SOURCES OF INCOME GROWTH AND POVERTY REDUCTION IN LAOS, VIETNAM, AND MYANMAR

SOURCES OF INCOME GROWTH AND POVERTY REDUCTION IN
LAOS, VIETNAM, AND MYANMAR

Jonna P. ESTUDILLO

               There has been great interest in keeping track of poverty trends as the 2015 deadline for meeting the Millennium Development Goals (MDGs) is now on the horizon.  Target 1 of the MDGs is “to halve the proportion of people living on less than a dollar a day between 1990 and 2015”.  This target was reached 5 years ahead of the deadline.  The United Nations reports that the proportion of population living on less than $1.25 a day fell from 47 per cent in 1990 to 22 per cent in 2010 (UN, 2013).  This means that about 700 million fewer people live in extreme poverty in 2010 than in 1990.  Creating jobs is an important strategy for reducing poverty inasmuch as labor is the most abundant asset of the poor (Fields, 2012; Otsuka et al., 2009).

              In this essay, I explore pathways out of poverty for rural households in the Lao People’s Democratic Republic (Laos), Vietnam, and Myanmar.  These three countries are being exposed to an unfavourable scenario that could deepen poverty—the increasing scarcity of farmland because of population pressure on a closed land frontier.   Contrary to expectations, I found a decline in the incidence of poverty.  Poverty headcount ratio (as proportion of population) at poverty line of $1.25 per capita per day (in Purchasing Power Parity in 2005) in Laos declined from 56 per cent in 1992 to 34 in 2008; in Vietnam, it was from 64 per cent in 1993 to 17 in 2008.  Using their own domestic poverty line, poverty headcount ratio declined in Myanmar from 32 per cent in 2005 to 26 in 2010 (Republic of the Union of Myanmar, 2011).

              To identify pathways out of poverty, it is necessary to conduct surveys for at least two periods of time (most preferably) on the same set of households. The survey should include detailed questions on sources of household income and choice of occupation of household members.  In Laos, I have panel data in 2007 and 2010 for 528 households in Champassak, Savannakhet, and Xayaboury.   In Vietnam, I have panel data for 184 households in four villages in Hanoi and Thai Nguyen in the north and for 160 households in four villages in Long An and Can Tho in the south. In Myanmar, I have data for 739 households in 1996 and 900 in 2012 in four villages in Ayeyarwady Division; I am unable to make panel data in Myanmar because the names of household heads are missing in the 1996 data set.

              Poor rural households in these countries pursued three complementary pathways out of poverty: (1) farming, (2) nonfarm work, and (3) migration (WB, 2008).  In Laos, cross-border migration to Thailand is a strategy to raise income in the midst of increasing scarcity of farmland and slow development of the nonfarm formal wage sector.  Cross-border migration is common among the women, the youth, and the educated—groups that are more susceptible to spells of unemployment and poverty (Estudillo et al., 2013).  In the southern villages in Vietnam, rice farming has emerged as an important source of income growth owing to the modernization of rice farming.  In the northern villages, the main strategies to raise income are production of high-value crops such as fruits, vegetables, and cut flowers; propagation of poultry and livestock by women; and migration by men in the cities and small towns to work in the formal wage sector.    In Myanmar, farming households are able to increase their income through rice farming and participation in the formal wage sector, whereas the landless households have been increasingly involved in informal wage work and self-employment.

              So, what does this mean for policy?  Indeed, “one size does not fit all”, but our findings seem to give a strong argument to undertake measures to increase nonfarm employment opportunities and facilitate migration.  This study has identified that investments in human capital (health and schooling), physical infrastructure (electricity, running water, and roads), and expansion of credit are keys to increasing nonfarm income and eradicating rural poverty. Surprisingly, access to farmland has lost importance relative to human capital as a determinant of income and poverty in these three countries.

 

References

Estudillo, J.P., Mano, Y. and Seng-Arloun, S. (2013) “Job Choice of Three Generations in Rural Laos” Journal of Development Studies 49 (7): 991-1009.

Fields, G. S. (2012) Working Hard, Working Poor: A Global Journey (UK: Oxford University Press).

Otsuka, K., Estudillo, J.P. and Sawada, Y. (2009) Rural Poverty and Income Dynamics in Asia and Africa (London and New York: Routledge Taylor and Francis Group).

Republic of the Union of Myanmar (2011) Integrated Household Living Conditions Survey (IHLCS) in Myanmar, 2009-2010. (Yangon:  The Republic of the Union of Myanmar).

United Nations (UN) (2013) The Millennium Development Goals Report 2010 (New York: UN).

World Bank (WB) (2008) World Development Report 2008: Agriculture for Development (Washington, D.C.: WB).