Rising inflation hurting poor, undermining poverty gains

With her face pressed up against the employment notice board, Duong Thi Chinh scans the lists of hundreds of job applicants who made the cut. As she comes to the end of the last page, she is near tears. "I took a bus all the way from Bac Can Province, 100km away, to look for my name," she said, "but it isn't here."

Chinh had applied to work at Canon Vietnam, one of dozens of new foreign-owned factories that have mushroomed outside the capital city. With only a high-school diploma, she had hoped to work on an assembly line. Though the job pays barely a living wage, she is desperate enough to take anything on offer. But with 1.2 million other young Vietnamese entering the workforce each year, landing even a low-paid job is not easy.

Low wages and a large and eager workforce have made Vietnam a popular destination for multinationals. The crisis for workers, however, is that the inflation rate is now 25.2 percent. Fuel is up 30 percent. Food, the main expense for poor families, costs 42 percent more than last year. A Hanoi factory worker's monthly US$60 salary could once feed a family, but now, even sharing a dormitory-style room and food and utilities with other workers, salaries barely cover the expenses of single workers, said factory workers interviewed by IRIN.

"No matter how careful I am," says Dinh To Trinh, who works at a Japanese rubber factory, "at the end of the month, I have nothing left."

Inflation blow

After a decade of impressive economic growth, Vietnam's rapid rise out of poverty is being jeopardised by the sudden onset of high inflation, a massive trade gap and a falling currency, Jonathan Pincus, chief economist for the UN Development Programme (UNDP) in Hanoi, told IRIN. Once known as the fastest-growing economy in Southeast Asia, Vietnam is now known for having the highest inflation rate in the region.

Photo: Martha Ann Overland/IRIN
Rice for sale in a Hanoi market, where prices are 30 to 40 percent higher than last year

The gains made in meeting the UN Millennium Development Goals - to halve poverty and hunger by 2015 - are under threat, said Pincus. "Higher rice prices will certainly mean a number of households that had risen above the poverty line will fall back below it. But we don't yet have enough evidence to know how many."

Nguyen Thuy Lien's family is feeling the pain. His father is in Hanoi's Thanh Nhan Hospital with kidney stones. Though the family has insurance, they still have to spend up to $20 a day on medicine.

"That's a lot for poor people like us," says Lien, 21. "Worse, we have to use our savings to pay the medical bills. Our family depends upon my mom, who is working in the fields, to pay for food and expenses. Life is very difficult now. We need the government to control inflation."

Last month, Prime Minister Nguyen Tan Dung went before Vietnam's National Assembly to acknowledge the economic problems. He told legislators that rampant inflation was hurting Vietnam's poor. The number of households going hungry has doubled compared with the previous year, according to Hanoi officials. "The government shares the difficulties with the people," said Dung, "and is aware of its responsibility towards curbing inflation."

The challenge Vietnam faces, economists told IRIN, is not to overly burden the poor while it puts its economic house in order.

Photo: Martha Ann Overland/IRIN
Medicines are increasingly out of reach of Vietnam's poor

Price caps expiring

Government efforts to lessen the blow included temporarily curtailing rice exports to increase domestic supply and lower prices. In March, the government also froze prices on 10 key commodities, such as cement and petrol. These caps are set to expire this month and many worry that when they are lifted, the poor will suffer the most.

Squeezed by higher prices, tens of thousands of factory workers have gone on strike seeking higher wages. According to the government, more than 300 strikes have been staged this year, double the number over the same period last year. The government opposes higher wages because salary increases fuel inflation and make Vietnam less attractive to foreign investors, who generate employment.

Only time will tell if Vietnam will curb its inflationary trends. But for Chinh, who was desperate to work at Canon, a poorly paying job is better than none at all. She is distraught at the prospect of returning to her village empty-handed. But undeterred, she will apply for several jobs she has spotted on the notice board before catching the bus home. In a few days, she will be back again, hoping this time it will be her name on the list.