Labour Institutions and Development Programme

DP/81/1995
ISBN 92-9014-591-9
First published 1995

The social impact of economic reconstruction in Vietnam: A selected review

By
Do Duc Dinh
Head, Developing Economies Study Department
Institute of World Economy, Hanoi, Vietnam
The social impact of economic reconstruction in
Vietnam: A selected review
TABLE OF CONTENTS

I. Introduction

II. Economic reconstruction: A historical review

III. Macro-economic and sectoral changes

IV. Other areas of concern

1. Population control
2. Unemployment and job creation
3. Poverty reduction

V. Education and training

VI. Health care

VII. Impact of economic reconstruction in urban areas

VIII. Social stratification

IX. Social policy implications

X. Unity and participation

Bibliographical references

I. Introduction

This literature survey is an attempt to assess the social impact of postwar economic reconstruction in
Vietnam. From 1976 to 1986, the first ten years after the reunification of Vietnam, the massive effort
required for the reconstruction of war damage and the restructuring of the former planned and centralized
economy, left little room for the investigation of social issues.

In 1986, Vietnam embarked on a strategy of overall economic restructuring towards the creation of a
market economy, marking the turning point in the process of Vietnam's socio-economic development. Since
the beginning of the 1990s, this process has been further strengthened by the adoption of the "Socio-
Economic Development Strategy toward the Year 2000". During this period, more attention was given to
social policy issues, by both decision-makers as well as researchers. This trend was also reflected in the
literature with a greater discussion on social issues, in particular on the general social impact of economic
restructuring and the effect on specific groups such as workers and urban dwellers, peasants and the rural
population, and on different regions and provinces throughout the country.

These effects have been investigated in greater detail in the following papers which form the basis of this
literature survey: Nam [1993]; Anh, Vu Tuan [1993b]; Chuan [1993]; Luan [1993]; Anh, Tran Thi Van
[1993] and; Dinh [1994].

II. Economic reconstruction: A historical review

According to these papers, the reconstruction process began in what was a very difficult and challenging
time: in the mid-1980s Vietnam was deeply engulfed by a severe social and economic crisis and, was
regarded by the international community as being on the "brink of bankruptcy". During this period,
agricultural production stagnated, food shortages dragged on and industrial production, while showing
statistical increases, was actually in a state of "false profits and true losses", the reality being hidden by
heavy government subsidies. The market was in a terrible turmoil and galloping inflation had reached a rate
of 774.7 per cent in 1986.

This economic situation, combined with the unresolved consequences of over 30 years of war, led to a
serious deterioration in general living conditions for many groups. The legal monthly wages of workers and
employees were just enough to meet their basic needs for about 10 to 15 days. In the countryside, prior to
harvest time, food shortages were widespread; in certain years, between 8 to 9 million people did not have
enough to eat. Negative social impacts and general social disquiet were becoming widespread.

The crisis reached a climax between late 1985 and late 1986, the majority of the population found life
unbearable, and the Party and State leaders were also finding it impossible to maintain outdated policies.

In the spirit of "looking straight at the truth", the Vietnam Communist Party's Sixth National Congress
(December 1986) undertook a severe self-criticism of its policy orientation. Discovering it to be erroneous,
dogmatic, and voluntarist it adopted instead a new policy for reconstruction with the objective of taking the
country out of the crisis and advancing it towards progress and development.

A few years after the process of reconstruction was initiated, Vietnam faced huge difficulties arising from
changes in the global situation, particularly with the collapse of the old East European socialist states and
the Soviet Union, formerly Vietnam's major trading partners. In the past, about 70-80 per cent of Vietnam's
total imports (nearly 100 per cent in the case of oil and gas, cotton, nitrogen fertilizer, insecticide, complete
equipment) were from the Soviet Union and the East European countries, and about 50-60 per cent of
Vietnam's total exports were also to these countries. By the beginning of the 1990s, these trade relations
and numerous bilateral cooperation projects with these countries came to an almost complete end. Soviet
preferential aid to Vietnam (about 1 billion US dollars a year) was also abruptly cut off in August 1990.
This situation was further aggravated by the protracted United States economic and trade embargo against
Vietnam which continued to impose considerable difficulties on Vietnam's normal development.

The question arose in the mind of many observers as to whether Vietnam would be able to weather such
grave internal and external pressures to survive and overcome the major challenges ahead. In response to
this crisis, Vietnam made great efforts in launching a comprehensive programme of reconstruction which
included major reforms in all social and economic areas. As an initial step, emphasis has been placed on
three main areas. First, the gradual transformation of the centralized, bureaucratic and subsidized economy,
which was based mainly on public and collective ownership, to a commodity economy and then into a
market mechanism regulated by the State but with the participation of both the public and private economic
sectors. Second, the democratization of social and political life by building up the necessary institutions to
create a legitimate State of the people, by the people and for the people. And finally, by opening the door
with a view to enhancing cooperation with the outside world in the spirit of friendship, to strive for peace,
independence and development.

III. Macro-economic and sectoral changes

The shifting of priorities in the development strategy from a focus on heavy industry to the promotion of
agriculture, consumer goods and exports has brought about considerable changes in the economic structure
and given rise to initial high growth rates. The total food output increased from 18.4 million tons in 1986 to
over 25 million tons in 1994 and has helped Vietnam to change from a net food importer to a food
exporting country with an annual rice export of over 1.5 million tons.

Although industrial production suffered a temporary decline between 1989-91 due to both internal and
external causes, considerable progress has been achieved in the diversification and improvement of
products, especially consumer goods. High growth rates have been recorded in industrial production since
1992 with annual increases of 13 to 15 per cent.

An improvement has also occurred in terms of foreign trade. During the years from 1986 to 1988 the deficit
in the trade balance was between $1.3-$1.6 billion per annum. This figure was gradually reduced from
1989 to 1991; it stood at $160 million in 1991. In 1992, for the first time in decades, Vietnam showed a
small surplus in its trade balance. In 1993 and 1994 the deficits reappeared, but they were not large.

Together with the diversification and expansion of foreign trade relations, inducement to foreign investment
was also felt to be a necessary policy priority in the reconstruction process. Following the promulgation of
the Law on Foreign Investment in December 1987, companies from about 50 countries, with a total capital
of over $10 billion, applied for investment projects in Vietnam. There has been a yearly increase in both the
number of projects and the volume of capital; in 1988 there were 37 projects with investments of less than
$400 million and by 1994 there were over 150 projects with investments exceeding $1,100. Foreign
investments have had a positive effect on job creation by increasing the volume of exports and raising the
capacities of a number of industries. Generally speaking, this has had a favourable impact on the
Vietnamese economy, making a significant contribution towards increasing stability for the majority of the
population and promising a brighter prospect for future economic growth. The strengthening of bilateral
and multilateral cooperation, the lifting of the United States embargo and significant changes in the
political and diplomatic relations between the South-east Asian countries have all helped to create
favourable conditions for the integration of the Vietnamese economy into the global and the regional
economies.

However, the social impact of these economic reforms is not as clear and direct as the impact on economic
growth. The functioning of the market economy has begun to reveal both positive and negative impacts on
Vietnamese society.

The structure of trade, services and incomes has undergone a major transformation under restructuring. The
creation of a market economy has led to increases in the demand for certain types of labour, particularly in
the areas of trade and services. In both urban and rural areas, the traditional system of social values, which
had previously been used to evaluate the social position of the trade and service sector as well as of
individuals in those sectors, has rapidly changed. Entrepreneurs, traders and service sector workers who
formerly had a low social status, are now growing in number and increasing their social worth.

Small and medium-sized private enterprises have been given incentives by the State to develop and to open
up employment opportunities in this sector for young people who formerly looked for jobs only in the State
sector.

Economic growth has resulted in income increases for most Vietnamese people; living conditions have
improved not only in quantity, but also in quality. However, this development has also been marked by a
growing differentiation in income levels. This has, on the one hand, stimulated entrepreneurship but, on the
other hand, it has weakened the formerly close community relations, particularly in rural areas. Individual
peasant households are now playing a more active role while community-level organizations such as the
Trade Union, the Women's Union, the Youth League etc., see their role dwindling. In the past, the latter,
besides their economic functions, also assumed certain social welfare functions such as the provision of
grassroots health care; the provision of day-care and pre-school education services, the provision of
insurance for workers and elderly people; supporting cultural and spiritual activities for the population
living in the areas where these organizations were located. With the shifting of the economic mechanism,
community economic activities such as labour cooperation, advances of cash and materials, product sales,
and common social endeavours have declined in many places while in others they are being reorganized
and made more efficient.

However, despite apparent economic benefits, the reverse side of the coin is also becoming visible. The
market economy stimulates a particular social culture; it creates a cult of consumerism and a cult of money
where profits are regarded as the highest goal, and material values take precedence over moral and human
values. In Vietnam today many of the social vices that are associated with the functioning of the market
mechanism -- particularly when the state legislation is not strict and abounds with loopholes -- have
appeared and are tending to develop. Corruption and smuggling have become "national diseases" together
with the spread of excess of all forms: prostitution, drug addiction and gambling.

While there are no rules preventing people from making money, the biggest concern at present is the
legality of certain wealth gain, particularly in the case of those who take advantage of their positions of
power to appropriate state assets and to pillage citizens' wealth. This has created feelings of severe social
injustice, causing discontent among the people. It is widely felt that if the perpetuation of this negative
situation cannot be stopped, the polarization between the rich and the poor will extend beyond any
manageable limits of security and threaten to ignite social conflict.

Apart from this, there are other emerging problems such as the deterioration in educational and health
establishments, above all in the rural areas; and the population explosion which carries with it the threat of
growing unemployment (every year, an additional 1 million people attain working age, but only between
one-third to one-half of them are absorbed by the labour market).

In the next section of this paper an attempt will be made to identify some other emerging areas of concern
that require further investigation by social policy-makers in Vietnam.

IV. Other areas of concern

1. Population control

According to the 1989 census, the population of Vietnam was approximately 64.4 million. By early 1993,
the total population had increased to 69.3 million. The average population growth rate was 2.2 per cent per
year. The experience of Western Europe and the newly-industrialized countries indicates that during the
period of economic take-off, the population growth rate should not exceed 1.5 per cent. Therefore, the
Vietnamese Government has been implementing a nationwide family planning policy designed to bring the
population growth rate down to 1.7 per cent by the year 2000.

The majority of the population is rural (80 per cent in 1992). The population distribution however, is
uneven in spite of being concentrated mainly in the two major granary regions: in the Red River Delta in
the North and in the Mekong Delta in the South.

Vietnam is a predominantly agricultural country, yet the average area of land under cultivation is very low:
0.11 ha/inhabitant. This, together with the uneven distribution of the population, is seen to have a negative
impact on economic development. The present Government's policy is to encourage migration from
densely to thinly-populated areas through programmes such as the "building of new economic zones".
Through such schemes, from 1975 to the present, some 3.5 million people have been re-settled on a nation-
wide basis.

Vietnam is the least urbanized country of South-east Asia. Its urban population -- 14,031,000 inhabitants in
1992 -- accounts for only 20 per cent of the total population. The population ratio of urban to rural is 1 to 4.
Vietnam's two major cities are Ho Chi Minh City (4 million inhabitants, density: 1,984 persons per km 2 )
and Hanoi (3 million inhabitants, density: 2,288 persons per km 2 ) and account for nearly half of the total
urban population. Hai Phong city has 1.4 million inhabitants. Other towns have fewer than one million
inhabitants. In recent years, there has been a trend of increasing migration from rural to urban areas.

2. Unemployment and job creation

Statistics on unemployment in Vietnam vary according to the sources and the different methods of
calculation, but there is general consensus that, in 1994, about 20 per cent of the total labour force of 42
million people were either unemployed or underemployed. In 1991, the estimate was that the rural areas
alone account for 7.5 million of the unemployed.

At present, approximately 31 million people are employed in various areas which can be grouped
(according to the language of the old system) under two main sectors: the materially productive and the
non-materially productive sectors. Agricultural labour accounts for the largest share (73 per cent) of the
workforce, whereas the industrial labour force is still quite small (11 per cent).

During the 1980s, the Vietnamese Government implemented a policy of sending a part of the labour force
to work in foreign countries in order to provide employment, generate foreign currency earnings and
provide the opportunities for Vietnamese workers to learn new techniques and managerial skills. By the
early 1990s, the labour force in the private sector and cooperatives increased by 3.5 per cent per year. In
particular, the number of people engaged in private trade rose considerably, by 22 per cent per annum,
adding 410,000 new jobs. The number of workers in private industrial enterprises also registered a twofold
increase.

Unemployment, however, remains a major problem for the country. Besides the present number of
unemployed, the present rate of population growth adds over one million new entrants into the labour
market each year for whom new jobs need to be created.

During the period of reconstruction, the largest channel for job creation is the development of the multi-
sector economy, in particular the private and household economies. For instance, in 1993, 1.2 million new
jobs were provided, mainly due to the fact that individual households, with the State's support through
credit provision and professional training, started small family businesses. Job promotion centres such as
those in Hanoi, Ho Chi Minh City and other cities, and in particular those which have been established by
the Youth League, have played an important role in the creation of new jobs. The new strategy of
industrialization, especially the development of labour-intensive industries, has also been a large source of
job creation. It is anticipated that the private sector and the results of the industrialization process will be
the main sources of future employment opportunities for the people of Vietnam.

3. Poverty reduction

One of the real problems facing Vietnamese society in the transitional period to a market economy is
growing poverty in both rural and urban areas. In the past, under the model of a socialist centrally-planned
economy, the distribution and supply of necessary commodities and public welfare was concentrated in the
hands of the State and conducted on the basis of an egalitarian principle, so that conflicts between the rich
and the poor was not a feature of social relations, even under war conditions with very low levels of
economic development. The shifting of economic policy towards the creation of a market system has
caused the issue of poverty to surface as a problem, capturing the attention of the Government,
communities and social organizations.
In Vietnam, according to an assessment undertaken in May 1993 by a group composed of representatives of
the Ministry of Labour, War Invalids and Social Affairs, the General Department of Statistics and the
Ministry of Agriculture and Food Industry, per capita income valued in food was equivalent to 15 kg of
rice/person/month. Based on this they set the monetary value of 30,000 Vietnamese dong (equivalent to 3
US$/person/month) as the measure indicating absolute poverty. (Endnote 1) Based upon this indicator, it can be
estimated that in Vietnam's rural areas there are 2,847,000 poor households with a coverage of 13.8 million
people, accounting for nearly 30 per cent of rural households.

According to the above poverty line measurement, about 8 per cent of the households in Vietnam's urban
centres can be considered as being poor; of these 7 per cent are in the North, 17 per cent are in the Central
urban centres and 6 per cent are in the South.

The percentage of relatively poor households differs greatly from one locality to another because of the
great differences in average income. This is particularly evident between rural and urban households. The
following figures show that the percentage of relatively poor households in the rural areas is more than 50
per cent of all households whereas in the urban centres they are less than half of all households: the rural
plain and midland areas of the North (38 per cent); the Northern mountainous rural areas (56 per cent); the
Central coastal rural areas (55 per cent); the Southern rural areas (60 per cent).

According to survey data published by the Ministry of Labour, War Invalids and Social Affairs, though the
percentage of acutely poor households has been reduced by less than 5 per cent between 1990 and 1992/93
(which reflects an improvement in the standard of living of the people), the relatively poor households have
increased in number in both urban and rural areas from about 5 per cent to 10 per cent depending on the
regions concerned. This is a reflection of the increasing disparities in incomes.

It is worth noting, however, that the number of people living in acute poverty, with an income equivalent to
the cost of less than 8 kg of rice per month, has not been significantly reduced in the rural areas. They
accounted for between 5-7 per cent in the rural areas in 1992 whereas in the urban centres the figure was
1.6 per cent in 1992.

According to surveys of diverse representative samples of the population, from 1989 to the present, due to
government policies of giving economic incentives to enterprising individuals, the number of rich people
has increased by 2.4 per cent but the number of poor people has increased by 1.7 per cent. In spite of the
rapid increase in rich people, they only make up about 7-10 per cent of the total population. Therefore
Vietnamese society as a whole is still characterized by the poor.

The difference in income between the rich and the poor has been tending to increase rapidly and become
more conspicuous: in the post-war period (1976-80), the differential was between 3 to 4, in the subsequent
period (1981-89) it rose to between 6-8 and at the present time the differential has reached as much as 20 in
the rural areas and 40 in the urban centres.

Table 1. Social differentiation in rural areas (figures have been calculated according to data from a
1991 survey of 3,057 households in 7 provinces in different regions)

Types of households Percentage Per-capita monthly average income equivalent (kgs of rice)
Very rich households 9.7 81

Rich households 12.7 40

Middle-income households 28.2 29

Low-income households 34.6 18

Very poor households 14.5 8

From these figures, one may conclude that social differentiation is the inevitable outcome of the process of
transition to a market economy. However, in Vietnam it has not as yet gone so far as to impoverish the
working masses and concentrate wealth in the hands of a rich minority. This is because the process of
shifting to a market economy is in its initial stages and all arable land is still under the "all people's
ownership" (so huu toan dan), though the peasants now have the right to use, inherit, transfer, exchange
and mortgage it and State-owned enterprises still control the key areas of industry.

The present social differentiation is attributable mainly to the fact that a section of the population who have
favourable access to capital, labour, technology and entrepreneurship are not only motivated but are
moving ahead in becoming rich.

Poverty Reduction Programme in Ho Chi Minh City

This programme was begun in 1992 and had as its aims: support for the poor through soft loans,
access to land and occupational training, in order to help them to develop their own businesses and
to improve their lives. In order that poverty and hunger could be visibly reduced a concerted effort
was made to identify genuine poor households as the target group.

An attempt was made to implement the programme in a comprehensive manner with the support
of the whole city and in collaboration with other social and economic programmes which relate to
the elimination of the causes of poverty and hunger.

The initial research was undertaken by a group of trained social scientists and researchers. The
research findings reflected the real state of poverty and hunger in Ho Chi Minh City:in 1992 there
were 17,618 poor households (8.32 per cent) among the total households in the outer city limits,
and 30,000 poor households (5 per cent) among the total households in the main city. The main
causes of poverty and hunger were identified as being: a lack of funds, land and jobs; a large
number of children; a lack of production tools; sickness; and natural calamities.

Based on these research findings, a list of requirements for those who needed assistance was
drawn up. These included better access to land, soft loans for production and business, job training
and job creation, and support for the production process including the provision of raw materials,
tools and services.

In order to ensure its effectiveness the Programme was focused on a few main areas of productive
activity: husbandry (55.3 per cent), cultivation (22.5 per cent), trade and services (9.5 per cent),
fishing (4.8 per cent), and handicrafts (2.3 per cent).

An evaluation of the impact of the programme showed that over 22,500 households were
supported through soft loans. Seventy six per cent of the households in the target group improved
their lot and were eliminated from the list. The number of high interest loans given by the rich to
the poor decreased considerably. Over 320 households were supported in gaining access to
cultivable land and forest land. The living conditions of these households have been improved, but
have not as yet stabilized. Over 3,000 workers were trained and provided with jobs. Over 30,000
workers (adult and early retirees) now have stable jobs. Over 100 households whose poverty was
caused by members' social "illnesses" such as drug addiction, gambling and drinking have now
 returned to normal life and their living conditions have been improved.

The Programme has supported over 70 per cent of the households who needed help in the four
main town districts and six outlying districts. Over 1,000 out of the 5,000 households who repaid
their loans in full were originally on the poverty list of the City and have since moved up to the list
of middle-income households.

Source: Dinh, Tran Ngoc [1993].

Compared to the earlier period of egalitarian distribution, which was in fact "the equal sharing of poverty"
-- when each person in the rural area was given between a minimum of 13 kg and a maximum of 18 kg of
paddy (which would give between 6.5 kg and 9 kg of rice)and each person in the urban area was allowed to
buy, at subsidized prices, a minimum of 3 kg of rice and/or other staples per child and a maximum of 21 kg
for an adult, the process of differentiation described above constitutes a considerable change in the sense
that it encourages those who are able to better themselves.

Realizing the difficulties facing the people who live in poverty, since the beginning of the 1990s, the
Government of Vietnam has encouraged the authorities in provinces and cities to implement programmes
for poverty reduction and hunger elimination with the support of the Central Government and contributions
from the local authorities. The programme has been in operation for only a few years, so it is as yet too
early for a general evaluation.

V. Education and training

Vietnam's population is comparatively young: the 16-30 years age group accounts for over 65 per cent of
the total labour force. Young men and women today have higher educational qualifications, a higher level
of professional skill and are more adaptive to new technologies. However, there is a great need both for
retraining and improvements in labour utilization.

Vietnam is one of the least developed countries of the world and despite efforts to improve the quality of its
education, in particular campaigns to eliminate illiteracy, its economic backwardness has been a major
obstacle to the development of its education and training systems. Trained technical labour accounts for
only 9 to 10 per cent of the total labour force. There are only 20 to 25 university students out of every ten
thousand inhabitants. It is now facing even greater difficulties: decreasing capital resources, lack of clarity
over training objectives and unstable organizational structures. In addition, various training programmes are
still at the experimentation stage to see whether they are suitable for the changing socio-economic
environment.

To overcome these problems, Vietnam's education system has been restructured. The Ministry of Education
which was responsible for pre-school, primary, secondary and adult education and the Ministry of Higher
Education and Vocational Education have been merged to form the Ministry of Education and Training.

A division of responsibilities has been worked out with respect to the construction of schools in order to
reduce the burden on the state budget: the villages and wards are responsible for the construction of
kindergartens and primary schools, the districts and precincts for secondary schools and the provinces for
vocational schools. The State has instructed the provinces to allocate at least 5 per cent of their budget to
the construction of schools along with a financial contribution from the local population.

At present, extra-budgetary funds for education account for 30 per cent of all expenditure on education.
Since 1981, efforts have been made to mobilize contributions from the people. Thus the development of
education is now being "socialized" in Vietnam. Both the State and the society are having to share the
responsibility for the provision of education to the population.
 VI. Health care

In spite of the heavy consequences of the war and great socio-economic difficulties, Vietnam's health
establishment has been able to provide a comprehensive and effective health service. Because of serious
budgetary constraints, health care in Vietnam was developed along the following basic lines: preventive
medicine; people-centred; and cooperation between the State and the people.

During the war years, an extensive medicare network was built in the rural and urban areas on the basis of
equality in access to health care with due attention being given to primary health care. This network
functioned efficiently in prevention, diagnosis and treatment for both modern and traditional medicine, in
the production and distribution of medicines, in training and scientific research and in the even distribution
of duly trained medical personnel and an adequate number of specialized personnel.

The benefits of this system have been significant. Vietnam which has the lowest per capita income in the
world (US$200) yet has, thanks to this system, a health care situation that is better than in most other low-
income countries. Based upon the 12 basic criteria of health care, Vietnam ranks 68th in the world, staying
well above 63 other countries. Today, financial constraints, poor networks of information, collaboration and
management, and outdated equipment threaten the future development of this system. However, the
Vietnamese Government continues to implement its firm policy that primary health care and preventive
medicine must enjoy the highest priority, and that people's health is the most valuable asset for developing
the economy, improving living conditions, eliminating poverty and achieving the objective of a prosperous
nation. The National Assembly has adopted the Law on people's health care which provides for partial
payment of hospital fees and for an increase in the budgetary health allocation. Health care is being
"socialized" so that the financial contribution by the people, provinces, economic and social organizations
would become, as is the reality today, an important contribution to primary health care. In addition,
international assistance is being regarded as an important resource for the improvement of Vietnam's health
care programmes.

VII. Impact of economic reconstruction in urban areas

The reconstruction process, together with the open-door policy, has created the conditions for the import of
different ways of life from overseas. The transition to the market economy has made a significant
contribution to individual and social dynamics, the stimulation of economic activities and effective labour
utilization. At the same time, the market is also the breeding ground that produces a consumer society,
mercenary egotistic individualism and the erosion of traditional culture and life styles.

The transformation towards the market economy has, however, presented new opportunities for the people,
especially the younger generation. They are no longer tied into a system in which there is only one way to
establish a career, by getting a job in the State sector. They can now find more ways to earn a living.

The following survey data provides some useful facts. An investigation in Hanoi in 1992 of families with
children old enough to work found that 57.4 per cent of families intended to let their children enter
universities; 20 per cent intended to encourage them to work as an apprentice; 12.8 per cent considered it
necessary to let the children become State employees or workers; and 18.5 per cent maintain the hope that
the State will have a policy to ensure jobs for their children.

An investigation of families in a central quarter of the Hanoi central district Hoan Kiem conducted in 1992
revealed a concomitant psychological change together with the economic transformation of the society.
Eighty per cent of people agreed with the principle "must learn to become rich legitimately"; 46 per cent
agreed with the principle "earning enough to live in a harmonious family"; 78 per cent agreed with the
principle "save ourselves before God saves us"; and 65 per cent are opposed to the attitude "depending on
the circumstances, leave everything to fate". Another survey in the township of Cam Pha conducted in 1993
revealed a similar trend. Here 92.5 per cent agreed with the principle "save ourselves before God saves us";
89.6 per cent were opposed to the attitude "depending on the circumstances, leave everything to fate"; and
90 per cent agreed with the principle "we must learn to become rich legitimately".

In the shift from a system of centralized planning to the market economy, people appear to have become
more rational, more dynamic, more positive, and better able to adapt themselves actively to the changes in
their environment. They now have more concrete targets to aim at and more opportunities to choose from.

This moral and material liberation has become the motivating force in the realization of some major
achievements, visible mainly in the improvement in the standard of living. Sociological investigation
results have demonstrated this clearly. In Hanoi, in a survey conducted in 1992, 75 per cent of the surveyed
families stated that their living standards had either remained stable (20 per cent), somewhat improved (34
per cent), or improved considerably (21 per cent) in the last years. In the central quarter of the Hoan Kiem
District in Hanoi, where the market forces are most active, 71 per cent of interviewed families said that
their living standards had stabilized or improved in the last four to five years.

In Cam Pha, the coal mining town, in the survey of July 1993, 75.8 per cent indicated an increase in their
living standards in comparison to that of 1990, (of these 16.7 per cent had achieved a considerable increase
and 13.6 per cent had maintained the same living standards).

VIII. Social stratification

An important social corollary of economic reform is social stratification, the polarization between the rich
and the poor, in urban areas. In the transition from the centrally planned to the market economy, social
stratification has often developed rapidly. This has been due, in particular, to the manipulation of the law in
the informal or "twilight" sector of the economy, thus enabling those operating outside the law to become
rich much faster than those who keep within the law. In the major cities, such as Hanoi and Ho Chi Minh
City, due to the complicated and dynamic nature of urban life and the diversity of the social and
occupational structures, the problem of social stratification and polarization has increased significantly. It
affects all areas of social life and impacts on the opportunities open to each individual and each social
group. Social stratification is not only evident in differences in income but also impacts upon the quality
and quantity of services available to a particular group: it is the cost of education, medical treatment, social
insurance and housing that not everyone is able to meet.

Especially important are the psychological effects. The belief in social equality (inherent in the former
socialist model) is mainly evident in the older generation and has influenced the reaction of workers who
have been negatively affected by the changes brought about by the new system. On the other hand, social
stratification has developed a practical social environment for emergence of real entrepreneurs and forces
having enough strength to push through economic development.

The following data was compiled based on the results obtained from sociological surveys carried out in the
attempt to explore the degree of social stratification taking place in four different urban locations in
Vietnam. In the samples, five standard groups were classified as "pyramids of strata" through which social
stratification in the urban areas was analysed.

The results in Table 2 indicate that social stratification is occurring in urban areas. Though the degree of
stratification varies according to the specific characteristics of each location and each sample, stratification
is taking place everywhere. Some families/groups are becoming rich and prosperous and others are
becoming relatively poor in all of the investigated areas.

The results of the studies also indicated that approximately 50 per cent of families have average living
standards and that the percentage of prosperous families lies between 5-10 per cent and is increasing as a
result of the recent economic developments. It also revealed that the percentage of poor families is between
3-6 per cent and it is higher in the rural areas than in the cities.
Table 2. Urban social stratification

Social status Four districts of inner One sub-district in One sub-district in the Campha town
Hanoi (1992) (%) central Hanoi (1992) centre of Hon Gai (1992) (1993) (%)
(%) (%)
Prosperous 4.9 5.5 14.3 4.6

Above 30.0 31.1 29.7 15.4

average
49.3 46.7 49.5 63.1
Average
11.9 12.2 4.4 10.8
Below
average 4.0 4.5 2.2 6.0

Poor

The difference between the top (rich) and the bottom (poor) groups in the stratification pyramid in each
index is not the same for all: it can be anywhere between 5-10 times or even a hundred times. For example,
under the present conditions, the differences in the size of the houses of families are not taken into account.
As a result the gap between rich and poor is only about 5-10 times. But if the value of property is also taken
into consideration when calculating income, the difference will be much greater.

IX. Social policy implications

From the evidence presented in the studies under review it is clear that, apart from the other negative
effects of economic change, increasing social stratification, especially in the urban areas, is fast becoming
an issue requiring further investigation by policy-makers in Vietnam. As a first step, a series of problems
associated with certain groups during the early years of reconstruction that warrant further investigation
and specific social policy interventions have been identified in order to point the way towards future
research and action in this area.

The emergence of a new social group -- the becoming rich fast group -- has been associated with the
changes in the economic system. This group is also referred to as the "advantaged group", as they have easy
access to administrative power, capital, social prestige, experience and employment skills, all the
advantages necessary to get rich fast under the new conditions. As a result they are becoming involved in
certain administrative, productive and business fields such as foreign affairs, import and export trade,
customs, large projects, real estate business (formal and informal), aviation, navigation, etc. The dynamics
and growth of this new class, especially in the case of young entrepreneurs who adapt easily to the market
economy at all levels -- the local, regional, national and international -- is manifested in the association of
administrative power and economic strength in big business activities and the discarding of legal
management ethics. This has encouraged informal sector activities, where anyone can by-pass rules and
regulations to further individual interests, a consequence of which is increasing bribery and corruption.

The evidence also indicates that the relatively poor groups, which are made up mainly of workers, are
suffering as a result of the labour surplus in the now non-profitable state enterprises. Furthermore, due to a
lack of skills and opportunities, they do not adapt well to the new conditions created by the market
mechanism. This group is regarded as having many disadvantages under the new system.

Increasing social stratification has also given rise to the appearance of new forms of social relations -- rich-
poor, employer-employee, old-young, functionary-citizen, educated rich -- "new" rich. Furthermore, the
recognition of increasing social stratification also requires an understanding of the role and the effect of
social policies on social stratification: policies to eliminate hunger and poverty reduction, of social
assistance, of encouragement for household economies, of taxation and business management, etc. And,
finally, there is a notable tendency for labour to migrate from the rural areas to the cities. Given the social
stratification occurring in the rural areas, this will only serve to increase the complexity of the urban
population structure and create many social problems.

The process of social stratification has also revealed the re-emergence of certain traditional social classes.
Among these, four important urban social groups have been identified:

(1) The worker families who have suffered most because they are less able to adjust to the changes.

(2) The majority of intellectual families (with university level qualifications upward) who have recognized
the transformation as realistic, are more or less adjusting well to the changes and are trying to ensure for
themselves a better standard of living (the majority of intellectual families have an average or above
average living standard). However, to continue to survive and to maintain this momentum, they need to
succeed in their involvement with the market.

(3) The "citizen families" (private enterprise, businessmen) who have made big gains during the shift to the
market economy. Many families became rich quickly because they had many advantages with regard to
capital, skill, experience and adaptability. They receive all the new economic policies with enthusiasm, as
their lifestyle is suited to the new conditions.

(4) The families of managerial cadres who make up a considerable proportion of the population, have
found opportunities to become rich or well off. There is a tendency to associate themselves with business,
production and commercial activities, to stabilize and strengthen their economic basis in the changing
environment.

It is necessary that national policies be designed specifically for each of these groups to provide them with
the support that they each require to take advantage of the changed economic situation and to improve their
income status.

X. Unity and participation

In order to be able to address the emerging social problems in an effective and realistic manner, an
important policy of the Vietnamese Government is to promote integration through the pursuance of national
unity. President Ho Chi Minh said "Unity, Unity, Great Unity; Success, Success, Great Success". This has
become the tradition of the nation and the people. During the process of reconstruction, this takes on further
importance and also becomes the strength of the nation. The policy of the Government is to integrate
people of all strata into a united force for the construction of the nation and the solving of social problems.
The National Unity Front, the Trade Union, the Peasant Association, the Youth League, the Women's
Union, the scientific and professional associations, the humanitarian associations and other mass
organizations, all have an important role to play in the integration process. The aim is to build Vietnam into
a strong nation and a civilized and prosperous society. The development strategy that is being followed is a
socio-economic one in which growth is combined with equity. While the rich may get richer the objective is
to ensure that the standard of living of the poor does not get worse. The rich will be richer, but the poor will
not be poorer. The interest of the poor will be protected, their living conditions will be improved and their
integration into society will be promoted. During the process of reconstruction and transformation toward
the market economy, this is not an easy task. However, with the tradition of unity and the widespread
participation of the people in the nation's development, it is hoped that this objective will be achieved