Land in Transition: Reform and Poverty in Rural Vietnam (review)

In the 1980s, Vietnam embarked on the transition from a socialist command economy towards a market-oriented economy. An important (and catalytic) part of the transition was major reforms in the agricultural sector, which would lead Vietnam's graduation from the socialist mode of agricultural production to a market-oriented one.

Vietnam's market-oriented land reforms led to the dismantling of cooperatives and collectives, and introduction of a legal market in land-use rights, where individual households could enter into contracts with the government. This provided an incentive to boost agricultural production, resulting in significant reductions in poverty rates. The success of the land reforms also contributed to other policy reforms that lead to more openness, diversification and growth.

Naturally, the reform took time. In 1988, households were first assigned land and output markets were liberalized. Individual households still had to provide an output quota to the government but could keep the surplus for themselves, either for sale or for their own consumption. Then, in 1993, official land use titles were introduced and land transactions were permitted for the first time in Vietnam's communist history. These later reforms helped to mitigate the initial inefficiencies in the administrative assignment of land, when decollectivization first took place.

The second stage of reform, which was clearly pro-market, posed a potentially major threat of elite capture, as the decentralized implementation of the reforms down to the commune level meant that the local elites (the cadres) could subvert the process to serve their own interests. However, this turned out not to be the case in Vietnam, despite reports to the contrary in the wake of the reforms that suggested (widespread) abuse.

Ravallion and van de Walle —who are leading experts in this field —traced the path of Vietnam's agrarian reforms over the decade after legal reforms were introduced, looking at the stages of land law reform and their impact on people's welfare and living standards. They provided a careful empirical analysis of the concerns over elite capture and other key factors that led to the success of the reform measures, using various econometric models of household consumption to assess the equity and efficiency implications of these determinants.

The results of their study indicate that the decentralized reform process actually achieved a more equitable outcome than would have been achieved by a purely free-market process. Although there was clearly a trade-off between equity and efficiency, the analysis of Vietnam's reforms bring to light a conscious effort by the government to protect the poorest from losing out, and that the land allocation process did not unduly favour the local elites (households with government or semi-government jobs).

They suggest two main reasons: first, the formation of a pro-reform coalition between farmers and the central government officials involved in the reform process, and second, favourable conditions for equitable distribution of land-use rights, due to the social policies under communism. The active role of the central government ensured that reforms were carried through despite the resistance of farmers. It is important to note, however, that resistance notwithstanding, the desire for reform was shared by many farmers who saw and felt the inefficiencies of collectivization. Thus, the reforms were not just a top-driven process, although the central government's commitment to reform certainly saw the process through its initial stages. Still, the reform process may have reinforced gender inequality, as more weight was given to households headed by males.

On the whole, the study highlights that while the adjustment process was gradual and there were both losers and gainers, the market mechanism did take hold, leading to other policy reforms. Vietnam's agrarian reforms were, on balance, found to be poverty reducing, though there were still some incidences of elite capture, and uneven benefits in some regions.

Other key findings were:

1. a. The pace of transition has been rapid in Vietnam. In roughly a decade after de...