecommunefixedeffectsasabove.Alternatively,aprobitmodelisappliedwithout communefixedeffects,butwithregionaldummies(e.g.whetherahouseholdislocatedin high mountains). ( ) ( )}'| | = |' =jdt t 1 y Pj ij(4) ( )ij jX |' u =The function( ) . u denotes the standard normal distribution. 3.3. Decomposition of Expenditure and Poverty A decomposition analysis of the differences in poverty (or of the expected probability of poverty) and expenditure of ethnic majority and minorities is carried out. As noted earlier, this reliesontheOaxaca-Blinder(1973)decompositionofthewagedifferenceintotwo components: the characteristic component, associated with the average levels of characteristics 9A fixed-effects logisticmodel is chosen, as a fixed-effects probitmodel cannot be estimated by standard commands available in Stata. 40 (e.g. education), and the structural component, related to returns to these characteristics. Letusfirstconsiderthepovertydecomposition.Denotingtheaverage(predicted) probabilityofbeingpooramongtheethnicmajoritygroupsandethnicminoritygroupsas majP and minP , respectively, the decomposition is obtained as: ( ) ( ) | | ( ) ( ) | |min min maj min maj min maj maj min maj, X p, X p, X p, X p P P | | + | | = ,(5) Here the subscript, i, j or k, is suppressed to make the notation simpler. It is noted that the first bracket contains the characteristics component and the second the structural component. In the first component, the differences in characteristics are evaluated usingthe coefficient estimates for the ethnicmajority groups (maj| ) as the reference group. In the second, the characteristics oftheethnicminoritygroupsareevaluatedtakingintoaccountthedifferencesbetween maj| andmin| .Thesecondcomponentissometimesconsideredameasureofdiscrimination. Along the lines of Kijima (2006), two observations are in order: (i) the first component, based ondifferencesincharacteristics,coulditselfreflectdiscriminationoveraperiod;and(ii)the lowerreturnstolandamongtheethnicminorities,ontheotherhand,couldbelowersimply because of locational disadvantages. This implies that this component could be non-zero even if there is no discrimination in the sample year. In order to disaggregate the characteristics and structural components, we take advantage of a decomposition procedure proposed by Yun (2004). All that is needed is to disaggregate the characteristics and structural components using two sets of weights. ( )( ) maj min majmajiminimajiiXX XX X| | = eA, ( )( ) min maj minminimajiminii X X| || |= e | Aand ==| A==A = e = eK i1 iiK i1 iXi1 These weights are defined for individual variables, i=1, 2,, K, and add up to 1. 4.Results 4.1. Regression Results Inthissection,wewilldiscusstheeconometricresultsobtainedfromthemodel specifications in Section 3. First, the key findings are summarised. Table 3 contains the results on the determinants of log of per capita expenditure by each ethnic group in 2002, with commune fixed effects. (Table 3 to be inserted) First,thepatternoftheregressionresultsisgenerallysimilarforethnicmajorit yand minoritygroups.Forexample,inbothcases,thecoefficientofdependencyburdenis negative and highly significant. That of whether a household head is married is also negative andsignificant.10Ontheotherhand,thecoefficientsarepositiveandsignificantforboth 10Itisnotclearwhyahouseholdwithamarriedhouseholdheadhaslowerpercapitaconsumption. Becausethisdummyvariableisnegativelycorrelatedwiththeheadsage(withthecorrelationcoefficient -0.35)andpositivelycorrelatedwithhouseholdsize(withthecorrelationcoefficient0.27),thesampleof marriedhouseholdheadsislikelytoincluderelativelyyoungcouplesdependentonlowincomeofthe husband. 41 educationalattainmentshigherthanprimaryschoolingandlandareasforallthedifferent categories. Square of land in each category is negative and significant, which suggests that the effect of land on expenditure is non-linear. Second,afewdifferencesintheregressionresultsacrossdifferentethnicminority groups may be noted. For example, the coefficient of the share of female members is negative andsignificantfor theKhmer,theMuong,andtheNung,butpositiveandsignificantforthe Gietrieng,andnotsignificantforothers.Educationisnotasignificantdeterminantforthe Khmer and some other minority groups.11 Table4containstheresultsobtainedfromthedatafor2004,withcommuneeffects. Note that these tables are not strictlycomparableasthe data for 2002 and 2004 arerepeated cross-sectional data, rather than panel data, and only a part (or about 16%) of the households in the 2002 data was resurveyed in 2004. Short and selective comments are given below. Age ofthehouseholdheadisnotsignificantinmostofthecaseswithafewexceptionsinwhich thecoefficientispositiveandsignificant(e.g.theCohoandtheSandiuinTable4).The coefficient of the dummyvariable whether a household head is married has a significant and positive(expected)signfortheethnicmajorities,butitisnotsignificantfortheethnic minorities.For2004,thetotallandareaanditssquareareused.Asexpected,theformeris positive and the latter negative.Thisimplies that per capita household consumptionincreases asdoeslandarea,but thereisanon-lineareffect, thatis,thepositivemarginaleffect ofland gets smaller as land area increases.12 13 (Table 4 to be inserted) The poverty regression results are given in Tables 5 and 6. Table 5 shows the results for 2002oftheconditionalfixed-effectslogisticmodelwithcommunefixedeffects.Table6, basedonthedatafor2004,correspondstoTable6for2002y.Foreachcase,threesetsof povertycut-offpoints,100%,80%and120%ofthepovertyline,areusedtotestthe sensitivityoftheresults.Becausewefocus onpoverty,rather thanconsumption,thesignsof most of the coefficientestimates are simply the opposite of those in the expenditure function. A summary of the key findings is given below. (Tables 5 and 6 to be inserted) Wenote from Table 5 that significant determinants of povertyare: (i) age of household head (negative, only for ethnic majorities and not for minorities), (ii) dependency burden (both for majorities and minorities), (iii) whether a household head is married (negative (for 80% of thepovertyline)formajorities;positiveforminorities),(iv)mostoftheeducationvariables (negative), and (v) most of the categories of level of land (negative). Table6reportstheresultsofpovertyregressionsfor2004.Mostoftheresultsare expected inlight of theearlier results for expenditure. Thecoefficients of dependencyburden arepositiveandsignificant;thoseforamarriedhouseholdheadarepositiveandsignificant 11We also tried the specification without commune effects, but with regional and religiondummies, using the data for 2002. Disaggregation by each ethnic group is not carried out as the regional dummies cannot be included in smaller samples.The results are notmuchdifferentfromthosegiven inTable 3.Asexpected, the coefficient estimates for the Buddhists and for those inhabiting Inland Delta or Coastal Area are positive andsignificant.Thecoefficientsofthedummiesforhighandlowmountainsarenegativeandsignificant. These results are also used for the decomposition analysis. 12Similarresultsareobtainedforthe2002dataifthesub-categoriesoflandareaggregated.Weuse disaggregateddata on land for 2002 inorder to facilitate comparison ofour resultswith those reported by van de Walle and Gunewardena (2001). 13In the cases without commune effects and with regional and religiondummies, we observe positive and significant coefficients for the Buddhists and Catholics, and for those inhabiting Coastal Area. These results are used for the decompositions. 42 only for the majority; those for higher levels of education are negative and significant; those of landarenegativeandsignificant,whilethoseofitssquarearepositiveandsignificant;and those of living in mountain areas are positive and significant. 4.2. Decomposition Analysis Poverty Decomposition Since the predictions of conditional fixed-effects logistic regression are much lower than theactualpoverty,whichwouldmakethedecompositionanalysisdifficult,weuse theprobit modelwithreligionandregionaldummiesasthebaseregression.In2002,theshareofthe structuralcomponentismuchlargerthanthecharacteristiccomponent, rangingfrom72%to 82%. While the structural component includes not only the returns to household characteristics butalsothereturnsto(ortheeffectsof)beinglocatedinaparticularregion,ouranalysis suggests that the difference in poverty between the ethnic majority and ethnic minority groups islargelystructural.Thatdoesnotnecessarilyruleouttargetedinterventions(e.g.,to concentrate resources for education on particular ethnic minorities). Rather, our results suggest that,forexample,effortstoincreasereturnstoeducationbyimprovingitsqualitywouldbe potentially more important. The second panel of Table 7 for 2004 reinforces this view. The results suggest that more than 90% of the poverty difference is structural.14 (Table 7 to be inserted) Expenditure Decomposition Generally consistent with van de Walle and Gunewardena (2001), structural factors are dominant when commune fixed effects are taken into account. The first and the last panels in Table 8 show that 95%-97% of the difference of log per capita expenditure is associated with the structural component. (Table 8 to be inserted) Thecasewithoutcommunefixedeffects,basedonthedatafor2002,showsthatthe characteristiccomponentincreasesto33%,whilethestructuralcomponentreducesto67%, consistent with van de Walle and Gunewardena (2001)15. However, the structural component is considerably more dominant (96%) in 2004, without commune effects. Itisshownthatthedecompositionbyeachexplanatoryvariablevariesconsiderably dependingontheyearorthespecificationused.However,ifwefocusonlyonthe decompositionofthestructuralfactorsdominantinallcases-withcommunefixedeffects, householdcharacteristicsarethemostimportant,followedbyland,inboth2002and2004. Withoutcommunefixedeffects,however,educationisthemostimportantinthestructural component, in both 2002 and 2004.16 14We also carried out the decomposition of the above results by each explanatory variable. The results vary accordingtothepovertylinechosen.If,forexample,wechoosethenationalpovertyline,thestructural factors are mainly associated with location, religion, other household characteristics and education (only in 2002). The results will be furnished on request. 15They report that, using the data for 1992/3, about one- half is explained by the characteristic component and another half by the structural component, if commune fixed effects are ignored. 16The results will be furnished on request. 43 5.Conclusion Thepresentstudyexaminedwhyethnicminoritiesarepoorerthanethnicmajoritiesin Vietnam, using the VHLSS data for 2002 and 2004. Some important findings are summarised below from a broad policy perspective. First, our analysis confirms that households belonging to ethnicminority groups are not onlypoorerbutalsomorevulnerabletovariousshocksthanthoseinthemajoritygroups, namely the Kinh and the Chinese. Second, household composition (e.g. dependency burden), education, land holdings, and location are important determinants of expenditure and poverty, whilst there is some diversity among different ethnic groups. Finally,thedecompositionsrevealthatethnicminoritiesarepoorernotnecessarily becausetheyaremoredisadvantagedintermsofhouseholdcharacteristics(e.g.educational attainmentorlocation),but,moreimportantly,becausethereturnsaremuchlowerforthem thanformajoritygroups.Soitisimperativethat governmentpoliciesconcentrate onnotjust enhancingtheendowmentsoftheminoritiesbutalsoseektoreducethedisparitiesinthe returnstosuchendowmentsbetweenthemandthemajority.Policyprioritesfromthis perspectivearetoimprovethequalityofeducationthatminoritiesreceive,andbuildbetter infrastructure in remote areas to promote easiermarket access and better livelihood prospects for them. References ADB (Asian Development Bank) (2002). Indigenous Peoples / Ethnic Minorities and Poverty Reduction - Viet Nam. Manila: ADB. Amemiya, T. (1981). Qualitative Response Models: A Survey. Journal of Economic Literature, 19, 1483-536. Blinder, A. S. (1973). Wage discrimination: reduced form and structural estimates. Journal of Human Resources, 8, 436-455. Borooah,V.K.(2005).Caste,InequalityandPovertyinIndia.ReviewofDevelopment Economics, 9, 399-414. Chaudhuri,S.,Jalan,J.,Suryahadi,A.(2002).AssessingHouseholdVulnerabilitytoPoverty fromCross-SectionalData:AMethodologyandEstimatesfromIndonesia.Discussion Paper, Columbia University. Gaiha, R. (1988). On Measuring the Risk of Poverty in Rural India. in T. N. Srinivasan and P. Bardhan (Eds.) Rural Poverty in South Asia, New York: Columbia University Press. Imai,K.,Gaiha,R.,Kang,W.(2007).PovertyDynamicsandVulnerabilityinVietnam. Economics Discussion Paper, 0708-2007, University of Manchester. Kijima,Y.(2006).CasteandTribeInequality:EvidencefromIndia,1983-1999.Economic Development and Cultural Change, 54, 369404. Fforde,A.(1998).VulnerableGroupsinRuralVietnam:SituationandPolicyResponse.A ReportbasedupontheSamplesurvey.ADraft,RetrievedJune15,2008from http://www.aduki.com.au/Vulnerable%20Groups.pdf. Fforde,A.(2005).Persuasion:Reflectionsoneconomics,data,andthe'homogeneity assumption. Journal of Economic Methodology, 12(1), 63-91. 44 Gaiha,R.,Thapa,G.(2006).Growth,EquityandPovertyReductioninVietnamProspects and Challenges, Draft, Asia and Pacific Division, the IFAD, Rome, December 2006. Gaiha,R.,Thapa,G.,Imai,K.,Kulkarni,V.S.(2007).Endowments,Discriminationand PovertyinRuralIndia.EconomicsDiscussionPaper,UniversityofManchester(0722, 2007). Gang,I.N.,Sen,K.,Yun,M.(2008).PovertyinRuralIndia:CasteandTribe.Reviewof Income and Wealth, 54(2) 149-165. McElwee,P.(2006).BloodRelativesorUneasyNeighbors?:Kinh-EthnicMinority InteractionsintheAnnamiteMountains.ADraft Presentedat theConferenceVietnam Update2006atResearchSchoolofPacificandAsianStudies,theAustralianNational University. Oaxaca,R.L.(1973).Male-femalewagedifferentialsinurbanlabormarkets.International Economic Review, 9, 693-709. Scott,S.,Chuyen,T.T.K.(2004).Behindthenumbers:Socialmobility,regionaldisparities andnewtrajectoriesofdevelopmentinruralVietnam.inP.Taylor(Ed.),Social InequalityinVietnam:ChallengestoReform,Singapore:InstituteofSoutheastAsian Studies (ISEAS), pp. 90-122. van de Walle, D., Gunewardena, D. (2001). Sources of ethnic inequality in Viet Nam. Journal of Development Economics, 65, 177-207. World Bank (2004). Vietnam Development Report 2004: Poverty, Hanoi, World Bank. Yun,M.(2004).Decomposingdifferencesinthefirstmoment.EconomicsLetters,2004,82 (2), 275-280. 45 Table 1: Poverty and Vulnerability by Ethnic Group in Viet Nam in 2002 TotalMajorityKinhChineseMinorityTayThaiKhmerMuongNung Real Consumption per capita3480372736995260193921802180275017352200 Poverty Headcount 800.1550.1060.1130.0710.4610.3890.4370.1350.5420.330 (based on 80% of the povertyline) Poverty Headcount 1000.2810.2230.2320.1460.6430.5860.6220.2810.7110.500 (based on 100% of the poverty line) Poverty Headcount 1200.4060.3490.3580.2120.7610.7100.7510.4960.8070.683 (based on 120% of the poverty line) Vulnerability Measure 800.0570.0100.0050.0330.3510.3010.4490.0270.4900.193 (based on 80% of the poverty line) Vulnerability Measure 1000.1490.0730.0680.1230.6210.6370.7450.1600.8090.517 (based on 100% of the poverty line) Vulnerability Measure 1200.3390.2680.2660.2500.7820.7990.8480.3890.9270.756 (based on 120% of the poverty line) No. of Observations295302456025108212407410451862260450450 DaoNgaiEdeCohoBanaSandiuSedangStiengGietriegStingmunOther Real Consumption per capita18151348161815801074286115261513164416372686 Poverty Headcount 800.4780.7300.4860.5560.8270.2410.5190.5710.4140.2860.305 (based on 80% of the poverty line) Poverty Headcount 1000.8120.8250.6880.7500.9520.3790.7400.7380.6210.7500.446 (based on 100% of the poverty line) Poverty Headcount 1200.8620.9050.8170.8150.9710.4710.8180.8570.8620.9290.567 (based on 120% of the poverty line) Vulnerability Measure 800.4400.4790.0990.4760.7120.1630.6410.0850.7120.8190.436 (based on 80% of the poverty line) Vulnerability Measure 1000.7530.7880.4010.7730.9320.4190.8420.4730.9900.9980.731 (based on 100% of the poverty line) Vulnerability Measure 1200.9110.8840.6930.8300.9730.6480.9240.8171.0001.0000.874 (based on 120% of the poverty line) No. of Observations13812610910810487774229281640 *Poverty headcount ratios and vulnerability measures based on the standard (or 100% of) poverty line are shown in bold. 46 Table 2: Poverty and Vulnerability by Ethnic Group in Viet Nam in 2004 TotalMajorityKinhChineseMinorityTay Real Consumption per capita482451695160627427993047 Poverty Headcount 800.1460.0930.0920.1580.4630.336 (based on 80% of the poverty line) Poverty Headcount 1000.2650.2020.2020.2110.6430.580 (based on 100% of the poverty line) Poverty Headcount 1200.3970.3370.3370.2630.7590.706 (based on 120% of the poverty line) Vulnerability Measure 800.0490.0060.0060.0000.3110.271 (based on 80% of the poverty line) Vulnerability Measure 1000.1440.0660.0660.1110.6220.667 (based on 100% of the poverty line) Vulnerability Measure 1200.3320.2610.2600.3700.7680.829 (based on 120% of the poverty line) No. of Observations918878477787631341291 DaoJraiEdeCohoBanaSandiuSedangStieng Real Consumption per capita23891823235124801779284124903257 Poverty Headcount 800.5380.8420.6250.4001.0000.2000.1821.000 (based on 80% of the poverty line) Poverty Headcount 1000.8460.8950.7500.8001.0000.5330.5451.000 (based on 100% of the poverty line) Poverty Headcount 1200.9230.9470.7500.8001.0000.6000.7271.000 (based on 120% of the poverty line) Vulnerability Measure 800.2470.4150.0170.4340.6760.4210.3500.250 (based on 80% of the poverty line) Vulnerability Measure 1000.5080.6040.6240.6001.0000.6670.5770.607 (based on 100% of the poverty line) Vulnerability Measure 1200.8450.7490.6880.6001.0000.7990.8180.875 (based on 120% of the poverty line) No. of Observations5534241726182814 47 Table 3: Determinants of log of per capita Consumption by Ethnic Group in 2002 (with Commune FixedTotalMajorityKinhChineseMinorityTayThaiCoef.Coef.Coef.Coef.Coef.Coef.Coef. (t value)(t value)(t value)(t value)(t value)(t value)(t valueAge of Household head0.0010.0010.001-0.0050.000.002-0.003(4.07)**(3.68)**(3.46)**(1.85)(0.05)(2.42)*(2.36)*The Share of Female Members-0.022-0.025-0.0290.059-0.024-0.115-0.133(1.85)(1.95)(2.20)*(0.35)(0.75)(1.78)(1.39)Dependency Burden-0.319-0.32-0.31-0.317-0.325-0.274-0.429(31.21)**(29.18)**(28.04)**(1.81)(11.45)**(4.75)**(4.75)**Whether a head is married-0.024-0.017-0.02-0.145-0.066-0.036-0.069(3.43)**(2.37)*(2.64)**(1.52)(3.48)**(0.90)(0.95)Primary School-0.019-0.047-0.035-0.0390.0350.020.125(Max. attainment of members)(2.03)*(4.45)**(3.33)**(0.36)(2.15)*(0.43)(2.74)**Lower Secondary School0.070.030.05(0.03)0.130.110.21(Max. attainment of members)(7.32)**(3.04)**(4.53)**(0.28)(6.73)**(2.37)*(4.04)**Upper Secondary School0.2030.170.1890.1250.2330.1940.298(Max. attainment of members)(19.15)**(14.36)**(15.93)**(1.03)(9.03)**(3.62)**(3.31)**Technical School0.3440.3120.3370.4540.3540.3320.306(Max. attainment of members)(27.68)**(22.57)**(24.33)**(1.58)(11.83)**(5.71)**(4.10)**Higher Education0.510.4730.4940.7230.5760.6180.511(Max. attainment of members)(38.09)**(32.45)**(33.78)**(3.37)**(12.99)**(7.82)**(5.18)**Agricultural Land6.0926.8866.672-17.1118.1662.6471.303(16.18)**(15.91)**(15.58)**(1.01)(7.76)**(0.44)(0.40)[Agricultural land] 2-6.471-7.136-6.909589.267-45.06939.365-7.995(10.16)**(10.49)**(10.19)**(1.46)(6.85)**(0.27)(0.43)Syvilcultural land2.4046.3626.269-271.4151.9150.664-0.309(4.31)**(4.13)**(4.27)**(1.87)(3.30)**(0.53)(0.05)[Syvilcultural land] 2-5.679-46.526-40.70816,690.70-4.099-2.35781.68(2.81)**(3.03)**(3.03)**(1.60)(2.16)*(0.25)(0.85)Aquacultural water8.7748.92510.873-55.32388.38458.511309.895(6.61)**(6.24)**(5.08)**(1.04)(3.77)**(1.34)(2.47)*[Aquacultural water]2-18.884-19.146-62.1563,308.70-3,778.56-2,391.10-23,362.43 48 (5.99)**(5.76)**(1.82)(1.25)(3.47)**(1.30)(0.30)Unused land-1.0880.525-0.635744.887-20.075-28.895-28.317(0.30)(0.11)(0.13)(1.56)(1.76)(1.03)(0.68)[Unused land]219.982-6.7143.9901,061.052,174.441,266.43(0.37)(0.11)(0.07)(.)(1.84)(1.34)(0.54)Constant7.9158.0157.9938.6497.4767.4567.651(472.93)(425.29)(423.77)(34.71)(199.78)(89.66)(64.05)Observations29530254562510821240741045510R-squared0.170.170.170.30.160.160.22Joint Significance F Test F(17,26621) =313.69** F(17,22780) =271.11** F(17,22623) =271.50** F(16,101) =2.69** F(17,3452) =39.57** F(17,933) =10.69** F(17,4=7.23**Prob. >F0.00000.00000.00000.00140.00000.00000.0000Number of Communes290126592468956059550* significant at 5%; ** significant at 1%, Significant coefficients are shown in bold. 49 Table 3: Determinants of log of per capita Consumption by Ethnic Group in 2002 (with Commune Fixed EffectsDaoNgaiEdeCohoBanaSandiuSedangStiengCoef.Coef.Coef.Coef.Coef.Coef.Coef. (t value)(t value)(t value)(t value)(t value)(t value)(t value)(Age of Household head-0.0010.0010.0010.0020.002-0.001-0.001 (0.35)(0.54)(0.46)(0.68)(0.74)(0.33)(0.90) The Share of Female Members0.107-0.0010.0070.433-0.0670.055-0.186-(0.74)(0.01)(0.04)(1.99)*(0.40)(0.28)(1.24) Dependency Burden-0.423-0.366-0.585-0.291-0.538-0.541-0.307 (3.73)**(2.42)*(3.32)**(1.61)(3.01)**(2.35)*(2.53)* Whether a head is married0.071-0.020.166-0.199-0.044-0.023-0.245 (0.81)(0.24)(1.35)(1.68)(0.51)(0.16)(3.19)** Primary School0.127-0.010.0360.0520.090.4460.057-(Max. attainment of members)(2.42)*(0.19)(0.42)(0.50)(1.34)(2.74)**(1.06) Lower Secondary School0.190.100.070.100.320.330.13 (Max. attainment of members)(1.79)(1.10)(0.63)(0.81)(1.08)(2.10)*(1.11) Upper Secondary School0.420.0180.0250.14100.5430-(Max. attainment of members)(2.28)*(0.06)(0.16)(0.87)(.)(2.90)**(.)(3.37)**Technical School0.5310.216-0.3270-0.2120.5510 (Max. attainment of members)(2.15)*(1.40)(1.27)(.)(0.67)(2.91)**(.) Higher Education00.41800.20300.8280 (Max. attainment of members)(.)(1.52)(.)(0.71)(.)(2.81)**(.) Agricultural Land8.57413.72921.07118.14951.136-104.09-8.25812.113(1.53)(2.06)*(4.20)**(1.14)(2.49)*(1.55)(0.62) [Agricultural land] 2-85.664-107.424-103.219-231.594-1,299.6112,825.69268.822-(1.54)(0.96)(2.61)*(0.51)(1.97)(2.29)*(0.69) Syvilcultural land3.182-626.42319.085019.20955.313-49.263 (2.92)**(1.31)(1.45)(.)(0.61)(1.77)(1.16) [Syvilcultural land] 2-6.139408,245.63-45,164.580-641.163-1,993.34705.019 (2.69)**(1.49)(1.11)(.)(0.35)(1.96)(1.14) Aquacultural water-438.6710-207.300-3,493.734,450.48 50 (0.59)(.)(0.14)(.)(.)(0.94)(1.34) [Aquacultural water]2508,590.800981,358.630017680441.72-1.39E+07 (0.44)(.)(0.36)(.)(.)(1.47)(0.73) Unused land-31.106-30.98103.280-94,570.38154.63 (1.32)(2.08)*(.)(0.20)(.)(1.99)(1.67) [Unused land]22,493.471,660.390001.18E+08-17,836.46 (1.72)(2.47)*(.)(.)(.)(1.98)(1.94) Constant7.2427.1527.127.0986.7867.1732,855.57 (45.87)(35.34)(34.51)(25.79)(33.21)(17.54)(0.73)(21.80)Observations1381261091081048777 R-squared0.370.330.390.190.220.570.37 Joint Significance F Test F(16,88) =3.24 F( 15,91) =2.98** F( 14,76) =3.44** F(11,85 ) =1.84 F(11,82 ) =2.07* F(17,50 ) =3.83** F(14,48 ) =2.00** F(9,25 )=2.64*Prob. >F0.00020.00070.00020.05880.03150.00010.0386 Number of Communes34201912112015 * significant at 5%; ** significant at 1%, Significant coefficients are shown in bold. 51 Table 4: Determinants of log of per capita Consumption by Ethnic Group in 2004 (with Commune Fixed EffectsTotalMajorityKinhMinorityTayThaiKhmerCoef.Coef.Coef.Coef.Coef.Coef. (t value)(t value)(t value)(t value)(t value)(t value)(t value)Age of Household head0 00-0.002 -0.007-0.004-(1.05) (1.07)(1.04)(1.63) (2.96)**(1.26)(The Share of Female Members-0.012 -0.023-0.019-0.024 -0.143-0.1430.125(0.43) (0.71)(0.58)(0.31) (0.97)(0.66)(Dependency Bu