Vietnam's Party chief warns against growing economic divide, again

By An Dien, Thanh Nien News

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As Vietnam's elite marches towards greater economic prosperity, the working class has been marginalized

A vendor sells fruit on a street in Hanoi. For more than two decades, Vietnam has notched up rapid and stunning economic growth and there have been warnings against the gap between the rich and the poor. The country's 13 year-low economic growth of 5.03 percent last year has continued to punish the poor and only exacerbates the gap between the haves and have-nots. PHOTO: AFP

Vietnam's wealth gap is only widening and poses the most worrying threat to the survival of the political regime, said Communist Party chief Nguyen Phu Trong.

Though the economic chasm has been oft-discussed, it remains unaddressed, he noted.

"The rich-poor divide"¦ [only] shows signs of getting worse," Trong said October 9 in his wrap-up speech at a regular meeting of the Party Central Committee, a powerful grouping of 175 senior Party members.

It was not the first time the country's top leader has warned against socioeconomic disparity. Trong emphasized the rich-poor gap at another meeting of the Central Committee last year, saying the gap existed even inside the Party.

"Some Party members have gotten richer so quickly, leading a lavish life that is miles away from that of the workers," Trong said at that time.

For more than two decades, Vietnam has notched up rapid and stunning economic growth and there have been warnings against the gap between the rich and the poor. But these concerns have largely been ignored in the euphoria of being the latest Asian economic tiger on the block.

The country's 13 year-low economic growth of 5.03 percent last year has continued to punish the poor and only exacerbates the gap between the haves and have-nots.

The number of extremely wealthy people in Vietnam has grown by 14.7 percent this year, the second fastest rate in Southeast Asia after Thailand, according to a recent report released by Singapore company Wealth-X and Swiss bank UBS. The inaugural World Ultra Wealth Report says the number of ultra-high net worth individuals (UHNWIs), defined as those with assets of US$30 million and above, has risen to 195 this year and they have a combined wealth of $20 billion.

Other regional countries that saw the number of UHNWIs increase are Singapore, Malaysia, the Philippines, and Indonesia. Thailand is at the top with a year-on-year increase of 15.2 percent from 625 last year to 720 now and Indonesia is third with an increase of 10.2 percent.

Vietnam joined the lower-middle income bracket in 2009, with per capita income rising to $1,555 last year from $110 two decades earlier, according to the World Bank.

But Vietnam's rich were 9.2 times wealthier than the poor in 2011 compared to 8.9 times wealthier in 2008, according to the latest data compiled by the General Statistics Office.

In major cities like Hanoi and HCMC, the gulf is glaringly evident.

Major luxury brand boutiques -- Marc Jacobs, Cartier, Gucci, Louis Vuitton, or Hermes -- preen on the streets before the eyes of construction workers and street vendors who sit at sidewalk eateries, spending less than a dollar on a meal.

In Vietnam's highlands areas, a majority of the ethnic minority residents are still struggling to eat enough food every day, while a 2014 Rolls-Royce Wraith is set to ply the Vietnamese streets that already teem with all the luxury brands -- Bugatti, Ferrari, Lamborghini, Maybach, Rolls-Royce and Bentley --soon as a local resident recently bought it at a cost of around VND19 billion ($902,000), Tuoi Tre (Youth) newspaper reported.

The best way economists and political scientists have to measure inequality is the Gini coefficient. In using the Gini coefficient, zero represents perfect equality and 100 perfect inequality.

According to the most recent World Bank data, Vietnam is at 35.57. Elsewhere in Vietnam's neighborhood, the Philippines is at 42.98 and Malaysia has gotten worse at 46.21.  Indonesia was 34.01 (better than in the past) and Thailand 40.02 (getting worse).  Cambodia is 37.85, Laos 36.74 and Myanmar has no data.

"Vietnam is hardly the worst in the region, but the trend lines are not good," Zachary Abuza, a Washington-based Southeast Asia analyst, told Vietweek.

"Vietnam is not a wealthy country, per capita income is still very low, so the disparities are very apparent, and also challenge the ruling ideology and social contract," Abuza said.

Whose hand on the money faucet?

Vietnam has prided itself on achieving the first United Nations' Millennium Development Goal (MDG) on poverty reduction well ahead of the 2015 deadline. MDGs is a set of targets for education, poverty, health and other areas.

The country has lifted some 30 million people out of poverty in the past two decades, the Ministry of Labor, War Invalids, and Social Affairs said in a recent report to the National Assembly, Vietnam's legislature. The poverty rate fell from nearly 58 percent of the population in 1993 to 7.8 percent currently.

But while experts tout Vietnam as a success story in alleviating poverty, they have repeatedly urged the country not to rest on its laurels.

The World Bank said in a report earlier this year that macroeconomic instability has now left the remaining poor harder to reach. Growth has slowed in recent years due to macro instability and external shocks, inequality is rising, and ethnic minority poverty remains persistently high, it said.

The report said Vietnam's 53 ethnic minority groups make up less than 15 percent of the population but they accounted for nearly 50 percent of the poor in 2010. Most minorities continue to reside in more isolated and less-productive mountainous regions of the country, it said.

The rapid economic transformation of the last few decades has left people in rural areas with limited access to high quality education and health services, as well as good jobs.

"Poverty reduction will become more difficult in the coming time as the poor people in Vietnam are now in more difficult positions, i.e., those that are in remote areas," a foreign diplomat told Vietweek on condition of anonymity.

Analysts say what makes inequality in Vietnam unique is that it is a nominally socialist system, ostensibly committed to creating a classless society. 

Beyond that obvious point is that what is allowing this gap to increase is that people are able to gain control over public assets, they say.

"Vietnam has had incomplete market reforms," Abuza, the Washington-based analyst, said.  "There is still too much state control over the economy, which allows connected insiders to profit."

Vietnam's top leadership has admitted to the surging influence interest groups have on the policymaking process, saying these groups could sway the decision making process of the nation's bread-and-butter policies.

During a meeting with the Vietnamese diaspora in Denmark as part of his visit to the Scandinavian country last month, President Truong Tan Sang yet again warned against the pitfall of economic growth in which the profits only accrue to several groups with vested interests while a majority of ordinary people are left behind.

There has been little statistical or empirical evidence linking inequality to increased criminality. But apparently, such a correlation does exist in countries that record high Gini coefficients.

The Philippines has a lot more crime such as kidnapping for ransom, murder, and bank robberies.  Indonesia too has a lot of crime, though some of it is religiously motivated. Though Thailand, whose Gini coefficient is also rising, hasn't seen a large increase in crime, it has seen much more political violence and the polarization of society, including mass riots. 

Given the regional context, Vietnam may not be immune from such development. Media stories of people not hesitating to kill others for the most insignificant reasons have continued to sprout up in the country. Meanwhile, crime rates have shown no sign of abating.

"A rising number of people have mysteriously made a windfall and this has done nothing but to add salt to the gaping wounds of the poor," Pham Bich San, a Hanoi-based sociologist, said.

"It is those nouveau riches emerging with no cultural and intellectual base that have fueled jealousy and the desire to have the same from the have-nots."

Huynh Ngoc An, a taxi driver in the tourism-haven Phu Quoc Island in the Mekong Delta province of Kien Giang, is not excited about a government plan to grant the island special administrative region status on the lines of Hong Kong in a bid to cash in on its tourism potentials.

"Clearly, Phu Quoc will continue to thrive but people like us will also continue to struggle to make ends meet," An said.

"For years, economic development has benefited only a handful of officials and powerful people."

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