Largest ever World Bank loan to Vietnam signals country's swift path to middle-income status


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Last month, Vietnam and the World Bank signed the credit agreement for a loan that is historic for the rapidly developing country. Not only is it the largest ever World Bank loan to Vietnam, but it is also the first from its International Bank for Reconstruction and Development (IBRD) – meaning the country is a step closer to reaching middle-income status by this year.

A few days earlier, I caught up with Martin Rama, the Bank’s lead economist in Hanoi, and asked him a few questions. In a short video interview (embedded below), Rama explains why this $500 million loan, meant in part to strengthen public investment in Vietnam, is so significant to the country.

"This is a country that has had 20 years of spectacular growth without a substantial increase in inequality – with one of the fastest reductions in poverty that we have ever documented. There is much for Vietnam to be proud of."

Read more about the development policy loan to Vietnam here.

Kevin Erwin
January 25, 2010

Whilst I agree with Martin Rama that the "economy" of Vietnam is developing, I disagree with his comment that "poverty" is reducing in Vietnam. The AVVRG has been operating in the Ba Ria Vung Tau Province since 1994 and although the Province benefits from off-shore oil production and a large influx of tourist's, especially in Vung Tau, one just needs to wander off the "beaten" track to see first hand that "poverty" is still very much in existence in Vietnam.
Kevin Erwin
Australia Vietnam Volunteers Resource Group

Lien Pham
January 26, 2010

I agree with Kevin. The reality of perpetuating poverty can be seen everywhere, right in the city of HCH. I see kids in Xom Chieu areas picking up trash or sleeping on pavements. In December 2009, I spent two weeks in Tam Ky, a small city in Quang Nam province below Hue and the desperate situations of so many people are a far cry from the poverty reduction that has been touted.
Also the growing income disparity between the rich and poor, urban and rural is evidenced clearly across the country. Many people have increased wealth to send their kids overseas for studying whilst schools in region like Tam Ky, Dac Lac or far Northern regions do not have basic facilities like clean water systems or books.

Lien Pham

Martin Rama
January 28, 2010

Kevin and Lien:

Thank you for your comments. I don't think there is a disagreement. A decline in the poverty rate does not mean that poverty has altogether been eradicated. Far from that. Furthermore, a decline in the poverty rate for the country as a whole is not incompatible with poverty being persistent, or even increasing, among specific population groups. Two main concerns need to be flagged in this respect. First, is the plight of ethnic minorities. In the World Bank’s most recent Taking Stock report (, issued last month, we noted:

"This relatively upbeat assessment should not mask the important challenges remaining in relation to poverty reduction. The 2008 VHLSS shows modest progress in reducing poverty levels among ethnic minority populations. Among this admittedly heterogeneous group the poverty rate only fell from 52.3 percent in 2006 to 49.8 percent in 2008 (Figure 5). In relative terms, this is much less than the reduction observed in the poverty rate for Kinh and Hoa populations (from 10.3 to 8.5 percent). Average welfare levels did increase among minority populations between 2006 and 2008, and there were reductions in both the depth and the severity of poverty. But growth was not sufficient to bring about substantial reductions in the poverty rate."

The second concern relates to the emergence of new forms of urban poverty. A detailed analysis was conducted comparing household survey (VHLSS) data from 2004 and 2006 (the 2008 data are still being checked), and the main findings summarized in the Bank’s 2008 ( Vietnam Development Report:

"While it is clear that poverty is largely rural in nature, the figures for 2006 suggest that economic growth alone may not be sufficient to deal with poverty in urban areas. The major cities of Vietnam have been booming for many years now, and yet urban poverty appears to have stabilized, if not increased. […] Understanding why this is so is especially important to adjust social protection policies in a period of rapid urbanization."

The report is actually devoted to reviewing social protection policies in Vietnam and making recommendations to increase their effectiveness.