Land in transition: reform and poverty in rural Vietnam

MARTIN RAVALLION and DOMINIQUE VAN DE WALLE
Land in transition: reform and poverty in rural Vietnam
Washington: World Bank and Palgrave Macmillan, 2008. 220 pp. ISBN 978 0 8213 7274 6, pb £21

Reviewed by Dimitrios Konstadakopulos University of the West of England

While much has been written about the agrarian reforms in the two largest transition economies of East Asia – China and Vietnam – relatively little has focused upon the impact on poverty alleviation. This excellent book co-authored by Martin Ravallion and Dominique van de Walle, leading economists in the World Bank, attempts to explain how Vietnamese people’s living standards were affected by changes in land allocations in their country after the doi moi programme of 1986. In the early 1980s, the government of Vietnam undertook radical reforms of agriculture and began to dismantle the national network of collective farms. These were replaced by a household contract system in which farmers fulfilled individual, rather than collective, contracts. However, as Ravallion and van de Walle point out in Chapter 2, it was not until the late 1980s that the new system gained momentum, through the doi moi policies that brought free market to Vietnam. One of these policies – Resolution 10, introduced in 1988 – recognised the household, for the first time, as the basic unit of the agrarian economy, and created new land laws that leased out former cooperative land to individual farmers. Households were given contracts which granted them the right to use the land for 15 years; they were also allowed to buy and sell inputs and outputs, and choose which crops to produce. However, Resolution 10 had a major drawback: it severely restricted land transactions, because the 1988 guidelines had proposed auctioning the most fertile land to the highest bidder. But widespread accusations of favouritism in land allocation eventually forced the government to change its policy.

The revised Land Law of 1993 permitted long-term lease of land from the state. This new law was immensely significant, as it granted households five rights: to transfer, exchange, inherit, rent, and mortgage their land. Moreover, households were issued with Land-Use Rights Certificates, otherwise known as Red Books, which gave legal recognition to a household’s use of land. My own work in northern Vietnam confirms the authors’ assertion that rural reforms gave villagers the opportunity to diversify away from agriculture and concentrate on low-tech production – mainly in handicrafts, which had virtually disappeared during the quarter-century of collectivism. More recently, a revision of the Land Law (No. 13/2003, implemented 1 July 2004) extended land-use rights, made mortgages available, and permitted the utilisation of land on a stable, long-term basis.

Chapter 2 also focuses on the welfare distributional impact of land reforms. The main arguments are based on the following two assumptions: firstly, unequal allocation of land would put at risk the prospects of higher output of key crops such as rice, thus reducing economic growth, which in turn would have less impact on poverty alleviation; and secondly, a more equal allocation of land that ignored the differing productive capabilities of households might jeopardise economic activity, thus creating food shortages or even a famine. In the following chapters (3 to 7), the authors embark on a number of econometric analyses, drawing from four national household surveys, which cover the period 1993 to 2004. After providing some useful statistics on changes in poverty, inequality and landlessness, they build a theoretical model for assessing the welfare outcomes of Vietnam’s first stage of agrarian reforms that followed the 1988 Land Law. In this model they show that land distribution was generally executed in an equitable way. They also found that land reallocation occurring after the 1993 Land Law was largely efficient, despite the fact that the process of reform was slow. For instance, households that started with a small parcel of land that was economically inefficient tended to increase their holding after a period of time. Land allocation adjustment was also equitable, as it favoured mostly the ‘land poor’; households headed by educated males with long roots in their local communities were also favoured by the law reforms (p. 119).

The next issue addressed by Ravallion and van de Walle is the controversy over rising landlessness among Vietnam’s poor, which resulted from the agrarian reforms. They reject the idea that increasing landlessness has exacerbated poverty in Vietnam, and argue that in fact the opposite is the case. The various statistical tests they apply indicate that ‘rising landlessness has been a positive factor in poverty reduction in Vietnam as a whole … as some farm households took up new economic opportunities, particularly wage labor’ (pp. 148-49). However, the authors found that landless households have fewer opportunities for obtaining private credit from market and non-market institutions, because they lack collateral. Such problematic access to credit by the landless poor is a concern for efficiency and equity, and might jeopardise Vietnam’s anti-poverty programme (pp. 172-73). Finally, the authors argue that land reforms, and the pace of transition to a market economy, have been greater in Vietnam than in China. Just a decade after collectivisation, ‘Vietnam’s agricultural output and factor markets had become roughly as free as found in most (long-standing) market economies’ (p. 180). Since the publication of their book, however, it has become apparent that land allocation has also had one undesirable outcome: rampant land speculation has created a ‘bubble’ in Vietnam’s land and property market, especially in the two large cities of Hanoi and Ho Chi Minh City.

Overall, this is a comprehensible book, drawing from a wealth of statistical data although this profusion of statistical analysis might be a little off-putting for the non-specialist reader. However, this is a valuable publication, which should be of great interest to scholars and students of Vietnamese and Southeast Asian studies, as well as to anyone interested in development studies and transition economies.