The State and the Social Sector in Vietnam: Reforms and Challenges for Vietnam

Abstract

The moi (renovation policy) that Vietnam adopted in the late 1980s has led to high growth and more openness in the economy. However, the economic progress has not resulted in similar improvements in the social sector. Under the old central planning system, social services were free and the state was the sole provider of services. Under the role of the government changed. Private providers in health and education were selectively allowed to operate through a policy called xa hoi hoa or socialization. This socialization policy was designed to compensate for the lack of public resources. During the 1987-97 period, secondary and tertiary education received an increasing proportion of public funding at the expense of primary education, and contributions from users and parents increased markedly. In the health sector, only a small fraction of the health budget is allocated to the commune health system, which serves 80 per cent of the population. The pension and social relief expenditure in the budget concentrated on pensions for public servants, war invalids and martyr families. The impact of this policy on the social sectors is mixed. I. Introduction Vietnam has successfully managed its transition from a centrally planned command economy to a socialist-based economy. This Renovation, termed as doi moi, started in 1987. The first decade (1987-97) of moi was devoted to build the foundations of the main macro-economic and institutional components. It began with massive land reform in the agricultural sector, where land was redistributed among rural households. Price liberalization and wide-ranging economic reforms have been introduced. As a result, the economy has achieved a steady growth of 8.4 per cent per year for the past 8 years, prompting a rapid reduction of poverty. The living standards have improved markedly, but the benefits are distributed unevenly, as shown by Vietnam's 1992-93 Living Standard Survey (VLSS)`where 90 per cent of the 51 per cent considered as poor live in the rural area. According to preliminary results from the newest 1997-98 VLSS survey, the ratio of absolute poor; dropped from 51 per cent of the population to around 35 per cent in 1998 (World Bank 1998).3 While economic progress has been impressive, the picture in the social sectors is generally less impressive and bleaker. Under the old centralplanning system (bao cap), social services were free and the state was the sole provider of services. At that time, Vietnam received major support and assistance from the socialist bloc. In this environment, private providers were not allowed to operate, even in areas of greatest need such as education, health and social services. During the moi and under severe budget constraints, health and education were opened to private providers through a policy called xa hoi hoa or socialization. Then user fees in health and education were introduced in 1989 at a time of rising income for most families. Socialization was required to replace diminishing public resources. During this period, contributions from users and parents increased steadily. The impact of this policy on the social sectors is mixed at best. The urban areas can rely on social insurance and social welfare while the rural social protection system remains largely dependent on family support and informal mechanisms combined with public poverty alleviation programmes. There is a lack of consensus among the leadership as to the speed, depth and pace of changes, and overall a reluctance to discuss the development of the private sector for it would be a deviation from the market economy with socialist direction.4 The role and place of the private sector and/or its partnership with the public sector is still under discussion and the lack of direction effectively hampers the speed of socio-economic development in Vietnam. Emerging from decades of political isolation and post-war socio-economic crisis, Vietnam managed to achieve a human development index, which stands quite impressive, compared with similar low-income countries. …