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Agrarian transition in Viet Nam

Appendix II

Poverty lines for Viet Nam: World Bank, this study, and Vietnamese sources

The appropriate poverty line for Viet Nam is a topical issue -- and a controversial one, after the publication of the World Bank's poverty line which yielded an estimate of 50 per cent poverty in 1992-93 (World Bank, 1995b). This appendix examines the World Bank's poverty line in detail and then postulates alternative measures, which are then compared to other existing poverty lines in Viet Nam.

The World Bank's total poverty line is based on its food poverty line -- which is the normal procedure. The critical question then becomes how is the food bundle composed? The World Bank chose the bundle consumed by the middle quintile group -- i.e. by the group above and below which lie 40 per cent of the households. This can be called the third poorest or the third richest group. The World Bank chooses to say the former, but in practical terms what the Bank chose is a food bundle consumed by the average household, i.e. by one above and below which lie half of the households. Why should such a household be considered representative of a poor household is never explained but we can see straightaway even from conceptual considerations that the consumption pattern of households in the 40-60 per cent rich (or poor) group cannot be thought to correspond to that of a poor household -- and we shall see that effectively it does not. With that kind of poverty line, almost by definition we should get 50 per cent poverty, as indeed happens.

The essential details from the Bank's calculations of the food poverty line are shown in table A.II.1. Unfortunately such directly comparable figures are not presented in the Bank document, so an airing here should be considered a service. The rice figures are obtainable directly from the Bank source; while figures for "others" have to be derived as a residual. This is explained in the table. From 163 kg of rice per year, 1,576 calories per day would be obtained ^(4), or 75 per cent of the requirement. In terms of expenditure, 39 per cent goes to rice. By subtraction, in the (World Bank) poverty line, 61 per cent of the expenditure is consecrated to non-rice sources, yielding only 25 per cent of the calories. That means the "others" calories were 4.7 times as expensive as rice calories. No doubt a 40-60 per cent group in even a poor country may have such a consumption pattern but it should prima facie not be postulated as a poverty bundle -- and if it is then those falling below it cannot be considered poor.

Table A.II.1. World Bank's food poverty line, 1992-93

Let us examine this assertion conceptually. What is a food poverty line trying to tell us? It says that those falling below it are failing to meet their food needs -- or 2,100 calories. They are "food poor". Thus by the World Bank's 748,000 dongs food poverty line somebody earning 500,000 dongs per year would be considered food poor, since he would be getting only 500/748 x 2,100 = 1,400 calories per day. The question is, would he behave that way? Trying to adhere to the consumption style of the third richest group would be irrational and in the long term suicidal as food intake is being jeopardized. Since there is no physical reason for trying to achieve dietal variety but there is for obtaining sufficient calories he will attempt to first satisfy his 2,100 calories. From 500,000 dongs a person would easily obtain 2,100 calories -- actually from just 387,000 dongs by omitting all non-rice foods. Thus persons falling below the World Bank's food poverty line cannot be considered food poor. Since the total poverty line is based on the food poverty line, the same conclusion applies to it too.

Alternative estimates

This study's estimation procedure is grounded on three "rules" about postulating a poverty line that arise from the above discussion:

• The poverty line should be based on a physical minimum. The calorie norm of 2,100 is a physical norm but since 2,100 calories can be obtained from a variety of foods this rule has to be supplemented by two others.
• The food bundle should be based on the cheapest foods. At the extreme a truly poor person will consume nothing but the basic staple -- rice in Asia, maize in Latin America, cassava/plantains in Africa -- simply to obtain his energy intake.
• Variety has a place: sauce to go with the staple; but variety has to come later.

Table A.II.2 shows our alternative derivation of a rice-only poverty line and a rice+sauce poverty line based on the above considerations. The period is again 1992-93 -- i.e. the period of the VLSS.

Table A.II.2. Alternative estimates of poverty lines, 1992-93

A 100 per cent rice poverty line would cost D369,000 and the rice+sauce bundle D488,000 -- i.e. 32 per cent more. The sauce being made up of more expensive foods than rice takes up 43 per cent of the poverty line while yielding 25 per cent of the calories. Compared to this in the World Bank bundle it occupied 61 per cent of the expenditure for the same (25 per cent) calorie yield.

Many poverty lines exist in Viet Nam. Some are rice-based -- some rice-only -- and there is also a recent estimate of a food poverty line by the General Statistics Office.

Poverty lines are often defined in terms of kilograms of rice in Viet Nam. Of course any poverty line can be stated in rice-equivalent terms. For example the World Bank's food poverty line could be translated as 35 kg of rice, but since a "rice only" benchmark would be at 17 kg the World Bank's standard is clearly nowhere near a bare sufficiency level. Our own rice+sauce poverty line could be cited as 22.5 kg equivalent rice line. While not offered as a bare minimum, at around one-third over the 17 kg requirement, it is not too far above it. Two Vietnamese sources give poverty lines in terms of rice. What they boil down to conceptually is discussed with the help of the following table (table A.II.3), along with the World Bank's and this study's poverty lines.

Table A.II.3. Rice poverty lines in Viet Nam compared to other estimates

Contradictory though it might seem, all the above measures of poverty -- including those of the Bank's and this study's -- are relevant if correctly used. Nguyen and Nguyen's standard yielding 2,000 calories per day would identify the core poor -- i.e. those able to meet their food requirements and nothing else -- while MOLISA's "hunger" measure would identify those chronically undernourished. MOLISA's rural measure is more or less a rice-only poverty line but the urban standard is of a different nature; it allows for non-food needs. If all the food calories come from rice then 7.5 kg of rice -- or 160,000 dongs -- would be left over to purchase non-food needs. Compared to that, as noted, the World Bank's food poverty would leave half of the income surplus if spent on rice only.

The World Bank seeing that the other measures of the poverty line in Viet Nam are much below its own, criticized these measures as being woefully low. That criticism misses the conceptual basis of the rice poverty lines. The following extracts from the Bank's document (World Bank, 1995a, p. 6) shows this when set beside our comments.

The kind of criticism levelled by the World Bank at the Viet Nam-based poverty lines and comparisons with its own poverty line are out of place once it is recognized that quite different types of poverty are being measured. We can see clearly that the Viet Nam poverty lines are attempting to capture core poverty; when the World Bank criticizes them, it could only be out of a belief that its own poverty line is also capturing core poverty. An inspection of its contents showed this not to be the case.

Stung by the World Bank's estimate of 50 per cent poverty the General Statistics Office decided to make its own estimate. In place of using the full poverty line, a food poverty line was used, which would necessarily give a lower estimate of "poverty" (but "food poverty") -- but instead of going with a rice only line a full-blown basket was used which contained proportionately the same amount of expensive non-rice items as in the Bank procedure. In consequence the GSO's estimate of the "food poverty" line was about the same as the World Bank's and hence also its "food poverty" estimate. Practically nothing is achieved since the World Bank's estimate of the food poverty line -- and hence also "food poverty" (25 per cent) -- is much too high and certainly does not measure calorie deficiency. The details of the GSO line compared to the World Bank's are shown below (table A.II.4).

Table A.II.4. GSO food poverty line and poverty estimates,

1993 v. World Bank, 1992-93

The difference between the two poverty line estimates arises from (i) minor differences in the poverty bundle; and (ii) differences in prices between the two years in question. The difference is only 7 per cent in the case of the urban measure and 15 per cent for the rural. As a result of the latter, but also the fact that the poverty line is applied to income data in the GSO procedure not consumption data, a lower estimate of food poverty is obtained by the GSO compared to the World Bank. Yet the estimate, it is still worth emphasizing, pertains to food poverty and it is on the same high side as the Bank's.

The following table (table A.II.5) shows the derivation of a food poverty line for Viet Nam based on prices prevailing in Hanoi in December 1997. It is thus an urban poverty line. It is based on the same principles as the food poverty line described previously -- i.e. around rice and the most essential and therefore the cheapest non-rice foods. These latter items are listed as pork and oil. The cheapest cuts of pork are included, the point being simply to show that a choice is available to the poor. The total "food poverty line" is at 703,000 dongs per year, of which 55 per cent is contributed by rice. A rice-only poverty line would cost 517,800 dongs. The rice+sauce poverty line is equivalent to 23 kg of rice per month, therefore of the same order of magnitude as the rice+ line for 1992-93.

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