As luxury cars, yachts, private aircraft and luxury items have been imported into Vietnam since late 2006, many people are glad because that is the most convincible evidence of the appearance of the middle-class and businessmen, which are needed for development.

The back side of luxury goods

Yet, statistics show that this trend has consequences which are contrary to the country’s goal of stabilising macro-economics. For example, import revenue of cars in 2007 reached $579 million, a rise of nearly 172% over the previous year. The percentage of consumer goods in the total import revenue rose 11.4% in 2007, compared to the average rise of 7.5% of the ten previous years, according to MUTRAP project. However, this rate would be much higher if smuggled goods were added.

Dr. Vo Tri Thanh from the Central Economic Management Institute, commented: “The boom of importing consumer goods is caused by the fast increase of income, especially the income of a group of people who earn revenue from real estate and securities.”

Thanh’s comment is similar to a report which is being compiled by experts of the Ministry of Planning and Investment. According to the report, the rate of consumption in GDP is rising, from 69.7% in 2005 to 71% in 2008. This means that the savings rate has decreased from 30.3% of GDP in 2005 to 29% this year. Meanwhile, total social investment has been over 40% in many years. The gap between savings and investment is always 10% compared to GDP, revealing the vulnerability of the Vietnamese economy. This is a consequence of the consumer habit of the group of newly-rich people in Vietnam.

Contrast

Meanwhile, the poverty rate in Vietnam seems to be increasing under the impacts of inflation.

According to the General Statistics Office, the poverty rate fell to 14.8% in 2007, from 20.2% in 2005. However, the Institute for Labour and Social Sciences said the poverty rate may increase to 17% by the year’s end, instead of decreasing to 13.83% as previously expected.

An expert from this institute said high inflation in 2007 and 2008 hit the incomes of many groups of the population, seriously hitting the poor and nearly poor people, and sending many families back into poverty again.

Fiona Lappin, chief of the UK Department for International Development in Vietnam, said that although Vietnam has obtained remarkable achievements, many people are still living in poverty. For example, 40 million Vietnamese people are living on less than US$2 per day.

She said she has witnessed the life in many rural areas in Vietnam and met with Thai, Muong, H’mong ethnic people and she understood the difficulties that they are facing, especially in health care and education.

In the context of high inflation, the state aims to ensure social welfare for everybody. However, according to a research work by the UNDP, there are many problems associated with Vietnam’s social welfare system. The richest people enjoy 40% of social welfare while the poorest receive around 7% only. The richest group receives 47% of the total pension while the poorest receive just 2%. The richest group benefits from 45% of health care services and 35% of educational services and it is merely 7% and 15% for the poorest group.

Source: SGTT