Vietnam has the highest urbanization rate in Southeast Asia. Just a decade ago, only 24% of its population lived in cities, with 65% of the labor force employed in rural agriculture. Today, already more than 30 million people live in urban areas, accounting for approximately 34% of Vietnam’s total population. The country is witnessing a rapid proliferation of urban areas, with the number of towns or cities at 755 and rising. Planners estimate that Vietnam’s cities will be home to more than 46 million people by the year 2020. The largest of these cities, Hanoi and Ho Chi Minh City, are the growth engines of the country, supported by a relatively low urban unemployment rate of 4.6%.
With its newly attained status as a middle income country and its ambitions to achieve higher levels of human development, Vietnam needs to address challenges in basic social service provisions for both rural and urban populations. In particular, Vietnam will have to cope with rural-urban migration, a global megatrend that will continue to trouble city planners for the foreseeable future. Many poor rural Vietnamese will try their luck in the thriving urban centers, perceiving them to be full of job opportunities for both skilled and unskilled workers. Urban planners need to find a way to accommodate this influx of migrants and account for the fact that most of them are ill-equipped to participate in the urban economy.
The latest infographic (see below) from the Asian Trends Monitoring (ATM) team tells a story about Hanoi, the capital of Vietnam, and how it fares in its struggle to provide basic services for its people. The numbers and information in the infographic are a combination of secondary data from the World Bank, primary data from the ATM poverty profile survey, as well as information from interviews ATM conducted in the field in September 2012.
This infographic highlights the emerging issues that Hanoi’s poor must contend with. Although Vietnam’s GDP is growing and income levels among the poor are rising, it does not necessarily translate into improved access to services. There are several limitations to the government’s service provision capacity, which leads to things like a strict “poor list” of eligible households.
The services available to Hanoi’s poor are extremely limited and often inaccessible to those most in need. Migrants and seasonal workers, often among the city’s poorest residents, are by default not eligible for the poor list because they are not official Hanoi residents. Furthermore, they are unable to access decent housing and financial services.
As most of Hanoi’s poor are self-employed in the informal sector, they often require loans for working capital and consumption. Unfortunately, microfinance services in urban areas are rarely available. The survey data confirms the lack of choice when Hanoi’s poor are in need of credit. The overwhelming majority of respondents, 73.9%, take private loans from relatives or friends. Even the services of informal money lenders, often the next most popular alternative when the formal financial system is inaccessible (compare with ATM Bulletin 17 “Manila’s Poor”), are only used by 7.8% of these individuals.
The poor are also deprived when it comes to health services. If they are unable to afford health insurance at market rates, they are forced to pay out-of-pocket for every treatment. An ongoing commercialization of health services has further worsened the gap between the affluent and the poor. The UNDP Human Development Report notes that attempts to ensure sustainable social service funding have led “to the increasing commercialization of public social services, and over-reliance on user fees by service delivery organizations.” More than 50% of respondents have difficulties in paying for health treatments. As a result, many choose to self-medicate or leave their ailments untreated. Moreover, over a third (36%) of those who make use of locally available clinics are dissatisfied with the service quality.
As we explain in our new report, ATM Bulletin 18 “Empowering Hanoi’s Poor”, there are a number of viable strategies to narrow the service gap and reduce urban poverty in Vietnam’s capital. These include a stronger focus on building social enterprises– for example, in the service and tourism sector– as well as comprehensive access to financial services for micro-entrepreneurs through affordable microfinance.
Both of these strategies focus on empowerment rather than direct provision of services. Although building clinics and schools for the poor can be effective at times, microfinance institutions provide the poor with the capital they need to start and grow their own businesses. Secondly, these approaches are also more financially sustainable because they are run on a for-profit basis and allow the organizations to expand their services both in reach and in duration.
The resulting improvements in household income will, in the long run, enable the beneficiaries to access and pay for existing services, without depending on handouts from the government.
Taufik Indrakesuma & Johannes Loh are research associates at the Asian Trends Monitoring Bulletin at the Lee Kuan Yew School of Public Policy, University of Singapore.