The Vietnamese Health Care System in Change: A Policy Network Analysis of a Southeast Asian Welfare Regime 9789814345699

Table of contents :
Contents
List of Tables
List of Figures
ABBREVIATIONS
FOREWORD
PREFACE AND ACKNOWLEDGEMENTS
GLOSSARY
1. Introduction
2. Theoretical Framework
3. The Socio-economic Setting of the Informal Security Regime
4. The Public Provider Network in Vietnam
5. The Private Provider Network in Vietnam
6. The Regulatory Policy Network in Vietnam
7. Conclusion
ANNEXES
Bibliography
INDEX

Citation preview

The

Vietnamese

Health Care System in

Change

The Institute of Southeast Asian Studies (ISEAS) was established as an autonomous organization in 1968. It is a regional centre dedicated to the study of socio-political, security, and economic trends and developments in Southeast Asia and its wider geostrategic and economic environment. The Institute’s research programmes are the Regional Economic Studies (RES, including ASEAN and APEC), Regional Strategic and Political Studies (RSPS), and Regional Social and Cultural Studies (RSCS). ISEAS Publishing, an established academic press, has issued more than 2,000 books and journals. It is the largest scholarly publisher of research about Southeast Asia from within the region. ISEAS Publishing works with many other academic and trade publishers and distributors to disseminate important research and analyses from and about Southeast Asia to the rest of the world.

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The

Vietnamese

Health Care System in

Change

A Policy Network Analysis of a Southeast Asian Welfare Regime

Kerstin Priwitzer

Institute of Southeast Asian Studies Singapore

First published in Singapore in 2012 by Institute of Southeast Asian Studies 30 Heng Mui Keng Terrace Pasir Panjang Singapore 119614 E-mail: [email protected] Website: All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the Institute of Southeast Asian Studies. © 2012 Institute of Southeast Asian Studies, Singapore The responsibility for facts and opinions in this publication rests exclusively with the author and her interpretations do not necessarily reflect the views or the policy of the publisher or its supporters. ISEAS Library Cataloguing-in-Publication Data Priwitzer, Kerstin. The Vietnamese health care system in change : a policy network analysis of a Southeast Asian welfare regime. 1. Public health—Vietnam. 2. Health care reform—Vietnam. 3. Health services—Vietnam. I. Title. RA541 V5P96 2012 ISBN 978-981-4345-68-2 (soft cover) ISBN 978-981-4345-69-9 (e-book, PDF) Typeset by Superskill Graphics Pte Ltd Printed in Singapore by Fabulous Printers Pte Ltd

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Contents

List of Tables

vii

List of Figures

ix

Abbreviations

xi

Foreword

xv

Preface and Acknowledgements

xix

Glossary

xxi

1

Introduction

2

Theoretical Framework

25

3

The Socio-economic Setting of the Informal Security Regime

72

4

The Public Provider Network in Vietnam

97

5

The Private Provider Network in Vietnam

147

6

The Regulatory Policy Network in Vietnam

193

7

Conclusion

241

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1

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vi

Contents

Annexes

255

Bibliography

289

Index

353

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List of Tables

Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table

2.1 2.2 2.3 3.1 3.2 3.3

The Three Worlds of Welfare Capitalism The Three Meta Welfare Regimes Components of the Institutional Responsibility Mix GDP Growth 1976–2010 Foreign Direct Investment (FDI) in US$ Billion Poverty Incidence in Percentage according to the National Poverty Line 4.1 Key Health Workers in the Vietnamese Health Care System 4.2 National Revenues (in VND billion) 4.3 Comparison of Public Expenditure in Different Southeast Asian Countries 4.4 Public Expenditure on Health 4.5 Central-Local Shares of Total Government Health Expenditure 1991–2002 4.6 Revenues and Expenditures of the Health Insurance Fund 4.7 The Four Health Insurance Schemes (in 2007) 5.1 Public and Private Expenditure on Health 5.2 External Assistance to the Health Sector 5.3 Major Sectors of ODA Involvement (in 2003) 5.4 Major International Non-Governmental Organizations (INGOs) in Vietnam (as of 2009) A.3.1 Short- and long-term benefits of the VSS A.3.2 Number of Social Insurance Participants (in million)

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29 38 44 78 80 83 111 115 118 119 120 126 127 150 160 164 170 267 268

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List of FIGUREs

Figure Figure Figure Figure

2.1 2.2 3.1 3.2

Welfare Outcomes of an Informal Security Regime Regulatory Policy Network Provincial Poverty Incidence 2006 Theil Index Inequality Within and between Urban and Rural Areas Figure 3.3 Inflation in Vietnam between 1995 and 2011 Figure 4.1 Structure of the Vietnamese Health Care System Figure 4.2 Sources of Health Expenditures in Vietnam in 2005 Figure 4.3 Coverage of Health Insurance 1993–2007 Figure 4.4 Distribution of Health Insurance Membership 2006 Figure 5.1 Pledged and Disbursed Official Development Assistance (ODA) 1993–2007 Figure 5.2 Examples of the Monopole Situation of Pharmaceutical Distributors, International Pharmaceutical Companies and Local Importers in Vietnam Figure 6.1 The Making of the Health Insurance Law Figure 7.1 Welfare Outcomes of an Informal Security Regime Figure A.2.1 The Administrative and Political System in Vietnam Figure A.3.1 The Vietnamese Public Social System

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42 57 84 86 87 105 121 129 130 163

181 228 244 260 266

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ABBREVIATIONs

ADB CBO CEM CEP CHC CHW COMECON CPV CRD DAV DFID DOF DOH DOLISA DOPF DOTS ECVN EPI FDI FES GDP GSO GTZ

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Asian Development Bank Community-Based Organization Committee for Ethnic Minorities Capital Aid Fund for the Employment of the Poor Commune Health Centre Commune Health Worker Council for Mutual Economic Relations Communist Party of Vietnam Centre for Rural Development Drug Administration of Vietnam Department for International Development Department for Finance Department of Health Department of Labour, Invalids and Social Affairs Department of Planning and Finance Directly Observed Treatment Strategy Evangelical Church of Vietnam Expanded Programme of Immunization Foreign Direct Investment Friedrich-Ebert-Stiftung (Friedrich Ebert Foundation) Gross Domestic Product General Statistical Office Gesellschaft für Technische Zusammenarbeit (German Technical Cooperation)

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xii

HCFP HDI HEPR HI HIF HMIS HPG HSPI HSS ICC IDA IDU IFC ILO IMR INGO JAHR n.d. IOS ISEAS KfW MCH MIGA MMR MOET MOF MOFA MOH MOHA MOLISA MPI MTEF NGO NHSP NIHE NIMPE NPE NPHEPR

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Abbreviations

Health Care Fund for the Poor Human Development Index Hunger Eradication and Poverty Reduction Health Insurance Health Insurance Fund Health Management Information System Health Partnership Group Health Strategy and Policy Institute Health System Strengthening Inter-Agency Coordinating Committee International Development Agency Injection Drug Use/User International Finance Corporation International Labour Organization Infant Mortality Rate International Non-Governmental Organization Joint Annual Health Review no date Institute of Sociology Institute for Southeast Asian Studies Kreditanstalt für Wiederaufbau Maternal and Child Health Multilateral Investment Guarantee Agency Maternal Mortality Rate Ministry of Education and Training Ministry of Finance Ministry of Foreign Affairs Ministry of Health Ministry of Home Affairs Ministry of Labour, Invalids and Social Affairs Ministry of Planning and Investment Medium-Term Expenditure Framework Non-Governmental Organization National Health Support Project National Institute of Hygiene and Epidemiology National Institute of Malariology, Parasitology and Entomology National Programme on Employment National Programme on Hunger Eradication and Poverty Reduction

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Abbreviations

NSE NTP NTP-PR ODA OECD PAA PCF PFPP PHC PIT PMT PPMT PSMS RDSC RP RTCCD SARS SBV SGFRR SI SIDA SME SOE STD TB TEW TU TYM Fund UBCV UN U5MR UNDP UNESCAP UNFPA UNICEF USSR VBARD

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xiii

Non-State Enterprises National Targeted Programme National Target Programme on Poverty Reduction Official Development Assistance Organization for Economic Cooperation and Development Post Assessment Activity People’s Credit Fund Population and Family Planning Project Primary Health Care Personal Income Tax Project Management Team Provincial Project Management Team Provincial Secondary Medical School Rural Development Service Centre Retirement Pension Research and Training Centre for Community Development Severe Acute Respiratory Syndrome State Bank of Vietnam Social Guarantee Fund for Regular Relief Social Insurance Swedish International Cooperation Agency Small and Medium Sized Enterprise State-Owned Enterprise Sexual Transmitted Diseases Tuberculosis Toward Ethnic Women Trade Union Tao Yeu May Fund Unified Buddhist Church of Vietnam United Nations Under Five Mortality Rate United Nations Development Programme United Nations Economic and Social Commission for Asia and the Pacific United Nations Population Fund United Nations International Children’s Emergency Fund Union of Soviet Socialist Republics Vietnam Bank for Agriculture and Rural Development

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xiv

VBP VBSP VCCI VFA VHLSS VHWs VLSS VND VNHS VNDP VPA VSI VSSA VUSTA VWU WB WG WTO

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Abbreviations

Vietnam Bank for the Poor Vietnam Bank for Social Policy Vietnam Chamber of Commerce and Industry Vietnam Farmers’ Association Vietnam Household Living Standards Survey Village Health Workers Vietnam Living Standards Survey Vietnamese Dong Vietnam National Health Survey Vietnamese National Drug Policy Vietnam Peasants’ Association Vietnam Social Insurance Vietnam Social Security Agency Vietnam Scientists and Technicians Associations Vietnam Women’s Union World Bank Working Group World Trade Organization

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FOREWORD

Health policy and health insurance systems have come under scrutiny all around the globe. From the debate of the U.S. American health care system and global health initiatives such as the Millennium Development Goals to that of privatization and reform of health services in post-socialist countries, discussions on health care provision and financing have been ongoing and heated. This book is the first macro-study systematically analysing the evolution of the Vietnamese health care system since the beginning of the reform process in the mid-1980s. The book is a valuable contribution to the welfare regime debate since it extends theorizing on welfare systems from a basically OECD-perspective to the domain of developing countries. It thereby examines changing state-society relations in an erstwhile socialist country. It supplements the bulk of literature on industrialized countries with an empirically rich and theoretically reflected study of an important developing country. The theoretical framework is based on the concept of informal security, network analysis and belief systems to explain the welfare outcomes in Vietnam. The book departs from two central questions: Why are attempts of the Communist Party of Vietnam and the Vietnamese government for more equitable health services so easily diluted? And under what conditions can positive welfare outcomes nevertheless be achieved? Kerstin Priwitzer argues here that Esping-Anderson’s famous welfare regime concept provides an excellent starting point, but does not fit well the conditions of developing countries where social security systems are highly informal and non-state based. For analysing Vietnam’s informal security

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xvi

Foreword

regime, she develops an analytical framework which distinguishes several analytical categories. One is the socio-economic setting in which Vietnam’s health system is embedded, the second is the provider network (public and private) and the third the so-called regulatory network which captures the interactions among actors in the health sector. Change in health policies is brought about by policy learning. The research questions reflect a key problem of Vietnam’s transition from a centrally planned state economy into a market economy with socialist orientation: the tensions that emerge between equity, on the one hand, and growth and efficiency, on the other. The reform politics (Doi Moi) introduced in 1986 arrested the country’s economic downward trend and ushered in a more market-based economic policy. Today Vietnam has caught up with the third generation of Asian tiger economies, which transformed East and Southeast Asia into the world’s most vibrant economic powerhouse. Yet, economic transformation based on world market integration had its price: It was paralleled by growing regional and social disparities and it exhibited the pathologies which usually trouble transitional societies. Although poverty rates declined, economic growth bypassed women, minorities and rural people living in the highlands. In the wake of eroding state resources, a creeping privatization of health services began well before Doi Moi. In the inevitable process of a progressive commodification and privatization of social services, major segments of the population got increasingly excluded from access to health and other welfare services previously provided by the state free of charge or at least at subsidized cost. People, in order to reduce personal insecurity, mainly relied on private institutions such as family, kin and friends. While access to private sources of health care provided a modicum of security, it heightened inequality. Poor people without access to public health services usually could normally not rely on a more resourceful private social security net. Individualization as a concomitant of rapid modernization and a highly fragmented public provider network even exacerbated this situation, confirming alarmist calls by international organizations, NGOs and the media about the increasingly exclusionary and discriminating tendencies of the Vietnamese social system. NGOs and international donors made noteworthy contributions, especially in financial and technical terms. Especially international organizations became a major source of ideas from which the government benefited. The drawback, however, was that most domestic private health service providers operated under a rather precarious and rigid legal framework and often had to contend with a state suspicious of nongovernmental activities.

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Foreword

xvii

In the book, the Kerstin Priwitzer departs from the observation that even a Leninist state is not necessarily a monolithic state. In fact, a continuous and accelerating perforation of the Vietnamese state could be observed with the advent of Doi Moi. Part of this perforation was an asymmetric decentralization from which large and rich provinces benefited most, whereas remote, rural and upland provinces were left behind. Another facet of this transformation of the state towards a system of governance was the pluralization of health actors — ranging from the relevant government ministries to the local agencies, to legislative bodies including an increasingly assertive National Assembly, and a plethora of private sector entities. It suggests that there is an increasing interaction between these actors which produces learning effects for the government. The latter can be seen in the gradually improving translation of core beliefs on the health (and social) system into operational secondary beliefs, all bottlenecks notwithstanding. The book places the Vietnamese example of health care reform in a comparative perspective. It combines insights into the Vietnamese health care system with international theoretical discussions. It is thereby a valuable source of information not only for scholars interested in Vietnam, but for development specialists and epistemic communities in Southeast Asia and beyond, too. It also advances the ongoing discussion about welfare regimes in developing countries and the opportunities and flaws of transferring concepts of social protection developed in the Western world to non-Western, newly capitalist systems. Professor Jürgen Rüland Department of Political Science University of Freiburg, Germany January 2011

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PREFACE AND ACKNOWLEDGEMENTS

The idea of this book derives from my Master thesis, which I wrote on civil organizations in Vietnam. While writing my thesis I realized what enormous impact non-governmental private actors have on every policy area in Vietnam. I also realized that to talk about the state did not make much sense, since Vietnam’s political system was far from being monolithic. I became interested in understanding reform processes in health policy, a policy area which I found especially important in terms of equity and social cohesion inside a society. This thesis could not have been completed without the help of many people. I would therefore like to acknowledge my gratitude to all those who have supported me in my work during the last years. First of all I want to thank Professor Dr Jürgen Rüland for accepting me as a doctoral student, for his support and guidance throughout the whole process of research and writing. Furthermore I thank Dr Jörg Wischermann who inspired this work, for his helpful advice and encouragement. I am grateful to Professor Dr Heribert Weiland for encouraging my work and providing me with a work place at the Arnold Bergstraesser Institute (ABI) in Freiburg. I am deeply indebted to all my friends and colleagues at the ABI. The ABI has provided me with a stimulating research and working atmosphere in which I have found motivation to finish my Ph.D. I would like to especially thank my friends and colleagues Angela Herrmann, Christl Kessler, Ingrid Wehr, Steffi Gerum, Jan Völkel, Clemens Jürgenmeyer, Martin Adelmann and Reinhard Kössler for their encouragement and critical analysis

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xx

Preface and Acknowledgements

of my work and Margret Rae, Gabriel Seifert and my dearest cousin Marcus Gerhardt for proofreading. During my field visits in Hanoi I have got in contact with many people, who have been of utmost importance for my research. Le Thi Hong Phuong from the Vietnam Social Security opened many doors for me; she introduced me to the right people and therefore deserves particular mentioning. I would also like to thank Hoa who over the time of my Ph.D. has become a friend. Special thanks also go to the team of the Friedrich-Ebert-Foundation in Hanoi who provided office space for me and got me in contact with important stakeholders. I am also grateful to my colleagues at the Vietnam Academy of Social Sciences in Ho Chi Minh City, in specific to Professor Bui The Cuong and his colleagues Nguyen Tuan Sinh and Ms Duong. At home the Stiftung der Deutschen Wirtschaft (SDW) gave me the opportunity to study and do research without having to worry about my livelihood. Beyond that, the foundation also provided a remarkably vivid forum for interchange of ideas across the disciplinary boundaries. I appreciate the many opportunities to attend interesting seminars and to meet new friends. I would like to say special thanks to Jörg Hülshörster, my personal point of contact at the SDW. I am also grateful to the staff at the publishing division of the Institute of Southeast Asian Studies and especially to the reviewers for helpful comments and suggestions and for accepting the manuscript. Finally I thank my partner Arnd for his love and patience. I thank all the members of my family and especially my Gotte (aunt) Brigitte, who has positively shaped my personality like no other person in my life. Despite of all the help I received I am of course still solely responsible for all mistakes and shortcomings of the book. Kerstin Priwitzer January 2011

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GLOSSARY

Adverse selection

Adverse selection refers to a market process (often within the insurance sector) in which information asymmetries exists between two parties. An insurance company for example does not know who is a smoker, a diabetic, or HIV/Aids patient and who is not. Hence, the fee is normally higher for both customers. This could lower the usage of health care services among poor or chronically ill people. A voluntary health insurance system also risks only attracting poor people and threatening off rich people, thereby undermining the financial means of a fund.

Catastrophic health Catastrophic health expenditures are often used to expenditures indicate the risk of people in a given society to sink into poverty. They are normally measured by the number of households with out-of-pocket-payments exceeding some pre-specified threshold of total, nonfood, or non-subsistence consumption, expenditure or income. Wagstaff/Doorslear (2007) consider out-ofpocket-payments being catastrophic when exceeding a ten per cent threshold of total household expenditure. Xu et al. (2003) describe out-of-pocket-payments as being catastrophic when they exceed more than forty per cent of a household’s non-subsistence spending.

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xxii

Glossary

Co-payment

Co-payment is a fixed amount or percentage which has to be paid for a health care service privately (OECD 2000: 155).

Equity in health care

Equity in health care means that health care resources are allocated according to need, not ability to pay (WHO 2000: 7).

Health

A state of complete physical, social and mental wellbeing, and not merely the absence of disease or infirmity (WHO 2006 [1948]).

Health outcome

Health outcome is the health status of an individual, group or population which is attributable to planned or unintended interventions. Interventions may include government policies and consequent programs, laws and regulations, or health services and programs, including health promotion programs, but also the actions of private actors. It may also include the intended or unintended health outcomes of government policies in sectors other than health (cf. WHO 1998).

Health sector

The health sector consists of organized public and private health services (including health promotion, disease prevention, diagnostic, treatment and care services), the policies and activities of health departments and ministries, health related non-government organizations and community groups, and professional associations (WHO 1998).

Household out-of- pocket-payments/ expenditures

Household out-of-pocket-payments are payments borne by a patient directly without the benefit of insurance (OECD 2000: 155). Payments include gratuities and in-kind payments made to health practitioners and to suppliers of pharmaceuticals, therapeutic appliances and other goods and services, whose primary intent is to contribute to the restoration or the enhancement of the health status of individuals or population groups (WHO 2006: 160). The higher the out-of-pocket-

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Glossary

xxiii

payments, the more likely it is for a person to face catastrophic health expenditures and thus poverty. Indirect payments for health care

Indirect payments for health care are payments not directly linked to individual’s consumption of health services such as general taxes, payments made to mandatory or voluntary health insurance schemes, or payments made to local health cooperatives (Gottret/ Schieber 2006: 232).

Moral hazard

The term moral hazard refers to the possibility that the redistribution of risk (such as insurance which transfers risk from the insured to the insurer) changes people’s behavior. A car driver could get less diligent, since the damage on his or her car would be covered by an insurance firm. The same is sometimes said about health systems, where universal coverage would increase demand for health care.

Primary health care Primary health care is essential health care made accessible at a cost a country and community can afford, with methods that are practical, scientifically sound and socially acceptable. The primary health care system is normally the first level of contact of individuals, households and communities with the health care system. It combines promotive, preventive, curative and rehabilitative services (WHO 1978, Article VI and VII). Private expenditure Private expenditure on health refers to privately funded on health part of expenditure on health activities provided by individuals, the for-profit and non-profit sector (WHO 2006: 159). Public expenditure on health

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Public expenditure on health refers to expenditure on health care incurred by public funds. Public funds are state, regional and local government bodies and social security schemes. Public capital formation on health includes publicly-financed investment in health

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xxiv

Glossary

facilities plus capital transfers to the private sector for hospital construction and equipment (OECD 2001). Purchaser provider split

The separation of purchaser and provider in governmentfunded health systems enables competition to develop between providers. Competition is seen as a means to drive technical efficiencies by providers.

Rider

A life insurance rider provides additional coverage for something specifically not covered with a primary policy. The rider is added to the primary policy for which the policyholder pays an extra amount.

Social health insurance

Social health insurance is an insurance programme which meets at least one of the following three conditions: participation in the programme is compulsory either by law or by the conditions of employment; the programme is operated on behalf of a group and restricted to group members; or an employer makes a contribution to the programme on behalf of an employee.

Social insurance

The technique of pooling risks and finances in autonomous funds.

Social protection

The set of policies and programs designed to reduce poverty and vulnerability by promoting efficient labour markets, diminishing people’s exposure to risks, and enhancing their capacity to protect themselves against hazards and interruption or loss of income. Social protection can be defined to include social security (social insurance), social services, social assistance, and social safety net schemes for government and private sector employees, the poor, and the disadvantaged and vulnerable groups.

Social security

The ILO defines Social Security as the protection which society provides for its members through a series of public measures.

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Glossary

xxv

Total expenditure on health

Total health expenditure (THE) has been defined as the sum of general government expenditure on health (commonly called public expenditure on health), and private expenditure on health (WHO 2006: 159).

Universal health insurance

A national plan providing health insurance or services to all citizens, or to all residents.

User fees

User fees are charges for goods or services in the health sector either by public or private providers (Gottret/ Schieber 2006: 231).

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1 Introduction

The social security system in Vietnam is in the process of changing and developing. Although there are still many difficulties, the State still allocates a significant amount for the development of this system. This also reflects the great care of the State for social policies, especially the policies for vulnerable and disadvantaged groups. Ministry of Labour, Invalids and Social Affairs (1999, p. 20)

European and Western scholars have discussed for a long time which factors (international, economic, political, institutional, historical, cultural) explain how welfare is provided through welfare states. Since Esping-Andersen’s publication of The Three Worlds of Welfare Capitalism (1993) the debate on what affects welfare outcomes in a country has somewhat shifted away from finding one single explanatory factor to establishing regime typologies. Latest welfare regime typologies have included the newly industrialized economies in East Asia,1 and even more recently low income countries such as Vietnam. As welfare regimes and social policy has been in a state of flux almost everywhere, the discussion about welfare regimes in East Asia is intense and passionate. For the last fifty years many countries in the region have seen a rapid socioeconomic modernization — in some cases even a political transition towards democracy. The question is thus whether East Asian countries with increasing levels of wealth would develop similar welfare regimes as the ones developed in the Western world, develop their own genuine systems or no systems at all. The same question also applies to Vietnam, which has been in a tremendous modernization and transition process for the last twenty years. Large economic and societal restructurings have changed the relationship between the public and private economic sector, workers have become more 

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The Vietnamese Health Care System in Change

mobile — migration has increased both within Vietnam and to other countries; the arrival of international companies and donors has exposed the political elite, but also the whole society, to new ideas in terms of categories such as the family, the elderly, the work place, and social protection. The Communist Party of Vietnam (CPV) and the government have indicated their commitment towards improving people’s income as well as the overall welfare of society.2 The government has thus started implementing several social protection measures such as a health insurance scheme for poor people (Health Care Fund for the Poor), a voluntary health and social insurance (targeted towards the rural population) and an unemployment insurance (targeted towards former state employees). Despite these efforts, the actual welfare outcomes are somewhat contradictory. While the country now has a poverty incidence of under sixteen per cent from almost sixty per cent in 1993 (VASS 2006, p. 20), Vietnam is plagued by raising levels of inequality. Catastrophic health expenditures3 are estimated to affect as much as ten per cent of all households in Vietnam jeopardizing the remarkable reduction of poverty in Vietnam (Xu et al. 2003, p. 113). The central question is thus twofold: • Why are attempts of the CPV and government for more health equity so easily diluted? • Under which conditions can positive welfare outcomes nevertheless be achieved?

1.1  A Policy Network Analysis of an Informal Security Regime of Health Protection The presented analysis attempts to clarify why positive welfare outcomes in Vietnam are so difficult to achieve even though the government and the Communist Party of Vietnam have emphasized their support for raising equality in the health care system. The work will draw from the concept of an informal security regime, network analysis and belief systems to explain the welfare outcomes in Vietnam. While the analytical categories of welfare in developing countries are similar to Western welfare regimes, the concept of an informal security regime gives emphasis to the specific differences to welfare regimes in the Western world. There are profound distinctions in the socio-economic setting between a Western welfare regime and an informal security regime in a developing country. Formalized work in developing countries such as in Vietnam is not as widespread as in the Western world; other forms of livelihood such

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Introduction



as peasant agriculture, petty trade, etc. are more common forms of work. In consequence, stratification normally does not only occur along lines of capitalists exploiting workers; other forms of exclusion coexist such as along lines of ethnicity, gender and religion. Furthermore, a very strong divide normally exists between rural and urban areas in terms of socio-economic development. Tax systems in developing countries are usually weak. Hence, financial means for financing social services are small. Often governments use user fees4 to compensate for the lack of tax income. However, user fees can easily exacerbate inequality since they reduce the utilization of health care by the poor. Fee exemptions and other good — but poorly designed — intentions often fail to counteract increasing inequalities. The opening process of the health care sector to private actors thus frequently weakens the ability of the government to implement and supervize health care reforms. Furthermore, the lack of regulatory power does not allow the government to compensate for the market. Additionally, the government is not fully able to provide a conducive context for private actors. As a consequence, private actors do not necessarily relieve the financial and administrative pressure from the public health care system; instead the private health sector deprives the public sector of financial means and human resources. Even if a national government is in favour of more equity in health, the structural problems of an informal security regime make it difficult to bring about positive welfare outcomes. Furthermore, political projects stemming from a generally pro-poor oriented national government are frequently also driven by a second set of ideas or beliefs: efficiency gains, growth, competitiveness and integration into the world market. Welfare outcomes therefore also have to be understood as a struggle of decision-makers for social equality on the one and economic growth on the other hand. This struggle takes place in a highly fragmented provider and regulatory network. Welfare outcomes are normally not only the result of state initiatives, but involve a broad provider and regulatory network including various public and private actors. Those different actors do not necessarily work in consistence with national set goals. Hence, lack of harmonization of policies and structures can only slowly be changed through a long-ranging process of policy learning and clarification over how to translate core into secondary beliefs. This work will concentrate on the case study of Vietnam to interpret and understand the logics of policymaking in the specific policy field of health protection reform. To concentrate on the aspect of health protection enables a certain depth of focus which a comparison of several cases or an analysis of the whole social system of Vietnam would not have allowed. It will provide a

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The Vietnamese Health Care System in Change

certain explanatory richness elaborating further the concepts and assumptions made about the welfare mix and the role the state, the market and society plays in the comparative literature. Rather than being caught in the exceptionalism of the case of Vietnam, the results from the policy analysis of the health protection system will be linked to the theoretical discussion — seeing it as a chance to apply and test models developed in academic research with a broad comparative approach.5 The findings of the analysis thus will make reference to the broader debate on welfare regimes in developing and (South) East Asian countries (cf. Aspalter 2006; Gough and Wood 2004a; Gough 2001, 2004a/b; Ramesh and Asher 2000; Rudra 2007). Here special attention will be given to the discussion whether there exists a genuine East Asian welfare regime characterized by high regulatory power, little investment in social insurance, but high investment in productive aspects of social policy such as education and health care (see also chapter 2.1.2). The case of Vietnam is especially interesting since the socio-economic and political setting of the welfare regime is quite different from the East Asian countries which have been included so far in the existing typologies such as Singapore, South Korea, Taiwan or Hong Kong. First of all Vietnam’s political system has a strong political dual structure of a Communist Party on the one hand and a national government on the other. The relationship between both actors can be seen as similar in their interests at some points, but conflict-riddled at others. East Asian countries have often been described as having had a strong regulatory and interventionist role during their rapid socio-economic transition. The transition process in Vietnam however takes place in an environment in which the policymaking process is exceedingly fragmented. Important changes have occurred bottom-up. Hence, financing and implementation of policies are highly decentralized. Investment in human capital (education, training and primary health care) has been low. Instead, the government has relied heavily on private expenditures. Furthermore, Vietnam has entered the world market as an economic latecomer. It is debatable whether the strategy of the newly industrialized countries — an outward oriented export-driven development strategy with little focus on domestic consumption — will bring similar results for Vietnam in terms of income and welfare. In contrast to other East Asian countries, Vietnam’s Communist legacies manifest themselves in comparatively high payments in the social insurance and social assistance system such as pensions for meritorious people, war veterans and hero mothers. However, the reforms which have taken place in the last couple of years have changed some of the

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Introduction



social policy initiatives profoundly. Vietnam therefore provides an interesting case for a social policy analysis in a transition process from plan to market. The conclusions of the study in terms of regime typologies might lead to slightly different results if one would look at other aspects of social policy in Vietnam such as labour markets, education or the social insurance system including pensions or occupational safety. However, since health can be seen as a central aspect of human capital formation (which is one of the major aspects of an East Asian welfare regime), it already is relatively indicative of the overall logic (or lack of logic)6 of the Vietnamese welfare regime. Furthermore, as Esping-Andersen (1999, p. 88) has pointed out, almost no regime type is pure in the sense that all benefits and programmes follow exactly the same logic. As Kasza (2002, pp. 274–78) has highlighted: parallelism in policy development is the exception rather than the rule — especially since the implementation of programmes and the group of public and societal actors differ depending on which welfare policy one analyses. However, I would agree with EspingAndersen (1999, p. 86) that one aspect of a welfare policy can already tell a great deal about how a state adapts to massive social and economic change and which structural problems and actor constellations are in place.

1.2  Assumptions about Social Policy,  Welfare State and Welfare Regime The assumptions made about welfare states — which are not even agreed on in the analysis of established Western welfare states7 — have to be questioned even more in developing countries, where the capacity of the state to tax and redistribute is only weakly developed (Gough and Wood 2004, p. 3). As Titmuss has argued, “we must not jump to the conclusion that social policy … is necessarily beneficient [sic] or welfare-oriented in the sense of providing more welfare and more benefits for the poor” (1974, p. 26). In contrast, social policy can foster and multiply inequalities — both in developing as well as in developed countries.8 Depending on the political system, social rights can be at times only vaguely developed (Gough 2004b, p. 182). In authoritarian regimes, the rationale for social policy is often legitimacy among certain important groups in society such as civil servants. Hence, social policy is provided not based on social rights and entitlements but rather on means-tests and is highly stigmatized (Croissant 2004). Keeping these excesses of social policy and welfare regimes in mind, welfare in this book is understood in a positive sense, as procedures or social efforts designed to promote the basic material and social well-being of people in need.9

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Narrow definitions of social policy only include welfare provided by state actors and their involvement in social assistance and social insurance programmes (including social health insurance). Following Heclo, social policy in this analysis is not restrained to political programmes by national actors. In fact, social programmes are only one way how policy is expressed (Heclo 1974, p. 4). An analysis of social policy also takes into account what is done through a policy as much as what is not done. Social services can come in different forms: through actual services, cash and in-kind. Social policy extends besides social insurance and assistance programmes to issues such as labour market policy and group specific policies for families and children as well as (community based) micro-credit and insurance programmes (see ADB 2003). It also includes housing10 and education policy.11 Areas which are closely affiliated to social policy and therefore deserve recognition are competition policy, fiscal policy, consumer protection and environmental policy. Social policy — both in developed and in developing countries — has to be thought of wider than just being related to state actions. A rough distinction will be made between privately provided social policy (through the family, community or the market) and public social policy (state institutions). Social policy is implemented by a variety of actors, i.e. the public sphere is not confined to the nation-state, but may extend downwards through regions, localities and associations to “clubs” and communities, and upwards to trans-national and global actors (Gough 2004a, p. 22). Social services can be provided for by the national government, the community, households and individuals, and international actors such as International Non-Governmental Organizations (INGOs) and donors. However, most often the state remains to play a key role in either the provision or the regulation of social services. Social policy is financed through several mechanisms: direct and indirect taxes (value-added tax, excise tax), compulsory insurance contributions, voluntary contributions, medical savings account, out-of-pocket payments, loans, grants and donations. Normally, systems combine multiple sources of financing. Due to weak tax collection systems and the absence of adequate numbers of workers in the formal sector, out-of-pocket-payments in developing countries often make up for the bulk of funding (Bhatia and Mossialos 2004, pp. 185–86). Following the distinction of Gough and Wood (2004), the term welfare state regime will be used to describe (Western) developed welfare states and their interaction with private actors. In contrast to welfare state regimes, the categories of informal security regimes and insecurity regimes will define social policy in a developing-country context to emphasize the fact that health

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services are often provided by non-state, transnational and informal (nonor weakly monitored) private actors (Abu Sharkh and Gough 2010, p. 28). Welfare regime12 will be used as the broadest term — which includes both welfare state regimes on the one hand and informal security and insecurity regimes on the other hand. The exact meaning of welfare is dependent on a societal process of negotiation or subjective feelings of wellbeing. The welfare outcomes can be analysed by looking at the way in which the welfare system “shapes inequalities, interests and power in society and in this way reproduces the welfare regime through time” (Gough 2001, p. 167). Health outcome is defined as the outcome in the health status of an individual, group or population which is attributable to planned or unintended interventions. Interventions may include government policies and consequent programmes, laws and regulations, or health services and programmes, including health promotion programmes, but also the actions of private actors. It may also include the intended or unintended health outcomes of government policies in sectors other than health (cf. WHO 1998). Positive welfare outcomes show high levels of equity in access to affordable health care services — both in the sector of prevention and curative care. Equity in health care means equal access to social services based on the principle of need, not on that of ethnic or class affiliation, dependence on the market or a certain occupational group (WHO 2000, p. 7).13 While equal access to health care alone cannot overcome all socio-economic differences inside a society and might not counteract all negative aspects related to the costs and immediate loss of income due to absence from work, it can reduce private out-of-pocket payments and catastrophic health expenditures. It thereby increases the level of human security,14 decreases exposure and vulnerability and prevents major stratification effects through the health care system (Diderichsen et al. 2001, pp. 14–16). Following Devereux and Sabates-Wheeler (2004), social protection will be defined as protection provided by “public and private initiatives that provide income or consumption transfers to the poor, protect the vulnerable against livelihood risks, and enhance the social status and rights of the marginalized; with the overall objective of reducing the economic and social vulnerability of poor, vulnerable and marginalized groups”. Social (health) protection thus is defined as the absence of poverty and the protection against livelihood risks and socio-economic and political marginalization. Social protection as social policy can be provided both by public and private actors.15 The term social security is often used by the ILO to describe the state provision of protection — especially in the area of social insurance (mainly contributory schemes), social assistance (tax-financed benefits provided only

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to those with low incomes) and universal benefits (tax-financed benefits, provided without being income- or means-tested) (ILO 2000). In this book, however, the terms social security, health security and security in general are used in the sense of human security and therefore interchangeable with social and health protection, which allows for the fulfilment of basic material needs and a minimum level of protection against livelihood risks. The factors that can contribute to health achievements and failures go well beyond the public health care system, and include many influences, varying from genetical propensities, individual incomes, food habits and life styles, on the one hand, to the epidemiological environment and work condition, on the other (Sen 2002, p. 660). At the individual level, health will always be unequally distributed (Peter and Evans 2001, p. 27). Therefore, this study is not so much an analysis of health indicators such as infant mortality or incidences of certain sicknesses and individual levels of inequality. Instead, this work concentrates on the political and institutional rationale of health care in Vietnam, access criteria and the utilization of services as well as the underlying power relations related to health care. Following Kreckel health inequality is defined as asymmetric relations between human beings and unequal access to health care, which influences the long-term living conditions of individuals, groups or whole societies (2004, p. 19). Positive welfare outcomes in the sector of education, social assistance, housing, and health can be achieved by equal access to services independent of gender, race, ethnicity, and local origin. Concerning health in developing countries, special attention is given to the relationship between health and poverty. Equal access in health care should break through the vicious circle in which poverty enhances ill health and ill health causes impoverishment. Primary health care services (including not only the direct services, but support for food and transportation) should be provided in order to minimize catastrophic expenditures in health.16 The reliance of the public health care system on private out-of-pocket payments should be kept as minimal as possible.

1.3  State of Research The literature on social policy is immense. Beginning in the 1940s and 1950s there are several waves of analysis, which mainly focused on the Western capitalist and democratic countries.17 At first, research focused primarily on economic growth correlating with demographic change. It was argued that these developments would eventually lead to convergence of social policy in different countries (Wilensky 1975, 1976).18 Later analysis focused more on

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the differences among welfare states. Authors explained the divergence by distinctions in ideology (see Wilensky 1975), the influence of the working class and power resources (Gough 1979; Korpi 1983), historical-institutional and path dependency concepts (P. Pierson 2000; Thelen 1999). Esping-Andersen in his later writings19 was one of the first authors who looked beyond single explanatory factors, and concentrated on identifying interaction effects (Esping-Andersen 1993, p. 29). He therefore started to analyse the broader welfare mix of the state, the private sector and households in producing livelihoods and distributing welfare (Gough 2001, p. 169). The outcome was a regime typology, which more systematically than before was able to analyse welfare states comparatively. For a long time, Japan remained the only Asian country which was included in the comparison of welfare states (Wilensky 1975; Vogel 1979; Esping-Andersen 1997a; Goodman 1998). Vogel (1979, p. 189) was the first author itemizing certain (East Asian) characteristics by looking at the example of Japan. According to Vogel, the family (including relatives beyond the nuclear family) and the workplace are the main bearer of welfare, while the state has a rather low profile. This characterization was later extended to the newly industrializing countries in East Asia (South Korea, Singapore, Taiwan and Hong Kong) and resulted in a debate whether a genuine East Asian welfare regime exists (Goodman and Peng 1996; Esping-Andersen 1997a). Neoliberals tend to stress that East Asian states have high levels of welfare despite low levels of government expenditure. The quality of the East Asian welfare state is therefore often measured by its ability to function as a “regulator which enforces welfare programmes without providing direct finance” (White 1998, p. 13). A strong emphasis on education is also seen as typically East Asian. Furthermore, it is stressed that social policy is often a political means to stability and legitimacy: Welfare programmes were … introduced as part of a broad political strategy to build legitimacy for authoritarian regimes (in Taiwan and South Korea), as part of a programme of sponsored democratization (in Hong Kong), or to forestall opposition challenges (in Japan in the early 1970s). As a result of these and other differences, individual welfare systems have their distinct characteristics: for example, the large-scale public housing programmes in Hong Kong and Singapore, and the Central Provident Fund (CPF) in Singapore, which reflects their status as city-states with migrant population. (White and Goodman 1998, p. 14)

As Goodman and Peng argue the lack of interest in the region can be attributed to language barriers and overall disinterest in the subject, but also

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to the fact that social policy in the region was often used for ideological reasons to justify a lean state (1996, p. 192).20 The Confucianist culture and family values (respect and care towards parents, sick and the elderly, mostly carried out by women in their role as mothers, sisters, wives and daughtersin-law) were used as an excuse to avoid the establishment of national social programmes. Family values did not make national programmes redundant. Quite the contrary: the lack of national programmes fostered family or company-based occupational welfare (Esping-Andersen 1996a, p. 21). The other factor which contributed to the neglect of the region was that most researchers concentrated on social insurance systems rather than on broader social policy initiatives including the development of human capital and land reforms. This brought scholars to the conclusion that East Asia was a social policy-free zone (Croissant 2004; Chang 2004). More recent research focuses on a broader definition of social policy and thus has come to quite different results. Holliday and Gough have classified East Asian states as productivist welfare regimes (Holliday 2000;21 Gough 2001) — that is regimes prioritizing productive aspects of social policy such as education (in the case of Japan and Korea especially on secondary education)22 and health over social insurance systems.23 The sustainability of productivist welfare systems relies heavily on economic growth. The private provision of social protection has thus become challenged in the context of the Asian financial crisis (Chan 2001; Croissant 2004). The democratization of countries in East Asia has also brought about changes in the notion and extent of social policy and social rights (Cook and Kwon 2007). Especially, South Korea and Taiwan seem to have taken a much more universalistic approach than countries such as Malaysia and Singapore (Holliday 2000).24 Many of the authors working on welfare regimes in East Asia have thus taken the road to building sub-categories of the productivist regime without however challenging the basic concept.25 Individual attempts to analyse welfare regimes in East Asia have been compiled for many countries in the region such as Japan (Vogel 1979; Goodman 1998; Uzuhashi 2003; Takayama 2003), South Korea (Joo 1999; Kwon 2002, 2004; Son 2003), Hong Kong (Jones 1990; Chan 2001; Lee 2005), Taiwan (Aspalter 2001), Singapore (Ramesh 2000b), Indonesia (Ramesh and Asher 2000; Ramesh 2000a), Malaysia (Ramesh 2000a), the Philippines (Reese 2005), and Thailand (Schramm 2000, 2002a/b). Publications on social policy and welfare regime development on China, with which Vietnam is often compared due to its Communist legacy, can also be found. Many authors look at how the Communist path dependence has influenced the present social policy in China. Few however have tried to

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11

link their results to the broader discussion of welfare regimes and comparative politics (White 1998; Aspalter 2001a/b; Cook 2002; Guan 2005; Leung 2006; Chan 2008).26 Comparing Vietnam and Eastern Europe shows some path dependent remnants: a high number of State-Owned Enterprises (SOEs) and comparatively high expenditures in the sector of health and social insurance. A broader look at Post-Communist states also brings some useful insights into the concept of statehood: Transitional Communist states are neither consolidated nor can they be described as coherent and unitary. They are at the crossroads between states which are disengaged from society — demands coined by patrimonial networks and personal relationships — and legal rational structures, popular sovereignty, and adherence to international norms. What can be drawn from a comparative analysis with Eastern European countries is that an analysis of the specific nature of statehood can bring major insights into social policy in transition processes (Grzymala-Busse and Luong 2002, p. 532). However, in general the countries in Eastern Europe are very different from Vietnam in terms of their economic, social and political transition,27 which makes the comparison quite difficult. As Son (2003) has argued there is a strong neglect of national variations in social policy programme development in the different East Asian countries. The same can also be said about Southeast Asia. Articles such as the one by Hort and Kuhnle stay on the surface of social policy development (mainly by listing government regulations and stating pledges) and lack — as the two authors admit themselves — an analysis of country-specific variations and policy which goes beyond the rhetoric of governments (Hort and Kuhnle 2000). Cook and Kwon (2007) are one of the first authors to have challenged the fact if East Asian welfare regimes can be analysed within a regional context, which is extremely heterogeneous in socio-economic,28 political,29 and cultural30 regards. In his analysis of Korea, Malaysia, Thailand, the Philippines and Indonesia, Gough (2001) was the first author who explicitly dealt with the assumptions Esping-Andersen made about welfare regimes in Western countries. He highlighted several factors, which are genuine to the experience of non-Western countries such as their history of colonialism, stronger economic dependency on the international economy, lower levels of industrialization and formalized income, and weaker class organization. More recent typologies (Gough and Wood 2004; Gough and McGregor 2007; Rudra 2007) look deeper into the differences between developed and developing countries. These typologies seem more promising for analyzing a late-coming industrializing nation as Vietnam than the productivist model

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which generalizes all East Asian countries and overemphasizes the ability of the central government to provide and regulate social services. Very little has been written so far on the Vietnamese welfare regime. Cook and Kwon (2007) briefly analyse the transition of the welfare regime of Vietnam from one mainly based on the community and the collective to one moving towards individual private provision of social services. London (2007, 2008) looks into what he calls the Vietnamese “market-Leninist regime”, in which the Communist Party of Vietnam (CPV) adopts “market institutions and employs market-based strategies of accumulation while retaining Leninist principles of political organization” (London 2008, p. 116). He concludes that the CPV uses redistributive and accumulative reassertions in order to bolster its subjective legitimacy. However, he does not go into details about the different layers of statehood nor does he follow a comparative approach (London 2008, p. 115). Much of the other literature on social policy in Vietnam is written from a technical perspective or primarily as policy advice on how to improve the social system. In general, very few references in these policy papers are made to the theoretical discussion on welfare regimes.31

1.4  Theoretical Assumptions and  Structure of the Argument The theoretical assumptions for the study are drawn from a variety of theoretical approaches including Esping-Andersen’s (1993) supposition of welfare regimes and the adaptation of Gough and Wood (2004) to developing countries (informal security regimes, insecurity regimes). Regime typologies offer an understanding of the way policymaking and policy outcomes have to be thought of in a state in society approach. The effects of public social policy cannot be understood without analyzing its relation to private actors such as the family, the voluntary sector, market participants, etc. The state is understood as being both, a powerful and clearly bounded unified organization at some point, but also a fragmented entity strongly entangled with private actors and social forces at other times (Migdal 2001, p. 22). The regime typology helps to schematize some of the problems in terms of actors and structures affiliated with welfare development in a developing country context. However, what is missing from the regime approach is that it lacks proper tools with which to more specifically analyse the different actors involved in the political process and their interaction. Furthermore, the concept is static in the sense that it does not explain how change in regimes can happen. This study therefore combines regime analysis with the concepts of network

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13

analysis and policy learning (Heclo 1974; Hall 1993; Sabatier 1988, 1993). Only few authors32 have come up with this solution even though it promises to give in-depth insights into policymaking and political change in a certain political area. In describing and analyzing social policy legislation and implementation in an environment of informal security, this analysis will highlight under which conditions positive change towards a more universal and equal social system can be achieved. The study is based on the assumption that in a setting of informal security which is characterized by a high fragmentation of political decision-making, welfare outcomes cannot only be explained (and ultimately changed) by the actions of a government, but by three factors which are interwoven: • the socioeconomic setting in which reforms are embedded; • the public private provider mix; and • the negotiations inside a regulatory policy network of different societal, political actors and — to a certain extent — international actors. The analysis will therefore be divided into the following categories, which also structure the study: • Socio-economic setting in Vietnam (chapter 3): The transition in Vietnam from plan to market has been characterized by privatization, spontaneous decentralization and deregulation. Furthermore, formalization of work remains low, and has — through the very process of privatization — even increased. This has augmented the already existent inability of the central government to fully implement its decisions. This failure to alter outcomes has enhanced inequality, since the state is not able to compensate for the shortcomings of the market. For a Communist government this lack of steering capacity is a worrying situation given the fact that the government assumed office with the explicit goal of eradicating poverty, exclusion and domination. • Public provider network (chapter 4): In chapter 4 the existing public schemes of health protection will be analysed. Here the historical development from the seizure of power by the Communist Party up until the official reform process shows some of the problems the central government faces. The analysis demonstrates that the central government has only a loose grip on health care in the fast modernization process; its steering capacity is weakened by local players,

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the marketization of health care and the way in which a decentralization process has taken place spontaneously from the bottom-up. Some of the reform efforts, which the government has initiated with the support of the Ministry of Health (MOH) in the area of health insurance and health assistance, are thus difficult to implement. • Private provider network (chapter 5): The family remains the most important social safety net since public programmes are only slightly effective. Private initiatives in the sector of health have long outnumbered the activities of the public sector. One of the most worrying developments in the private sector is how the public sector has privatized from within. Moonlighting and job sharing are common phenomenon among health care staff. The advent of private pharmaceutical companies has improved the availability of medicine, but has also increased self-medication and the costs for accessing health care services. The private voluntary sector including the international donor community and national and international NGOs has somewhat relieved the public health care system. However, while the former are highly fragmented, the later are often marginalized in the political process. • Regulatory policy network analysis (chapter 6): On the basis of core beliefs, the major actors inside the regulatory policy network agree that poverty should be eradicated and equality should be increased. On the level of secondary beliefs however, actors dispute on how fast these goals should be achieved — especially since the second core idea — that of economic growth — brings about much public legitimacy to the CPV. Hence, discussions revolve around which resources should be focused on projects enhancing health equity and which ones should focus on efficiency, growth and financial sustainability. The regulatory policy network analysis reveals the bargaining system of decision-making in Vietnam, which is highly fragmented, decentralized and characterized by a high level of informal decision-making. The assumption with regard to the policy network is that positive change can emerge from policy learning: this includes more regular interaction of the relevant actors inside the policy network. This enlarges a common understanding of the policy subject. It also allows pivotal actors to strengthen their analytical and bargaining power. Policy brokers or so-called Party champions can be helpful in finding a compromize for both sides.

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Introduction

1.5  Timeframe Investigated While the main timeframe investigated is 1989 to 2008, it should be clear that major changes have already occurred since the end of the 1970s. The year 1989 marks an important official turning point in terms of health protection in Vietnam. In this year the Vietnamese government introduced user fees for the public health care system and allowed private practitioners and pharmacies to operate. Health insurance was introduced three years later in 1992 to further overcome financial restraints of the state. Special focus will also be placed on the period 2002 to 2008, when important decisions related to the future of health insurance were made. Some of the major policy changes have been introduced through the Health Care Fund for the Poor (HCFP) (introduced in 2002) and during the drafting of a law on health insurance (2005 to 2008). As Sabatier argues, it is necessary to analyse a period of a decade or more for a policy analysis. This allows at least one cycle of formulation, implementation and reformulation and some insights into the success and failure of policy (Sabatier 1988). It strengthens the conclusions, as short-term variations are not so easily misinterpreted. In contrast, more emphasis can be put on the overall direction of the policy process.

1.6  Operationalization In order to get insights into the case study of the policy network of health protection in Vietnam, several methods were combined (methodological triangulation). The methods used (expert interviews, participatory observation, document/data analysis, personal email correspondence) proved to be especially valuable in capturing the concrete political practice of members of the policy network. All mentioned methods helped to reconstruct the informal rules of inclusion and exclusion of ideas and beliefs as well as to disclose the contradictions inherent in the informal security regime.

Expert Interviews Fieldwork for this study took place between March to July 2007 and between November 2007 and January 2008. Forty-one semi-structured interviews were conducted in Hanoi and Ho Chi Minh City. Through this qualitative method important members of the policy network could be identified. Furthermore, policy actors and their decision-making processes could be analysed. Interview partners from the policy network included current and former members of

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the relevant ministries related to social policy such as the Ministry of Labour, Invalids and Social Affairs (MOLISA), the Ministry of Health (MOH), the Ministry of Finance (MOF) as well as members of the organizations inside the Communist Party important for the overall direction of health policy in Vietnam. Interviews were also conducted with members of the Vietnam Social Security (VSS), which manages the health insurance fund, as well as a member of the National Assembly. Furthermore, meetings were arranged with members of research institutes, which are affiliated with the MOH, as well as various donors and consultants. For the interviews a semi-structured format based on an interview guideline was used (see Annex 1). Some of the interviews were recorded on tape. Mostly, especially in the case of Vietnamese interview partners, recording was not used in order to create a more informal environment for the interview. All interviews were transcribed afterwards. At the beginning of each interview the purpose of the interview was explained. The objective of the interviews was to get first hand information on issues affiliated with the hypothesis of the study — identification of the policy network, the interplay between different actors inside the policy network (public and private, national and local). Furthermore, the interviews were used to analyse the intentions, attitudes and evaluations of members of the policy network as well as to find out the long-term societal belief system. Another aspect was to identify structural problems responsible for the weak welfare outcomes in Vietnam such as the economic setting and the social environment in which policy takes place. The semi-structured interview technique was applied as it is rather seldom that one can find individual opinions and statements about political strategies and institutional attitudes in Vietnamese journals, newspaper articles and official documents. It is therefore especially difficult to extract opposing opinions inside the policy network about the past, present and future of the social system in Vietnam relying only on secondary sources. The information gained in the interviews was often more concrete and comprehensive than that found in any newspaper and journal articles33 — which is not to say that they were not helpful in other aspects of the study. The open ended form of interviews put few limits on the available response options and allowed interviewees to raise issues, which had not been considered so far. There was no coding scheme used. However, citations were grouped into thematic categories which related to the main questions which were established in the interview guideline. All interview partners were contacted via email or telephone. International donors were often very open and talkative about their experience. Meanwhile

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17

Vietnamese partners — especially members of the Central Committee and the Commissions — were often more difficult to get in touch with. After a while, a snowball effect took hold, in which one interview partner was able to open doors to other interviewees. Vietnamese interviewees were open and critical on technical issues and in broad categories also about other ministries and other views. They often maintained a low profile the moment one tried to dig deeper into criticism of individuals and actual beliefs. Vietnamese interviewees, who had had contacts with Germans before, mostly since they had studied in Germany, were more open in general and more often willing to meet more than once. In most cases interview questions were not sent to the interviewees a priori but asked on site. The questions to the interview partners were adapted to the individual position and situation of the respondent. Most interviews were conducted in English. Only three were conducted in Vietnamese and translated through an interpreter. Some were also in German. The interviews in general took between thirty and sixty minutes, in exceptional cases ninety minutes. For the reason of confidentiality, the interviewees are treated anonymously in the study.

Participatory Observation Further insights were gained in participant observation through the attendance at conferences, work shops and study tours. During my research visits I was able to participate in two workshops by the German development agency InWent with the VSS on model calculations for a compulsory health insurance system and training for employees of the VSS in May and December 2007. The two workshops allowed me to work closely with members of the VSS and gain insights into problems of data quality in Vietnam, political will and economic and administrative restraints of health insurance. In June 2008, I accompanied a study tour organized by the GTZ Poverty Reduction Project for several members of the Department of Social Protection inside MOLISA to Germany. The study tour was conducted to inform the group of state employees about social protection mechanisms for low income earners. This trip provided useful conversations with members of national and local representatives of the department of social protection inside MOLISA. Furthermore, I was able to comment as an advisor to the GTZ Poverty Reduction Project on the Vietnam Development Report 2008 on “Social Protection” allowing me to work closely with international donors, who operate in Vietnam. I gained a closer look at opinions inside the donor community related to the establishment of a health insurance scheme.

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Document and Data Analysis Apart from interviews, documentary research was a second major source of information. Legal documents and statistical data were collected to the extent that they were accessible either via the internet website of the General Statistics Office of Vietnam, the ministerial websites, publications available in Vietnam or via libraries in Germany. Substantial amounts of data were also drawn from donor publications. Additional information was gathered through the regular analysis of the English press in Vietnam, such as the Viet Nam News, Viet Nam Net, Thanh Nien Daily, as well as some blogs. The two research visits in Vietnam were used to collect information in libraries of the University of Hanoi and in NGO resource centres. Additionally, all secondary literature on the subject of social protection and welfare regime in theory and specifically on Vietnam was screened. Prior to and after the fieldwork, a careful literature review was conducted and regularly updated.

Personal Email Correspondence Some of the information has also been gathered through personal email correspondence before and after the field trips. Information from this source was only used when personal meetings could not be arranged in Vietnam or if some follow up information was needed.

Data Limitations As will be seen throughout the chapters, there is often no single truth about statistics in Vietnam. Current data limitations — especially the issues of accuracy, reliability and comparability — are a severe restraint to both academics and policymakers. One of the major statistical source in Vietnam are the Vietnam Living Standard Surveys — VLSS (1992/93 and 1997/98), which are conducted by the General Statistics Office (GSO).34 Both surveys were funded by the United Nations Development Programme (UNDP) and the Swedish International Development Agency (SIDA), and technically assisted by the World Bank. The household questionnaires include topics such as education, health migration, fertility, agriculture.35 As Fritzen and Brassard (2005, pp. 40–41) have highlighted much of the problem with data in Vietnam stems from the fact that more specialized databases are missing and the Vietnam Living Standard Surveys (conducted in 1992/93 and again in 1997/98) and the Vietnam Household Living Standard Surveys since 2002 are highly overused. Knowles highlights: “[a]ccuracy suffers

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Introduction

because many health workers do not have enough time and motivation to ensure that their statistics are complete and accurate and, in some cases, they have incentives to misreport data on the level of services provided” (Knowles et al. 2008). Sample sizes often remain too small to precisely estimate poverty at lower levels than provinces. Poverty maps allow estimates of poverty rates at the district and commune, but can be easily contested due to the rapid change in economic growth and massive rural-urban migration (World Bank 2008a, p. 6), a problem with which probably everyone who works in a developing country has to live with. Another challenge is that some social and political issues have not been covered yet in the data. So far no reliable and longitudinal data on domestic migration exists. Similarly, there is no national database which gives insights into the characteristics and operation of the rural land-use rights market (Fritzen and Brassard 2005, pp. 40, 44).36 In order to minimize restraints related to data reliability, it will be indicated when several opinions on numbers and figures exist.

1.7  Spelling and Citation Some Vietnamese terms are written in spelling with diacritics, especially when newspaper articles are cited in Vietnamese or when more than one English expression exists for a Vietnamese institution. Đoåi môùi is simplified to Doi Moi, Hà Noäi to Hanoi, Vieät Nam to Vietnam etc. Viet Nam is only used when it is part of the official name of a newspaper or organization. Vietnamese names are cited and alphabetized by the full name starting with the family name, which is the first name in order, i.e. Nguyen Khac Vien (1975).

Notes

1



2

A distinction will be made between East Asia and Southeast Asia. The term East Asia refers to the countries of Japan, China, Taiwan, Hong Kong, North and South Korea, and all countries in Southeast Asia. Southeast Asia consists of Burma (Myanmar), Cambodia, Laos, Thailand, Vietnam and Malaysia, Brunei, East Timor, Indonesia, Malaysia, the Philippines, and Singapore. The newly industrialized countries in East Asia — Hong Kong, Singapore, South Korea and Taiwan — are also referred to as the four Asian Tigers. The slogan of the Communist Party of Vietnam (CPV) illustrates this policy agenda: “accelerating national industrialization and modernization for a prosperous people, a strong country, an equitable, democratic and civilized

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3



4



5



6



7



8



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society.” See for example: Embassy of the Socialist Republic of Vietnam in the United States of America: Press Communique on 4th, last working day of the IX Congress, 21/04/2001, (accessed 11 August 2009). Catastrophic health expenditures are often used to indicate the risk of people in a given society to sink into poverty. Catastrophic health expenditures normally refer to the number of households with out-of-pocket-payments exceeding some pre-specified threshold of total, non-food, or non-subsistence consumption, expenditure or income. Household out-of-pocket-payments are payments borne by a patient directly without the benefit of insurance (OECD 2000, p. 155). Payments include consultation fees, purchase of medications, and hospital bills. Wagstaff and Doorslaer (2003) consider out-of-pocketpayments being catastrophic when exceeding a ten per cent threshold of total household expenditure. Xu et al. (2003) describe out-of-pocket-payments as being catastrophic when they exceed more than forty per cent of a household‘s non-subsistence spending. User fees are charges for goods or services of public or private providers of health care (Gottret/Schieber 2006: 231). I would agree with Lees (2006, p. 1098) that single-country scholars should be aware of the danger of constructing tautological explanations based on the assumption of cultural exceptionalism. One of the characteristics of informal security regimes is exactly the lack of a certain organizational logic, stemming among other factors from the way in which the state is not able to alter market, community and family relations. The state is not able to regulate other actors in the welfare mix, decision-making is highly fragmented and consensus is thereby more difficult to achieve (Gough 2004, pp. 28–30). As Weale (1985) has argued, welfare states in the OECD world pursue very different objectives. The whole idea of welfare regimes is that societies make different public choices about the level of equality and redistribution in society. According to Esping-Andersen “[S]ocial policy is supposed to address problems of stratification, but it also produces it. Equality has always been what welfare states were supposed to produce, yet the image of equality has always remained vague.” (1993, p. 3). In his later works he added: “We should not confuse the welfare state with equality […]. Welfare states, in fact, pursue different conceptions of equality” (Esping-Andersen 1996b, pp. 261–62). Latin America is a typical example how social services can be highly regressive. Cf. Huber et al. (2009). Wellbeing is a term almost as vague as welfare (cf. the discussion in Gough and McGregor 2007). In my understanding, the concept of wellbeing does not only include the notion of material wellbeing, but extends to concepts of social inclusion, i.e. access to social services, equal opportunities in terms of health and education and most importantly a say in decision-making processes for social

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10



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policy. The notion of wellbeing is dependent on subjective evaluations, which can change over time. As Ramesh (2004, pp. 116–52) has demonstrated housing policy has been very important in some of the East Asian cases, where rapid urbanization and population growth promoted a strong demand for affordable housing. There is no consensus whether to include education into the analysis of social policy, however most authors refrain from doing so. I would agree with Iversen/ Stephens (2008: 602) that the design of education policy is closely related to an economic development model and social protection — having profound impact on the distribution of income and the level of vulnerability a person faces inside a society. Reference is made here to the definition of a welfare regime by Esping-Andersen as “the combined, interdependent way in which welfare is produced and allocated between state, market and family” (Esping-Andersen 1999, pp. 34–35). I will use this definition as a starting point for the elaboration of my own theoretical framework in chapter 2. Inequality, by implication, means asymmetric power relations between human beings and unequal access to public goods. Those asymmetries influence the long-term living conditions of individuals, groups or societies (Kreckel 2004, p. 19). Human security in this book is not only understood as freedom from fear, but in a broad term as “a condition of existence in which basic material needs are met, and in which human dignity, including meaningful participation in the life of the community, can be realised” (Thomas 2001, p. 161). For an overview on definitions on social protection see Devereux/Sabates-Wheeler (2004). See also ADB (2003) and ILO (1984; 2000). Health expenditures are catastrophic when a household must sacrifice immense parts of its current consumption and/or faces negative long-term welfare consequences due to borrowing or depleting assets to pay for Fhealth care. There is no consensus over the exact threshold of catastrophic expenditures. Authors have concluded several thresholds varying from five per cent (Berki 1986) to forty per cent of total household income (cf. Xu et al. 2003). For terms often used in the text see also the glossary in Annex 8. See Titmuss (1958), Cutright (1965), Aaron (1967) generally on social policy; see Zöllner (1959) on Germany; Woodroofe (1962) and George (1968) on Great Britain; Kuhnle (1978) on Nordic welfare states. Wilensky (1975, p. 27) analysis of sixty countries brought him to the conclusion that their social systems converge through economic growth: “[E]conomic growth makes countries with contrasting cultural and political traditions more alike in their strategy for constructing the floor below no one sinks”. In his early writings (see for example Esping-Andersen 1985), Esping-Andersen’s approach was quite close to the power resource theory such as followed by Korpi (1983). Esping-Andersen first analysed how political power resources of the

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working-class affect the distributional and institutional characteristics of welfarestate development. His later writings are still rooted in a perspective of class conflicts but are somehow broader by looking not only into the power resources of the working class, but in general asking “under what conditions the class divisions and social inequalities produced by capitalism … [can, comment K.P.] be undone by parliamentary democracy” (Esping-Andersen 1993, p. 11). Vogel (1979) for example emphasized that the Japanese welfare state was able to provide security without granting entitlements (title of chapter 8: security without entitlement). Holliday (2000) further differentiates the productivist welfare regime into a facilitative regime such as in Hong Kong in which the state only play a facilitating role, a developmental universalist which emphasizes the universal provision of social services such as in Japan, Taiwan and South Korea, and a productivistparticularist in which individual provision of social services is prevalent such as in the case of Singapore. For further information see Snodgrass (1998); Stevenson (1998) demonstrates that the original endowments of educational capital in East Asia was not better than in other regions and even worse than in Latin America were pupils had 3.0 years of education compared to 2.3 in East Asia. However, in the 1960s, East Asian countries started to have higher than average enrolment rates compared to their income at the primary and secondary level. This discussion is very linked to the debate about the East Asian developmental state, which was able to achieve high growth rates combined with low levels of inequality by proper education systems, well targeted subsidies, and outwardoriented export-led growth, as well as the strategic and selective intervention into the market and thereby a counter concept to free market ideologies (Johnson 1982 on Japan; Amsden 1989 on Korea; White and Wade 1984; Wade 1990; Önis¸ 1991 for an overview on the debate; Thompson 1996; Goodman, White and Kwon 1998 for the connection between the East Asian developmental and welfare state debate; for the newer discussion see Radice 2008). Other authors who have analysed countries East Asia social policy in regional terms are Goodman/Peng (1996), Goodman et al. (1998), White and Goodman (1998), Gough (2000, 2001, 2004b), Holliday (2000), Tang (2000), Aspalter (2001a/b, 2006), Kamimura (2002), Kwon (2005), Walker and Wong (2006), Lee and Ku (2007); on East and Southeast Asia see Hort and Kuhnle (2000), Croissant (2004), Ramesh (2004); for Southeast Asia see Ramesh and Asher (2000). Holliday (2000) differentiates between facilitative (Hong Kong), developmentalparticularist (Singapore), and developmental-universalist (Korea and Taiwan) productivist welfare regimes; Park and Jung (2008) use a hierarchical cluster analysis to differentiate between three groups which include some Southeast Asian countries: Japan, Korea, Taiwan, Thailand, and the Philippines, (2) Hong Kong and Singapore, and (3) Malaysia and Indonesia.

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Introduction

23

Besides this literature which makes reference to the broader discussion on welfare regimes and welfare regime theories, there are a number of publications which are of more technical or descriptive nature such as Low (2004) on Singapore or Ku (2007) on South Korea. 27 One of the major differences is the socioeconomic and industrial structure of Vietnam in contrast to Eastern Europe. While Vietnam’s share in agriculture in the late 1980s was as high as fifty per cent of GDP (or around sixty-five per cent of the total labour force), countries such as Poland, Hungary or Czechoslovakia had shares around fifteen per cent of GDP and much higher shares in industrial production (CIA 1990). Private health spending on average was between 9 (Czech Republic) and 35.5 (Romania) per cent of total health spending in 1996 (Haggard/Kaufman 2008: 213) in contrast to around 70 per cent in Vietnam in 2000 (WHO 2008). The high number of private health expenditure shows how much more privatized the Vietnamese system is. Another difference is the political landscape. Democratic transitions in Eastern European countries since the breakdown of the USSR have been much more profound compared to the small-scale political liberalization process in Vietnam (Haggard and Kaufman 2008, p. 305; for Vietnam see for example Hansson 2003). 28 The Human Development Index (HDI) in 2005 varied enormously between Japan (0.953), Viet Nam (0.733) or countries such as Cambodia (0.598) or East Timor (0.514) (UNDP 2008). 29 According to the Economist Intelligence Unit’s (2008) Index of Democracy 2008, on a scale from 1 to 0, Japan scores 8.25, Laos only 2.1, North Korea with 0.86. 30 In terms of religion, the region of East Asia is influenced by Confucian (China, South Korea, Japan, Vietnam) Buddhist (Thailand, Vietnam, Laos, Myanmar), Muslim (Indonesia, Malaysia, Brunei), and Catholic (East Timor), and Animist influences. In addition, a vast range of languages (Malay, Mandarin, Thai, Korean) and ethnic groups (Tai, Austronesian, Burmese, Mon-Khmer, etc.) exist. 31 Cf. Ensor (1995), Ron et al. (1998), Ekman et al. (2008), Long (2008) on health insurance, Deolalikar (2002) and Gabriele (2006) on the utilization of health care; Nguyen Tran Hien et al. (1995), Nguyen Thi Hong Ha et al. (2002) in specific on the role of the private sector; Wagstaff (2007a) on the HCFP, Jowett/Thompson (1999) on voluntary health insurance; on social protection in general: Prescott (1997), Van de Walle (2003); donor publications such as UNDP (2007a/b), Wiebe (2006), World Bank (2008), ADB (2005a). 32 Kai Hon Ng (2007) has worked on policy networks in Hong Kong, specifically on the government policy on civic education between 1970 and 2000. Son is one of the few which uses a historical-institutional approach to better understand the extension of the entitlement to health insurance to the non-wage earning population in Korea and Taiwan. She uses this approach to better highlight the impact of the political system (especially presidentialism) and the importance of culture and belief systems of both countries on social policy (Son 2003). 26

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For further information on the advantage of a qualitative method mix in policy analysis see Schneider/Janning (2006) and Behrens (2003). 34 In the VLSS 1992/93, a total of 4,800 households in 150 rural and urban communities have been surveyed. In the VLSS 1997/98, 1,200 more households were added. Of those over 6,000 households in total, 4305 households had been surveyed already in the first VLSS. Questions were added such as on social subsidies, government poverty alleviation and assistance from non-governmental organizations (Cox 2004, footnote 1, footnote 12, 575). Out of the 4,800 households of the 1992/1993 VLSS, only 495 (roughly ten per cent) were not interviewed again for the 1997/1998 survey. Due to the small sample size and the low frequency of implementation every five years, the information gathered was often contested. Since 2002 therefore, every two years Households Living Standards Surveys (VHLSS) are published. The VHLSS 2002 contained 30,000 households. 35 For further basic information on the sample, size, data processing, etc. of the VLSS 1997/98 see World Bank (2001c). 36 For an assessment of the information system in health see MOH (2006). 33

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2 Theoretical framework

2.1 From the Analysis of Welfare States to Informal Security Regimes In the Western world, the welfare state has received much attention. According to Esping-Andersen, the question what a welfare state can accomplish, can only be answered by elaborating the state’s larger role in managing and organizing the economy. Economic issues of employment, wages and overall macro-economic steering are thus considered integral components in the welfare-state complex (Esping-Andersen 1993, p. 2). Esping-Andersen thus uses the concept of a welfare regime, which combines an analysis of the role that the state plays in providing welfare as well as an in depth investigation of the market and the community as the other two important pillars of welfare provision. The overall concept of welfare regimes is not only useful for the analysis of Western social systems, but also for the rest of the world. Especially in developing countries, the conditions in terms of the authority of the state to nationally implement and regulate policy issues including the health and education system are often weak. States in developing countries often lack the ability to extract substantial income from private economic activity in the form of tax revenues, which can then be used for redistributive planning. The steering of central governments is weak and lower levels of government more often disobey than obey policies by central governments. Labour is only weakly formalized, which makes it more difficult to gain additional resources for the social system through taxing labour. The welfare regime typology is a good starting point through which welfare regimes in developing countries can be analysed. However, given the 25

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fact that most welfare regime concepts are based on the example of developed high-income Western democracies, adjustments in the conceptualization need to be done in order to analyse the case study of health protection in Vietnam. Major parts of the theoretical framework of this study will be drawn from the writings of Esping-Andersen (1993) and Gough and Wood (2004). While employing their central theoretical concepts, the study will enhance their explanatory power by adding network analysis, which allows investigating the policymaking process more concretely. Policy network analysis deepens one’s understanding about the “division of responsibilities” (Einerhand and Nekkers 2004) in most developing countries, where a multitude of actors influences the welfare outcome (Rosenau 1992). Politics in this debate is not uniquely influenced by the strong state, which administers all aspects of life (Risse and Lehmkuhl 2006, p. 7), but has to be analysed through the interaction patterns between different horizontal and vertical networks. Policy change is explained by understanding how state programmes implicitly refer to theories how certain aims can be achieved (“belief systems”). This includes the effectiveness of specific policy-instruments (see Sabatier 1993, p. 130) such as health insurance financed via general taxes vs. health insurance financed via contributions, or private provision vs. public provision. Belief systems involve value priorities, perceptions on causal relations and the efficacy of policy instruments (Sabatier 1988, p. 132). Even if a country agrees on core beliefs such as equality, freedom, etc., the political struggle occurs when attempts are made to change them into actual policy (near core and secondary beliefs). So-called near core and secondary beliefs form the strategic and instrumental mechanisms through which core beliefs are actually implemented. On this political level, conflict occurs over the proper implementation of core beliefs. In order to find out why positive welfare outcomes in the sector of health equity are so difficult to achieve in Vietnam, a distinction will be made between the provider network, which includes all actors involved in the provision of social protection, and the regulatory network, which strongly influences the regulatory framework. In general, the two networks greatly overlap. However, distinguishing between the two allows a deeper understanding of the different mechanisms which shape the welfare outcomes in Vietnam. In this study it is argued that better welfare outcomes come about through policy learning. This happens when all actors inside the regulatory network interact regularly and thereby lower uncertainty over outcomes. Through this “collective puzzlement on society’s behalf ” (Heclo 1974, p. 305) core

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Theoretical Framework

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and secondary beliefs can be reconciled. A policy broker can help to mediate between different actors and ideas.

2.1.1 Esping-Andersen: The Three Worlds of Welfare Capitalism Welfare states have first occurred in Western democratic settings in the twentieth century. Their existence was often associated with the rise of social rights1 as one aspect of a broader modernization process and the creation of nation states — the other two being the growth of civil (eighteenth century) and political (nineteenth century) rights (Marshall 1977; C. Pierson 1991, pp. 21–22). The welfare state has been regarded as an intervening variable within the process of economic reproduction and distribution. Welfare states were seen as providing key welfare services such as health care, education, housing, income maintenance, etc. (C. Pierson 1991) — thereby equalizing income and risks between groups or between periods in a lifetime (Korpi 1983, p. 186).2 The attempt to construct different ideal types of welfare states or welfare state regimes has been highly advanced through the work of Esping-Andersen.3 The basic idea behind the regime typology was to overcome the weaknesses of the “first generation comparatives” (1993, p. 19) that analysed the capitalist Western welfare states, but did not give a convincing case for one of the existing theories. Neither Cutright (1965) and Wilenksy (1975, 1976) who put much emphasis on the economic and demographic development as an explanatory variable for welfare state variations, nor authors such as Hewitt (1977),4 Stephens (1979), and Korpi (1983), who stressed the importance of the working class and the representation of left wing-parties in parliament, were able to fully explain the variations in welfare capitalisms. Esping-Andersen argues that both sides overestimate a linear approach in which more or less power, democracy or (social) public spending can explain the variations among welfare states (Esping-Andersen 1993, p. 19). In contrast, he points out: “The hope of finding one single powerful causal factor must be abandoned”, instead the task is “to identify salient interaction effects” (ibid., p. 29). In Esping-Andersen’s understanding of social policy, the state is no longer seen as one consistent actor. He instead looks at the involvement of and interaction between various public and private actors. This broader comprehension of social policy is also reflected in his terminology. EspingAndersen uses the term “welfare regime” instead of welfare state to highlight

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one important aspect of the way welfare is provided in a nation state: “To talk of ‘a regime’ is to denote the fact that in the relation between state and economy a complex of legal and organizational features are systematically interwoven” (Esping-Andersen 1993, p. 2).5 A welfare regime is therefore “the combined, interdependent way in which welfare is produced and allocated between state, market and family” (Esping-Andersen 1999, pp. 33–34). The nature of social policy is revealed by analyzing the broader welfare mix, “the interactions of public sector, private sector and households in producing livelihoods and distributing welfare” (Gough 2001, p. 169). Depending on which of the three actors — the state, the market or the family — is the most important in a given country, one can categorize countries into different ideal types of welfare regimes. The ability to de-commodify wage earners, which means “to endow individuals with a relative independence of the cash nexus and work compulsion” (Esping-Andersen 1985, p. 224) is the second important line along which welfare regimes can be differentiated. Since in Western capitalist societies workers are dependent on selling their labour force to the market, every citizen is a commodity. For Esping-Andersen, the introduction of social rights, which is one of the fundamental goals of the welfare state, implies a loosening of the status as a commodity. De-commodification is achieved once a person can maintain a livelihood without reliance on the market (EspingAndersen 1993, pp. 21–23). A third dimension along which welfare regimes can be differentiated is the stratification effect a welfare regime has on its citizens. The question here is how a welfare regime does not only intervene and possibly correct the structure of inequality, but also how it stratifies a society: does it foster universal solidarity, status segmentation or individualism (Esping-Andersen 1985, p. 224). Gough (1999) calls this category the dominant locus of solidarity. Resulting from different ways in which state, market and family interact and in which the state helps to de-commodify or stratify citizens, EspingAndersen forms three ideal types (see Table 2.1): a liberal, a conservative and a social-democratic. These ideal types give an insight into a “discrete logic of organization, stratification, and societal integration” (Esping-Andersen 1993, p. 3) in their attempt to overcome social risks (Esping-Andersen 1999, p. 36).6 Liberal welfare states are characterized by means-tested assistance, modest universal transfers and social insurance plans. Entitlement rules are very strict and often the acceptance of social assistance is connected with stigmatization of those persons in need. Since public benefits are modest, the state encourages

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Theoretical Framework

Table 2.1 The Three Worlds of Welfare Capitalism Role of Family Role of Market Role of State Degree of De-commodification Dominant Locus of Solidarity Dominant Mode of Solidarity Country Examples

Liberal

Conservative

Social democratic

Marginal Central Marginal Minimal Market Individual USA

Central Marginal Subsidiary High Family Kinship Germany, Italy

Marginal Marginal Central Maximum State Universal Sweden

Source: Gough (1999, p. 3; 2004a, p. 24).

the market to take over the risk management of people. The liberal model has minimal de-commodification effects, it leaves welfare outcomes mainly to the market and only provides a very low floor below which no one sinks. In the second regime type — that of a conservative or corporatist — status is reinforced through social insurance schemes. Such schemes allow those who are engaged in the labour market to keep their status even after they have lost their job or are unable to work. Since it excludes all people who are not involved in the formalized labour market, it stratifies society along the line of formalized and non-formalized labour.7 The state fosters this stratification by only intervening in the welfare outcome if the capacity of the family to service its members is exhausted (Esping-Andersen 1993, p. 27). A third type — the social democratic one — achieves the highest level of universal access to social services and de-commodification. Welfare organizations do not only play a subsidiary role for the market and the family. In contrast, social institutions are strongly committed to providing social rights defined by citizenship, not by status, family networks or productivity in the labour market. According to Esping-Andersen, this regime type comes closest to a fusion of socialism and liberalism. Since this system is the most costly of all three, the state inside the regime tries to minimize social problems and maximize revenues by including as many people as possible in the labour market (ibid., pp. 27–28). By looking at the three ideal types it becomes obvious that social policy cannot be understood independently of existing economic, political and societal structures which have evolved in a specific country over the years. The conclusions drawn from the welfare mix analysis are more comprehensive than if one had defined welfare based on social expenditure figures alone. The

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former allows a closer look at who actually benefits from social policy (EspingAndersen 1987, pp. 6–7). To look at a specific welfare regime therefore does not only mean to analyse either the public or the private sector, since “100 per cent ‘privateness’ or 100 per cent ‘publicness’ is rare” (Asher 1985, p. 1). The important issue is to understand the blend between the private and the public sector and the particular permutations of how welfare is provided. Even though the state might not be the main provider of social welfare — as in the case of the liberal welfare regime — the state nevertheless has a major role in regulating the playground for private actors. The welfare outcomes cannot be analysed by just measuring the direct involvement or provision of social services, but needs to include an analysis of the overall direction of social policy and the legal framework in which private initiatives by firms, trade unions, the individual and the family operate (Asher 1985). As Adams has pointed out, even in strong or centralized welfare states such as France the state has always relied on private charities and initiatives to carry out social services, these were “services that the government wished to control but not necessarily provide” (C. Adams 2005, pp. 87–88). A systematic examination of welfare regimes should therefore consider not only national systems’ characteristics (such as the level and duration of benefits, the percentage of insured people, etc.), but also at what Einerhand and Nekkers call the “division of responsibilities”, in which the state is not the only provider in town, but remains important by setting the playing field for other actors (2004, pp. 25, 33). The types of inter-active roles must be analysed (Asher 1985, p. 1).

2.1.2 East Asian and Southeast Asian Welfare Regimes The discussion on welfare regimes in Southeast Asia has often been related to the East Asian developmental states (see White 1984; Önis¸ 1991; Thompson 1996; Kwon 2005). East Asian countries which made up the “East Asian Economic Miracle” (World Bank 1993) were supposedly able to alter the outcomes of market relations and combine growth with equity without putting much emphasis on social policy. A mostly authoritarian leadership allowed a public-private cooperation which was more than just the representation of private rent-seeking interests in society. The state strategically influenced the structure of the economy by regulating the relationship between industry and agriculture. The state was necessary “to overcome market imperfections and create the conditions for entrepreneurship and market rationality to take root” (Bernard 1996, p. 652).8 It also protected infant industry sectors or expanded key industrial sectors (see White 1984), but decided to open up its

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31

economy to exports at an early stage. In contrast to communist governments who decided to replace markets, East Asian governments were said to have promoted markets and corrected market failures through conscious political interventions such as the decision to expose products to export markets (Stiglitz 1996; Johnson 1982). Furthermore, as in the case of Korea, intermediate organizations such as industry and farmers associations are said to have played a vital role as ‘transmission belts’ between state and economy (White and Wade 1984). The earliest discussions whether there exists a genuine East Asian welfare regime started with Japan independently from regime typologies (see Vogel 1979; Nakagawa 1979). The low level of Japanese social spending was mainly related to Buddhist beliefs and Confucian familial and communal solidarities as well as extensive corporate welfare programmes. It was argued that a high level of equality was reached through growth, investment in human capital and poverty reduction by inclusion into the formal employment sector. Esping-Andersen later found similarities with a Swedish productivist welfare regime: one in which a pre-emptive social policy ensured that the labour market produces welfare and equality (Esping-Andersen 1997a, pp. 181–82). He came to the conclusion that Japan is a hybrid between a conservative and a liberal regime. The strong level of corporatism in Japan bears similarities to the continental European countries. The family, voluntary organizations and a social insurance system that stratifies according to ones occupation (seamen, teachers, farmers, public employees) plays an important role in providing welfare. The means-tested social assistance scheme and a low level of social rights show resemblance with the liberal regime (EspingAndersen 1997a, p. 183).9 Goodman and Peng were the first ones who stated that welfare regimes in East Asia should be analysed as a regional cluster, since they have incorporated many ideas of Western welfare states, but in practice deviate enormously (1996, p. 194). Kwon (1998) and Holliday (2000) further developed this regional approach and defined capitalist states in East Asia (especially Japan, South Korea, Hong Kong, Taiwan, and Singapore) as a fourth type of welfare regime — that of a productivist welfare regime. Authors who distinguish between welfare regimes in East Asia and the Western world emphasize that in East Asian welfare regimes social policy is subordinated to economic policy. They argue that welfare regimes should not only be distinguished by the degree of de-commodification, the quality of social rights, the stratification effect, and the relationship between state, market and family (Holliday 2000, p. 708; Gough 2001, p. 181; Kwon 2002, p. 4). According to the authors, a fourth criterion — that of subordination of social

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over economic policy — should be included in the welfare regime matrix. As a result of this subordination of social to economic policy, social policy only provides minimal social rights. Social protection is mainly provided via the integration in productive wage labour,10 through investment in human capital and land reforms with low expenditure in social insurance schemes. East Asian welfare regimes are based on dynamic emerging capitalist market economies with a strong imperative of nation-building and regime legitimacy (Wood and Gough 2006, pp. 1705–706). Productivist states are unified in their decision-making process and characterized by high steering and infrastructural capacities. This allows governments to put more emphasis on regulation rather than provision of social services. In addition, governments rely heavily on strong family and household networks, high savings rates and social programmes related to employment (ibid., pp. 1705–706). Much emphasis lays on human capital formation (especially on secondary and vocational training) (Holliday 2000; Gough 2001). It is seen as social investment which allows people to move out of poverty and reduce social inequality (Gough and Wood 2004, p. 9; Haggard and Kaufman 2008).11 Since new countries constantly enter into an export-oriented development strategy, East Asian states are challenged by lower wage countries. As a consequence, industrial upgrading through investment in human capital is of utmost importance (Haggard and Kaufman 2008, pp. 10, 67). Human capital is thus regarded as a key asset in enhancing an export-oriented development strategy which relies on a flexible workforce.12 As most theories on an East Asian welfare model only include the richer developmental states in the region,13 the underlying assumptions made about statehood have been transferred to less developed countries in the region without considering the structural differences. In newly industrialized countries in Southeast Asia such as Indonesia, Malaysia, Thailand and the Philippines and even more so in less developed countries such as China, Vietnam and Cambodia, the state monopoly on the use of force has undoubtedly been much stronger than in Sub-Saharan Africa or South Asia, but also much weaker than in countries such as Japan, Taiwan, and South Korea. Late industrializers in Southeast Asia including Vietnam have functional short comings of state administration and inadequate implementing capacities; it is therefore doubtful whether policy makers can actually be seen as agents of change or if policy is not only trying to catch up to a reality, which has already been established through other actors (Fforde 2009a, p. 28). Skepticism is appropriate given the fact that decision makers face limited areas of statehood (Faust and Croissant 2008, p. 2).

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In theory, comprehensive social protection mechanisms and the right to work exist.14 In practice, major difficulties in implementation are common as are lack of coverage, financial sustainability and coordination. Most people in Southeast Asia work in the informal sector.15 This leaves major parts of the population uncovered by public social and work programmes. Proper targeting of poor and vulnerable people is endangered through the low level of tax revenues, high tax evasion and corruption. All of these factors undermine the public steering capacity. Furthermore, developing countries usually lack reliable data and statistics on which proper targeting should be based. As a consequence, much of the responsibility of social protection lies with the family, civil organizations and the commune (John 2002, pp. 12–13). Women are often employed in the informal sector. They are also responsible for assistance to children, elderly and handicapped people. Private transfers between generations and from urban workers to rural households help to mitigate risks (Jacobs 1998, p. 95). A closer look at sub-national statistics however reveals that substantial gender inequalities and regional disparities remain. This is mainly due to regional concentration of work and income opportunities, the political marginalization of certain social groups and cultural obstacles to female emancipation (Croissant 2004, p. 516). The way in which social insurance is organized — often individually based social insurance schemes such as the ones in Malaysia and Singapore — hamper any form of risk pooling16 and solidarity mechanisms. Benefits compiled during work life are not necessarily sufficient, especially when workers become disabled or die young leaving families and dependents without any financial support (Zin et al. 2002, pp. 133–36). Labour movements and civil society organizations, which fight for social rights, are not only stigmatized, but often harshly repressed (ibid., p. 128). In Communist countries such as China and Vietnam which on paper stand up for equality and solidarity, the rapid privatization and marketization of public goods bring about an individualization of social rights, which neglects the social cohesion of society.17

2.1.3 Informal Security and Insecurity Regimes The attention the welfare regime typology pays to the welfare mix between market, family and state is highly applicable to the socio-economic and institutional setting in developing countries (Gough 2004a). It integrates structures and actors within a comparative analysis. Those “interactions of public sector, private sector and households in producing livelihoods and distributing welfare” can be seen as “a fruitful theme in the development

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literature” (Gough 2001, p. 169). The welfare regime typology reaches beyond an analysis of state-generated welfare and thereby gives a more realistic picture of the welfare situation in a developing country. However, while the regime typology based on Esping-Andersen is useful as a starting point, it has several conceptual limits. In particular, Esping-Andersen makes several assumptions which cannot be reconciled with the particular conditions present in many, if not most, developing countries (Gough 2004a, pp. 26–27).18 Gough and Wood (2004) have therefore adjusted Esping-Andersen’s welfare regime concept so that it can be applied to developing countries and emerging market economies. Gough and Wood analyse nine ideal typical assumptions made about welfare regimes in developed countries and alter them to the context of developing countries. Assumptions are held with regards to the following nine areas: 1) 2) 3) 4) 5) 6) 7) 8) 9)

Dominant Mode of Production; Dominant Social Relationship; Dominant Source of Livelihood; Dominant Form of Political Mobilization; The State Form; The Institutional Landscape; Welfare Outcomes; Path-dependent Development; and The Nature of Social Policy. (Gough 2004a)

1) The Dominant Mode of Production: The first assumption EspingAndersen (1993) makes is that the dominant mode of production is capitalism. This is mainly due to the fact that the debate on the welfare state originates from Western welfare states and the assumption of formalized wage labour. The question posed by Esping-Andersen and others is therefore, how much independence an individual has from being involved in waged labour (EspingAndersen 1987, p. 5; Polanyi 1944). Given the actual lack of commodification, questions of inequality and stratification have to be thought of in different ways. Other forms of production such as employment in the informal sector, subsistence economy, and reciprocal relations of gift giving and receiving dominate the scene. The mostly rural population is spatially dispersed. To an overwhelming degree, labour is not formalized and therefore not easily administered. This implies more emphasis on social assistance, which is however restrained through lack of tax resources. As a consequence, informal security rather than social security is prevalent (Guhan 1994, p. 37).

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2) The Dominant Social Relationship: This brings us to the second assumption of a dominant social relationship in which non-asset-owners are exploited by asset-owners. In developing countries again other forms of exclusion, coercion and domination exist in parallel. Stratification happens not just along lines of classes, but additionally along those of religion, ethnicity, and gender. In agrarian societies, land-ownership rather than occupation might reflect the social position in society more effectively (Diderichsen et al. 2001, p. 16). Conflict lines might also go along centre-periphery — with the centre being shaped by manufacturing and the periphery by agricultural production (Alber 1995, p. 133; Krugman 1992, p. 90). Social services such as education, social insurance and health care facilities are often very urban biased, stratifying society along the line of urban vs. rural (Ghosh 2008, p. 266). Due to harsh conditions in rural areas and promising jobs in booming areas, farmers decide to migrate to cities, where no public social systems exist and family ties no longer work. Gender stratification is another dimension, only briefly mentioned by Esping-Andersen. In the agricultural sector women face the double burden of heavy agricultural work and nurturing the family. In urban areas women are often employed in insecure jobs in the garment, rubber, and food manufacturing industries. Those jobs offer only low wages and long working hours. Women in both areas face the double burden of working and serving the needs of their children, husbands and parents/parents-in-law. In cases of female ethnic minorities, women often experience a form of a ‘triple oppression’ along lines of race, class and gender. 3) Dominant Source of Livelihood: The third assumption is linked to the first two: in the welfare regime typology of Esping-Andersen the dominant source of livelihood is provided through engagement in the labour market. This however, is not the case in developing countries, where people might not succeed in survival strategies of integration in the labour market. Other means of livelihood such as sharecropping, peasant agriculture, tribal cultivation, petty trade, etc. therefore often coexist or even overtake the formal labour market. 4) The Dominant Form of Political Mobilization: The fourth assumption is a consequence to the first three assumptions. In developing countries the dominant form of political mobilization is not along lines of classes and political parties, but along lines of ethnicity, regional origin, religion, caste, age groups, clans or kinship. In many developing countries, political mobilization

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is jeopardized by the strong grip of authoritarian regimes. Nevertheless, independent labour unions, farmers’ associations and other forms of civil expression are often found in developing countries. 5) The State Form: In contrast to developed countries, the state form is not characterized by a relatively autonomous sphere. It is inadequately differentiated from surrounding social and economic power systems. Private interests dominate over public interests. The regulatory ability of the state is weak. Bureaucracies are corrupt and ineffective, unable to monitor and enforce laws and regulations and weak in extracting revenues to provide essential public goods.19 Subsequently, the state is not the compensator for inequities of the market, but more often than not, civil society is the compensator for the inequities of the state (Wood 2004, p. 84). This inability of the state to compensate for the shortcomings of the market is fostered by the fact that decision-making is highly fragmented and consensus is thereby more difficult to achieve. The aspect of fragmentation can be found not only in decision-making, but also in implementation since here again co-ordination problems occur. Due to financial restraints and power mechanisms, each level of government has an interest to shift the burden of financing social services to the other by simultaneously preserving as much autonomy as possible. Conflicts between centre and periphery therefore foster the fact that public goods are not provided adequately (Alber 1995, pp. 143–46). 6) The Institutional Landscape: In such a highly fragmented state form with weak central actors, the institutional landscape is not dominated by the state. State institutions are not the only actors able to intervene and able to shape outcomes in a welfare mix, a wider range of actors including communities, informal groups and formal NGOs are involved.20 Those can — among other factors — be reflected in high private social expenditures, overseas remittances and foreign aid. Transfers by NGOs, intra-household savings and other private transfers are also a good measure, albeit much harder to analyse than official social spending due to lack of reliable data (Gough 2004a). 7) Welfare Outcomes: Since non-state actors and informal production are of utmost importance in developing countries, welfare outcomes cannot easily be measured by the degree of de-commodification. In a race to catch up with the industrialized societies, commodification is still to come; however, some of the states decide to prioritize protection from markets even before commodification occurs (Rudra 2007, p. 83). In order to analyse the level of protection, more direct measures of human well being, security and

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insecurity should be taken into consideration. These include the national poverty line as well as international poverty lines such as the US$1.25 rule.21 Furthermore, other measures of the satisfaction of basic needs for health and autonomy should be included (life expectancy, prevalence of disabilities and child development deficiencies, illiteracy, nutrition, access to clean water, absence of basic health care). Also, composite measures such as the Human Development Index can be used. 8) The Path-dependent Development: The inertia of policy makes paths which once have been followed difficult to change, even if they are not in line with the needs of a society or up to date to changed life styles (Watson 2001, p. 29). The path-dependent development in developing countries however is not only influenced by the welfare mix between the state, market and family. The costs of exit strategies or the change to an alternative do not only rise due to internal power struggles or a stimulus to reinforce an institution’s stability and further development.22 They also augment due to the involvement of groups and actors which have their main field of operation outside the country such as international migrants, NGOs or other countries. Internal political settlements are thereby harder to establish. Furthermore, they are also less necessary since external funding provides vast parts of welfare. 9) The Nature of Social Policy: Last but not least, the nature of social policy is not predominantly shaped by normative welfare goals within the public sphere based on social rights and social citizenship. Short term desires of political decision-makers prevail over long-term collective needs. Often social policy reinforces privilege, short-term gain, exclusion and domination. Social rights — if they exist at all — are highly fragmented between urban and rural areas and mostly directed towards a small clientele. Welfare policies are not necessarily redistributive and beneficent, “even though they are often thought of in this way” (Rudra 2007, p. 384).23 Social policy is not only unwilling, but unable to countervail the outcome of the economic sphere and the status quo, since the state is more a predator than a market compensator and enabler. “[T]he state represents part of the problem of insecurity rather than a moderator of it.” (Wood 2004, p. 64) Thus the population relies more on those private institutions which might reduce their personal insecurity, i.e. community and kin. In dealing with Esping-Andersen’s regime typology, Gough and Wood (Gough and Wood 2004; Wood and Gough 2006) generate two additional meta regimes, which characterize the welfare situation in developing countries: The informal security and the insecurity regime (see Table 2.2). Wood and

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Welfare State Regime

Informal Security Regime

Source: Gough (2004a, p. 32).

Dominant Mode of Advanced Capitalism technological Peasant economies within Production progress plus exploitation Peripheral Capitalism, uneven development Dominant Social Exploitation based on stratification Variegated forms of exploitation, Relationship and market inequalities exclusion and domination based on religion, ethnicity, gender Dominant Source Access to formal labour market A portfolio of livelihoods of Livelihood Dominant Form of Class coalitions, issue-based political Diffuse and particularistic based on Political Mobilisation parties and political settlements ascribed identities (patron-clientelism) State Form Relatively autonomous state ‘State’ weakly differentiated from other power systems Institutional Welfare mix of market, state Broader institutional responsibility Landscape and family matrix with powerful external influences and extensive negative permeability Welfare Outcomes Varying degrees of de-commodification Insecurity modified by informal plus health and human investment rights and adverse incorporation Path-dependent Liberal, conservative and social Less autonomous path dependency Development democratic regimes with some regime breakdown Nature of Social Countervailing power based on Less distinct policy mode due to Policy institutional differentiation permeability, contamination and foreign actors



Table 2.2 The Three Meta Welfare Regimes

Insecurity: intermittently extreme Political disequilibrium and chaos Absent

A portfolio of livelihoods with extensive conflict Diffuse and fluid, including flight Shadow, collapsed and criminal states with porous, contended borders Precarious: extreme negative permeability and fluidity

Variegated forms of oppression and destruction

Predatory Capitalism

Insecurity Regime

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Gough use these three regimes as ideal type categories. In reality, countries combine elements of all three types. While some citizens of a country might be effectively incorporated into a state protection system, others will continue to depend on community and family arrangements (Wood and Gough 2006, pp. 1700–701). In order to understand the difference between a security and an insecurity or informal security regime, one has to find out why some states are able to compensate for the shortcomings of private actors such as the family, community and the market, while others are not (why are positive welfare outcomes so difficult to achieve?). As Wood has argued it is not necessarily a matter of lacking solutions but more about how these solutions “are mediated through relationships of power and inequality, which define the performance of the very institutions through which we expect outcomes” (Wood 2004, p. 63). How and when are political agendas and normative goals achieved? Here a distinction has to be made between the policy output — the formal decision content of policy — and the actual outcome which is influenced by a variety of structural factors and actors (Windhoff-Héritier 1980, pp. 4–5).

2.1.3.1  Informal Security Regime In an informal security regime people cannot rely on social services provided by the state and therefore have to rely more on national and international family and community networks. Those however, can be endangered, too, since traditional structures are often ripped apart through modernization processes such as migration, urbanization and landlessness. Risks are concentrated on the poor rather than being spread more equally across society through mechanisms of risk pooling and enforced solidarity (Wood 2004, p. 53). Often poor people have to sell assets when the main bread winner dies or family members become ill in order to achieve some short term security. This however enhances the longer term vulnerability and dependence. Underlying patron-client relations are strong, making change from civil grass roots resistance less likely (Wood and Gough 2006, p. 1699). While informal security regimes have operating nation states (a characterization which differentiates them from insecurity regimes), problems of governance and effectiveness remain (Wood 2004, p. 55). In informal security regimes the state is not able to disentangle itself from patronage and patrimonial structures. Those structures are normally hierarchical and asymmetric. They “result in problematic inclusion or adverse incorporation, whereby poorer people trade some short-term security in return for longerterm vulnerability and dependence” (Gough 2004c, p. 301). The state has to

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be thought of as being socially embedded. Thus it produces discretionary and even arbitrary outcomes in which legitimacy is based more on authority than accountability. In fact, legitimacy can be also totally substituted by coercion (Wood 2004, p. 65). Informal security regimes have poor to high levels of welfare outcomes and public spending. What differentiates them from insecurity regimes is that they normally have low international flows. Examples for an informal security regime can be found all around the world from Central Europe, to Latin America, South Asia, to Africa and Southeast Asia.

2.1.3.2  Insecurity Regime A third meta regime applies to countries with low HDI and low public spending, but high international flows. These so-called insecurity regimes are highly dependent on external sources and normally have very poor levels of welfare outcome. Insecurity regimes are a common phenomenon among Sub-Saharan African countries. Insecurity regimes are characterized by the fact that “the very essence of the nation-state is itself contested” (Wood and Gough 2006, p. 1706). Part of this has to do with colonial histories, which transgressed primordial loyalties and identities. Part of it also stems from highly unregulated markets, in which patrons and warlords replaced national representatives of social policy institutions. Insecurity regimes are framed by weak states24 and are therefore highly vulnerable to outside forces, such as other nation states, international organizations, transnational corporations and criminal networks. As a consequence, the capitalist mode of production does not flourish. Capitalism only occurs in some kind of feudal or predatory type, in which various forms of oppression exist. People engage in a variety of livelihoods, including subsistence farming, pastoralism (stock farming), cashcropping, petty trade, reciprocity, corruption, begging, and theft. Investment is often made in social networks, via rent-seeking and ‘primitive accumulation’ (Bevan 2004, p. 97). Welfare outcomes are very meagre, pandemics and weak health systems are prevalent; education is insufficient and poverty wide-spread. The heavy reliance on individuals for security cannot be met and therefore results in high levels of insecurity and poor levels of need-satisfaction (Wood and Gough 2006, p. 1707). The emergence of stable informal mechanisms to mitigate insecurity is blocked (Gough 2004c, p. 301).

2.2 Welfare Regime and Network Analysis In contrast to several of the East Asian productivist regimes (Gough 2001; Holliday 2000), Vietnam’s integration into the international market has not

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been accompanied by the same commitment to human capital formation. In contrast, the government has lost important steering ability by opening up the health care system to the market. The ability to provide equal access to the health care system and overcome the informal security would mean to create sufficient means for controlling and steering the private market and the voluntary sector. It would also mean to provide services for those who cannot afford risk mitigating products offered by the market or are not reached by the voluntary sector. Vietnam can be seen as an exceptional case in so far as a formerly state dominated system has opted for a rapid privatization and market integration. It shows much similarity to the ideal-typical informal security regime rather than the East Asian productivist welfare regime. Short-comings of the state administration and inadequate implementing capacities result in welfare outcomes which are quite different from the ones intended by the central government. While the analysis scheme of the informal security regime provides useful stimulus on the way social protection/informal security is provided through a public private welfare mix, it does not give a detailed analytical framework with which to analyse the actual structural problems as well as the constellation of actors important for the welfare outcome. In order to overcome some of the shortcomings of the welfare regime approach, the study uses a policy network analysis as an additional theoretical source. Through a combination of the two, the presented work will be able to systematically analyse how welfare outcomes emerge through the negotiations and interactions of actors inside a provider and regulatory network. Through the concept of policy learning the study can demonstrate under which conditions change in the sense of a real improvement of provision and regulation of health care can happen even in an informal security regime (see Figure 2.1).

2.2.1 Socio-Economic Setting The overall socio-economic setting gives an insight into the social and economic relations under which social policy happens. The four central elements of the socio-economic setting (dominant mode of production, dominant social relationship, dominant source of livelihood and dominant form of political mobilization), which are mentioned by Gough and Wood (2004, p. 28), (cf. 2.1.1) allow insights into the economic and social environment in which social policy is embedded. It also gives discernments into the existing distribution of power inside a society. The degree of inequality is dependent on a variety of factors such as the employment structure, the market power of actors as well as the in- and exclusion of different societal groups into political

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State

Source: own compilations.

Market (nat. and int.) PUBLIC

Social Relationship

Political Mobilization

Household (nat. and int.) Community (nat. and int.) PRIVATE

Mode of Production

Source of Livelihoods

Provider Network

Socio-Economic Setting

Welfare Outcomes “Why are positive outcomes so difficult to achieve?”

Source: own compilations

Policy Learning

“Under which conditions can positive welfare outcomes nevertheless be achieved?”

Global Level

National Level

Local Level

Regulatory Network

Figure 2.1 Welfare Outcomes of an Figure 2.1Informal Security Regime Welfare Outcomes of an Informal Security Regime

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decision-making. The category socio-economic setting thus allows a better understanding about how social inequality in a country is (re)produced. The socio-economic setting influences the way in which the provider and regulatory network operates but does not determine the mobilization of different groups and actors (Wood and Gough 2006, p. 1701). As Sabatier has highlighted the socio-economic setting interacts with other structural aspects of path-dependent institutions and the belief 25 system of a policy network. If the socio-economic conditions in a country change, this might have in impact on the actors inside a policy network since it will restrain the available options and resources. However, the core of a governmental action programme will not be changed unless fundamental changes in the socio-economic setting will occur (Sabatier 1988, p. 148). As Heclo has argued, neither economic growth nor the sheer boost in destitution is sufficient to bring about a substantive increase in the activity of social policy. What is more important is the depth and rapidity of economic change and modernization (1974). Industrial societies make people (more often correctly speaking men) more wage- and market-dependent. This brings about a paradox in which workers can “become both more autonomous and more interdependent, more wealthy and more vulnerable” (Heclo 1974, pp. 285–86). Hence, changes in the welfare outcome can be explained among others by the changes occurring in the socio-economic setting. A productivist model with an emphasis on economic policy and outwardoriented growth normally tries to have few initiatives in the sector of social insurance, because it increases the costs of labour. Therefore, social policy initiatives are mostly found in the sector of education and health. In addition, the government encourages the market and self-reliance (Rudra 2007, p. 384). However, if this model is pursued in a strongly decentralized fragmented setting, self sufficiency goes to such lengths where the central government is not capable of controlling the outcomes on the ground. In such a setting, informal institutions take over formal ones.26

2.2.2  The Provider Network The provider network describes the way in which social services are provided in a country. Normally, the provider network includes national governmental and nongovernmental actors as well as the family, the community and the market. The welfare mix in developing countries also usually includes a global dimension “recognizing that poorer, and now transitional, countries have a greater over-reliance in all four domains [household, community, market, state, comment K.P.] upon international actors and transfers” (Wood and Gough

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2006, p. 1702). As a result, the four domestic components get a second global dimension — the international household, the international voluntary sector (including contributions by INGOs, bi- and multilateral donors), global markets and Multinational Corporations (MNCs) and supranational organizations. All four components shape the welfare outcome by mitigating risk. Provision can come in the form of tax money, donations, loans and remittances and can be used for cash transfers, infrastructure including health staff, hospitals and Communal Health Centres (CHCs) and universities.

Table 2.3 Components of the Institutional Responsibility Mix

Domestic

Supranational

Household Community Market State

Households Voluntary sector Domestic markets Domestic governance

International households Voluntary sector (INGOs and donors) Global markets, MNCs Supranational organizations

Source: Gough (2004a, p. 30) and own adjustments.

This “division of responsibilities” (Einerhand and Nekkers 2004) results in an institutional responsibility matrix with a multitude of actors which provide for health care services (see Table 2.3). The provision of social services by non-state actors and soft modes of governance are thus as important as the state provision of social services (Risse and Lehmkuhl 2006, p. 7).

2.2.2.1  Household In every society, the family is defined as a core-societal institution, “the microfoundation of society” (Esping-Andersen 2000, p. 35). Especially in developing countries de-familization — the degree to which individuals can uphold a socially acceptable standard of living, independently of family relationships, either through paid work or social security provision — is normally low. Health shocks are among the most important sources of poverty for households having to cope with the costs for medical treatment and the income loss stemming from the inability to work. The family therefore bears a very big responsibility putting aside funds to provide for its own security

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(Vogel 1979, p. 189). It acts as the main producer of social protection inside a society. The family often does not only include the nuclear family, but also the whole lineage family, clan members and domestic and overseas migrants (Buvan 2004, p. 104). The ability to use the family as a source of informal security system depends on the way in which households can save money, borrow or sell assets in times of hardship. However, family networks can become easily overstretched when unexpected expenditures such as high hospital bills exceed the savings. It is thus of utmost importance that the state coordinates with the community and the market to avoid that someone falls outside the safety net. Among the family, women are often the ones who bear the strongest responsibility in the provision of social protection by nurturing and fostering children, elderly and poor people. They produce cost-free goods and services that could also be provided by the market or the state (ECLAC 2007, p. 56). In an East Asian outward-oriented development model, influenced by Confucian and patriarchal traditions, women face the double burden of household and work. As a result such systems are often characterized by high levels of gender stratification and pauperization, especially since low-skilled workers in a highly competitive environment are very unlikely to unionize (Rudra 2002, p. 419). Discrimination against women can take the form of lower benefit levels, the designation of women as dependents of men, or the failure to address the fact that many women leave employment to raise children (Midgley 1996, p. 12). Migration to cities and abroad disrupts family systems of social protection, where public systems are not (yet) in place. Squatter settlements in cities or close by export processing zones are often characterized by extreme poverty, lack of proper health, education and sanitation systems (Hall and Midgley 2004, p. 176). Pressure exerts on international migrant communities and members in the Diasporas to assist the people who stayed at home. Remittances become a major source of external development funding and a steady source of income — even in times of economic crisis. In fact, often remittances exceed the amount of ODA provided for in developing countries. Remittances are used for direct consumption, but also for small businesses, housing, sanitation, health care, food and schooling (De Haas 2005, p. 1275).27 However, normally they cannot substitute for state programmes. First of all, it is not necessarily the poorest and most vulnerable members of a society, who migrate. Second of all, remittances cannot overcome structural aspects of underdevelopment such as lack of a sound macroeconomic policy or deficient investment in roads, Communal Health Centres (CHCs) and teacher training (Skeldon 2008, p. 9).

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2.2.2.2  Community In developed and developing countries the third sector (also called voluntary or non-profit sector) has gained much attention as alternative to the state and the private for profit sector in providing public goods (Etzioni 1973; Anheier and Seibel 1990). International developments such as deregulation and decentralization have opened new opportunities for NGOs to engage in rural development projects and the provision of social services (Gideon 1998). Actors in this field embrace neighbours, congregations, Community-Based Organizations (CBOs) such as women’s organizations, hometown associations, and trade unions, altruists, but also bandits. International actors include international development and humanitarian NGOs as well as international donors and multilateral institutions. Most advocates of CBOs providing social services stress the fact that their initiatives have the advantage of having intimate knowledge about the needs of their member households and are thereby able to identify the most needy and vulnerable. Furthermore, due to their proximity to people in need, they can use relatively low-cost methods of providing social services since peer monitoring and social sanctions leads to low levels of abuse (Bhattamishra and Barrett 2008, p. iv; Wischermann 2003, p. 867). In the sector of health insurance, private prepaid programmes of community-based health insurance schemes are one way how poor people can participate in risk-pooling programmes — problems of adverse selection28 however might endanger the financial foundation of a community based scheme (Bhatia and Mossialos 2004, p. 188). This problem is even more pressing provided that community-based schemes are organized into occupational subgroups — i.e. farmers, workers, etc. The pool for risks thus becomes too small to predict the financial loss from loan defaults, major epidemics etc. (risk pooling). Another problem occurs when community based schemes are set up by a group of people who only accept people from a similar socio-economic, ethnic or cultural background. To be poor or from a different ethnic background might hinder the inclusion into a communitybased scheme (Carrin et al. 2005, p. 801). In remote areas few possibilities might exist for resource mobilization and management capacities might be poor. This can be enhanced by manipulation of local leaders especially in poor and isolated regions where few checks and balances exist (Bhattamishra and Barrett 2008, pp. 62–63). Projects by NGOs, communities and donors are at risk of being stuck in small-scale projects thereby endangering the financial base of risk pooling done

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through micro-insurance, -credits or -saving schemes. In addition, since their projects are often restrained to a very small area of influence, the ability to equalize welfare outcomes among participants and among time is restrained. As a result, regional disparities can only partially be reduced. Furthermore, being faced by multiple national and international actors, local authorities face the risk of being overburdened with the increase in management and regulatory oversight. Due to the intervention of hundreds of different organizations, self-help groups, NGOs and donors the governance in the health care sector can easily be fragmented. This can draw away attention from important (structural) issues, such as the organization of primary health care, the control of the commercialization of the health sector and human resource development (WHO 2008a, p. 83). In order to achieve health equity and positive outcomes it is thus important that non-state and non-for profit initiatives are included into a broader public system.29

2.2.2.3  Market A market solution of social provision is supposed to serve patients in a more cost-efficient and consumer-oriented way. Public providers in contrast are often said to be patient-unfriendly and have inflexible payments and opening hours. The argument goes that when the public budget is relieved by fewer expenses and able to gain additional income through fees and user charges, there are more resources available for the poor. Besides the state, the market thus often plays a central role in the provision of social services in developing countries (Bhatia and Mossialos 2004, p. 186). The reality is often quite different — being characterized more by market anarchy than supervised market provision. Markets usually emerge for those parts of the population, which are able to pay and live in central cities.30 In fact, the market can easily leave those behind, whose asset — their manpower — is not traded on markets such as informal workers, peasants, handicapped, and old people. In addition, a market solution risks to weaken the public system since it often deprives the public system of money, which would have otherwise remained there (Drechsler and Jütting 2007, p. 507).31 In many cases market solutions are either unable to serve poorer parts in society (especially in remote areas) or they demand heavy out-of-pocketpayments making this private system more expensive for the poorest segment of the population than a state-led one. In cases where private providers are not properly supervised patients run the risk to be exposed to untrained staff,

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harmful treatments and over-servicing (Mehrotra and Delamonica 2005, p. 153). Information on the necessity of certain treatments and the costs of services is ultimately asymmetric (Ghosh 2008, p. 264). Other side effects of a market-governed system include the rise in prices for pharmaceutical products due to augmented demand and drug resistance as a consequence of false utilization and over-prescription (Mehrotra and Delamonica 2005, p. 153). Private providers also often do not have an incentive to engage in public health campaigns, since health education and immunization might reduce future demand of patients and thereby lower their income. The marketization of health services is often done carried out for pragmatic reasons to provide income for some people or done without any conscious policy in mind (Bennett 1997, pp. 98–103). User fees are often introduced to raise revenues for the public system or to make patients more conscious of health care costs. However, the evidence often shows that there are normally not as many extra resources as expected since the administration of user fees is often quite costly. Revenue collection, printing of receipts, cash boxes, bank charges, staff time devoted to the administration, etc. are all costs associated with the management of fees. There is also much room for corruption since fees are often not easy to track (Creese and Kutzin 1997, p. 48). The redirection of freed resources also requires a strong political commitment. In an advanced private system, there is no possibility to engage the richer parts in society into a solidarity community. In contrast, the richer parts of society are often totally de-linked from national financial and social systems by shifting their risks to international systems i.e. international banks and insurance companies (Hall and Midgley 2004, p. 187)32 or using health service abroad. Private market provision of social services can only function under the condition that private suppliers and reimbursement mechanisms are strictly regulated and supervised, not leaving poor people uncovered. This however, requires control capacities on the side of the state which normally differ from traditional bureaucratic administration. Contracting makes it necessary to envision in advance the service needs and diverse contingencies which might arise over the course of the contract. A market approach can only partly replace the state; in general however, one should talk about a restructuring of the state rather than a reducing of the state (Starr 1990, p. 44).

2.2.2.4  State States stand in the centre of how to define regime-types. States should not only be “identified through what they do, or what they have legislated, but

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also in terms of how they interact with the market and alternative private arrangements” (Esping-Andersen 1993, p. 103). For the Western capitalist states, Max Weber saw the state as a legitimate agent, which is able and authorised to make and implement the binding rules in a given territory, using force if necessary (Weber 2002 [1922], p. 29).33 Which role, however, can the state play in developing countries in providing social services? Migdal argues that many social scientists see politics, policy and planning as a subject of almost boundless possibilities. The expectations are that states have high capabilities to extract, regulate and appropriate, thereby being a strong state (Migdal 2001, pp. 10–15). In reality, however, the state should be seen as being part of society (state in society) as Migdal has highlighted. The state should not solely be characterized as a “powerful image of a clearly bounded, unified organization that can be spoken of in singular terms”, but also “as the practices of a heap of loosely connected parts or fragments, frequently with ill-defined boundaries between them and other groupings inside and outside the official state borders and often promoting conflicting sets of rules with one another” (Migdal 2001, p. 22). The state becomes one among other actors, in which networks and non-hierarchical negotiation systems operate next to formal hierarchical ones (Benz 2004; Mayntz 1997, 2003, 2004; Mayntz and Scharpf 1995). In general, the provision of social services in developing countries resembles the one found in developed countries. The state provides financial means through tax and other income to finance public projects. Normally developing countries have a fully developed curative infrastructure with public doctors, Communal Health Centres (CHCs) and central, provincial and district hospitals. Furthermore, the state often invests in specialized research institutes both for curative and preventive care. Additionally, the state is often active in the provision of medical products owning its own pharmaceutical companies and factories. In many countries, the state is also in charge of a health insurance fund. This offers the state to provide a huge form of risk pooling among society, which a private actor could not achieve. The regulatory power however is normally weakened by ineffective and incomplete administrative and financial decentralization initiatives. In such an institutional setting, even if decisions of the top leadership are pro-poor, pro-equality, etc. they can easily be diluted and modified by other national and local actors. The reasons are at least twofold: the unwillingness to reform or the inability to implement new rules due to lack of financial means or administrative and technical skills. In countries with a high level of decentralization and a lack of monitoring mechanisms unfunded mandates in the sector of social policy often aggravate the gap between rich and poor

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provinces, since only the rich provinces are able to achieve the national goals (Hall and Midgley 2004, p. 191).34 The exercising of authority is often very fragmented (Migdal 1988, p. 28). This uneven distribution of social control cannot easily be changed, since once established conflicting sets of rules are difficult to dismiss (ibid., p. 263). The financial base of social services is weakened by the fact that taxes place considerable organizational and bureaucratic demands on the state, which many developing states including several of the Southeast Asian ones cannot provide (Moore 2004b, p. 304; Carrin et al. 2005, p. 799). Besides the fragmented distribution of social control and the meager public revenues for social services, the public system is further weakened by the fact that the existing means are targeted towards legitimizing agents of the regime such as civil servants or a business elite rather than the most vulnerable groups in society.35 As a consequence, health care systems are often regressive not progressive — which means that its utilization puts greater burden (relative to resources) on the poor than on the rich (Wibbels 2006).

2.2.3  The Regulatory Network In the case of East Asia it has been argued the actual welfare provided by the state cannot only be measured by the low level of government spending on health and social protection. The output of the state in East Asia has to be measured not only against its involvement as provider of social security, but as “regulator which enforces welfare programmes without providing direct finance” (White and Goodman 1998, p. 13). The degree of human welfare is thus not solely achieved by financial means, but also by the state’s ability to strategically influence various economic and social outcomes: [A]ny view that measured the welfare role of the state purely by financial indicators would be misleading because it ignores the ways in which the state has acted pervasively in East Asia to achieve welfare goals by other means. Most notable is the strategic role of states in directing a process of economic development with distributive as well as growth objectives, resulting in a relatively egalitarian pattern of income distribution compared with other industrialising regions such as Latin America. (ibid., p. 13)

Contracting out to private actors, however, needs high capacities in management systems (Bennett and Mills 1998, p. 134). Regulation needs to have an effective administrative system, which is able to design, implement and supervise policy. A prerequisite for a functioning system is that information systems are in place that allow to communicate between different actors,

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monitor and evaluate policy. Furthermore, the roles and functions of the different actors involved in regulation, supervision and provision have to be clear (Bhatia and Mossialos 2004, p. 183). Regulation has at least three prerequisites: a good regulatory design, proper implementation and supervision. This includes a good understanding about the tasks and responsibilities of the private and the public sector, priority-setting as well as awareness of all relevant factors and costs. Implementation should provide for sanctions for non-performance. It should also keep the complexity of the implementation low. Supervision requires establishing performance indicators which guarantee that the achievement of a certain quality can be monitored. It also means to collect and analyse information on the quality of the service provided, to whom the service is provided (particularly a concern if there may be potential problems of cream skimming); and the costs of the contract to government (Bennett and Mills 1998; Bhatia and Mossialos 2004, pp. 182–84). Furthermore, as White argues, social and political factors play an important role in the way a state can impact economic changes (“The relationship between state and economy is more organic and multifaceted and the state’s impact on economic changes depends heavily on its broader, ‘non-economic’ social and political influences”) (White 1984). The effectiveness of state intervention is not only dependent on the specific economic policy one government uses, but is “rooted in the basic nature of the state itself and its overall relationship to society, notably its impact on social structure and attitudes. These latter provide the matrix within which specific policies flourish or shrivel away” (White and Wade 1984). In Southeast Asia, the role of the state as setting the playground for private actors probably is less constructive as in East Asia or Europe (World Bank 1993). As Faust and Croissant have argued, in the case of Southeast Asia, only in Singapore, Malaysia and Brunei one can talk about a secured and entire state monopoly on the use of violence. In many countries of the region, due to functional deficits of the administration, and lack of capacities to implement decisions, areas of limited statehood exist (“Räume begrenzter Staatlichkeit”) (Faust and Croissant 2008, p. 2).36 The state is not able to compensate for the market since the state does not have the regulatory power to overcome shortcomings of the market. Wood legitimately asks: How “does it make sense to expect the state to disentangle itself from deep structures in order to compensate for them?” (Wood 2004, p. 58) The state has to be characterized as having “multiple centres of authority-building, each with different sectoral capabilities and degrees of influence” (Grzymala-Busse and Luong 2002, p. 533). Even in Post-communist countries such as China and Vietnam, which are often

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described as centrally planned, it is not easy to differentiate conceptually between sate and society. The separation can be best described as a “blurred boundary” (ibid., p. 534). The rationale of the national top-down implementation model is thus quite unrealistic in a setting of strong provincial varieties, fiscal and administrative decentralization. In contrast to a strong unitary state with a powerful executive, the reality in many developing countries (and even in developed ones with strong federalism) is that the central state has a reduced steering capacity. A wide range of actors from the statutory, private, voluntary and informal sector address the long-term problems confronting modern societies (Hudson 2004, p. 76). Social governance37 (rather than social government based on hierarchy) is done through a diverse network of public and private actors (Rosenau 1992). Politics in this debate is not uniquely influenced by the strong state, which administers all aspects of life (Risse and Lehmkuhl 2006, p. 7). Network analysis highlights the informal political decision and coordination structures besides party systems, the iron triangle between congress, administrative agencies and lobbying groups. The symbiotic relationship between state and society, a policy network can be understood as a broad societal governance structure (Kenis and Schneider 1991, p. 31). This form of analysis of policymaking is especially applicable for highly decentralized states and settings in which boundaries between the public and the private are blurry and the informal influence is processed in soft law or state sponsored self-regulation. The policy network analysis reveals that policymaking and implementation requires the cooperation with private actors and new forms of self-regulation instead of a state which takes total responsibility in society. This extends to the international dimension in which national policy processes have to be thought of as being embedded in international policy environments and policy interdependencies (ibid., p. 35). As Wood has stated, even in developing countries the analysis of social policy comes down to structure, relationships and conditions of constrained choices. However, so far scholars have often neglected to analyse nationally negotiated social pacts in developing countries and instead have focused on the level of social spending (Rudra 2006, p. 4). An analysis of social policy in developing countries should find out “why positive outcomes are so difficult to achieve, not because solutions do not exist, but because they are mediated through relationships of power and inequality, which define the performance of the very institutions through which we expect outcomes” (Wood 2004, p. 63).

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These relationships of power can be analysed through the actors38 inside a policy network, who by their function are involved in the decision-making and implementation process (Marin and Mayntz 1991, p. 16). Policy networks are “specific structural arrangements [sic!] in policymaking. Policy networks are new forms of political governance which reflect a changed relationship between state and society” (Kenis and Schneider 1991, p. 41). The establishment of policy networks describe the fragmentation of the state, the blurry boundaries between the public and the private (ibid., p. 41). The foundation of a policy network is its shared topic, which brings about relations of allies and opponents in strategies of power enforcement.39 The network consists of several organizations that are required to accomplish particular tasks (a task network). The number of actors can vary.40 The linkages between the actors of a policy network serve as communication channels and simplify the exchange of information, expertise, trust, etc. (Kenis and Schneider 1991, p. 43). The way interactions inside the network take place can facilitate or constrain organizational performance (Hilderbrand and Grindle 1994). Policy networks have an ambiguous nature: they “can both enhance and reduce the efficiency and legitimacy of policymaking” (Börzel 1998, p. 254). The culture of a network can thus be a restraint and an opportunity. Central state agencies cannot automatically be seen as the major centre of action in which policymaking is only decided by central agencies and implemented top-down. In contrast, the network analysis sharpens the view that policy learning over time occurs when problems are identified on the ground and in different parts of the network and then in a second step, some common ground on which to base the decision is found (Héritier 1993, p. 16). The network approach emphasizes that in multi-stakeholder decisionmaking it is not applicable to speak of simple hierarchy and subordination (Lehmbruch 1989, p. 222): networks emphasize bargaining and accommodation rather than hierarchical centralization. Through those bargaining processes, the bridging of vertical and horizontal institutional differences of the structures of political decision-making can be explained (ibid., p. 235). Different actors inside a policy network can be brought together by meetings organized by the government, in committees, international conferences, etc. Those interactions and coordination mechanisms can bring about growing interdependence (ibid., pp. 225–27) and eventually alter the outcomes towards more equity and efficiency. As Waarden (1992, p. 31) has stated: “Networks do not necessarily have a power centre, and hence coordination is not by hierarchic authority (or, in

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more enlightened form hierarchic consultation) but by horizontal bargaining”. Hence, the focus of the analysis has to be both on the formal institutions and the informal practices and structures such as personal agreements. These rules of the game define the way according to which every nation has its own political logic (Immergut 1992, p. 4). Policy network analysts do not negate that there exist differences in resources and means (access to information, money, infrastructure, etc.) and thereby also differences in power. One of the major distinctions between national state actors and others is that the former have the exclusive right to legislation and a bigger influence on how resources are allocated. The actual outcome of a policy, however, can only be explained by looking at the whole network: “Often there is one particular organization which is central to this network, but the capacities of each organization may be relevant to the overall performance of the task” (Bennett and Mills 1998, p. 309). Network members often have a core of key members and a periphery of less influential members, who nevertheless can become important at certain times.41 The network is dynamic, not static in the sense that the whole network is task-, not structure-oriented (Hudson 2004, p. 81). Since networks are only partly accountable to the state, and more often self-regulating, the state cannot totally control them, but only steer them by a variety of incentives and sanctions (Rhodes 1997, p. 53; 2007, p. 1246). Furthermore, since not all actors of a group are institutionalized into the formal policymaking process, some members can willingly or unwillingly be marginalized: “The emphasis on friendships, personal contact and informality in network style relationships means that ‘insider’ and ‘outsider’ groups can form, with poorly resourced or marginal groups finding it hard to ‘break in’ to the network” (Hudson 2004, p. 81). This is the reason why the complexity of a policy network produces a variety of uncertainties for a government in terms of policy outcomes: “[I]t involves a relaxation of central control and an acceptance that dependency on other actors makes such a top — down model redundant” (Hudson 2004, p. 82).

2.2.3.1  Belief Systems inside a Regulatory Policy Network: Core and Secondary Beliefs Social action inside a network can be explained by rational maximization of utility, but also by ideas, arguments, belief systems as well as institutional habits (Héritier 1993, p. 19). Furthermore, the network defines the role which actors play and contains organizational imperatives. When decisions are made inside a network, they do not only reflect the rational assessment

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of available options, but reflect past conflicts as well as the culture and values of decision makers. Power relations inside a policy network have to been seen in the broader socio-economic and political context of a society (Marsh and Smith 2000, p. 5). In order to understand the welfare outcomes of certain policy decisions, one has to understand how state programmes implicitly refer to theories how certain aims can be achieved (belief system), including the effectiveness of specific policy-instruments (Sabatier 1993, p. 130) such as health insurance financed via general taxes vs. health insurance financed via contributions, private provision vs. public provision etc. Belief systems involve value priorities, perceptions on causal relations and the efficacy of policy instruments (Sabatier 1988, p. 132). They include elements of individual rational short-term selfinterest, but in terms of core beliefs might be much more irrational stemming from the socialization of values. As such they are “structural constraint[s] on the action of network members” (Sabatier 1987, p. 664). An essential part of these belief systems in a country and among the policy elites are the underlying beliefs, which give priority of some values over others such as freedom vs. security, stability vs. economic growth; they are fundamental normative and ontological axioms. In analyzing the basic criteria of distributive justice (whose welfare counts?) one better understands the political outcomes of a certain policy area (Sabatier 1988, pp. 144–46). Near core and secondary beliefs form the strategic and instrumental ways in which core beliefs are formed into actual policy. Even if a country agrees on core beliefs, problems occur when trying to implement those. Decisions, which concern those second types of beliefs, are of a more technical nature. At the near core level, decisions are made about the proper ratio between state and market and development vs. equity. Other issues involve organizational decisions such as the distribution of power between different governmental units and the way in which various segments of the population participate in decision-making. Other relevant issues at the level of secondary beliefs include the identification of groups, whose welfare has priority over others. On the level of secondary beliefs, actors inside the policy network try to find information, which is necessary to implement core beliefs and come up with administrative rules and budgetary allocations (Sabatier 1988, p. 145). In developing countries, institutions are not well established and factions and group interests are not easy to spot. Furthermore, institutional norms, beliefs and ideas might be contradictory. Coordination problems result from decisions which are ad-hoc, and an environment in which contents, ideas and norms are not clear — especially not since the network lacks a clear

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hierarchical structure. Professional norms are also not well attuned to each other in times of rapid transition (Bhatia and Mossialos 2004, p. 184). Furthermore, core beliefs predetermine the direction in which the policy network will head to, but the actual ability to implement decisions and thereby the outcomes will depend highly on the resources (money, expertise, political authority, etc.) of different actors as well as on the institutional capabilities that were put in place at some earlier period (Krasner 1988, p. 67). The institutions then again evolve in response to changing environmental conditions and political maneuvering but in ways that are constrained by past trajectories (Thelen 1999, p. 387). This becomes especially true in situations, in which there is high uncertainty over the outcomes of a specific policy. In “technical matters where contrary perceptions of the same facts are facilitated by the emergence of scientific versus social imagery, or in the case of upcoming complex issues that have not yet been fully comprehended by all actors and that may be changed by additional events” (Schneider and Leifeld 2007, p. 9) people might not only know where their interests lie and what their preferences are, but also how to actually realize core beliefs. In practice, when it comes to the implementation of core beliefs, which involve some form of redistribution of financial means and institutional power, polarized cleavage structures emerge pitting those who benefit from a policy (or more often those who advocate those interests) against those who have to bear the costs (Windhoff-Héritier 1992, p. 149).

2.2.3.2  The Different Actors inside a Regulatory Network The importance of different actors inside a network is dependent on various factors, not only on the authority to make binding rules, but also by the influence resources like expert knowledge, the ability to influence the public for ones cause, or the “fluid” funds for bribing (Pappi et al. 1998, p. 557). The policy actors are not necessarily only from one specific governmental institution, but rather a whole policy network or policy subsystem, which brings together various public and private organizations, “who are actively concerned with a policy problem or issue such as air pollution control, mental health, or surface transportation” (Sabatier 1988, p. 131). The shared topic is thus the glue which keeps the regulatory network together. The welfare outcome can be understood besides other factors by the interaction between state actors — both on a horizontal and vertical level — and key groups in society (Ramesh 2004) (see also Figure 2.2).

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Source: own compilations.

NGOs

Departments of Health

People’s Committees

L O C A L

N A T I O N A L

G L O B A L INGOs

VSS

Source: own compilations

Donors

Parliament

Press

Government

Research Institutes

Ministries

Party

Figure 2.2 Network Figure 2.2 Regulatory Policy Regulatory Policy Network

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State actors might try to look unified from the outside, but since most state institutions are not totally monolithic they will become arenas of social conflicts, in which state managers will be divided on substantive goals (Rueschemeyer and Evans 1985, p. 47). This heterogeneity does not only apply to the national level, but goes further down to lower levels of government and extends to global influences through donors and epistemic communities. National Level Political elites might often be concerned with the strategic issue of preservation of the larger regime. One strategy to do so is by initiating redistributive reforms and thereby co-opting challenges to the regime. This strategy has two ways how to deal with societal crisis such as abrupt transition processes, modernization and cultural changes: “[r]eform is one classic response to crisis — the other being repression” (Crone 1993, p. 58), a third one might be a consensus of non-interference into the other actor’s influence. The outcome of such intra-elite struggles can be explained by the fact that different goals coexist next to each other: “Limited resources are deployed from moment to moment to most effectively maintain control and loyalty. Resource exchanges occur within political party structures or patrimonial networks, and engage primarily elites in charge of these structures” (Crone 193, p. 59). The ministries in charge of social, labour, education and health issues are responsible for developing, overseeing and implementing social policy programmes. Conflict can arise due to the fact that different ministries have to deliver separate programmes, but govern over the same people and thereby interfere in the coordination of the planning and delivery of various social services. The Ministry of Finance has an important role, too. Even though it is not involved directly in the planning and delivery of social programmes, is has immense power to decide which financial means will be assigned to certain tasks (Hilderbrand and Grindle 1994). National leaders must be able to make informed decisions. They therefore revert to the opinions of secondary actors relevant for policy outcomes such as national statistics offices, research institutes, civil organizations, researchers and advocates. National statistics offices and other informants are a valuable tool to gain information. With the support of interest groups and grassroots initiatives they are able to collect information from the ground (Rueschemeyer and Evans 1985, p. 53). Researchers, analysts and journalists, too, have an important task in generating, disseminating and evaluating policy decisions (Sabatier 1988). The administration can be a central actor in correcting the social conditions, since civil servants might be able to identify social problems and

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frame concrete alternatives (Heclo 1974, p. 302). An effective bureaucracy is a key prerequisite in the state’s capacity to intervene and to alter outcomes. As such the administration needs both, the financial means to sustain itself, and the accumulation of expertise to solve problems. In order to make such as bureaucracy work, shared norms, goals and commitments (an esprit de corps) can be an important asset in institutionalizing a certain behavior, providing civil servants with social prestige and exclusiveness. If no shared commitment is in place the national government might risk that local cadres will not only implement policies, but in actuality will also shape them into another nonsocial direction (Rueschemeyer and Evans 1985, pp. 51–52). In an authoritarian developing country, information systems are more often unable to report back due to the lack of monitoring mechanisms as well as technical and financial restraints. International organizations therefore often take over national tasks by providing advice, technical support, best practice examples and standardized solutions. The important aspect of success of members of the policy network is not only to provide information, but to establish personal relationships which enhance trust through regular interaction and thereby allow intervention. Local Level The actual members of the policy network are not only combined of members from the national government and the administration, actors at various levels of government active in government formulation as well as government implementation shape the welfare outcomes of a country (Migdal 1988). This is especially true in a situation in which an institutional consolidation has not been reached yet. In such an environment, local actors such as provinces and communes, non-state actors such as NGOs, INGOs and international organizations and soft modes of governance influence the national outcome, in ways which might not be intended by the national political elite of a country (Risse and Lehmkuhl 2006; Rosenau 1992).42 On a positive note, provinces can act as pilot areas and experimental ground for national programmes, giving useful insights into broader projects. The hospital management can be an important actor in the welfare outcomes. Since over seventy to eighty per cent of the health budget in developing countries goes to the curative, hospital and high-tech care, doctors are an important group of actors whose attempt must be to keep the allocations high (Bhatia and Mossialos 2004, p. 184). However, to be fair, local governments and the civil service are often exposed to many and often conflicting rules and regulations, which even if they wanted to improve the welfare outcomes put a heavy burden on them. In such a setting, elites have to find a fine balance between centralization,

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which will hinder local initiatives to find suitable solutions and efficient outcomes, and decentralized systems in which the organizational ability to alter outcomes and enforce laws are no longer given (Rueschemeyer and Evans 1985, p. 55). Furthermore, the central ability to monitor the outcomes might be so weak that if the local governments willingly or unwillingly misinterpret decisions, it will not be recognized or corrected for a long time (Bird and Vaillancourt 1999, p. 26). Mechanisms also have to be in place which avoid that national and local government representatives do not use their power to appoint favored people in order to foster their political survival. Patronage networks can enhance the political stability and thereby the political survival of a regime; however, in terms of social policy, it often weakens the set welfare goals of the national government, since those lower tiers of administration and government can become powerful sub-organizations, which themselves are able to modify the outcomes and which the national level can no longer totally control (Migdal 1988, p. 264). Normally the electorate does not have the same control function as in developed countries. The reason for this is twofold: on the one hand, many countries are authoritarian and therefore “democracy accountabilitystate effectiveness dividend” is not given (Moore 2004b, p. 299). Interests of people are only weakly represented. Taxes do not play the same role as in Western countries, which is the reason that income of the state is no so much dependent on its people, since it is derived either from natural resources rents or strategic rents, mainly military and development aid, which accrue especially to those governments that are recognized actors in the international system (Moore 2004a, pp. 12–13).43 Other ways how states can receive income is by raising indirect taxes, which are not felt by citizens to the same extent as direct taxes such as private income tax (Moore 2004b, p. 304). The more states fund themselves without taxing their citizens, the less citizens are like to mobilize politically around taxation issues or around how money is spent and if it is spent accountable (Moore 2004a). Many forms of self-regulation exist “in the shadow of hierarchy”. State functions are transferred to private organizations and supposedly monitored. The state can step in, when self-regulation remains ineffective. In reality, such a form of cooperation between the state and civil society requires a strong or “powerful” state, which takes account of public interests. Certain institutional and structural preconditions therefore have to be met before such a cooperation can work (Mayntz 2003). Global Level As has been stated before, international experts can bring about technical knowledge and best practice examples. Haas calls members of international

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expert networks epistemic communities. Based on their beliefs international convergence in a certain policy area or in terms of a policy problem (i.e. private provision of health services, universalization of health insurance) can influence the way national decision-makers go to decide on how to implement beliefs. Science, knowledge and expertise become a source of authority and thereby enable this so-called knowledge elite to influence national decision-makers. Using information from international experts does however not mean that the national elite is no longer in the drivers seat. More often, the information will be used to justify a policy which the elites have already wanted to pursue but spreading the blame (Haas 1992, p. 8). International actors such as development NGOs with strong links to international organizations and international financial institutions become more important to the extent that they are the ones which try to influence fiscal responsibility and budgetary transparency (Moore 2004a). As Yeates states, international organizations are more and more willing to take up this task: “[S]ocial Policy is a key arena in which the politics of globalization are fought out. Debates about the appropriate model of social development have risen in prominence on the agendas of supra-national and international institutions” (Yeates 2001, p. 1).

2.3 From Social Insecurity to Social Protection through Policy Learning During times of great uncertainty such as fast and sometimes unpredictable transition, a shift from informal to formal institutions can be a primary means of establishing authority (Grzymala-Busse and Luong 2002, p. 541). Authoritarian elites are especially eager to avoid that large parts of society are alienated by their economic policy, since this could challenge their claim to power. Major social policy initiatives44 — especially among authoritarian countries — have occurred at times of internal threats and rapid modernization processes (Merkel 1999, p. 317). Examples include social initiatives after the 1969 race riots in Malaysia or in the late 1960s and early 1970s in Indonesia following rioting against the imposition of the New Order (Gough 2001; Ramesh 2004).45 In such situations, social policy is used to build up political stability and trust: Welfare programmes were also introduced as part of a broad political strategy to build legitimacy for authoritarian regimes (in Taiwan and South Korea), as part of a programme of sponsored democratisation (in Hong Kong), or to forestall opposition challenges (in Japan in the early 1970s). As a result of these and other differences, individual welfare systems have their distinct characteristics: for example, the large-scale public housing

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programmes in Hong Kong and Singapore, and the Central Provident Fund (CPF) in Singapore, which reflects their status as city-states with migrant population. (White and Goodman 1998, p. 14)

Social policies often were often accompanied by political suppression, using some kind of carrot and stick politics. In Singapore for example, the government repressed the opposition party Barisan Sosialis and demobilized the labour unions, but in return promised to achieve full employment and provide social programmes. In Malaysia trade unions were restrained by strict labour laws, and employers were tucked into a corporatist corset, in which they were obliged to provide welfare programmes to their workers (Thompson 1996, pp. 633–34). The double strategy of social welfare and suppression was often backed up by a cultural justification.46 Confucianism was often reinterpreted and sometimes even manipulated in order to fit the needs of the nationbuilders to legitimize a modernization process which was different from the one perceived in Western countries (Wei-ming 1996). Policy makers used Confucian ideas to build as Altbach has stated an “ideology of nation building and industrialization” and as a means to political stability, which avoided the danger of democratization (Altbach 1996, p. 237). In the words of Chan Confucianism was a “legitimating agent” (Chan 1996, p. 28). Examples are the leadership of the Meiji restoration or the Singaporean Communitarianism by Lee Kuan Yew, for whom Confucianism was a means to put the needs of the nation and society above personal needs and install a culture of obedience, harmony and reliance on the family net (White and Goodman 1998, p. 9).47 Hence, data on social policy becomes an instrument with which to legitimize regimes. It becomes a strategic source to be used for tactical purpose rather than to decide on the provision of public goods (Asher and Nandy 2006, p. 21). While some state actions (i.e. income subsidies for the poor) are more to “pacify and control the surplus population”, others are directed towards the reproduction of the labour force (i.e. through social insurance) (O’Connor 1973, p. 7). As Rudra has highlighted, if a government drives for a productivist welfare state (based on the exposure to international markets and the commodification of workers) and not to on the protective welfare state (based on protection from international markets and the de-commodification of workers), state initiatives might enhance social protection in a country (Rudra 2007, p. 384). The productivist welfare regime is based on the integration into world-wide markets and the commodification of labour.

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Under the assumption of sticky institutions and path dependency of welfare regimes,48 a prerequisite for such a change towards implementing social policy as one means to achieve social stability is that steering and infrastructural abilities have to be gained in order to get through with a development agenda (Wood and Gough 2006, p. 1705), which pursues economic growth through ascending the industrial ladder from primary to secondary and tertiary products. In such a development strategy, social policy is not affiliated with social rights, but best seen as a prerequisite for the fulfillment of economic policy (Wood and Gough 2006, p. 1706; Gough 1999, p. 14). Socio-economic change alone cannot explain how more positive welfare outcomes can come about. How exactly can such a drive towards change be then explained? Even under the assumption that institutions are sticky, path dependent and inert, North summarizes how change can come about: “At every step along the way there [are choices]-political and economic — that provide … real alternatives. Path dependence is a way to narrow conceptually the choice set and link decision making through time. It is not a story of inevitability in which the past neatly predicts the future” (1990, pp. 98–99). What is most difficult in a network with multiple actors is how to achieve an effective collective action. Co-ordination which cannot be achieved by hierarchy has to rely on other means how to regulate, implement and supervise. One means is to achieve cooperation and trust-building (Hudson 2004, p. 80). Trust is essential for cooperative behaviour and, therefore, the existence of the network (Rhodes 2007, p. 1246). As Heclo has highlighted, positive policy change can come about, when specialists inside a policy area learn more about the specific problems, and are able to experiment with various means to achieve their goals (Heclo 1974; Sabatier 1987, p. 675). According to Heclo “[p]olicy-making is a form of collective puzzlement on society’s behalf” (1974, p. 305). Policy learning can be seen as a reaction to some kind of societal or environmental stimulus (1974, p. 306), the actual change however requires that decision-makers can take expectations of all actors into account and through repeated interactions lower uncertainty over outcomes (Mershon 1994, p. 51). Through search processes and trial-and error, strategies can be changed by challenging data, the validity of causal assumptions, pointing out costs or savings. Empirical (pilot) studies, and political investigations of social conditions need to be closely examined (Heclo 1974, p. 309). Actors inside the policy network “negotiate binding agreements between contending interests” (Esping-Andersen 1996a, p. 6), which are then willingly implemented. One prerequisite for a

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binding agreement is that knowledge is diffused and communicated through information channels over time among the members of a social system. Policy diffusion thus refers to the active dissemination of policy and programme ideas by a number of agents with an interest in ensuring the spread of a particular policy or programme. It is this ability to assimilate and use information that is the cornerstone of effective organizational learning. Policy learning can be enhanced by technological innovation systems (Common 2004, p. 41). Policy learning does not look solely at the individual learning process nor on society at a whole which can be characterized by an “organic mind responding to holistic stimulus.” Social learning can be seen as a process in which individual agents of change learn and in interaction with others “acquire and produce changed patterns of collective action” (Heclo 1974, p. 306). Experience and capacities to respond to a given problem are thereby rising. Learning is more likely when a committee meets regularly. The “key agents pushing forward the learning process are the experts in a given field of policy, either working for the state or advising it from privileged positions at the interface between the bureaucracy and the intellectual enclaves of society” (Hall 1993, p. 277). The more gradual the process, the more will the policy network be able to agree on new institutional settings (Grzymala-Busse and Luong 2002, p. 542). In the end, the actors should be able to agree on regulation, implementation and supervision combined with sanctions in case of non-compliance (Windhoff-Héritier 1992, p. 149). Debates and disagreements between aspects of the implementation of core beliefs can be mediated by policy brokers. Policy brokers49 will help to keep political conflict within limits and bring about reasonable solutions to problems (Sabatier 1987, p. 662): Authority based on professional and scientific knowledge, neutrality and a commonly accepted use of language can be extremely constructive for the learning process as participants tend to be more willing to listen to such actors. An indicator of a member’s authority can be the extent to which the other members view the person as having significant analytical capabilities or experience beyond the ordinary. (Nedergaard 2006, p. 316)

The effects of such middlemen or policy brokers pile up over time — eventually being sufficient to move “the vast glacier-like inertia of existing policy” (Heclo 1974, p. 309). As cross-national policy diffusion often relies on international networks (epistemic communities) and policy communities to provide forums for interaction, by analyzing mechanisms of policy diffusion as processes of organizational learning, patterns of policy

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adoption by governments can be explained (Common 2004, p. 41). Epistemic communities can be used to gain information, but also to voice issues, which are sensitive — relying on the benefit of an outsiders view. The exposure to ideas from outsiders can positively influence the ability of middlemen and policy brokers to change policy. The actual policy change only occurs inside a small political circle allowing the institutional learning. However, this is not to say that a particular group, party or administrative organ will be able to capture a monopoly of influence on any policy (Heclo 1974, p. 319). Nevertheless, the executive becomes again the centre of orientation (Luhmann 2000, p. 244) on which all alignments o the political process taper (Rüb 2008, pp. 103–104).

Notes

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5

Social rights as stated in the United Nations’ Universal Declaration of Human Rights are the right to social security (Article 22), the right to work (Article 23), leisure (Article 24), the right to a standard of living adequate for the health and well-being of oneself and of ones family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond ones control (Article 25); a further social right is the right to education (Article 26); cf. United Nations (1948). See also the UN International Covenant on Economic, Social and Cultural Rights enacted in 1967 (United Nations 1966). See Marshall (1977, p. 86) on the development of social rights in England. Questions of equality in the twentieth century were often raised related to the “Arbeiterfrage” or “soziale Frage” (social question) (Esping-Andersen 1999, p. 7). Earlier typologies include Titmuss (1974, p. 30f.) residual welfare model of social policy, the logic behind is that the family and the private are the main bearers of social services, only when those break down, will the state move in temporarily. In the industrial achievement model of social policy, social needs are met on the basis of the individual productivity. The institutional, redistributive model of social policy regards social welfare as an integral part in society providing universal services independent from the market and solely based on needs. Hewitt (1977) thesis is that the stronger democratic socialist parties in a country, the more egalitarian is a society. The term welfare regime has to be differentiated from the terms international and political regime, but also bears some resemblance. The international regime theory looks at the influence of principles, norms, rules, and decision making procedures on nation-states (Krasner 1982, p. 186). Besides the very different

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focus of the international regime theory there are some interesting analogies to the welfare regime typology. International and national welfare regimes both are more than ad-hoc arrangements. They explain an underlying logic of co-operation and interaction between a variety of network actors. Network analysis and international regime theory share an understanding that actions are influenced by norms and beliefs. Both, network analysis and international regimes are issue-oriented and focus on the formal as well as the informal rules and organizations. They are not based on hierarchical and rational market-oriented decision-making, but more on co-operation and complex interdependence of different actors. On international regimes see Krasner (1982); Haggard/Simmons (1987). A political regime is defined here as a system of government and “refers to the rules (formal or not) that govern the interactions of the major actors in the political system. The notion of regimes involves institutionalization, i.e., the idea that such rules are widely understood and accepted, and that actors pattern their behaviour accordingly (Mainwaring 1992, p. 296). See also Collier and Collier (1991, p. 789). 6 Esping-Andersen (1999, pp. 40–43) differentiates between class risks (different occupations), life-course risks (youth, age, motherhood, etc.), intergenerational risks (inherited inequalities of poverty, low education, etc.). 7 Esping-Andersen has been criticised for underestimating the importance of the gender aspect. Since women often work at home or do volunteer work they are not or only partially commodified on the market (Sainsbury 1994). EspingAndersen (1999) later absorbed this criticism, by adding the concept of defamilization. By this he means policies, which lessen the reliance of individuals on the family and maximizes the command of the individual over economic resources independent from familial or conjugal reciprocities (45). 8 For a comprehensive and informative overview of the concept of as well as some of the literature on the developmental state see Önis¸ (1991). 9 Vogel (1979) named one of his book chapters “Security without Entitlement” to positively highlight the relationship between high equality and a low attitude to demand social assistance. 10 Burawoy (1985, p. 144) describes how in the case of Japan, unions were established in a top-down approach. The low level of state-provided social insurance aggravated laborers’ dependency on enterprise welfare. In South Korea and Singapore labour unions were equally suppressed. The governments in both countries were able to define economic growth based on cheap labour costs as the primary goal in the fight against colonialism and communism and in search for political stability. See Woo (2004) on South Korea. 11 Iversen/Stephens (2008) address the relationship between education (human capital formation) and high levels of equality for the OECD world. The social democratic countries rank highest on overall education spending and active labour market policy. See also Estevez-Abe et al. (2001). 12 In contrast to an outward-oriented development strategy, an inward-oriented development strategy as pursued by many Latin American countries in the 1970s

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and 1980s requires a large, densely organized and insured industrial workforce. As a consequence social spending differs depending on the development strategy. Latin American countries spent on average more money on social insurance in the last fifty years, which benefited only the formal sector and civil servants. Meanwhile, many newly industrializing countries in East Asia such as South Korea and Taiwan focused their social expenditures on education and health (Wibbels/Ahlquist 2007a/b; Estevez-Abe et al. 2001, p. 146). See for example Goodman and Peng (1996), Goodman et al. (1998), Holliday (2000), Kamimura (2002), Ramesh (2004), Aspalter (2006), Walker (2006), Lee and Ku (2007). In China a system of life long tenure (“iron rice bowl”) has for a long time provided job security and thereby asocial protection through engagement in the workforce, which in reality was more of a common insecurity. The informal sector is defined here as one in which labour relations are based mostly on casual employment, kinship or personal and social relations rather than contractual arrangements with formal guarantees in terms of labour, tax or social insurance laws (cf. ILO 1993b). By building big risk pools, insurance companies or health insurance funds are normally better able to predict the probability of financial loss of adverse selection and thus to spread the financial risks (Ruger et al. 2006, p. 626). Wong highlights the fact that there have been huge gaps between rhetoric and practice concerning social rights and social welfare in East Asian Communist states. Social welfare was normally better in cities than in the country side. The quality of service was poor and except few cadres and party members everyone was part of a “common poverty”. See Taylor (2004a) for Vietnam, see Wong (2002) for China. Esping-Andersen himself says very little about welfare states outside the developed world. He sees modernization processes tearing apart old institutions of social integration, but not necessarily new ones emerging. Esping-Andersen is pessimistic about the development of welfare states in non-Western countries due to the changes in the international environment: He assumes that policy makers in developing countries are afraid that the extension of social rights might jeopardize their comparative advantage such as cheap labour and low labour laws, or the privileges of elites (Esping-Andersen 1996a, p. 3). Corruption is not a phenomenon genuine to developing or authoritarian countries. Especially in transition to democracies, corruption can be an expression of struggles over the boundaries between state and society, the public and the private role and collective and individual interests (Della Porta and Vanucci 1999, p. 8). However, the difference might lay in the fact whether corruption is a structural phenomenon or something more or less exceptional. The impact of non-state actors has been mentioned by Esping-Andersen (1999, p. 35, footnote 2) only parenthetically: “To this triad [of market, state and family, own comment] we should rightfully add the ‘third sector’, of voluntary, or nonprofit, welfare delivery. In some countries, the voluntary sector (often run by

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the church) does play a meaningful, even significant, role in the administration and delivery of services.” The US$1 or since 2008 the US$1.25 rule is used in international research and development to apply a common standard, anchored to what “poverty” means in the world’s poorest countries. It is based on an average poverty line of the 15 poorest countries in the world. In 2008, the World Bank has started using the US$1.25 mark instead the US$1 mark, which it says is more accurate of the actual costs of living in a developing country. See Chen and Ravaillon (2008) and World Bank (2008) for poverty measurements. Regarding path dependency, C. Pierson (2000) speaks about increasing returns of changes. Political development must be thought of as embedded in institutions (formal rules, policy structures, but also informal rules and norms), which cannot easily be changed. North emphasizes that institutions boost a stimulus to reinforce their own stability and further development and thereby resist change (North 1990). Authors such as Richard Titmuss criticise that the term social policy is normatively overcharged not only in developing, but also in developed countries. Titmuss argues that “when we use the term ‘social policy’ we must not […] automatically react by investing it with a halo of altruism, concern for others, concern about equality and so on. Nor must we unthinkingly conclude that because Great Britain — or any other country — has a social policy or has developed social services, that they actually operate in practice to further the ends of progressive redistribution, equality and social altruism. What is ‘welfare’ for some groups, might be illfare for others” (1974, p. 27). I use the term strong and weak state to differentiate between states which have more capabilities to implement national goals and those which have less of them (see Migdal 1988). Evans et al. (1985, p. 351) prefer to use the term state capacities rather than the differentiation of weak vs. strong states. They argue that the term strong states could be associated with a Weberian fully rationalized and centralized state which does not face any social control, which is however not my intention here. It should also be highlighted that states can be strong in some policy issues, in some period of time, or on some people (military policy, transport policy) and weak in others (Migdal 1988, p. xiv; Krasner 1978, p. 58). However, some fiscal and administrative capacities might be fundamental. I will use the expression of belief rather than interest to highlight the fact that this analysis is not only focusing on rational short-term self interests of individual actors, but more on the broader direction of social policy and the underlying beliefs, which put them into direction, which might is also dependent on the socialization of the actors (cf. Sabatier 1987, p. 663). In my understanding informal institutions are “socially shared rules, usually unwritten, that are created, communicated, and enforced outside of officially sanctioned channels. By contrast, formal institutions are rules and procedures that are created,

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communicated, and enforced through channels widely accepted as official. This includes state institutions (courts, legislatures, bureaucracies) and state-enforced rules (constitutions, laws, regulations)” (Helmke and Levitsky 2004, p. 727). Informal institutions have less certainty and occasionally less rigidity attached to themselves, however in contrast to individual behaviour it implies certain shared expectations among citizens and public officials (Mershon 1994, p. 50). De Haas (2005, p. 1275) highlights the fact that remittances can enhance security, but only under certain circumstances. General development constraints such as bad infrastructure, corruption, red tape, lack of macroeconomic stability, the absence of appropriate public policies (schooling, health care, land reform, etc), and market failures inhibit the positive role remittances can play in enhancing the productivity of domestic citizens. Adverse selection refers to a market process (often within the insurance sector) in which information asymmetries exist between two parties. An insurance company for example does not know who is a smoker, a diabetic, HIV/Aids patient, etc. and who is not. Hence, the fee is normally higher for both customers. This could lower the usage of health care services among poor or chronically ill people. A voluntary health insurance system also risks only attracting poor people and threatening off rich people, thereby undermining the financial means of a fund. A side effect of the engagement of NGOs in local affairs is the brain drain which often comes along with their work. Employees are lured away from the public sector with higher salaries, thereby undermining the efficiency of the public provision of services. Private providers often target individuals with low personal risks. This behavior of private providers is therefore often referred to as “cream skimming” (Drechsler and Jütting 2007, p. 507). In Chile, many rich citizens withdrew their money from the public social insurance system. As a consequence, only poorer segments of society remained in the public scheme (Barrientos 2000, p. 109). Hall/Midgley raise the example of high-income earners willing to buy private life insurance in developing countries, which are linked to international banks, but not necessarily any longer to national financial and social systems (2004, p. 187). I refer to Max Weber‘s definition who regards the monopoly within a fixed territory over the legitimate use of violence as one of the major defining elements of the state (Weber 2002 [1922], p. 29). The advantages often stated in favour of financial decentralization are cost efficiency, improved accountability, and increase in resource mobilization. If the institutional setting is not appropriate, however, exactly the opposite can happen: an increase in costs, less and/or unequal efficiency and inequity might be the result. For an in-depth analysis of the positive and negative impact of financial decentralization on developing countries see Bird and Vaillancourt (1999).

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The Thai example might be a positive exception. The universalization of health care through the 30 baht scheme has lead to a reduction in the proportion of poor households that incur catastrophic health spending (Limwattananon et al. 2007). 36 In order to distinguish oneself from the colonial rulers, nationalist movements in the region tried to establish a nation not based on the dominant ethnic majority — both by policy and more often by force. However, the different actors of the Cold War often undermined the attempts by national leaders in Southeast Asia to build broad based alliances by exploiting local ethnic grievances and furthering local separatism (Christie 2000, pp. 21–22). 37 Governance is understood as the whole of coexisting forms of collective regulation of societal issues (cf. Mayntz 2004, p. 66). 38 Actors inside a policy network are individuals, but in the analysis they are defined mainly in their organization-representative function, which is the reason why for the sake of simplicity they are understood as organizations (Waarden 1992, p. 33). 39 I see the policy network analysis going beyond Tsebelis (1995; 2002) analysis of veto players. Tsebelis understands a veto player as an “individual or collective actor whose agreement […] is required for a change in policy” (1995, p. 301) or “who can block the adoption of a policy” (1995, p. 305). He adds: “An institutional player will not count as a veto player unless it has formal veto power” (1995, p. 305). While Tsebelis focuses mainly on the formal decision-making process (outcome of the legislative process), the network analysis of welfare outcomes at hand has a broader analytical focus including the analysis of non-state actors, informal institutions and structural problems emerging from multiple centres of action. The analysis of Tsebelis is somewhat blind to structural weaknesses of the regulatory and supervisory capacity of the state and informal institutions. 40 There has been so far no agreement on what the numerical boundaries of a network are. Marin/Mayntz argue that “only a few or not too many actors can actually inter-act with each other” (1991, p. 17). They however do not answer the question what “not too many” actually means. Pappi/Henning (1998, p. 561) state the number of actors can be quite large and therefore a network analysis might be only able to identify the top players negotiating policy outputs. If a policy network includes all actors involved in the formulation and implementation of a certain policy issue, than the number of actors must be large. One attempt to keep the numbers manageable is to form categories. 41 Any particular organization can belong to several other task or issue networks (Hilderbrand and Grindle 1994). The membership and position of actors inside a network is constantly negotiated and rearranged (Windhoff-Héritier 1992, p. 145). 42 I see similarities between the concepts of networks and governance in so far as both break open a state centric analysis of hierarchical regulating and governing, while governance is the more encompassing term. Network is thereby understood 35

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“as a mode of governance — the means by which social co-ordination is achieved” (Lowndes and Skelcher 1998, p. 314). It should be mentioned that the above description of citizenship and participation is an ideal type assumption made about Western states. Social policy can be one way how to appease the population. Other state interventions such as infrastructure, sanitation, housing policies, etc. might serve the same goal (see Gough 1979, p. 52). Note that in multi-ethnic countries including many of the East and Southeast Asian ones, attempts to achieve social cohesion means to establish a national myth which is based on the ethnic majority. This often leads to an exclusion of minorities and a neglect of differences (Derichs and Heberer 2006) in the creation of an imagined community (Andersen 1993). See Thompson (2004) and Lee (1997, 2003) for a summary of the Asian value discussion. A. Chan (1996) gives a good overview on how different East Asian politicians used Confucian ideas to achieve their personal goals. As Abu Sharkh and Gouh (2010, p. 28) elaborate, the notion of welfare regime implies a certain temporal consistency, inertia or stickiness of welfare inputs and outputs. Heclo (1974, p. 308) prefers the term middlemen over policy broker having access to information, ideas, and knowledge.

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3 The socio-economic setting of the informal security regime

Vietnam can be characterized as being both in an economic transition and a modernization process. Officially, the Vietnamese government has followed an East Asian strategy of outward-oriented economic growth with a rise in exports and the attraction of large masses of Foreign Direct Investment (FDI). The Communist Party of Vietnam and the government are of the opinion that they have kept a wary eye on the economic transition from plan to free market. However, the long period of war and the international isolation meant that the reform process Doi Moi was not an option, but a necessity, as the social and political system was deprived of desperately needed funds. In fact, major changes including the privatization of the economy and the decentralization of decision making and governance have often taken place informally from the bottom-up without the involvement of the national government. Peasants for example evolved entrepreneurial skills through agreeing on sneaky contracts with local cadres. Moonlighting has increased rapidly among the public health care staff and has blurred the line between the public and private sphere. Integration into the world market and the shift towards export-orientation has decreased poverty in Vietnam from around sixty per cent in the early 1990s to less than sixteen per cent in 2006. However, modernization and the economic transition have also increased the competition among provinces for FDI, thereby putting a strain on the government to adjust incomes. The major share of capital is concentrated in key economic areas such as the 72

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Red River and the Mekong Delta. Less attractive provinces thus compete against each other by lowering safety standards and ignoring environmental regulations. Provincial People’s Committees try to attract private (foreign) capital by offering cheap land and tax breaks. Provinces which are able to attract investment, can invest in infrastructure. In view of the current lack of genuine income redistribution financed by taxes and social insurance contributions, this intensifies the uneven development. The reform process in Vietnam has yielded quite contradictory results — being as it is the outcome of a strange mix of selective state interventions and neo-liberal recipes. The merger of State-Owned Enterprises (SOEs) into conglomerates has increased monopolies and rents for ministry officials and members of provincial People’s Committees. The restructuring of the state sector including the dismantling of many cooperatives and small SOEs has by contrast reduced the formalization of work — especially among women. This has increased the vulnerability of many women, who are usually laid off first. Hence, the de-commodification through social insurance benefits only involves a small, but politically relevant part of urban based workers and highranking officials. The sale of land has brought additional income for some groups, but has also deprived many others of their only source of income. Ethnic minorities in remote areas, landless peasants, migrant workers, the chronically poor, women, disabled, old and sick persons have so far benefited least from the marketization process. On the contrary, the reduction of state subsidies, deregulation, and privatization have decreased the access to health care. Investment in human capital, which could ameliorate the situation of many people, has been lagging behind. The national government faces a dilemma between the conflicting core beliefs of economic growth and efficiency on the one hand and equity on the other: the government benefits from growth and employment, but also has the declared mandate of achieving equality.

3.1  The Opening Process from the late 1970s up to Doi Moi After the victory over the American troops, the Democratic Republic of Vietnam was established in 1975. Only two classes — workers and peasants — were to remain. At the Fourth Vietnam Workers Party Congress in 1976, collective mastery was defined as a system in which “the true and supreme masters are the social community, the organized collective of working people, with the worker-peasant alliance as the core” (Pham Van Dong 1977,

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pp. K11–K12 cited in Gillespie 2005, p. 49). The idea of the revolutionary movement under the leadership of the Communist Party was to abolish feudalist and imperialist structures, which had led to massive exploitation of workers under French colonial rule.1 The Leninist principle of democratic centralism (taäp trung dân chuû) was introduced. This new political strategy was supposed to reinforce the control of the central government over regional cadres, state officials and the public. It was regarded as a remedy to regionalism and localism (ñòa phöông chuœ nghóa), which potentially could threaten national plans (Le Van Luong 1960 cited in Gillespie 2005, p. 48).2 In addition, the government expropriated the private sector (including the nationalization of pharmaceutical companies and pharmacies) and initiated the forced collectivization of the agricultural sector. Furthermore, the government invested intensely in heavy industry at the expense of agriculture, handicrafts, and light industry. The collective system, which had been established throughout North and Central Vietnam during the 1960s was extended to the South after the reunification,3 albeit it never really gained momentum in the South. Although some peasants worked in the collective system, many continued pursuing their own private endeavors.4 The heavy industry was comparatively unproductive as was the agricultural sector. The economic situation after the war was devastating. Most people suffered from hunger and almost everyone among the population was part of a “common poverty” (Taylor 2004a, p. 6). Pham Xuan Nam (2008, p. 21) stated “social equality was in fact poverty” for the average Vietnamese. External aid was used to overcome internal production shortcomings. However, this eventually led to a huge trade deficit, while rampant inflation reduced the incomes of people. The economic and diplomatic relations with ASEAN countries had already been very tight at the end of the 1970s. The border fights with Cambodia and China and the eventual halt of all Chinese aid5 therefore brought Vietnam at the brink of bankruptcy. The situation even further aggravated after Western donors implemented an economic embargo following the Vietnamese accession to the COMECON6 and the invasion of Cambodia (Thayer 2004, p. 8; Ljunggren 1993, p. 57).7 Due to the economic isolation and the failure of the state-led industrialization process, the state budget shrank constantly. The economic growth rate stagnated at around two per cent in 1977 and 1978 respectively (Ljunggren 1993, p. 59). In the short-run, the government could rely internally on the fact that the clashes with China and Cambodia had welded the nation rousing nationalistic feelings (Vasavakul 1995, p. 273). In the long-run, the economic decline eventually affected the legitimacy of the regime and the

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communist ideology promising a wealthy and more equitable society (Khng 1993, p. 99). At the end of the 1970s the government finally decided to respond to the economic crisis. It started to implement some first reforms which however were of major importance for the country. One of the key decisions was the introduction of the household contracting system (Directive No. 100 CT/TW of the Central Committee, January 1981). The directive legalized a practice of local markets that had already been practiced throughout the country since the late 1970s (Ngo Vinh Long 1993, p. 174). Under this system, first market mechanisms were introduced. Tasks which had been in the hands of cooperatives such as ploughing and irrigating were contracted out to households. The system also allowed farmers to use five per cent of their land privately and to put their surplus on the market instead of selling it to the state (Beresford 1999, p. 13).8 In reality, however, farmers often used ten to fifteen per cent of their land privately. This bottom-up non-violent strategy was very successful in slowly transforming the economy from a centrally-planned to a market economy, because rules were only slightly, but constantly disobeyed (fence-breaking) (Ngo Vinh Long 1993, p. 178). The success following the privatization and spontaneous decentralization process led to more fence-breaking in other areas such as the industrial sector or the public health care system where more and more staff moonlighted (see also 5.4.2). These changes were then afterwards legalized by the government. In what can be called a form of “everyday politics”, the Vietnamese people were able to bound regulations to conform to their needs. Through this dayto-day resistance, direct confrontation with the government was avoided and personal space was created (Kerkvliet 1995, p. 67). At the beginning of the 1980s, the local planning departments increasingly withdrew their influence which led to more entrepreneurial freedom. The household contracting system was expanded and private enterprises were allowed (Will 1989, p. 82). In 1982, the government revised its reform policy for a short period. Many private enterprises had to close down or accept export or import restrictions. Due to the economic downturn (the GDP decreased from 8.2 per cent in 1982 to 5.9 per cent in 1983, inflation was galloping to 500 per cent in 1986), the revision policy was short lived.9

3.2  Doi Moi and the new Development Strategy of a Public-Private Mix After the death of long-time party leader Le Duan, the CPV officially introduced its reform policy Doi Moi at the VI. Party Meeting in December

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1986. Nguyen Van Linh became the newly elected party general secretary. The main content of the reform measures were twofold: • Internally: the change from a centrally planned state economy to a market based multi-stakeholder and more decentralized economy • Externally: trade openness, export-orientation and international cooperation Following the reforms, Vietnam’s economy and domestic consumption increased. However, the main drivers of its economic growth were exports and a surge in Foreign Direct Investment (FDI). Vietnam’s development strategy was somewhat inspired by neighbouring countries such as Taiwan and South Korea but remained very distinct: “Vietnam’s economic development strategy within the framework of Doi Moi has always been a mix of selected ‘statist’ and neo-liberal recipes” (Painter 2005a, p. 264). Some of the reform measures including the introduction of user fees in the social sector, the willingness to accept private actors’ involvement and the attraction of FDI have followed the outward-oriented strategy with low-skilled and labour-intensive production of goods in the manufacturing sector (see also chapter 2.1.2). However, the growth in exports in the 1990s was primarily due to agricultural goods and petroleum (Perkins 2001, p. 250). In pivotal areas of the economy such as banking, SOEs, energy, etc. the government shows little willingness to lose its influence. Corruption in Vietnam is in comparison with other countries in the region endemic and property rights still lag behind the regional average.

3.2.1 Economic Growth and Stabilization Doi moi was the official starting point for a change from a planned to a market economy with socialist orientation: The reform process had however become at this point not only “a matter of choice — a reform policy option”, but definitely a “necessity”, following the disastrous financial situation in the late 1970s (Sidel 1995, p. 294). In its 1986 political report, the CPV officially committed itself to a “market economy with socialist orientation’ or ‘socialist-oriented market economy” (kinh teá thò tröôøng ñònh höôùng xã hoäi chuœ nghóa) (see also chapter 6.1). In the Sixth Plenum of the Central Committee in 1979, the adjustment in the economic strategy had already endorsed the concept of a multi-sector economy consisting no longer only of a public and collective sector, but also of a private and individual one. In theory, the state sector maintains the key role in production,

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while collective and private actors are encouraged to undertake own economic endeavors to build a socialist society.10 In contrast to former Party resolutions emphasizing investment in heavy industry, the development of three major branches was now pursued: foodstuff, consumer and export goods (Vasavakul 1995, pp. 274–76). Rather than inward-oriented, the economy was now supposed to drive towards global integration and export-led growth. Some of the major first steps which laid ground for the market economy included the Foreign Investment Law in 1987, the 1989 Ordinance on Economic Contracts, the 1988 Land Law, the 1995 Civil Code, the 1997 Commercial Law, and the 1999 Enterprise Law. From a country in the 1970s still struggling with famines, Vietnam became in the 1990s the rice bowl of the region. It fast took up the position of one of the world’s leading exporters of coffee, pepper and rice. Vietnam’s growth rate in the region became the highest behind China. Growth rates increased from on average 3.7 per cent before Doi Moi, to around seven to eight per cent in the 1990s and 2000s (see Table 3.1).11 Before the reform process the public sector had officially been the only employer. In 2006, thirty-eight million people — of a labour force of fortythree million — now worked in the private sector. Around four million worked in the public sector.12 The official unemployment rate stood at 6.4 per cent in 2000.13 Even though there has been a decline in people working in agriculture, it remains the major source of employment along petty trade and small household enterprises. More than seventy per cent of people in working age are believed to work in the informal sector without any labour protection (Bales and Castel 2006, p. 10).14 The industrialization of vast parts of society is still to come. Cities such as Hanoi and Ho Chi Minh City have attracted masses of unskilled labourers, thereby overcrowding the cities, overstretching the social infrastructure, and increasing pollution and congestion (Bui Van Hung 2004, p. 191). The industrialization has led to an increase in some export industries such as garment, textiles, and footwear. In contrast to what is said about developmental states in East Asia, the partnerships between research institutes and the manufacturing industries — having a major positive impact on industrial upgrading — are still missing. In fact, investment in human capital — especially in secondary school and vocational training — has been lagging. While the Vietnamese state has engaged in industrial policy, “there is a big gap between the formal intentions of policies and their implementation and enforcement” (Tran Ngoc Angie 2004, p. 158).

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5.4

1980–85

4.8

1986–1990 8.2

1991–1995 7

7.5

1996–2000 2001–2005

Source: IMF (2010); numbers for 1976–1985: Socialist Republic of Vietnam (1993, p. 4).

0.2

1976–80

Table 3.1 GDP Growth 1976–2010

8.2

2006

8.5

2007

6.3

2008

5.3

6.5

2009 2010 (est.)

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Since 1986, the number of SOEs has decreased from 12,296 to 5,600 (Abuza 2001, p. 119). The downsizing of SOEs and co-operatives resulted in large numbers of workers — most notably women — being pushed out of employment with social security coverage and maternity benefits and entering less secure jobs in the informal economy (ILO 2003, p. 28). Even though the public sector does not provide for the bulk of new jobs, for more than 9 per cent of the labour force it is still a source of income15 and social protection. The government therefore shows reluctance to privatize or downsize the sector even further.16 Most of the equitized17/privatized enterprises so far have been small and medium-sized.18 The privatization of big SOEs is still to come.19 SOEs are symbols of the state ideology — a clear sign of the traditional socialist model: “Holding the ‘commanding heights’ of the economy is seen as the principal means by which the state, as representative of the whole society, can exercise its leading role” (Beresford 2004, p. 69). They are supposed to provide social benefits and keep unemployment low which emphasizes the socialist orientation of the regime and its role as provider of stability and growth (Clarke 2004, p. 98).20 In addition, through its involvement in key economic sectors such as banking, electronics, and electricity, the government remains able to determine the development of the national economy. De-collectivization has destroyed the safety net of farmer co-operatives. The socialization21 or privatization of social services (see also chapters 4.6.1, 5.2 and 6.2.1) has increased the costs of public goods and exposed farmers to higher levels of vulnerability (Bui Van Hung 2004, p. 190). Hence, the role of the government to fight inequality in the future will be of major importance: This shift — whereby workers gradually move out of agriculture into better paying jobs in manufacturing, and thus enabling those staying in agriculture to enjoy higher returns — is essential to further success in rapid poverty reduction …. Other countries that have paid inadequate attention to balanced growth have found that such phases have been accompanied by growing inequalities, and widening urban-rural gaps. (World Bank et al. 2000, p. 4)

The private sector competes directly with the public sector, while the latter is lacking clearly defined performance criteria (Tran Ngoc Angie 2004, p. 158). The private sector faces a complicated legal and regulatory framework, and in addition is at a disadvantage in terms of information, market access and credit. The SOEs therefore continue to generate a major part of GDP

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(an estimated twenty-nine per cent of GDP as of 2005) (ADB 2005c, p. 3), while being largely unable so far to compete internationally and raise productivity (Beresford 2004, p. 70).

3.2.2 International Integration and Export Orientation Doi moi and the rules and laws which were accompanied by this new policy did not only have an effect on internal, but also an enormous one on external affairs. The Law on External Investment which was adopted in 1987 for the first time since the reunification in 1975 regulated trade between Vietnam and non-communist countries. It furthermore ensured property rights for international investors. The law was confirmed in the Constitution of 1992 (Ljunggren 1993, p. 70). The peace treaty with Cambodia in October 1991 brought about the normalization of diplomatic relations with China one month later. It also ended the trade and aid embargo of the Association of Southeast Asian Nations (ASEAN). Starting from 1992, the country again received financial aid from Japan. In 1994, the application of Vietnam to join the ASEAN was acknowledged and its membership in July 1995 ratified. The acceptance of Vietnam into the ASEAN started something of a domino effect, which enhanced the integration of Vietnam into the international community (Thayer 2004, pp. 8–11). The law on Investment and the normalization of relations with noncommunist states including the signing of the Bilateral Trade Agreement with the United States in July 2000 enhanced the inflow of Foreign Direct Investment (FDI) enormously (see Table 3.2). In 2006, Vietnam joined the WTO. Investors started to explore Vietnam as economic and investment

Table 3.2 Foreign Direct Investment (FDI) in US$ Billion Year

1995

2000

2006

2007

2008

Registered Disbursed Ratio in %

2.09 1.1  52.6 

2.4 2.2 91.6

10.2 4.1 40.2

21.3 8 38

60.2 11.5 19.1

Source: for 1995 and 2000 Le Danh Doanh (2002), for 2006 and 2007 Vu Long (2007), for 2008 MOFA (2008).

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site. Especially Singapore, Taiwan, Japan and Korea placed huge sums into Vietnam. At the end of 1995, ASEAN states had invested US$3.2 billion increasing to US$7.6 billion in 1997 (Thayer 2004, p. 9). Between 1988 and 2002, Vietnam attracted capital of US$38.3 billion. The disbursed capital reached US$22 billion. This accounted for seven per cent of registered capital, a high proportion compared to other economies in the region (Le Dang Doanh 2002, p. 2). In recent years, the ratio between registered and disbursed FDI has however been reduced. Investment could not be carried out due to poor infrastructure, shortage of electricity and skilled personnel. Furthermore, there is no evidence, that knowledge and technology has been transferred between foreign and domestic firms. Most of the foreign companies are subsidiaries of big South Korean, Taiwanese or Japanese firms using machinery and technology from their mother corporations while relying on Vietnamese cheap labour. The export promotion policies definitely created jobs, however, so far it did not contribute much to the value added and the productivity (Tran Ngoc Angie 2004, pp. 163–66). All provinces and cities in Vietnam have attracted FDI. However, the major share of capital is concentrated in key economic areas in the North (Hanoi, Ha Duong, Hung Yen, Hai Phong and Quang Ninh) and in the South (Ho Chi Minh City, Dong Nai, Binh Duong, Vung Tau) (Le Dang Doanh 2002, p. 4). Since the national decentralization process has given municipalities the right to grant investment licenses, oversight of social and environmental downsides of investment is often hard to track. Authorities even though they know about the potential risks, are more concerned about the quantity of FDI rather than the quality (see also chapter 6).22 Companies having been rejected licenses in one province are invited to invest others. Hence, companies have an enormous advantage over regional Departments of national ministries. The latter are too understaffed to control all industrial parks, export zones, and firms. In addition, there is the issue of local handshakes between companies and local People’s Committees. As the Chairman of the Vietnam Environmental Economics Association, Nguyen The Chinh, emphasized: Many citizens see environment pollution everyday, so it’s unreasonable to say authorities do not see it, it is unacceptable when authorities say that they do not know of any companies causing pollution. How can they discover violations in small enterprises when a large enterprise like Vedan [a Taiwanese monosodium glutamate producer] can go unnoticed?23

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Criticism is expressed on the controversial issue of how land use rights are assigned by People’s Committees: “Recently, there are too many steel and golf projects granted licenses, and authorities seem not to have considered or measured carefully enough the effects of these projects on the economy or their bad impacts to the environment”.24 Farmers, especially ethnic minorities who use swidden agriculture techniques, have not seen their traditional user rights transferred into formal titles (FAO 2004, pp. 28–29). However, it is not just the local People’s Committees who prioritize growth over environmental protection. As the Minister of Natural Resources and Environment Pham Khoi Nguyen has stated, it is the whole government which faces a severe dilemma between growth and employment on the one hand and environmental protection on the other: “Vietnam had to protect the environment”, Prime Minister Nguyen Tan Dung told the National Assembly in November. “But in the Vedan case, we also need to think of protecting the thousands of factory jobs at the plant”.25 Despite efforts by the government in Hanoi to limit certain practices, provincial leaders vie for foreign capital by giving out tax breaks or selling land below value. As some provinces are more able to attract capital than others, the process of uneven economic growth is reinforcing itself. Provinces attracting FDI are able to improve their site by investing in infrastructure, labour, social services and giving out further tax breaks. Provinces which draw a great deal of FDI can afford to apply national rules and regulations more lax since at least financially they are less dependent from the national government (Malesky 2004, pp. 289–90).

3.3 Poverty and Inequality Social stratification has fast become an issue in Vietnam, since new relations such as rich-poor, employer-employee, urban-rural, old-young, etc. had to be defined, which before under communism were officially “non-existing” (Beresford 2003, p. 58).26 Especially rural and mountainous areas with a high density of ethnic minorities have so far not equally participated in the modernization and economic growth process (see for example Baulch et al. 2007). Other social groups such as women, laid-off workers in state-owned enterprises, migrant workers, disabled and chronically ill are suffering from the transition and modernization process, too. Since the first poverty line was drawn in 1993, poverty has decreased nationally from fifty-eight per cent in 1993 to under sixteen per cent in 2006 (see Table 3.3), based on an amount of VND 200,000 and VND 260,000 per

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Table 3.3 Poverty Incidence in Percentage According to the National Poverty Line

1993

1998

2002

2004

2006

Red River Delta North East North West North Central Coast South Central Coast Central Highlands South East Mekong River Delta National

63 86 81 75 47 70 37 47 58.1

29.3 62.0 73.4 48.1 34.5 52.4 12.2 36.9 37.4

22.4 38.4 68.0 43.9 25.2 51.8 10.6 23.4 28.9

12.9 23.4 46.1 29.4 21.3 29.4 6.1 15.3 18.1

10.1 22.2 39.4 26.6 17.2 24.0 4.6 13.0 15.5

Source: GSO (2009), for 2004 and 2006 adjusted to GSO (2007), for 1993 GSO as cited in VASS (2007, p. 20).

person/per month.27 Some provinces have reduced their poverty incidence to fewer than twenty per cent. Poverty is especially concentrated in the Northern Uplands (see Figure 3.1).28 The five poorest provinces located in the Northern Uplands are Ha Giang, Son La, Cao Bang, Lao Cai, and Lang Son. Poverty is also widespread in the North Central Coast area and the Central Highlands provinces of Gia Lai and Kon Tum (Minot and Baulch 2002, pp. 22–23). A closer look below the provincial level reveals even deeper regional differences. In 2007, poverty in Ho Chi Minh City officially stood at under one per cent, while poverty in the province of Lai Chau was over fifty-eight and in Dien Bien over forty per cent (GSO 2007, pp. 625–27).29 Social indicators such as infant and mother mortality also vary enormously depending on the province people live in (Fritzen and Brassard 2005, p. 5). In 2004, infant mortality rate (IMR) of the Northwest region was 33.9 per cent, three times higher than for the Southeast region at 10.6 per cent. The IMR in rural areas (20.4 per cent) more than doubled the one in urban areas (9.7 per cent) (MOH 2007a, pp. 4–5). The ratio is equally diverse when looking at the access to sanitation facilities. Only twenty-five per cent of all mountainous provinces meet the hygienic standards set by the MOH, while the percentage in city and delta provinces stands at over ninety-five per cent (Fritzen and Brassard 2005, p. 5).30 Ethnic minorities only make up for around thirteen per cent of the population, but constituted for twenty-nine per cent of the poor in Vietnam

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Figure 3.1 Provincial Poverty Incidence 2006

Source: World Bank (2007a: 8).

in 2004 (Swinkels and Turk 2004).31 With the exception of the Kinh, Hoa (ethnic Chinese), the Khmer and the Cham, the remaining fifty ethnic groups mostly reside in remote, mountainous rural areas (Rambo and Jamieson 2003, p. 140). Most of the ethnic minorities are economically and socially disadvantaged across a range of dimensions including overpopulation and the side effect of environmental degradation,32 low educational attainments, poverty, and exclusion from important positions in politics and economics.

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In 1999, the Infant Mortality Rate (IMR) for the whole country was 36.7 per cent. While the IMR of Kinh stood at 21 per cent, that of the Gia Rai was 69 per cent and for the Hmong 56 per cent. A similar pattern emerges from the figures of the under five mortality rate (U5MR). The U5MR among the poorest quintile is twice as high as that of the richest quintile. The rate for the poorest quintile has seen almost no change over the past few years, while the rate for the better off and rich quintile has experienced significant declines (MOH 2007a, pp. 4–5). Members of ethnic minorities are less likely to seek medical advise when falling sick (Swinkels and Turk 2004, p. 8). Exclusion is enhanced by the fact that even though under Article 5 of the Vietnamese constitution,33 ethnic minorities have the right to use their own language and writing, the government has so far only offered very little multi- or bilingual education — often on experimental base.34 Many indigenous children are not able to follow the lessons in Vietnamese. Often they drop out of school early or remain illiterate.35 The rise in inequality is reflected in mounting inequality indicators. The Gini coefficient has augmented from 0.35 in 1995 to 0.41 in 2002 (GSO 2006, p. 329). What has been striking is that Vietnam has reached the same level of inequality as China much faster.36 While the increase in inequality between 1993 and 1998 can be attributed to a widening gap between the rural and urban areas, between 1998 and 2002, inequality has also risen within urban and rural areas as indicated by the Theil index37 (see Figure 3.2) (Fritzen and Brassard 2005, p. vii). The inflation rate, which has stood at around seven to eight per cent since 2004, has severely decreased the income of poor people. In July 2008, the inflation rate climbed to 27.04 per cent (see also Figure 3.3).38 Vietnam is now known for having the highest inflation rate in the region. This contrasts it from the description of East Asian developmental states having been praised for their sound macroeconomic policy. Due to the rise in inflation (especially in food and fuel prices, but also in prices of construction material), many people are severely threatened by falling back into poverty. Female headed-households39 in the countryside are among the most vulnerable groups in society — even more so when having an ethnic minority background. In addition, women in Vietnam are especially endangered to poverty in cases of natural disasters, illnesses or economic downturns (Packard 2006). Another social problem is the marginalized group of migrant workers and the issue of urban poverty (Pincus and Sender 2008). This social phenomenon has received attention only in the last couple of years (IMF and IDA 2002,

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1992/93

21%

79%

2002

35%

65%

between urban-rural area

1997/98

32%

68%

Source: VLSS calculations cited in Fritzen and Brassard (2005, p. 6). Source: VLSS calculations cited in Fritzen and Brassard (2005, p. 6)

within urban-rural area

0

0.05

0.1

0.15

0.2

0.25

Figure 3.2 Theil Index: Inequality Within and between Urban and Rural Areas Figure 3.2 Theil Index: Inequality Within and between Urban and Rural Areas

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per cent

4.10 -1.80 -0.30 4.10 year

7.90

8.30

7.50

8.40

8.00

2010 2011 (est.) (est.)

Source: IMF (2010)

8.40 23.10 6.70

3.30

8.10

16.90 5.60

3.10

2003 2004 2005 2006 2007 2008 2009

1995 1996 1997 1998 1999 2000 2001 2002

Source: IMF (2010).

–5.00

0.00

5.00

10.00

15.00

20.00

25.00

Figure 3.3 Inflation in Vietnam between 1995 and 2011

Figure 3.3 Inflation in Vietnam between 1995 and 2011

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p. 5). People are not free to move in Vietnam. Instead they have to register under a four-tier household registration system from KT1 (permanent) to KT4 (3 month residence permit).40 Since many social services are attached to the location of residence including free access to school for children and free medical treatment, the household registration system further deepens the rise in inequality. Many parents live in big cities on temporary residence permission. If they want to send their children to a school close by, they have to secretly pay someone from that school in order to arrange for the school attendance of their children. The registration system therefore increases the inequality41 between the ones who are officially registered and can apply for formal jobs and the ones who have temporary residence permits and therefore often have to work illegally.42 In the past, one of the reasons why poverty decreased in almost every part of Vietnam was that land had been distributed relatively evenly (Writenet 2006). Since Doi Moi, however, the local political elite has benefited most from land transactions (Taylor 2004a, p. 15). The growing number of landless workers by contrast is exposed to many risks related to sickness, old age and death of the male breadwinner. Increasing landlessness among farmers is one of the reasons why hundreds of thousands of them start working in industrial zones, where labour rights are often ignored (Human Rights Watch 2009a, p. 6) and the chances of upgrading ones knowledge and skills are limited (Taylor 2004b, p. 252). Furthermore, once they change their residence, they are only weakly protected by labour laws and lack access of social services.43 Vietnam faces a nutrition transition, in which due to economic growth and a diversity of food products, the diet for the urban and richer population changes from a poor and simple ration to a rich one, including animal protide and lipide as well as processed food. At the same time as modern illnesses such as overnourishment, diabetes and asthma become common social phenomena, the poor rural population still faces “traditional” illnesses such as malnutrition and undernourishment,44 pneumonia and diarrhea. Due to the rapid industrialization process, air and water pollution,45 dust and exhaust gases as well as overuse of fertilizers have brought serious damage to the health of Vietnamese. ‘Flagship companies’ such as Vedan are responsible for high numbers of stomach, lung, and liver cancer cases as well as losses in the livelihood of residents from fishing and shrimp farming.46 Food insecurity poses a severe problem for landless Kinh farmers from the Mekong Delta and ethnic minorities living in mountainous and midland rural areas. Both groups are especially affected by natural disasters such as flooding, drought, storms and landslides.47 This double burden of old and new sicknesses presents a major challenge for the public health system.48

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3.4 Conclusion As Sabatier has argued, an analysis of the basic criteria of distributive justice (whose welfare counts?) explains the political outcomes of a certain policy area (Sabatier 1988, pp. 144–46). Two concrete conclusions can be drawn from the socio-economic setting of the Vietnamese informal security regime. First, the transition process has resulted in contradictory results, but has not changed the overall character of the Vietnamese regime which is characterized by informal security. Some groups in society could turn the opening process to their advantage. They have benefited from decentralization and privatization providing space for private business. The opening up of national markets has increased the availability of goods, capital and exposure to new ideas. However, other groups in society have been exposed to new forms of risk or see no real improvement: the dominant mode of production and the dominant social relationship remain unaltered. Vietnam is still largely characterized by stratification based on regions, gender and ethnicity. In fact, the stratification has probably even increased. Infrastructure projects and resettlement dispossess peasants from their former ways of sustaining their livelihood without necessarily bringing them new forms of income. In addition, the high inflation rate eats up the gains made by many citizens in the last couple of years. Furthermore, ethnic minorities have not seen their traditional user rights transferred into formal titles. Small farmers in the Delta and Northern regions and fisher families on the Central Coast suffer from diminishing natural capital due to the increase in population, over-exploitation and natural resource degradation. FDI and national investment is concentrated on only a few provinces. De-commodification remains of little importance given the fact that the dominant mode of livelihood for many Vietnamese is to work in the informal sector (cf. 2.1.1). Secondly, the economic opening process has started more or less independently from the national government. The first years of growth have decreased the number of poor people enormously. However, this positive change was mainly due to the government legalizing practices of spontaneous privatization and decentralization. This has major implications for the steering capacity of the Vietnamese central government in its bargaining process with investors and local governments. The latter two have interacted regularly and informally without interference by the central government and line ministries. To achieve economic growth, to lift the rest of the population out of poverty and to increase health equity (through a decrease in catastrophic health

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expenditures and a reduction of out-of-pocket-payments) will be the major challenge in the near future. This requires more punctuated interventions and more efforts on the part of the national government.49 It also presupposes that the government is willing to better supervise its social programmes.

Notes

1



2



3



4



5

Ho Chi Minh saw Communism and the Third International as the only way Vietnam could achieve its independence: “At first, patriotism, not yet communism, led me to have confidence in Lenin, in the Third International. Step by step, along the struggle, by studying Marxism-Leninism parallel with participation in practical activities, I gradually came upon the fact that only socialism and communism can liberate the oppressed nations and the working people throughout the world from slavery” (1960). For an analysis of the application of Marxism-Leninism to Vietnam see Kelly/Mackerras (1985) and Lacouture (1968). Gillespie (2006, pp. 80–86) explains that the Soviet system of law and development was transplanted to Vietnam without consideration of the local context and potential economic, political and cultural problems. Due to resistance from below, acculturation took place in which laws were accustomed to local conditions, but without theorising a genuine Vietnamese legal ideology. Party Secretary Truong Chinh therefore claimed: “That our Party has led the Vietnamese revolution from one victory to another and recorded such tremendous achievements is due to the fact that it has applied Marxism-Leninism in a creative manner to the concrete conditions prevailing in Vietnam and charted a correct revolutionary for our class and country” (Truong Chinh 1968, p. 583). Under the cooperative system work brigades specialized in different sectors such as soil preparation, irrigation, making of fertilizers, etc, while the basic production brigades performed all other tasks. In return workers from the work brigades were given work points, while the basic production brigades were entitled to a certain amount of the production which exceeded a given quota. The value of a workday often fluctuated. This uncertainty encouraged many people to devote more time to the family economy. After the reunification of the country, rather than drawing lessons from previous failures, the government continued to push cooperative consolidation in the North to achieve large scale socialist production (Ngo Vinh Long 1993, pp. 167–69). Ngo Vinh Long (1993, p. 177) states that in the North and Central regions, over ninety per cent of peasant households, but only 6.9 per cent of those in the South belonged to cooperatives. As a consequence, the reforms had different effects in regions where the collective system was strong and in those where it was weak. Up until the late 1970s, China was the biggest donor to Vietnam. One of the reactions of the Vietnamese government to the severe economic situation was

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to establish new economic zones at the border of Cambodia where it resettled several thousand Vietnamese citizens — hoping to build new living grounds. Armies of the Pol Pot regime reacted on these measures by attacking Vietnamese settlers (Will 1989, p. 78). In 1979 Vietnam invaded Cambodia which it justified by the atrocities of the Pol Pot regime. Many Asian and Western countries argued that Vietnam was only using the tumults inside the country to expand its territory. Due to the invasion, China started a war at its Southern border and stopped all military, economic, and technical support (Ljunggren 1993, p. 56). The foreign relations with China are up to today still tense due to the legacy of Chinese colonial rule over Vietnam and the fight over the territory and the oil and gas resources of the Spratly and Paracel Islands. 6 The COMECON (Council for Mutual Economic Relations) was a network of Communist states that was established in 1949 by the USSR and the Eastern European countries. It is often characterized as a countermovement of the Communist states to the establishment of the Organization for Economic Cooperation and Development (OECD) of Western countries. Members of the COMECON were the USSR, Bulgaria, Czechoslovakia, the GDR, Hungary, Rumania, Mongolia, and up until 1961 Albania. At the end of the 1970s, two more members, Cuba and Vietnam joined; see White (2003, p. 19). 7 As a result of the discord between Vietnam and China, Vietnam tried to improve relations with the USSR resulting in the signature of the 1978 Treaty of Friendship and Cooperation. The USSR replaced China as the major donor. With the deployment of Party General Secretary Gorbachev drastic cuts in aid, credit and favourable trade agreements beginning with the Five Year Plan 1991–1995 forced the Vietnamese government to balance its trade with the Soviet Union and Eastern European countries in hard currency at world market prices (Freeman 1992, pp. 289–90). 8 The idea behind the household contract system was that individual efforts could complement the work of cooperatives and motivate labourers. The initiative was highly disputed at that time. Some party officials thought that the contract system was needed to consolidate the cooperatives, others argued that the system weakened the cooperatives. However, no one believed yet that loosening the system could basically mean the beginning of the end of the cooperative system (Chu Van Lam 1993, pp. 153–56). 9 For further information on the economic downturn, see Will (1989); for the issue of inflation in Vietnam see Nguyen Tri Hung (1999). 10 Statements made by Dr Nguyen Si Dzung, Vice President of the National Assembly Office and Nguyen Phu Trong, Politburo member, former president of the Party Central Committee’s Theoretical Council, an advisory agency of the Party Central Committee, the Politburo and the Secretariat. Voice of Vietnam News: “After 20 years of Renewal process”, 25/04/2006. (accessed 1 July 2009).

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For a critical view on Vietnam’s growth see Fforde (1993). GSO [General Statistics Office]: “Employed population as of annual 1 July by ownership and by kind of economic activity”, n.d. (accessed 1 July 2009). 13 GSO: “Unemployment rate of labour in working age in urban area by age group and by province”, (accessed 1 July 2009). 14 Groups in the informal sector include owners and employers of microenterprises, self-employed, street vendors, home-based workers and paid domestic workers. 15 The labour force grows by around one million each year. While low skilled laborers are available abundantly, high skilled workers are rare putting much pressure on policy makers to create as many income opportunities as possible. 16 Over one million workers have already been dismantled during the first three years of the reform process. In addition, 750,000 soldiers have been demobilized. More than 200,000 migrant workers returned home in the early 1990s from the former Soviet bloc, East Germany and the Gulf countries. Around 65,000 refugees and asylum seekers (“boat people”) were repatriated from neighbouring countries (Jamal and Jansen 1998). 17 The term equitization is often used instead of the word privatization in Vietnam. 18 In general rather than a decline in numbers of workers employed by SOEs, Vietnam has seen an increase. Most of the SOEs which were equitized were small and medium-sized. According to the Central Committee for SOE Reform, in 2004, there were 4,296 SOEs with a total capital of VND 89,000 billion, of which however, 2,019 had a value of less than VND 5 billion (Do Phu Tran Tinh 2006, p. 8). 19 Since the early 1990s rather than to privatize SOEs, the government has opted for a merger of SOEs. Corporations were established and later on even bigger economic conglomerates focusing on strategic sectors. In many cases those conglomerates are not export-, but import-oriented. This increases the likeliness of those conglomerates to seek protection from international markets, build monopolies and look out for quick returns in the real estate or financial sector rather than to build competitive sectors (Harvard Vietnam Program 2008, p. 31). 20 Gainsborough (2005) doubts that the equitization of SOEs is not fostered due to the social costs such as unemployment or raise in insecurity. He traces this situation back to the political struggle between People’s Committees and local Finance Departments on the one hand, who want to make money through the privatization, and “officials” connected with the company on the other hand, who want to buy shares cheaply, for control over state assets. 21 There is no consensus about the term socialization in Vietnam (see also chapter 6). In some publications it can be equated with privatization, in others in has a 11 12

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broad meaning indicating that everyone in society including individuals as well as voluntary and corporate institutions should be involved in and contribute to a certain social policy area such as health, education, etc. Viet Nam News: “Hidden Cost of FDI”, by Ha Phuong, 30/09/2008, (accessed 1 July 2009). Viet Nam Net: “Pollution scandal shocks nation”, 25/09/2008, (accessed 1 July 2009). Viet Nam News: “Hidden Cost of FDI, by Ha Phuong”, 30/09/2008, (accessed 1 July 2009). Tran Dinh Thanh Lam: “River Pollution Scandal a Wake-up Call”, 13/12/2008, Inter Press Service, (accessed 1 July 2009). Social inequalities were reduced during planned economy. Women, farmers, and ethnic minorities had more access to education, health and social benefits than in other countries in the region. Regional differences however, further existed. The three industrial cities of Hanoi, Hai Phong and Quang Nih produced half of the industrial output, but only hosted around fifty per cent of the population. As Beresford has highlighted equality was on the rise in the early phase of transition up until 1988/89. However, after that the inequality between urban and rural areas has been augmenting (Beresford 2003: 66). The national poverty line has been raised several times from VND 55,000 in rural and VND 90,000 in urban areas (1997–2000) to VND 80,000 and VND 150,000 (2001–2005) and further to VND 200,000 and VND 260,000 per person and month (2006–2010). Vietnam‘s government differentiates between eight regions: Red River Delta, North East, North West, North Central Coast, South Central Coast, Central Highlands, South East and Mekong River Delta. Note that in Vietnam the household is the focus of poverty measures. As Van de Walle highlights it is assumed that inside a household income is distributed equally, even though the reality for women and children might be different (Van de Walle 1999, p. 128). It is highly questionable if a sanitation coverage of ninety-five per cent in Ho Chi Minh City is realistic considering the fact that big cities attract high numbers of non-permanently registered migrants, who are not included in official statistics; see chapter 4 on private community initiatives which help migrant workers. Vietnam’s government acknowledges 54 ethnic groups, of which the Kinh make up for the majority with eighty-seven per cent of the population (around 69.4 million). The ethnic minorities with the biggest population are the Tay whose population totals to 1.6 million people, the Thái to 1.5 million, the MöôΩng 1.2 million. All three live in the Northern Mountain Region. These three groups are followed by the Khmer 1.1 million, the Nùng 914,000, the Hoa (Hán) 913,000,

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the Hmong (Meo) 896,000, and the Dao 685,000. The smallest minorities are estimated to count less than 1000 (Ô ñu approximately 370, Rô-maêm 418, Brâu 350). For a full list of ethnic groups in Vietnam you can visit the website of the Committee for Ethnic Minorities (CEM) at (accessed 1 July 2009). The first ethnic Vietnamese arrived in the Central Highlands in the late 1800s, when the French colonists built tea, coffee, rubber and other plantations in the area, bringing with them Kinh labourers. During this time, the numbers of Kinh increased, but remained relatively low. Between 1954 and the early 1970s, the South Vietnamese Government resettled entire lowland Vietnamese villages in the Highlands. Land which belonged to the ethnic minorities was usurped. Due to the enormous population pressure in the lowlands, the Vietnamese government after the end of the war encouraged ethnic minority groups to move to the less populated highlands. As a consequence of the increase in population, traditional practices of cultivation for rice and vegetables (slash and burn methods in a rotating cycle allowing forests to regenerate) could no longer be applied. Many ethnic minorities were forced to participate in producing cash crops for the world market (Barrett et al. 2001, pp. 52–53). As a consequence of the overuse of land, forests and soil, erosion and leaching of nutrients have reduced soil quality (Rambo and Jamieson 2003, p. 148). Cf. Socialist Republic of Vietnam (2001, Article 5): The various ethnic communities have the right to use their own language and writing, to preserve their ethnic identity and to nurture their fine customs, traditions and cultures. A first positive step has been done by a programme of UNICEF to model and design school programs and bilingual education for pre-school and primary students in ethnic mother tongues. The programme started in 2006 in cooperation with the Ministry of Education and Training. One of the major problems is the lack of qualified teachers, textbooks and facilities. Of the 1,188 teachers teaching ethnic minority languages most only teach in Khmer, Ede, Cham and Chinese; cf. Viet Nam Net: “Ethnic schools lack books, teachers”, 03/09/2008, (accessed 1 July 2009). Lowland teachers are difficult to attract. Tran Dinh Thanh Lam: “Gap grows between Vietnam‘s haves and have-nots”, Asia Times Online, 10/04/2002: (accessed 1 July 2009). The Theil index, named after the econometrician Henry Theil, is a statistical index used to measure economic inequality. The advantage of the index in contrast to for example the Gini index is its ability to differentiate between groups. Nga Pham: “Inflation in Vietnam passes 27%”, BBC News, (accessed 15 August 2009). The ILO defines female headed households as households where either no adult males are present, owing to divorce, separation, migration, non-marriage or

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widowhood, or where men, although present, do not contribute to the household income; cf. ILO: “Female Headed Households”, (accessed 1 July 2009). KT1 residents have the right to purchase land and use social facilities such as schools, kindergartens and health facilities in their district. KT2 residents have moved from one place in a district to another. They are also allowed to purchase land, however, access to social services is restrained to the original place of residence. KT3 residents have residence permits for six to twelve months. The residence permits are normally renewed. Access to social services is restrained by the fact that demand of social services can only be provided if KT1 and 2 residents do not fully occupy them. KT4 residents have residence permits for only three months. They normally live in guesthouses or other temporary dwellings (Waibel 2007, p. 3). Non-permanently registered residents are excluded from the VLSS, which makes it difficult to really estimate the impact migration has on equality and access to social services (cf. also Chapter 1.6). On 29 November 2006, the Law No. 81/2006/QH11 on Residence was passed by the National Assembly. It has somewhat simplified procedures and decreased administrative obstacles (Waibel 2007, p. 4). The issue of free social services being provided for only in the home town of residence has however not been paid enough attention yet. The World Bank therefore tries to lobby for one single insurance number with which contributions and benefits become movable as much as people have become in Vietnam (Rama 2007). The Vietnamese government allows only one official labour union, the Vietnam General Confederation of Labour (VGCL). Several labour movements have started to organize wild cat strikes, which always have been harshly suppressed. On the VGCL and its relation with illegal labour movements see Hansson (2003), Ngoc Tran Angie (2007), Human Rights Watch (2009a). The FAO estimates that in 2001, nineteen per cent of Vietnamese were still undernourished (FAO 2003). For an overview of water pollution see World Bank (2006b). Since 1995, residents in Dong Nai and in neighbouring Ba Ria-Vung Tau province have demanded compensation for their losses. Only after more than fifteen years of operation did Prime Minister Nguyen Tan Dung order Vedan to pay US$7.6 million in environmental dues it owes, an acceptable sum in view of the annual turnover of around US$100 million (or around US$4 million profit), and especially if one considers the fact that many of the fees so far have not been paid. Vedan International Homepage: “Vedan announces 2007 interim results — net profit increases 32% to US$8 million”, online: (accessed 1 July 2009). The natural endowment of Vietnam (long coastal line and three quarters of its territory being hills and mountains) and the economy’s dependency on the

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agricultural and aquacultural sector makes the country very vulnerable to natural disasters including sea level rise, drought, floods, and typhoons. Especially poor households lack the resources to absorb climate related risks or to rapidly recover from the ensuing financial shock (Chaudhury and Ruysschaert 2007, p. 6). 48 The food poverty line is calculated by the World Bank and General Statistics Office (GSO) based on the level of expenditure needed to buy food (rice and non-rice) to provide 2100 calories per person per day (FAO 2004). 49 Vietnam News: “UN representative calls for policies to eradicate poverty, malnutrition”, 24/10/2005, (accessed 1 July 2009).

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4 THE PUBLIC PROVIDER NETWORK IN VIETNAM

The current health care system is a legacy of Vietnam’s traditional medical system based on autonomous villages and strong local forces. In addition, it has been shaped through the French colonial rule, which established a variety of national French institutes and hospitals between 1860 and 1945. In the 1950s and 1960s, the Vietnamese Communist government installed a wide-spread network of Commune Health Centres (CHCs) and village workers. During the 1970s, the Communist government tried to extend the primary health care system to the South. In general, the four tier health system (central, provincial, district and communal) has enhanced the availability of health care throughout the whole country. However, the long period of war against France and the United States and the loss of financial aid from China and the Soviet Union led to severe financial constraints on the health care system (see also chapter 3). Education and training of health staff was neglected. Health care services thus were neither evenly distributed nor of comparable quality in the late 1970s. Since the 1980s, the health care system has continuously deteriorated. At the end of the 1980s, Vietnam reacted to the crisis with a series of political measures to increase the financial means in the health care system. In 1989, user fees were officially introduced. At this point, many nurses and doctors had already left the public system or received additional payment from private patients. The public health care system since then has been privatized and decentralized slowly from within. Many private revenues and expenditures therefore remain undetected. This makes both budgeting and better targeting enormously difficult. 97

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The direct expenditures by the Ministry of Health (MOH) represent only six per cent of all expenditures in the health care system. Furthermore, it is quite unclear according to which principles the few resources are allocated to provinces, districts and communes. Preliminary findings indicate that the wealthier, more urbanized and industrial provinces have benefited on average more from national transfers than smaller and poorer provinces. Especially the rural areas are becoming less and less attractive for doctors and nurses, making it impossible to achieve a comprehensive coverage of health workers. The Health Management Information System (HMIS) of Vietnam is still underfinanced, improperly equipped and understaffed. There is no single database which aggregates all four administrative levels in one. Furthermore, figures provided by provinces, districts and communes are normally unspecific. Some localities take money dedicated for health care from other ministries than the MOH and donors into account. Others leave them out. Formal and informal fees are normally understated. Since there is no separately designated budget line for health statistics and a very small government budget share allocated to the health sector, health institutions normally prioritize professional activities over monitoring and supervision. Investment in statistical information work is very modest and irregular, especially in poor provinces. In 1995, the government set up a compulsory health insurance fund under the guidance of the Vietnam Social Security (VSS). The introduction of a social health insurance system was not only supposed to enhance health equity, but also to increase the funding of the health care system. Meanwhile, several other schemes have been established such as a voluntary scheme, a scheme for poor people and one for children under the age of six. In fact, the government has set itself the goal to achieve the universalization of health insurance by 2014 (see also 6.2.1). However, so far the government has not been able to implement, supervise and finance the different health insurance schemes properly. Part of this has to do with the fact that the enrolment rate under the compulsory health insurance has remained low ever since. Only around fifty per cent of all employees are registered with the Vietnam Social Security (VSS). Fee exemption schemes for poor were first introduced in 1994, following the increase in formal and informal fees since 1989. However, utilization of health care services among poor people has remained low and on average selfmedication has increased. Especially ethnic minorities, unemployed landless peasants, women, chronically ill, disabled and people living with HIV/Aids had little access to free health care services. In 2002, a new Health Care Fund for the Poor (HCFP) has been set up. This is the first fee exemption scheme which seems to be decreasing out-of-pocket payments and catastrophic health expenditures among the poor.

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In 2005, the government implemented a voluntary health insurance scheme. This decision has promoted the goal of universal coverage, but has also overstretched the financial means of the Vietnam Social Security (VSS) and the Health Insurance Fund (HIF). Only individuals, who are currently sick register, thus further burdening the Ministry of Health (MOH) politically and financially. Preventive measures through the National Target Programmes (NTPs) seem to be somewhat more successful than the initiatives in health insurance due to the commitment of important political leaders, However, this area also suffers from misperceptions and miscommunication from all central and local actors. As will be shown in this and the following chapters (especially chapter 6), the central government has been trying to regain regulatory power and strengthened its role through the public provider network since the late 1990s. In cooperation with the MOH and strong support from the Central Committee, it begun to adjust regulations in order to overcome some of the shortcomings of the current health care system. However, many loopholes remain to be filled, especially in the areas of monitoring and supervision. In 2002, a new health care fund for the poor was created. This is the first fee exemption scheme that seems to be decreasing out-of-pocket payments as well as catastrophic health expenditures among the poor.

4.1  Vietnam under French Colonial Rule1 The French colonialization of South Vietnam (Cochinchina) in the 1860s marks the beginning of France’s influence in the region. Throughout almost one hundred years, France tried to shape the political, economic and social landscape in Indochina.2 In the health care sector, France introduced measures to help govern the territory. The motto of the Civilizing Mandate (mandat civilisateur) was to “vaccinate, record and disinfect” (vaccination, déclaration et désaffection) (Monnais-Rousselot 2002, p. 141). Modern medicine was seen as a “civilizing weapon” in colonial times to exterminate backward and primitive behavior. The importance attributed to Western medicine had tangible implications on traditional medicine. Even though it was never fully abolished, its use stagnated. Its methods were seen as unscientific. Vietnamese were regarded as being unable to look after their health themselves (Wahlberg 2006, pp. 129–30). French Dominican and Franciscan missionaries first introduced Western medicine (Craig 1997, p. 125). Starting in the 1870s, the colonial administration introduced hygiene and sanitation courses in schools — mostly in urban areas. Furthermore, under Governor-General Paul Doumer the first

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civilian medical assistance was founded (Monnais 2006, p. 42). By a decree issued by the office of the State Secretary of the Colonies on 7 January 1890, a Colonial Health Advisory Council and a Colonial Health Corps were to be established. Between 1860 and 1883, several hospitals for military and colonial staff as well as for French civilians and locals were built in Hue, Hanoi, Vinh and other bigger cities (Monnais-Rousselot 2002, p. 142). At lower levels, clinics, dispensaries, consultation rooms and first-aid posts provided health services (ibid., p. 151). Under the first medical assistance programme in 1897, health care directors for each territory of Indochina were appointed. Starting in 1902, Indochinese residents (médecins auxiliaires) were trained to support the French colonial doctors in the Hanoi School of Medicine. In the same year, a network of basic pharmacies (dépôts de medicaments) was built in the North. In 1905, under the leadership of Governor-General Paul Beau the foundation was laid for the Indigenous Medical Assistance scheme (Assistance Médicale Indigène, AMI), thus providing more free care to the poor indigenous population (indigents indigèns). The programme was used as a tool of public campaigning against “wide-spread prejudices and ignorance” among the indigenous population (Monnais-Rousselot 2002, p. 143). The scheme however, was said to have little impact beyond urban elites, who only made up a fraction of the population of eighteen million (Craig 1997, p. 125). In 1907, obligatory monthly and annual reports for each province provided detailed data on the general situation of health care, consultations and the availability of pharmaceuticals (Monnais and Tousignant 2007, p. 138). Organizations and clubs, such as the Service of Social Assistance established in 1929, were included in carrying out social and health tasks. Due to financial restraints the work of private organizations was often quite restrained (Monnais-Rousselot 2002, p. 155). The majority of AMI clinics and hospitals in North Vietnam were located in urban and provincial centres (Monnais and Tousignant 2007, pp. 140, 149).3 After 1918, greater emphasis was put on building primary health care facilities in rural areas. New laws from 1924 onward provided guidelines for the surveillance of food, clothing, quality of drinking water, sanitation systems and health plans against common diseases such as malaria (Monnais 2006, p. 45). The utilization of health care in Vietnam increased from 1.7 million consultations in 1913 to almost 14 million in 1937 (Monnais-Rousselot 2002, p. 178). In addition, the greater availability of drugs led to an increase of self-medication (Monnais and Tousignant 2007, p. 147). Implementation however varied enormously depending on the resources and the political will in the respective districts. Pharmaceutical products were mainly imported from France making them comparatively expensive

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(Monnais and Tousignant 2007, p. 148). Apart from the successful vaccination campaigns against smallpox and cholera, the colonial health care system remained limited (Bryant 1998, p. 241). Especially the two World Wars and the great depression had a major impact on the colonial budget (Monnais and Tousignant 2007, p. 148).

4.2  Health in North Vietnam (1954–75) In 1954, North Vietnam was one of the poorest countries in the region. Much of the limited economic development in the French colony had been undone through the great depression and the subsequent wars. The North Vietnamese government took control of the private sector. With the help of the Soviet Union it restructured the state administration of the economy. In addition, it invested heavily in the industry and collectivized the agricultural sector (Bryant 1998, pp. 241–43). Resolutions of the Communist Party of Vietnam (CPV) after 1954 highlighted the importance to inherit, improve and develop traditional medicine and combine it with modern medicine. Generous foreign aids allowed the government to pass out benefits, such as sick-pay and health care free of charge. This decreased the burden for children to look after their parents in urban areas. In rural areas, there was no significant change (ibid., p. 253). In contrast to French colonial times, during which education and health were seen as acts of charity for the poor and backward Vietnamese, the CPV wanted to install a socialized system that was based on citizenship and enshrined in the Marxist-Leninist ideology. The generalization of health care and thus health itself among the entire population was seen as a means to distinguish the Communist from the colonial government. The aim of the Cultural Revolution was to abolish illiteracy and improve the health of the people. In a letter sent to the Conference of Medical Workers, Ho Chi Minh in 1955 wrote: [W]e must build our own medicine. Our ancestors had rich experience in the treatment of disease using local medications and those of the North [China]. To enlarge the sphere of action of medicine, it is necessary to study the means of uniting the effects of oriental remedies with those of Europe. (Hoang Bao Chau et al. 1999, p. 26, cited in Wahlberg 2006, p. 130)

Shortly after the revolution in 1945, the provisional North Vietnamese government launched mass public health campaigns. As Bryant (1998, p. 246) wrote, the government made a virtue out of necessity by emphasizing the

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Vietnamese tradition of preventive medicine. Due to the limited financial means available during the war, physicians used traditional medicine in addition to Western medicine. Health workers, who had been given basic training, were sent to villages to distribute mosquito nets, conduct vaccinations, deliver babies, and offer basic medical services. However, during military operations against the French army most of the medical supplies were drained and all available trained staff was preoccupied. During the 1950s and 1960s, the government installed more health care centres throughout the country. Funding and staffing was done on a local base (Bryant 1998, p. 247).

4.3  Health in South Vietnam (1945–75) Besides few major changes, such as the foundation of the Hue Medical School, the basic health care system remained weak under American rule (Luu Ngoc Hoat 2008, p. 49). In fact, the health care system in South Vietnam after the war was abysmal. In 1965, only 800 physicians were available for roughly fifteen million people. Of twenty-eight provincial hospitals a mere eleven could be used. The others ceased to function due to the lack of medical personnel (Allukian and Atwood 2000, p. 219). Half of the population had been forced to resettle as refugees. Civilian war casualties filled the hospitals; thousands of people were disabled due to the massive bombardments. There was little improvement between 1966 and 1973.4 The U.S. Government together with bilateral donors, such as Japan, the Federal Republic of Germany, Australia, Great Britain, Canada as well as international organizations such as the World Health Organization (WHO), UNICEF, Save the Children Fund, Oxfam and the Red Cross tried to increase the quality of health care.5 In spite of national and international efforts, hospital facilities and preventive measures including vaccination remained seriously inadequate up until 1975 (Allukian and Atwood 2000, p. 220).

4.4  After Reunification: Vietnam under Socialism After reunification, attempts were made to extend the administrative structure of the primary health care system to the South. However, regions such as the Central Highlands lagged far behind the nationally envisioned model (Barrett et al. 2001, p. 56). Health care services were free of charge. However, patients had to pay for their own drugs (Bloom 1997, p. 6). Every commune and the work brigades in villages normally had a health station and a brigade nurse. Policymakers urged cooperatives, State-Owned Enterprises

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(SOEs) and communes to provide social welfare services to their members. In contrast to the industrial state sector, which was funded by the central budget, corporations were required to be financially self-sufficient. Due to the financial independence and the impracticability of many official policies, most communes and corporations only partially implemented the policy (Bryant 1998, p. 243; Van de Walle 2004, p. 191). State statistics and official documents do not reveal much of the differences in accessibility; neither do they tell us much about scope and quality of the health care system under Socialist rule. Even though health care was theoretically free of charge and equally accessible to all, the reality was often quite different. Accessibility for the urban population and those with party ties was much higher than for the rural population. Residents in South Vietnam were often discriminated against due to their past loyalties with the Southern regime (Barrett et al. 2001, p. 56). Women and ethnic minorities also normally had very bad access to health care (London 2007, pp. 421–22). Much emphasis was put on the fulfillment of the plan and on quantitative indicators rather than on an efficient provision of social services (Fforde 1995, p. 30). Furthermore, the steady decline of the cooperative system during the 1980s deprived the public health care system of important funds, while the government did not increase central funds. State subsidies to pharmaceutical factories were reduced. Many restrictions on the establishment of pharmacies and the sale of drugs were removed (Monnais and Tousignant 2007, p. 134). Training and education was neglected; many of the health care centres — especially in the highlands — ceased to function (Bryant 1998, p. 256). The role of the government in health financing and monitoring was thereby decreased dramatically. Since the financial crisis in the 1980s, drugs became scarce and nurses were often no longer reimbursed by the state. With the overall deteriorating economic situation and the decrease in international aid, health workers started to offer their services privately. Others moved to areas where their service yielded greater personal benefit (Bryant 1998, p. 247) or returned to farming (Fforde 1995, p. 30). The health system in many parts of the country in the 1980s laid idle (ibid., pp. 3, 17). In contrast to the situation in North Vietnam in the 1950s and 1960s, the national health system in total regressed. As a consequence of the economic opening process the previous “shared” poverty became replaced by both upward and downward mobility leaving parts of society such as women, disabled and ethnic minorities — more vulnerable to shocks “previously mitigated by the safety nets of the cooperative system” (ibid., p. 3).

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4.5  The Health Care System since Doi Moi In the late 1980s the government admitted the existing deficits in the system of health care and sought additional funding by Decision No. 45/1989. Through the decision, user fees for health services as well as for school attendance were introduced. Furthermore, the regulation encouraged contributions of international and national donors and allowed the establishment of private schools and hospitals. Private practice of heath care services as well as the private sale of drugs was also authorized. For the first time since the reunification of Vietnam, health care services were officially no longer free of charge. As a consequence to the policy changes, pharmaceutical products became more available. It also provided for a stimulating competition between the private and public sector. The downside of the liberalization of drugs and services was that Vietnam saw a sharp increase of self-medication and poor people further lagged behind. Drug sellers and physicians often only operated in regions, in which there was enough income which could be spent on drugs (Fforde 1995, p. 30). In general, the health system is structured in the same way as the administrative system (see also Annex 4); there are basically four levels of health administration: central, provincial, district, communal and village levels, with the Ministry of Health (MOH) at the central level. The MOH controls around fifty institutions including central general and special hospitals, research institutes, medical and pharmaceutical universities, and pharmaceutical companies. At the provincial level, each province has a provincial Department of Health (DOH). A number of institutions including provincial hospitals, preventive centres, secondary medical schools, and pharmaceutical units operate under the guidance of provincial DOHs. On the district level, the DOHs supervise hospitals, preventive medicine centres, training classes and pharmacies (see also 6.2.8). Village and ward health workers as well as Communal Health Centres (CHCs) are supposed to act as a first contact point for sick people (see Figure 4.1). There are four major components of the Vietnamese health care system: — curative health care Central, provincial and district hospitals, CHCs, specialized research institutes with patient beds at central level that are dedicated to one discipline, such as pediatrics, obstetrics and gerontology; — preventive medicine National Institutes of Nutrition, of Hygiene and Epidemiology, and of Malariology, Parasitology and Entomology; preventive medicine centres at provincial level and preventive medicine teams at district level;

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Figure 4.1 Figure 4.1Structure Structure of Vietnamese the Vietnamese Health Care System of the Health Care System Government at central level Ministry of Health

City/Provincial People’s Committees

Research institutes (both preventive & curative)

Central general and special hospitals

Medical/ Pharmaceutical & Medical technological schools

Production & health service provision sector

Provincial health bureau Provincial hospitals (general & specialized)

Centers under preventive medicine

Production & health service provision units

Secondary medical schools & colleges

District People’s Committees District health centres Hospital

Preventive medicine centres

Commune People’s Committees Commune health centre

Village health workers

Training classes/units

District Pharmacy

Regional policlinics

Village health workers

Village health workers

Source: Department of Organization and Manpower, Vietnam Ministry of Health, 2006, cited in Luu Ngoc Hoat (2008, p. 39).

Source: Department of Organization and Manpower, Vietnam Ministry of Health, 2006, cited in Luu Ngoc Hoat (2008, p.39) — training of health professionals Medical, pharmaceutical and medical technological universities and colleges at central level; colleges, secondary medical schools and training centres at provincial level and training classes or units at district level; and

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— pharmaceutical production and distribution Pharmaceutical companies and factories, health facilities and equipment provision. Additionally, a Health Management Information System (HMIS) is supposed to provide all necessary information to the higher levels of policymakers. At the communal level, all four components are combined in one facility — the Commune Health Centres (CHC) (cf. Luu Ngoc Hoat 2008, p. 38).

4.5.1  Curative Health Care The curative public health sector in Vietnam is composed of roughly 11,400 primary Commune Health Centres (CHC), 900 hospitals (including 730 general hospitals and 103 specialized hospitals), 860 general clinics, 94 specialized clinics, 58 maternity clinics, 79 rehabilitation hospitals and centres, and 3 specialized health centres. Most of the health facilities are under the guidance of the MOH. Around 80 hospitals are owned by the Ministry of Public Security, the Ministry of Defence, the Ministry of Labour, Invalids and Social Affairs (MOLISA), the Ministry of Transport, and the Ministry of Information and Communications (Pham Thi Mai Huong and Vo Thi Kim Hue 2007, p. 97).

Village Workers and Communal Health Centres Village workers and Communal Health Centres (CHCs) in communes provide primary health services including consultation, treatment of common diseases, maternal and child health care, family planning, and hygiene and health promotion. Concerning preventive and curative care, the CHCs are supposed to be the first contact with the health system for the population. The Vietnamese government regards them as a vital link to equity in health care. However, due to the collapse of the cooperative system, local sources of financing have been decreasing without being substituted by central funds. Usage of public facilities therefore dwindled. As a consequence a lot of staff left the public sector. The demise of the village (or work brigade) health worker had major implications for the general access to public health care, especially in mountainous areas (Fforde 1995, p. 23). Evidence from a health care and economic development project showed that only nine out of 181 CHCs in the Central Highlands province of Dak Lak were operational in 2001. Many hospitals were in desperate need of material, technical and personnel support (Barrett et al. 2001, p. 56). For many people who did not have the time or

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money to seek higher levels of the health care system, self-medication became the major form of therapy (Tuan 2004, p. 15). As a survey in Long An province showed, when health workers function both as communal health workers and private practitioners, patients prefer to consult them privately due to more flexible working hours and modes of payment (MOH and UNICEF 1996, p. 31). Even though private providers became quite popular among the rural population, they were not officially included in the government’s health sector development strategy (S. Adams 2005, p. 15). Utilization of public services therefore markedly declined without any direct policy response. In 1994, the government recognized that CHCs were going to collapse imminently (see also chapter 4.4). The government started to pay for the salaries of health workers in the CHCs with the central health budget (World Bank 2001b, p. 73). However, because the salaries of rural health care staff remained low,6 doctors and nurses continued to rely on privately issued fees as an additional income. Extra income in the public health sector, which is not tracked in official accounts, has been estimated to exceed the salaries of most physicians. In 1996, it constituted around thirty per cent of the total staff income (World Bank 2001b, p. 81) (see also chapter 5.4.4).

District, Provincial and National Clinics and Hospitals Above the communal level, there are a variety of different medical and dental clinics including the ones based in schools and companies, as well as district, provincial and national hospitals. District hospitals have around sixty beds each and provide basic treatment for common diseases. Provincial hospitals in contrast comprise between three hundred to five hundred beds providing curative in- and outpatient care for local patients and patients from farther away. Due to the low quality of the services at the local level and a general mistrust of Vietnamese towards the staff of district level institutions, many people prefer to go directly to the often severely overcrowded provincial hospitals.7 National general and specialized hospitals in Vietnam’s largest cities provide treatment with advanced techniques. They normally have over 500 beds and are technically up-to-date (World Bank 2007b, p. 41). So far, the number of beds has not been sufficient. Hospitals are totally overloaded.8 What is especially worrisome is not the sheer number of hospital beds, but more often the unequal distribution. Especially the North Central and Central Highlands — which also have the lowest average income in the region — suffer from far fewer beds per capita than other regions (World Bank 2007b, p. 42).

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The current budgeting strategies of hospitals aggravate the problem. In 2004 and 2005, about thirty-nine per cent of revenues were based on the number of staff and beds and not on actual needs. This regulation encourages overuse and inefficiency (ADB 2008b, pp. 42–43). In 2008, the government reacted by deciding to issue bonds to invest in upgrading district as well as regional general hospitals (MOH and HPG 2008, p. 15).9

4.5.2  Preventive Medicine The preventive measures in Vietnam are coordinated by the MOH and several national institutes including the National Institute of Nutrition, the National Institute of Hygiene and Epidemiology (NIHE), and the National Institute of Malariology, Parasitology and Entomology (NIMPE). These central institutes are supported by preventive medical centres at the provincial level and preventive medical teams at district level. In the district preventive health centres, village health workers (VHW) are in charge of keeping track of communicable and non-communicable diseases. Preventive measures in Vietnam include prophylaxis in the area of disease control through immunization and vaccination (tuberculosis, leprosy, dengue fever, avian influenza, Severe Acute Respiratory Syndrome [SARS]). In addition, it comprises the disbursement of information on food hygiene, (traffic) injuries, smoking, drinking, and use of drugs,10 as well as information on HIV/Aids and other sexually transmitted infections. The sector of dental prophylaxis has received only little attention aside some several campaigns that the government launched in cooperation with firms such as Colgate and Unilever and the East Meets West Foundation.11 The Expanded Programme of Immunization (EPI), which has covered vaccination of sicknesses such as tuberculosis, measles, and diphtheria, has been implemented on a pilot scale in 1982. In 1985, it has been expanded to the whole country (World Bank 2001b, p. 45).12 Ten National Target Programmes (NTP) for increased control of tuberculosis, leprosy, malaria, dengue fever, and other diseases13 have decreased the number of incidences of communicable diseases enormously. The new National Malaria Control Programme for example — re-launched in 1991 under the management of NIMPE — has decreased malaria incidences enormously. This success is attributable to a change of strategy and more and better targeted funding of the malaria prevention campaign.14 Part of the success has also to do with the fact that the political commitment in the fight against malaria and other communicable diseases has been very high. The concept of NTPs has found support among some

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of the highest ranking policymakers. In 1992, Prime Minister Vo Van Kiet chaired the National Conference on Malaria, and the Vice Prime Minister took subsequent trips to affected districts (Schuftan 2000, p. 7). Despite the enormous success, incidences of malaria and other communicable diseases remain high among certain groups and regions: ”[M]alaria still is a social disease with the great majority of sufferers being underprivileged rural populations, minorities and migrants” (Schuftan 2000, p. 5). In the sector of immunization, rates are lower in the North Uplands and the Central Highlands and highest in the Southeast and the Red River Delta. The differences are not as big as in other sectors (World Bank 2001b, p. 46). However, given the fact that since 2001 funding for the NTP has been provided to the provinces as block grants as part of the wider decentralization campaign, the MOH is losing power to supervize that provinces give sufficient attention to the sector of prevention and public health services (Socialist Republic of Vietnam and World Bank 2005b, pp. 63–64). Additionally, the steering capacity of the MOH is weakened by the fact that patients often turn to private providers for greater privacy.15 This makes it hard to estimate the exact number of patients and the preventive measures which ought to be taken.16 Unregistered migration handicaps the proper implementation of preventive programmes as does the sheer number of private practitioners and health care facilities competing with the public sector (see also chapter 5). Even though on the outside, political commitment in the area of disease control seems to be very strong, on the level of implementation, many loopholes exist. In the case of avian influenza, many people disobeyed the rules of the government, continued eating poultry, hid their pets from government officials, and bribed the police to sneak unvaccinated poultry into the cities. Statements of central government officials and state-controlled news reporters tried to promote an image of a strong central government that had to successfully overcome the resistance of disobedient local governments, ignorant farmers, greedy traders, and reckless consumers of poultry meat (Tuong Vu 2009, p. 24). However, blaming local administrative levels and ignorant citizens leads to a lack of correct information and stigmatization. Consequently, political decisions in the area of prevention and containment of diseases might be inappropriate for actual local conditions (see also chapter 6).

4.5.3  Training of Health Professionals The training of health professionals takes place under the guidance of the Ministry of Education and Training (MOET) and the MOH. The MOET

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defines curriculum guidelines for all higher education, including medicine, while the content of the medical curriculum lies within the responsibility of the MOH (Luu Ngoc Hoat 2008, p. 184). Until 1989, medical education including food and accommodation was officially free of charge. In return, graduates were committed to work for the public sector for a certain amount of time. Since the late 1980s, the government no longer supplies room and board and only partly subsidizes the tuition of students (Bicknell et al. 2001, p. 413). The education of physicians and pharmacists takes place in several medical and pharmaceutical schools in Vietnam.17 Some are under the guidance of the MOH, some under the MOET. Vietnamese medical students enter the university after secondary school. The degree requires six years of preparatory work, clinical theory and practice. Practical training takes place at clinical sites and the expenses are budgeted by the clinic or health care centre (ibid., p. 414). Receiving a certificate as an assistant doctor, nurse, midwife or community health worker requires between one and three years of training. The training takes place in one of the fifty colleges or primary and secondary medical and pharmaceutical schools (Luu Ngoc Hoat 2008, p. 41). Not all provinces have their own secondary medical school; provinces therefore send some of their trainees to neighbouring provinces (World Bank 2001b, p. 128). The educational institutions are afflicted by an incomplete policy framework. Organizational structures are fragmented and financing more than often inadequate. The future of the quality of the Vietnamese education system is especially worrisome since a number of private teaching organizations are entering the system before standards and regulations are actually in place (ADB 2008b, p. 40). Since the late 1990s, the government has pursued reforms in the medical education to make it more community and primary health care oriented: Many young doctors assigned to district or preventive health centres don’t focus on their work, mainly because they feel they lack knowledge and skills to work in those areas, and their contributions are less recognizable than in curative care. Head of District Health Centre (cited in Luu Ngoc Hoat 2008, p. 185)

The ratio of doctors and nurses to the whole population in the public sector has been quite low probably due to the low level of official salaries (see Table 4.1). A survey of the General Statistics Office (GSO) has found out that civil servants gain only around one third of their income from their

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Table 4.1 Key Health Workers in the Vietnamese Health Care System Year Population 1993 2002 2006

71.0 79.7 84.2

Total number of health workers

Doctors/ 10,000 inhabitants

Nurses/ 10,000 inhabitants

Nurse/ doctor ratio

205,045 234,354 271,149

4.2 5.6 6.2

6.2 5.8 6.8

1.48 1.03 1.10

Source: Health Statistical Yearbooks, MOH (1993, 2002, 2006), cited in Luu Ngoc Hoat (2008, p. 42).

salaries (Bicknell et al. 2001, p. 419, footnote 17). Many health workers choose to work in the private sector full time or part-time for extra income, since they see their living costs exploding without a correlating increase of their public salaries (ibid., p. 416). Preliminary findings showed that in Ho Chi Minh City, 6,500 civil servants shifted to the private sector between 2003 and 2008, the majority of which works in the social services (3,034 civil servants working in the education sector; 849 in the healthcare sector and 1,841 in other social service sectors). A similar situation seems to be prevalent in other parts of the country.18 Especially the rural areas are becoming less and less attractive for doctors and nurses, making it impossible to achieve a comprehensive coverage of health workers. The percentage of villages with available health workers has decreased slowly but surely since 2004 (MOH and HPG 2008, p. 13). Of the over 270,000 health workers in the public sector in 2006, approximately eightytwo per cent worked in provinces, districts or communes. However, rural areas normally lack medical specialists, nurses and other health professionals such as college-trained pharmacists, and specialist hospital managers (ADB 2008b, p. 38).19 Since the late 1970s, to work at a government agency yielded some stable income. However, due to the decline of the quality and payment in the public sector, the incentive of having a stable job is not attractive enough to get people to sign up in a rural community (ADB 2008b, p. 46). Negative aspects, such as closed working environment, resistance against improvements by colleagues as well as low payment have made the private sector more attractive.20 Resolution No. 7 of the Eighth Communist Party’s Central Committee was adopted to improve the salaries of civil servants, but up until now has not been implemented properly.21 In 2008, Health Minister Nguyen Quoc

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Trieu issued a plan to change round doctors between central and grassroots hospitals for three- to six-month-rotations in order to overcome the shortages of qualified staff on the district and communal levels (Decision No. 1816/2008/ QD-BYT on the rotation of specialists from upper level hospitals to support lower level hospitals to improve quality of care). The MOH guaranteed to pay for the wages and allowances for those doctors who would be sent from central levels to work at provincial hospitals.22 This decision appeals to the social responsibility and obligations of doctors. However, it is questionable if this measure will be successful. As one health expert said: “Why should a doctor work in the countryside, when he or she can earn ten times the regular salary with private patients in the city?” (Merten 2009, p. 238). The success of teaching provincial and district hospitals more advanced techniques can also be questioned since most of them lack the infrastructure, medical facilities and the human resources to implement innovative technologies.23 So far, there is no comprehensive policy document or long term plan for training the health workforce. The MOH is currently drafting a Law on Examination and Treatment, which would install a medical workforce registration system. It would also regulate the competencies and conditions of practice for private and public practitioners and define the rights of patients. Health workers would be required to complete a course at one of the accredited training institutions or pass a national final examination (ADB 2008b, p. 46). The law would also establish a medical council, which will help to moderate complaints from patients. The expected outcome is improved quality and management of the health workforce. Given the strong private sector, a better supervision of health workers could actually bring about major gains for patients.

4.5.4  Pharmaceutical Production and Distribution In 1989, state subsidies for pharmacies were officially reduced. By now, only around forty per cent of drugs are produced in Vietnam. The relative value of these drugs is even less and is estimated to be around twenty-five per cent. The majority of pharmaceuticals are imported from abroad (World Bank 2001b, p. 106). The MOH regulates import licenses and quotas. However, the MOF allows city wards to set their own price bands, which adds to the pricing confusion.24 The Drug Administration of Vietnam (DAV) is the highest authority for drug management in the country. It is under the guidance of the MOH. It has two support agencies, the Drug Quality Control Institute and the

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Drug Inspectorate. In each province, there is a pharmaceutical department and a Drug Quality Control station that falls under the management of the Provincial Health Authority. At the central level, VINAPHARM is a stateowned corporation responsible for supplying drugs to the entire country. The company, which is based in Hanoi, combines eighteen central and 126 provincial government factories producing drugs. The remaining provincial pharmaceutical enterprises are presently under the control of the Provincial Health Authority. So far, Vietnamese drug producers have focused on generic products that are used for common illnesses (World Bank 2001b, pp. 106–107). The long-term strategy of the government is to make Vietnam less dependent on pharmaceutical imports. A pharmaceutical production plan was thus released in the first half of 2007. It was entitled Development of Drug Industry and Medical Supply Model.25 The aim is to have around seventy per cent of the total value of drugs produced in Vietnam by 2015 and to increase this to eighty per cent by 2020. A further goal is to satisfy ninety per cent of the demand for essential drugs and drugs used for national health programmes. Given the monopolistic structure of the distribution of pharmaceutical products, it is questionable if this goal can be achieved. Of the 4,500 branded foreign drug products available in Vietnam, 1,000 are handled by sole distributors of international pharmaceutical companies (see also chapter 5.4.6).26

4.5.5  Health Management Information System (HMIS) The Department of Planning and Finance inside the MOH is in charge of unifying and managing statistical indicators on health, methods of collection, recording of data, and operating procedures (MOH 2006, p. 15). Information on the health situation in Vietnam is drawn from a number of sources. Aggregated data is normally provided by the GSO, which relies on its own surveys, information from various national health programmes, the communicable disease surveillance system as well as statistical information from other institutions such as the MOLISA, the National Committee on Population, Family and Child Affairs, and the MOF. Each information system and sub-system has separate record and reporting forms and acts relatively independently (ibid., p. 10). The Health Management Information System (HMIS) of Vietnam is still underfinanced, improperly equipped and understaffed. Since there is no separately designated budget line for health statistics (MOH 2006, p. 20) and a very small government budget share allocated to the health sector

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(around US$15 per capita and year), health institutions normally prioritize professional activities over monitoring and supervision. Investment in statistical information work is very modest and irregular, especially in poor provinces and disadvantaged areas. The lack of reliable data throws the whole policymaking process into question. Decision-makers in Vietnam often face the problem of overlapping information from different programmes and organizations. There are also political obstacles to better information systems. Under the current health care system, which relies heavily on formal and informal user fees, some employees of the public health care system are reluctant to introduce health information technology, since it makes revenues and expenditures explicit.27

4.6  Public Financing of Health Care 4.6.1  State Revenues for Health Care The state revenues for public health care are drawn from a number of sources. Besides the high out-of-pocket-payments in the form of formal and informal fees which go directly towards hospitals, health workers and pharmacies, the financial resources available to the Vietnamese government are drawn from individual payments (taxes and premiums), businesses and employers (taxes and premiums), and external aid (mainly ODA). Statistics by the GSO and the MOH normally do not include user fees for health and education collected at the local level (World Bank 2005a, p. 42). According to official figures by the Ministry of Finance (MOF), the biggest source of income are revenues from the sale of oil amounting to 48 per cent of total revenues in 2006. The revenues from SOEs still make up the major bulk of domestically produced national income28 (see Table 4.2). The income from personal income tax (PIT) has increased in absolute terms, but has stagnated in relative terms at around 3.6 to 3.9 per cent of the domestic revenues and at two per cent of the total revenues between 2000 and 2006. The progressive tax regime is applied to income from businesses, wages, and salaries for all residents. The lowest tariff is five per cent for an income under VND 5 million per month, the highest rate is thirty-five per cent for a monthly income of over VND 80 million. Other sources of income are taxable at flat rates such as interest earnings (five per cent), inheritances (ten per cent) capital gains (twenty per cent), or profit from real estate sales (twenty-five per cent).29 Labourers in the formal sector have to pay one per cent of their monthly income and employers two per cent respectively on health insurance premiums. This money goes into the health insurance fund (see 4.6.3 and 4.7.1).

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7.276 7.764 772 2.338 3.021 5.486 26.510 31.571 2.249

4.735 5.802 1.776 1.831 2.713 2.823 23.534 18.954 2.028 90.749

Total

Source: MOF (2009).

25.066

19.692

123.860

63.530

2002

46.233

2000

Domestic Revenues Revenue from Sale of State-Owned   Enterprises Revenue from Foreign Invested   Enterprises Revenue from Non-State Sector Agricultural Tax Individual Income Tax Fees and Charges Revenues from Land, Housing Oil Revenues Import-Export Tax and Value  Added-Tax Grants

Items

152.274

33.845 2.969

10.361 151 2.951 3.279 10.546 36.773

9.942

28.748

78.687

2003

190.928

34.913 2.877

13.261 130 3.521 4.182 17.463 48.562

15.109

32.177

104.576

2004

Table 4.2 National Revenues (in VND billion)

228.287

38.114 3.789

16.938 132 4.234 4.192 17.757 66.558

19.081

39.079

119.826

2005

237.900

40.000 2.500

20.650 85 5.100 3.550 16.650 63.400

27.807

42.243

132.000

2006

281.900

55.400 3.000

27.667 81 6.119 3.885 18.143 71.700

31.041

53.954

151.800

2007

323.000

64.500 3.600

38.347 82 8.135 4.889 21.792 65.600

40.099

63.159

189.300

2008

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Revenues from personal income tax and the social insurance system have been rather modest so far.30 Part of this has to do with the fact that even in the formal sector, social insurance premiums are avoided by only taking the hard salary (often the net salary without any benefits and bonuses) into account.31 Furthermore, the informal sector is still the major source of employment, where state revenues through income tax are harder to estimate and difficult to claim (UNDP 2007a, p. 15).32 Due to the lack of revenues from PIT, the central government relies heavily on general financing of the health and health insurance system, while the local health care facilities additionally draw on formal and informal fees (estimated at around one per cent of GDP). The main purpose of fees is to compensate for the insufficiency of central budget allocations to meet the cost of service delivery (World Bank 2005a, p. 42). On the downside, they are one of the most regressive parts of the Vietnamese tax system (UNDP 2007a, p. 12). As Will elaborates, the lower levels of governmental administration see no incentive under the current structure to decrease local fees and taxes, since they constitute major sources of independence from the national budget. On the other hand, the national legitimacy depends on the loyalty of its local cadres. Since it does not provide for other means of income, it seems reluctant to regulate fees and local resources vigorously (Will 2008). The political response to the problem is further decentralization. Decree No. 10/2002/ND-CP, 16 January 2002,33 grants local and provincial agencies extensive budgetary autonomy by allowing them to manage their own revenue accounts, restructure their staff to increase efficiency, and set administrative expenditure guidelines that are different from those set by the central government. Decree No. 43/2006/ND-CP further expands the accountability and rights of public hospitals.34 The policy instrument shifts financial responsibilities from the national budget to service delivery units and tries to expand service units’ authority in managerial and financial matters. Decree No. 10 and Decree No. 43 likewise are supposed to bring about autonomy to lower administrative levels and decrease the “subsidy-mindedness” of public service entities, “clinging on to the State budget and afraid of accountability and responsibility when given financial autonomy” (Cuvillier and Hoan Van Hai 2002). Meanwhile, the authority to introduce new taxes or to reset the rates for existing taxes has been retained fully by the central authorities. User fees are still regulated by the centre, with Provincial People’s Councils only allowed to decide on their rates (UNDP 2007a, p. 10). Especially health facilities which operate under conditions favourable to the commercialization of services are for the decree, since it provides them with the opportunity to raise extra money. Poorer provinces on the contrary

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attempt to give free health care and education to the poor population of Vietnam who is endangered by the two decrees (see also chapter 6). If not well managed, Decree No. 10 potentially undermines Vietnam’s attempt to bring equality to the health care system. It could provide incentives for health facilities to only serve those able to pay (World Bank 2007b, pp. 49–51). London therefore states that health service providers in poor and remote areas are “unlikely to see many benefits from this form of autonomization, particularly in the short term, as such facilities commonly lack the market opportunities or managerial capacities required” (London 2007, pp. 16–17). The major problem associated with higher degrees of autonomy is highlighted by London: “Evidence suggests that hastily-conceived decentralization schemes can have dire consequences on the quality and accessibility of health services” (ibid., p. 17). Furthermore, even though there has been a delegation of tasks from central to local government units, in the area of planning and management, there is no clear mechanism that promotes the local government’s pro-activity and creativity. Laws and regulations often do not clearly state which tasks are under the central government’s jurisdiction, which are under the local government’s jurisdiction, or are shared by both central and local government units. This leads to a mismatch between fiscal and political independence (Fforde 2003, p. 23). The practice of raising local fees and taxes has become once again contested. In Directive No. 24/2007/CT the government has decided that local administrations cannot raise taxes without legal ground and act on one’s sole discretion. At a meeting of the Central Committee in 2007, it has also been decided that members of the army and the Ministry of Home Affairs have to disassociate themselves from any enterprises which bring personal benefits to members of these two institutions.35 As long as the fiscal decentralization is not accompanied by effective monitoring mechanisms, decentralization will further encourage local healthadministrators and doctors to maximize revenues at the expense of public health interests. The coherence, efficacy, and equity of health service provision might therefore decline even if health expenditures do increase.

4.6.2  State Expenditures on Health Care In comparison to other countries in the region, public expenditure on health36 is on average (see Table 4.3). In absolute terms however the share is still rather low. Between 2000 and 2007, the public spending ratio has increased from 25 to 30 per cent, which is comparably high in Southeast Asia.

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Table 4.3 Comparison of Public Expenditure in Different Southeast Asian Countries Public in % of in % of on on expenditure… GDP GDP Education Education (1995– (2001– in % of in % of 2000) 2006) GDP GDP (1995– (2001– 2000) 2006) Japan Singapore Hong Kong Korea Malaysia Thailand Philippines Indonesia Vietnam

17.9 18.5 16.6 17.6 22.1 17.7 19.1 17.1 25 (2000)

16.9 17.9 18.0 18.6 26.0 17.2 18.7 19.0 30

3.9 3.7 3.6 3.7 5.0 4.3 3.6 1.2 2.9 (2000)

on Health in % of GDP (1995– 2000)

on Health in % of GDP (2001– 2006)

4.0 5.6 3.8 1.2 4.1 2.3 3.0 — 6.3 1.4 4.1* 1.4 2.8 0.5 0.9** 0.5 3.5 0.8 (2000)

6.9 1.1 2.2 — 1.8 1.4*** 0.3 0.3** 0.9

Source: ADB 2008a, * only 2001–2005; ** only 2001–2003; *** only 2001–2004.

The public expenditure on health has increased likewise. However, in contrast to expenditures on education and pensions, the public assignment on health, which is about 4.1 per cent of the total Vietnamese public budget, is still low (Table 4.4). Concerning health expenditures in Vietnam, it is not easy to draw correct conclusions, given the continuous lack of control mechanisms on health revenues and expenditures. Hence, current health expenditures are still obscure. Often figures depend on which source one cites. The WHO (2007a) releases much higher numbers for the national budget on health as per cent of overall state expenditure than the GSO (2007): the number of the WHO is 6.0 per cent in contrast to the 3.17 per cent released by the GSO for 2000. What seems to be clear from the figures is that the expenditures by the central state provide only one source among many others. The public health expenditure amounted to twenty-seven per cent of the total health expenditure in 2005. At least sixty-seven per cent of health expenditures were out-of-pocketpayments including user fees and indirect expenses such as food, lodging, travel and gifts for health workers. Of the twenty-seven per cent of public health expenditures only six per cent came from the central budget, ten per

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4.656 17.844 841 13.221 3.14 12.04 0.57 8.92

4.211 15.432 434 13.425

Public Expenditure on… (VND in billion) Health 3.453 Education and Training 12.677 Population and Family Planning 559 Pension and Social Relief 10.739

Public Expenditure on… (% of Total Public Expenditure) Health 3.17 3.24 Education and Training 11.63 11.89 Population and Family planning 0.51 0.33 Pension and Social Relief 9.86 10.34

Source: GSO (2007); number for military expenditure from CIA (2008).

0.91 3.41 0.06 2.11 2.50

7.608 28.611 483 17.747

262.697 31

839.211

2005

Public Expenditure on… (% of GDP) Health 0.78 0.87 0.87 0.88 0.84 Education and Training 2.87 3.21 3.33 3.73 3.54 Population and Family Planning 0.13 0.09 0.16 0.11 0.06 Pension and Social Relief 2.43 2.79 2.47 2.68 2.42 Military

6.009 25.343 397 17.282

214.176 30

715.307

2004

2.90 10.89 0.18 6.76

2.96 12.63 0.37 9.08

5.372 22.881 666 16.451

181.183 30

613.443

2003

2.81 11.83 0.19 8.07

148.208 28

129.773 27

535.762

2002

108.961 25

2001 481.295

2000 441.646

GDP (VND in billion) Total Public Expenditure (VND in billion) Public Spending Ratio (%)

Year

Table 4.4 Public Expenditure on Health 2007

1.18 3.83 0.05 2.27

3.74 12.12 0.16 7.19

11.528 37.332 489 22.157

308.058 32

1.28 4.13 0.05 2.34

4.10 13.23 0.17 7.50

14.660 47.280 590 26.800

357.400 31

974.266 1.144.015

2006

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cent from the local budget, nine per cent from social insurance premiums, and two per cent from external assistance (ODA) (see Figure 4.2). As Table 4.5 shows, the share of central government expenditure on health has decreased from thirty to twenty-five per cent between 1991 and 2002. This is in line with the overall decreasing share of central government spending as per cent of total government expenditure. This decrease in central share expenditures weakens the steering capacity of the central government. There has been a small increase in health expenditure since 2006. The adoption of Resolution No. 18/2008/NQ-QH12 calls for a greater portion of the annual central budget allocated to health. It states that the growth rate of health spending should be higher than the growth rate of overall spending from the national budget and reserves at least thirty per cent of the state health budget for preventive medicine (MOH and HPG 2008, p. 15). This is a positive sign for the efforts of the MOH in the area of health equity and the reorientation of spending behavior in the sector of health. The resources actually spent on health care in provinces, districts, and communes depend on several factors: the recurrent expenditures of line ministries in each of the provinces; the fees and contributions raised at the local level; the investment programmes undertaken from the central level, and the spending by National Target Programmes (NTPs). Thus, despite limited official revenue autonomy, there appears to be a considerable diversity in the amount of public resources spent in each province (World Bank 2005a, p. 5). According to a report by the World Bank (2000b, p. 48), the MOF and the Ministry of Planning and Investment (MPI) determine the expenditure allocation for health with limited inputs from the MOH. The overall level of recurrent spending on health is determined by projected growth rates of total revenue and of total recurrent expenditures (after subtracting estimated expenditures for new policies such as increased salaries) and the share of Table 4.5 Central-Local Shares of Total Public Health Expenditure 1991–2002 1991 1995 2000 2001 2002

Central Share (in %)

Local Share (in %)

30 41 20 26 25

70 59 80 74 75

Source: Socialist Republic of Vietnam and World Bank (2005b, p. 59).

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10% 6% 2% 6%

Local budget Central budget External assistance Other private

in MOH/HPG 27).Accounts, cited in Source: National(2008: Health MOH/HPG (2008: 27).

Source: National Health Accounts, cited

9%

Social Insurance

Out-of-pocket-payments 67%

Figure 4.2 Sources of Health Expenditures in Vietnam in 2005

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health in total recurrent expenditures. This type of incremental budgeting for the MOH pays little attention to health goals and health priorities set by the MOH. Furthermore, some of the communal expenditures drawn from their own resources (generated through fees and extra payments) are not included in the national budget. This is mainly due to the fact that a comprehensive database which aggregates the four levels into a consolidated statement of expenditures in different sectors is lacking (World Bank 2000b). The MOF allocates budgets for the central health institutions through the MOH. The local health budget is allocated by the provincial Department of Finance (DOF) in form of block grants to the provincial Departments of Health (DOHs). After receiving budget from the provincial DOFs, the provincial DOHs are responsible for further allocating the grants to provincial health facilities, district hospitals, polyclinics, and district preventive medical centres. The budgets of the DOHs, the CHCs and village health workers are allocated by the district People’s Committee (MOH 2006, p. 20). The block grants conceded to the provinces are supposed to depend on the size, disease patterns and other factors. One block grant is normally given for “wages and salaries” and another for “all other operations and maintenance” (S. Adams 2005, p. 9). In addition, the provinces receive funds from the various national health programmes, such as the Expanded Programme of Immunization and the Tuberculosis Programme, which are designed to achieve national standards in key areas (World Bank 2000b). The National Health Accounts (NHA)37 provides relatively complete information on health expenditures on the national level. Data sources show big variations concerning the money spent on health care. Public expenditure on health amounted to VND 8.286 billion in 2002 according to administrative reports, but VND 11.428 billion according to the NHA. In 2003, the administrative reports registered an expenditure of VND 10.181 billion, the NHA VND 13.873 billion. These differences can be explained through several factors. First, many administrative reports do not take the expenditure of other ministries and sectors other than under the direct guidance of the MOH into account. Secondly, many localities do not synthesize the entire amount from grants and loans, especially funding from donors (training and study tours abroad, hiring local and external consultants, procurement of equipment). Thirdly, user fees are normally underreported (MOH 2006, p. 41). There is an official version on how provinces receive their share of the national budget and a second truth: Apart from the official norms, other criteria may be used by MOF during the budget negotiating process. There is therefore a need to make

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transparent the full criteria used in allocating funds to the provinces.… Investment expenditures have previously been more growth than equity oriented, with significant concentration in the growth regions of HanoiHaiphong and Ho Chi Minh City. (World Bank 2000b, p. 19)

This is in line with the findings of Beresford who underlines that government expenditure has so far favoured the “wealthier, more urbanized and industrial provinces” (Beresford 2003, p. 74). A joint publication by the MOH and the Health Partnership Group confirmed these findings in 2008 based on the National Health Accounts of 2005: The 2005 National Health Accounts data show that the Red River Delta and the Southeast regions of the country had the highest spending levels, at VND 211,000/person and VND 196,000/person respectively, while the Mekong River Delta had the lowest per capita national state budget spending on health care at just VND 45,000, or a quarter that of the region with the highest expenditure. (MOH/HPG 2008, p. 41)

Therefore large disparities exist in the money spent within provinces, districts and communes. As S. Adams (2005, p. 9) highlights it is often not clear according to which principles provincial People’s Committees further allocate funds to districts and communes. As the World Bank has found out, the most important aspect of how much a district has available for health care expenditures is not always the need of a district, but the size of the provincial budget and the bargaining power of local politicians (World Bank 1996, p. 55). An analysis of inter district variation in per capita expenditures showed that expenditures of districts depended more on the ability of districts to provide social services than the actual needs (ibid., Annex 2.10, p. 1). Therefore, it was better “to be a poor district in a rich province than a rich district in a poor province” (ibid., p. 55). Estimates suggest that local governments spend more than seventy per cent of their budget on curative care and very little on salaries and preventive initiatives. This penalizes poor people living in remote areas and having to bear the costs affiliated with an inpatient treatment. Less than ten per cent of the budget is believed to be spent on CHCs (World Bank 1995, p. 99; World Bank 2001b, p. 174). Since the major source of income are user fees and drug sales, the resources available to CHCs are therefore dependent on whether they can keep utilization high. This is a difficult in light of the competition it faces by private practitioners and the decline in quality resulting in a vicious circle of lower budgets and lower utilization (Fritzen 1999, pp. 82–83).

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In order to achieve health equity, better reporting mechanisms need to be put in place. Furthermore, the covering up of incorrect financial figures has to be counteracted: While it is not desirable that central controls by the MOH should replace provincial autonomy in expenditure decisions, it is important that mechanisms be developed to provide MOH with adequate information to assess health outputs and outcomes at the local level, so that it can exercise its policy role. In the annual budget allocation document sent to provinces, only an aggregate recurrent budget is provided-not its composition across sectors. (World Bank 2000b, pp. 48–49)

4.6.3  The Health Insurance Fund In 1995, the government decided to establish a health insurance fund to bundle the income from the social health insurance system established in 1992 (see also 4.7). The budget of the Health Insurance Fund (HIF) is composed of income from the compulsory and the voluntary scheme, but also of transfers from the central government. The HIF actually consists of three insurance funds — the fund from the compulsory health insurance programme, the Health Care Fund for the Poor (HCFP), and the voluntary health insurance programme, respectively. Since the introduction of the HIF in 1995, the VSS has faced difficulties balancing its sheet due to political decisions. First official overspending took place in 1996 in twelve cities and provinces. Reasons for the deterioration of funding included adverse selection in the sector of voluntary health insurance, where only sick people joined the HIF. Furthermore, there was also a lack of proper risk pooling among the different schemes and provinces. Up until the late 1990s, risk pooling was done only on the provincial level. In 1998, the government decided to introduce co-payments38 (Decree No. 58/1998/ND-CP39) as a measure to stop the escalation of costs. Patients were now officially required to pay twenty per cent of their costs privately (ILO 1999, p. 11).40 Since 2005, cross-subsidization and risk pooling has been ameliorated. Decree No. 63 of 200541 permitted the VSS to use money from the compulsory health insurance fund to cover medical costs of participants in the voluntary scheme (MOH 2007a, p. 235). As the HCFP scheme is not pooled nationally, the VSS does not need to cover the deficit of the HCFP scheme in one province from the surplus of another; neither is there a mechanism to crosssubsidize HCFP members from surpluses of compulsory or voluntary schemes (see also 4.7.3).

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Since the merger of the VHI and the VSS in 2003, a deficit of one provincial social health insurance scheme can also be cross-subsidized by the surplus of another within the provincial pool. If the compulsory and voluntary health insurance schemes combined have an overall deficit, then the VSS needs to request the Prime Minister to issue a decision on deficit finance. Prime Ministerial Decision No. 2/2003 on Financial Regulations of the VSS requires administrative expenses not to exceed four per cent of the estimated value of the revenue of the social insurance fund per year (MOH 2007a, pp. 28–29). Even though risk pooling and cross-subsidization has increased, the fund has been in a deficit for two years in a row (see Table 4.6). Part of this has to do with the re-launch of the voluntary health insurance scheme in 2005 and the enormous increase in members (see also 4.7.4). In 2010 it is expected that the fund will face a deficit of US$522 million.42 The VSS has therefore lobbied strongly for higher premiums and better control mechanisms of companies and tax payers. Last year, employers owed the VSS up to VND 2 trillion (US$117.64 million) of social insurance premiums. Only recently has the VSS started to sue big corporations in Hanoi and Ho Chi Minh City43 and has been able to lobby for higher state transfers (see also chapter 6).

4.7  The Four Major Schemes of Health Insurance Since 1992, the government of Vietnam has used health insurance to overcome the difficulties it faced in the health care system. It has started with the formal sector, but has moved fast towards including other groups such as children, pupils, poor persons and the people employed in the informal sector. The health insurance system is seen as a possible way of balancing equity and efficiency in the health care system (see also chapter 6). Specific targeted programmes are supposed to lower the unequal use of health care, which has been one of the major downsides of the privatization of the health care system and the few state resources available. Through the use of health insurance and additional interventions in the health system, three major goals are to be achieved: • an increase in the utilization of health care among poor people; • lowering out-of-pocket-payments and costs associated with health; and • improving the quality of services Four major schemes have been installed since 1995 to achieve these goals (see also Table 4.7):

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Table 4.6 Revenues and Expenditures of the Health Insurance Fund (VND in billion) Year

2003

2004

2005

2006

Revenues: ➢ Compulsory Health Insurance Pensioners Workers Meritorious Goups Health Care Fund for the Poor Voluntary health insurance Students Other Voluntary

2.035 1.861 323 1.274 163 99 173 170 2

2.352 2.109 353 1.432 161 161 242 219 23

3.304 2.910 667 1.868 169 205 393 273 120

4.367 3.826 729 2.061 268 767 541 319 221

Expenditures: ➢ Expenditures Inpatient Compulsory Health Insurance Pensioners Workers Meritorious Goups Health Care Fund for the Poor Voluntary Health Insurance Students Other Voluntary

1.187 594 552 218 167 104 61 41 41 —

1.742 864 802 305 246 141 109 61 52 9

2.940 1.568 1.344 477 449 227 189 223 106 117

5.717 3.057 2.296 749 747 325 473 761 211 549

➢ Expenditures Outpatient Compulsory Health Insurance Pensioners Workers Meritorious Groups Health Care Fund for the Poor Voluntary Health Insurance Students Other Voluntary

593 556 197 214 96 48 37 37 —

878 804 245 330 133 96 73 62 11

1.372 1.182 361 494 170 155 189 97 92

2.660 1.990 541 818 259 371 670 241 428

Balance

847

609

363

–1.349

Source: VSS (n.d.).

• • • •

Social Health Insurance (SHI); Health care for children under the age of six; Health Care Fund for the Poor (HCFP); and Voluntary health insurance

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49

Source: VSS cited in Ekman et al. (2008, p. 255) and own compilations.

Total

Voluntary Health 11 • Self employed Insurance • informal sector workers • dependents of CHI- members • students and school children

Students: – Increased utilization 60,000–120,000 VND/ – Reduced out-of-pocket person/year (urban) payments 50,000–100,000 VND/ person/year (rural) Others: 160,000–320,000 VND/ person/year (urban) 120,000–240,000 VND/ person/year (rural)

– No reported impacts

General government revenues

Free Health Care for 11 Children under the age of six

All children under 6 years of age

General government – Increased utilization revenues (75%) and – Reduced out-of-pocketprovincial resources (25%) payments 130,000 VND per person – Reduced risk of and year catastrophic payments

Health Care Fund 18 • Poor, ethnic minorities for the Poor in mountainous areas • inhabitants in disadvantaged communities

Reported Impacts

Pensioners and meritorious people: 3% of minimum salary paid by the government

Financing



Target Groups Formal sector workers: – Increased utilization 3% payroll tax – Reduced out-of-pocket2% employers payments 1% employees – Improved risk protection

Coverage (in % of total population)

Social Health Insurance   9 • Formally employed pensioners • Meritorious people

Programme

Table 4.7 The Four Health Insurance Schemes (in 2007) The Public Provider Network in Vietnam 127

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The system of social health insurance was introduced in 1992 and targeted towards formal sector workers who are additionally covered under a social insurance system. The system provides health insurance and additionally benefits for sickness, disability, and survivorship as well as maternity leave (see Annex 3). People living in mountainous areas were specifically excluded from the scheme, since many of those regions were new economic areas with special taxation and other benefits. There was no established scheme specifically for poor people, but local governments, national and international organizations were encouraged to support poor and vulnerable groups (Ron et al. 1998, p. 91) (see also 4.7.3). Many state enterprises, such as the coalmining, gas, oil, and rubber industries, decided to set up their own insurance schemes. In 1993, three different schemes with different contribution and benefit levels existed. Programmes had parallel structures, which decreased risk pooling and increased confusion, since contribution levels and benefits varied. Furthermore, many companies operating industrial health insurance schemes had little understanding of how to run a health insurance system (Axelson 2007, p. 4). As a result of the implementation of Decree No. 63/2005 and Decision No. 139 (see chapter 6), the coverage for health insurance has increased steadily (see Figure 4.3). In 2006, it covered almost thirty-six million participants, an equivalent of forty-one per cent of the whole population. This increase is mainly due to the decision of the government to cover poor beneficiaries under the Health Care Fund for the Poor (HCFP). Of the almost thirty-six million beneficiaries, around fifteen million are HCFP recipients, around two million meritorious people, eight million students (voluntary insured), two million voluntarily insured otherwise, and 1.8 million pensioners (see Figure 4.4). The health insurance package includes outpatient and inpatient treatment, medicines, consumable materials, transportation (for some particular groups), rehabilitation, as well as high-tech services. The VSS has contracts with 1,913 health care providers over the country for delivering health care services to the insured beneficiaries. 1,807 of those providers are public hospitals and health centres, 106 are private hospitals (VSS 2008).

4.7.1  Social Health Insurance After several piloting projects on health insurance in the provinces of Hai Phong, Thai Binh Bac Thai and Ninh Binh between 1989 and 1992,44 Decision No. 299/199245 for the first time introduced the mechanism of

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1994

1993

Number of Insured in Million

Source: VSS (n.d.).

0

5

10

15

20

25

30

35

40

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

Coverage in % of population Coverage in percent of Total Population

Number of Insured in Million

Source: VSS (n.d.)

0,0%

5,0%

10,0%

15,0%

20,0%

25,0%

30,0%

35,0%

40,0%

45,0%

Figure 4.3 Figure 4.3 Coverage of Health Insurance 1993-2007 Coverage of Health Insurance 1993–2007

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Source: VSS (n.d.).

18% 6%

Source: VSS (n.d.)

Workers Health Care Fund for the Poor Other Voluntary Insured

5%

43%

6%

Pensioners Meritorious People Students

2%

Figure 4.4 Distribution of Health Insurance Membership in 2006

Figure 4.4 Distribution of Health Insurance Membership 2006

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health insurance for the whole national health care system. Both schemes, the compulsory and the voluntary (targeting dependents, informal sector workers, and students), were put under the guidance of the Vietnam Health Insurance Agency (VHIA), which in turn was under the direct leadership of the MOH and observation of the MOF and MOLISA (see also chapter 6). Under the health insurance decree, Vietnamese formal sector workers were entitled to obtain a health insurance card and to receive medical examination or treatment at any health station with the most favourable conditions (Article 13.1). Besides paying one per cent of their income the obligations of the insurance card holders to the VHIA were to “comply with provisions of this regulations on health insurance” and to “keep in good conditions and duly use health insurance cards” (Article 13.2). The compulsory scheme is directed towards active and retired workers in the public sector and private enterprises with more than one worker. The contribution rate combines two per cent paid by the employer and one per cent paid by the employee, thus adding up to a three per cent contribution rate. The contribution rate of meritorious persons, pensioners, family members of army officers and police officers is set at three per cent of the monthly income paid for by the government. The decree has also been applied to the dependants of those workers who joined the health insurance fund. Dependants have to pay a flat rate rather than a contribution based on the salary of the main breadwinner. Therefore, especially workers with low salaries normally do not enroll their dependants (Ron et al. 1998, p. 93). According to Decision No. 299, the sums collected for compulsory health insurance are delivered to provincial and city health insurance agencies. Ninety per cent of these funds are used to pay for medical examinations and treatments, eight per cent for administrative purposes, two per cent for VHIA (1.5 per cent for the back up of local health insurance agencies in case of deficits and 0.5 per cent for administrative purposes). The system has been financially burdened by the fact that it included many state employed pensioners right from the beginning of the implementation. In fact, in the first two years, pensioners constituted more than fifty per cent of the insured population. On average, they induced costs which were twice as high as for other social groups without having previously paid into the fund (Ron et al. 1998, p. 93). The number of private workers contributing to the health insurance fund under the VSS has increased in the last three years from 1.9 in 2005 to 2.8 million in 2007 (VSS 2006; 2008). Up until now, however, the social health insurance scheme faces a lack of members. In 2005, it is estimated

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that there were about eleven million workers, of which only 5.8 million were participating in compulsory health insurance. Strong measures to achieve compulsory enrolment have been lagging (MOH 2007a, p. 238).46 In light of the growing deficit of the HIF (see 4.6.3), Decree No. 58/1998 replaced Decree No. 299/1992 and introduced a twenty per cent co-payment rate for all insured except for meritorious groups such as war invalids and dependents of diseased army men, whose costs were still fully covered.47 Much criticism from the public and mass organizations followed the introduction of this new rule. In 2005, the government responded by issuing Decree No. 63/2005. The decree ended co-payments for compulsory insurance for basic services but retained co-payments (a forty per cent co-insurance) for catastrophic costs above VND 7 million, except for the poor and beneficiaries of the HCFP (see also chapter 6).

4.7.2  Health Insurance for Children under the Age of Six Health insurance for children under the age of six covers around eleven per cent of the Vietnamese population. The scheme was first introduced in 1991 and amended in the 2004 Law on Protection, Care and Education of Children. Decree No. 36/2005/ND-CP of the government laid out the details for implementation of the law. It entitles children under the age of six years to health care free-of-charge at public health care facilities. Most of the children under the age of six are also eligible to receive coverage through the HCFP. Despite the government’s effort, there are still around one million children who are not covered (Lieberman and Wagstaff 2009, p. 68). At the moment the scheme faces financial restraints and implementation problems. The MOH and the government have thus decided to revise the current scheme. The system will most likely be integrated into the existing compulsory health insurance scheme in order to avoid overlapping coverage; currently children carry up to three different cards (healthcare cards, cards for poor people, and cards for children under the age of six). The heads of the Department of Insurance inside the MOH and the Child Care and Protection Department inside MOLISA have lobbied to exchange the free healthcare check-up and treatment cards into the free health insurance cards. The new health insurance cards would not only simplify the card system, but also allow parents to bring children to private hospitals which have a contract with the VSS, rather than having to rely solely on public hospitals.48 In the sector of health insurance for school children and students, the VSS competes heavily with commercial health insurance companies, which attracts young and healthy people under the current situation (see also chapter 5).

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4.7.3  Health Insurance for the Poor Several health insurance schemes for the poor and fee exemption schemes have been operating in Vietnam since the introduction of user fees in 1989. Fee exemption schemes were first introduced in 1994 (Decree No. 95) under the umbrella of the Hunger Eradication and Poverty Reduction Programme (HEPR). They later extended to Programme 135 beneficiaries, a programme targeted towards extremely difficult Communes in “Ethnic Mountainous, Boundary and Remote Areas”.49 Two other decisions targeted fee exemptions to six extremely poor provinces in the North Highlands (Decision No. 186), as well as the Central Highlands (Decision No. 168). In addition, a Strategy for Health Care in the North Midlands and Highlands Region for 1996 to 2020 was launched. These regional programmes provided for exemptions for medical expenditures for ethnic minorities treated in government clinics and hospitals. Most of the programmes also included provision for building health infrastructure, such as commune health care centres (Nguyen Thi Thu Phuong and Baulch 2007, pp. 28–30). Findings indicate that these programmes did not help to reduce the exposure to health risks among poor households. In fact, funding provided for the construction of CHCs under Programme 135 for residents of remote communes may have favoured the better off families, who lived closer to the centre of communes where most facilities were built (Teerawichitchainan and Phillips 2008, p. 13). In 1999, a nation-wide fee exemption scheme for poor people was introduced (Interministerial Circular No. 95/1999, 29 January 1999). Provinces could buy cards for the scheme from the VHIA at VND 30,000 per card per person and year. Since the programme relied heavily on funding from provinces, many poor provinces could not afford to purchase health insurance cards for the poor. Furthermore, the level of funding provided for each beneficiary was inadequate. Despite the scheme, poor people thus continued being disadvantaged due to extra fees (S. Adams 2005, p. 13). In 2002, fewer than two million poor people were covered under the scheme as compared to the originally target four million beneficiaries (Socialist Republic of Vietnam and World Bank 2005b, p. 66). Little was known regarding the quality of the services that were provided. In mountainous areas, sicknesses that had been contained, such as malaria, returned, malnutrition and income gaps increased and the very low salaries of medical staff worsened the quality of health care (Socialist Republic of Vietnam 1993, p. 25). The fact that health care providers such as doctors, pharmacies and hospitals were able to sell their products meant that they tended to focus on high-end services and did not focus on the poor. Up until the early 2000s, a more pro-poor allocation of state funds had not been achieved.

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In recent years, the government has put much emphasis on establishing a Health Care Fund for the Poor (HCFP) under Decision No. 139 of October 2002.50 The decision is finally supposed to make the distribution of government health spending more pro-poor (Socialist Republic of Vietnam and World Bank 2005b). The fund provides free access to health services and drugs for poor inpatients and outpatients. The fund integrates the existing schemes of fee exemptions. This measure is supposed to overcome inconsistencies resulting in a low coverage rate. Beneficiaries of the HCFP are all poor as identified by the national poverty line. They include all people living in communes of Programme 135, all ethnic minorities in the Central Highlands (five provinces) and the North Uplands’ most disadvantaged provinces (seven provinces) (see also Annex 3). The HCFP is managed by the Provincial Fund Management Boards and chaired by a vice-chairman of the provincial People’s Committee. The number of beneficiaries eligible for the HCFP is 14.3 million people, which is about seventeen per cent of the national population. Urban poor, who do not have legal permanent residence status, are excluded. In December 2003, it was reported that 3.6 million health insurance cards had been issued from the HCFP and that eleven million people had benefited (Axelson et al. 2005, p. 9). Several measures have increased the utilization of health services among poor people and decreased out-of-pocket-payments. The per capita allocation of the fund has slowly increased from VND 50,000 to VND 130,000 per person and year due to the overall increase in funding. Under Decree No. 63/2005 all Decision No. 139 (Health Care Fund for the Poor) beneficiaries were transferred to the compulsory scheme of the VSS in order to better monitor them (which were formerly covered under province-level direct reimbursement schemes). It also introduced coverage of transportation costs of the poor on referral. Furthermore, the HCFP fee exemption scheme was the first one, for which the government provided the majority of funding (seventy-five per cent). If a province is poor and cannot attract extra money from other sources, the local government is supposed to receive the rest of the money (twenty-five per cent) from the central government. One improvement was also made through the change in reimbursement. Until 2005, two ways existed for the Provincial Fund Management Boards (PFMB), which administer the HCFP, to access the health cards: they could either enroll HCFP beneficiaries in the social health insurance system (VSS reimbursement) or manage the risk themselves by directly reimbursing providers (direct reimbursement). In the former case, the provinces purchased the health insurance cards from the VSS. In the direct reimbursement

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mechanism, beneficiaries received a free health card to use the HCFP. The provinces reimbursed facilities directly out of government funds without any interference from the VSS and the MOH. The provinces tended to favour the direct reimbursement method for beneficiaries, which gave more autonomy and flexibility to the provinces, but on the other hand also reduced the monitoring capacity of the MOH. The World Bank raised concerns about this form of administration: the enrolment of the beneficiaries into the health insurance system seemed to be more approachable for poorer provinces. The VSS thereby had the main administration to bear, while the direct reimbursement method required between five to seven persons to do this work (Axelson et al. 2005). Another concern from the beginning was that the method of direct reimbursement would duplicate administrative structures taking into consideration that every province already had a representative office of the VSS (Socialist Republic of Vietnam and World Bank 2005b, p. 67). The World Bank together with other donors therefore made the recommendation to encourage provinces to purchase health insurance cards for the poor rather than reimburse healthcare providers directly. In 2005, a government directive updating Decision No. 139 phased out the direct reimbursement method (Wagstaff 2009). So far, there has not been any standardized evaluation of the health care that beneficiaries of Decision No. 139 receive (Socialist Republic of Vietnam and World Bank 2005b, pp. 66–68). However, smaller surveys show some of the difficulties: A survey of 772 households conducted in two provinces in Vietnam, Hai Duong and Bac Giang provinces during December 2004 and January 2005, revealed that many poor people still do not use health facilities due to indirect financial constraints such as transportation, food, drug, ignorance about the content of the scheme both on the side of receivers and the people in charge and the low ceiling of the scheme (Axelson et al. 2005: 20). Although it continues being difficult to correctly identify the beneficiaries, the survey revealed that health care utilization among poor people had increased and out-of-pocket-payments could be lowered. Wagstaff (2009) actually doubts that utilization has changed much, but also emphasizes that out-of-pocket payments have decreased. In 2005, the MOH proposed to the government to support the near poor for two additional years after having moved above the poverty line in order to avoid people from falling back into the poverty gap (Vietnam Health Financing Group 2006). This recommendation was taken up in Decision No. 289/QD-Ttg.51 Fifty per cent of the health insurance premium for members of near-poor households enrolling in the voluntary health insurance

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scheme is covered by the government (see also next section). As for the implementation of the scheme, Lieberman and Wagstaff see an instant need for the government to bring “recalcitrant provincial governments” into line and assure that all Decision No. 139 beneficiaries are actually covered by the health insurance scheme (Lieberman and Wagstaff 2009, p. 92).

4.7.4  Voluntary Health Insurance At the moment around eleven per cent of the whole population is covered by a voluntary health insurance scheme of which more than seventy per cent are students and pupils. This means that of all students and pupils in Vietnam around forty-one per cent were covered by voluntary health insurance in 2005 (VSS 2006, p. 5). Around 2.8 million people are regular voluntary health insured. Voluntary health insurance was first introduced like the compulsory scheme in 1992. The voluntary health insurance was implemented to introduce the health insurance to the informal sector. However, it concentrated on students and pupils, among which adverse selection was believed to be low (Xu et al. 2006, p. 3). In 1994, the first implementation regulations were issued (Circular No. 14). School children over the age of six were insured by Bao Viet — the sole and largest State-owned insurance company in Vietnam until the mid1990s. Contributions were collected by schools and kindergartens. The relatively high number of voluntary insured can be easily explained given the fact that normally the school or kindergarten board decided whether or not voluntary health insurance was available in the name of the whole facility. The voluntary health insurance was therefore voluntary only by name. Attempts to install voluntary health insurance schemes among the informal sector remained at a pilot stage for a long time. Farmers could get a voluntary insurance to which they contributed thirty and provincial governments seventy per cent (S. Adams 2005, p. 13). However this scheme only really came into effect in 2003 when the Implementation Circular No. 77/2003/TTLT-BTCBYT was adopted. An enrolment threshold was set at a minimum thirty per cent of total uninsured from a community or an association in order to increase risk pooling in a certain location. Furthermore, it was only implemented in two communes of each province and a co-payment of twenty per cent of all medical expenses was required. In 2005, contribution collection and issuing cards was started nationwide (Joint Circular No. 22/2005/TTLT/BYT-BTC of 24 August 2005). In contrast to Circular No. 77, Circular No. 22 allowed voluntary health

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insurance in every commune. Furthermore, no co-payment was any longer required. The scheme stated an annual fee from VND 80,000 to VND 140,000 for urban areas, and between VND 60,000 to VND 80,000 for rural areas. For pupils and students, insurance fees varied from VND 35,000 to VND 70,000 for urban areas to VND 25,000 to VND 30,000 for rural areas per person and year.52 As the implementation agency, the VSS was assigned to distribute ninety per cent of the fund for disease treatment, two per cent for propaganda and eight per cent for commission paid to collecting and certifying issuing agencies. Household members were allowed to pay voluntary health insurance premiums every three months, six months or twelve months, while students and pupils paid premiums once or twice a year or once for the whole course of study. As a consequence of the new circular, the number of voluntary insured — others than school children and students — quickly rose from around 315,000 in 2004 to 1.3 million in 2005, increasing the number of voluntary insured in total from 6.4 to 8.8 million (VSS 2006, p. 4). Administrative hurdles such as a “ten per cent rule”53 prevented more people from joining. Furthermore, the complicated reimbursement mechanisms overburdened the administrative capacities of the hospital staff. Criticism among the population was quite widespread.54 As a consequence to criticism by some members of the National Assembly and wide outcry in the press and public, the prime minister gave the promise to end the “ten per cent rule”; a decision which under the impression of the VSS seemed poorly conceived and not affordable.55 As the health fund had already been in a deficit, in autumn 2006, the VSS decided to stop the issuing of new cards. This measure even increased the outcry in newspapers and among the population and induced the government to force the VSS to reactivate the issuance process. Joint Circular No. 06/2007/TTLT-BYT-BTC56 issued by the MOH and MOF on 30 March 2007 was supposed to overcome some of the shortcomings of the existing voluntary scheme by raising the contribution rates,57 while the mode of payment remained. However, only six months later, Deputy Health Minister Nguyen Thi Xuyen had to admit that the Circular and its stated premiums did not match the real costs of health care per person and had to be readjusted.58 In January 2008, once again the premiums therefore were increased.59 The MOH also tried to make the scheme more family-friendly by giving a ten per cent reduction on the premium for the third member of the family, twenty per cent for the fourth and thirty per cent for every additional member after that. Since the premiums still did not match the actual costs of around VND 900,000 per patient/per year, the government

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had to make the promise towards the VSS that it would subsidise the scheme to the extent of VND 800 billion (around US$50 million) for every one million health insurance cards issued.60 Measures to support the near poor were implemented more vigorously since 2008.61 The province of Bac Ninh started to pilot subsidies for the near poor in 2006. Approximately 10,000 people were entitled to the subsidy since their income was less than between VND 200,000 and 260,000 per month in rural and between VND 260,000 to 360,000 per month in urban areas. The beneficiaries were picked at the ward or commune level. The list of beneficiaries was approved by Communal People’s Committee followed by the District Department of MOLISA; after that the VSS issued cards for those identified (ILO 2007b, p. 50). The experience gained from the pilot study was then used in Prime Ministerial Decision No. 289/QD-TTg dated 18 March 2008. According to the decision, the government made the commitment to pay for half of the premiums of ethnic groups, social welfare targeted households, poor and near-poor households.

4.8  Conclusion As the following chapter has demonstrated the Vietnamese health care system has several path dependent elements including a number of hospitals, medical schools and national institutes as a legacy from the French colonial time. In addition, the health care system is based on a large network of Commune Health Centres (CHCs), which came into existence after the Communist seizure to power. The outcomes of the Vietnamese health care system are influenced by various public and semi-public actors. In fact, the Vietnamese state is no unified, clearly bounded entity able to rule and implement (cf. Migdal 2001). Public actors interact, but practices are often not harmonized. All actors inside the public provider network try to interpret the core beliefs in a way which is most suitable in their opinion. The struggle over secondary beliefs takes place in an environment that lacks financial resources and the rigor to implement the rules and regulations, which have been put into place. Richer provinces have been more successful at dealing with decentralization and autonomy. Since the focus of health care spending still lies on the curative system, rural areas lag behind in terms of available health staff and resources. Block-grants to the provinces for National Target Programmes (NTP) in prevention and specific diseases such as malaria, tuberculosis, and dengue fever, have been given to the provinces thereby allowing them more flexibility in spending and targeting. However, by cutting down on its own power, the

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government has also lost some of its ability to control the implementation of the various NTPs. Fund flows from the central government to provinces are split along different budget lines. The double structures of the MOH and its local branches — the DOHs — on the one hand and institutions for the NTPs under the guidance of the MARD and MOLISA on the other hand weaken the ability of the MOH to streamline and to control the outcome of its social interventions. Intra-elite struggle occurs due to strategic issues, but also since some actors are primarily focusing on collecting and distributing state-controlled benefices among patronage networks. Limited resources are deployed from moment to moment to most effectively maintain control and loyalty instead of being focused on the poorest households. Resource exchanges occur within political party structures or patrimonial networks, and engage primarily elites in charge of these structures. Decentralized structures leave much room to People’s Committees to implement only those regulations, which are in favour of their own goals. This practice is augmented by unrealistic and wrongheaded national assignations. Hence, the informal smoldering struggle over resources is enhanced by cumbersome procedures that try to guarantee the redirection of health revenues and budgets to lower levels of the health care system (see also chapter 6). In the area of health insurance, the government and the MOH struggle to increase coverage among all groups of society and decrease the amount of complicated procedures. Even though many obstacles are still in the way, some of the results show a positive trend. The introduction of the HCFP for example seems to have increased the utilization of health care among the poor and decreased out-of-pocket-payments. In other sectors such as the voluntary health insurance scheme, the MOH is making efforts to achieve health equity, but also risks of jeopardizing the whole project. Voluntary health insurance is currently financially unsustainable. At the moment, it is also unlikely to bring the government closer to attaining the goal of universal health insurance coverage, because it only attracts poor and very sick persons. Hence, for the emerging middle class, voluntary health insurance is no alternative to common forms of risk management such as borrowing money and or effecting a private insurance scheme (see also chapter 5). This leaves only the most vulnerable willing to join. The political will to achieve universal coverage is at hand inside some actors among the MOH. However, core beliefs of the central government about health equity meet political realities on the ground, where financial restraints and different priorities are a hard, but true reality. Political maneuvering with the twenty per cent rule and other policies demonstrate

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the political difficulties enshrined in the whole project of achieving universal health insurance (see chapter 6). The sector of prevention seems to be somewhat more successful in achieving nationally set health objectives for more health equity. Part of this probably has to do with the fact that the whole subject is less complicated than health insurance and more strictly follows the logic of a centralized administrative system. Part of it could also be attributed to the fact that the sector of prevention is seen by political decision-makers as an arena in which they can demonstrate their strength and attract positive media coverage. Besides putting control mechanisms in place, the government needs to press ahead with the public administration reform and especially with the reform of wages for civil servants, which has been unresolved for a long time. Otherwise the public health care system will see another cutback. In the absence of institutional mechanisms to control politics and enforce policy, much continues to depend on the political personality in each location as well as the role other non-state actors can play in the provision of social services.

Notes

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Much more is known about the situation in North Vietnam than the one in South Vietnam. It is questionable if all statements are thus equally applicable to the South. In 1887, the Indochinese Union consisted of the areas of Tonkin in the North, Annam in the centre, Cochinchina in the South (making up what is now Vietnam), Cambodia, and Laos. For more information on the French colonial time see Brocheux and Paris (1995). In 1913, Cochinchina had thirty-three registered hospitals, infirmaries and dispensaries, Annam twenty and Tonkin forty. Most of the hospitals were based in urban areas, while dispensaries and medical posts were stationed in the countryside (Monnais-Rousselot 2002, pp. 155–56). Statement of Wells Klein, member of the Subcommittee Study Mission to South Vietnam (1973). Relief and Rehabilitation of War Victims in Indochina. Hearings of the Subcommittee on Refugees and Escapees, Part 4: South Vietnam and Regional Problems. Hearings of August 1, 1973. Senate Committee on the Judiciary. Washington D.C., US Government Printing Office, (accessed 1 July 2009). Appendix 1: Other Donor Assistance to Health and Social Welfare Needs in South Vietnam and Laos (1973): Relief and Rehabilitation of War Victims in Indochina. Hearings of the Subcommittee on Refugees and Escapees, Part 4: South Vietnam and Regional Problems. Hearings of August 1, 1973. Senate

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Committee on the Judiciary. Washington D.C., US Government Printing Office, (accessed 1 July 2009), pp. 59–64. The minimum monthly salary for civil servants in the medical sector has been increased to VND 650,000 (around US$37) from VND 540,000 (around US$31) after thousand civil servants went on strike last year. Vietnam Business Finance News: “Vietnam to raise minimum state salary by 20%”, 06/04/2009, (accessed 15 August 2009). Health facilities can pay bonuses and allowances on top of salaries, which is only significant for staff of hospitals at central level and hospitals in more affluent areas (World Bank 2001b: 128). Due to the comparatively low wages in the public sector, medical personnel and pharmacists prefer to remain in urban areas, where there is a potential market for extra income through private practice (Dieleman et al. 2003) (see also chapter 5). Viet Nam News: “District hospitals struggle to keep up”, 07/08/2008, (accessed 1 July 2009). Viet Nam Net: “Hospital overload a pressing issue”, 03/02/2009, (accessed 1 July 2009). Prime Minister of Vietnam: Decision No. 47/2008/QD-TTg, 2 April 2008, “On the scheme on investment in the construction, improvement, upgrading of district-level general hospitals and inter-district areas using government’s bond and legal capital resources in the period 2008–2010”; cf. also Viet Nam Net: “Meeting discusses healthcare equality”, 14/04/2008, (accessed 15 August 2009). The national broadcaster VTV 2 has started a programme on the proper use of drugs on TV. Other mass TV campaigns include raising awareness of HIV infection among young people through series such as a House with Many Windows, which has been broadcasted on national TV between September to November 2008, and HIV-negative starring Miss Vietnam 2006 Mai Phuong Thuy. See East Meets West Foundation: (accessed 1 July 2009). The proportion of districts covered by the national tuberculosis programme for example increased from forty per cent in 1986 to almost one hundred per cent in 2000 (N. T. Huong et al. 2005, p. 152). The ten NTPs combined are also referred to as the National Programme to Eliminate Social Diseases, Dangerous Epidemics and HIV/Aids. In 1991, Vietnam’s government changed its strategy from mass spraying of the pesticide DDT to a malaria control approach, which gave more funding to the campaign. The government also supported the distribution of drugs and mosquito nets and better targeted insecticide spraying. Furthermore, much emphasis was put on health education in cooperation with village heads, Women’s Union

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cadres and commune health staff. Funding increased from US$540,000 in 1991 to US$6.3 million in 1995 (Schuftan 2000, pp. 3–7). 15 In recent years HIV/Aids is fast moving from injection drug users (IDU) to female sex workers and through them to non-injection clients and their partners. Sex workers and HIV/Aids as such is highly stigmatized as social evils and forced into illegality. Women from rural areas only occasionally selling sex and female sex workers using the internet and telephone for arranging meetings remain hidden in most statistics. Numbers of sex workers are therefore often underestimated (Nguyen Thu Anh et al. 2008; Johnston et al. 2006, p. i17). The question which impact the private sector has on prevention in other areas such as tuberculosis control, has to be analysed against the background of many public practitioners also operating in the private sector (moonlighting of public-private practitioners) (Lönnroth et al. 1998). The reporting of illnesses might therefore be better than expected. The perception of stigmatized diseases such as HIV/Aids, however, probably leaves certain groups such as women under-detected and therefore under-protected (Nguyen Thu Anh et al. 2008). Pathfinder International, which has been active in the sector of HIV/Aids prevention since 2000, highlights the fact that in recent years the stigmatization of people living with HIV/Aids has been somewhat reduced: “An important shift in paradigm is gradually occurring, with efforts to emphasize harm reduction approaches, rather than stigma and discrimination linking the disease with “social evils” (Pathfinder International 2006). 16 It has been estimated that notified cases represent only about sixty to seventy per cent of all actual tuberculosis incidences in Vietnam; cf. MOH (1996), cited in Nguyen Hoang Long et al. (1999, p. 392). Under-detection is especially widespread in the Central Highlands and North Western provinces. Fortunately, an incentive system, which has been introduced in 1996 has increased the case detection and treatment supervisions. Under the system, health workers in the lowland receive US$0.70 for each positive smear and US$3.50 for each tuberculosis patient cured (Nguyen T. Huong et al. 2005, pp. 152–55). 17 The universities Hanoi Medical University, Hanoi School of Public Health, Hanoi Odonto-Stomotology University, Traditional Health and Medicine University, Hai Phong Medical University, Hai Duong Health Technical University No. 1, Nam Dinh Nursing University, Thai Binh Medical University, Hue Medical School, Can Tho Medical and Pharmaceutical University, Tay Nguyen Medical Faculty, Thai Binh, and Ho Chi Minh Medical and Pharmaceutical University are under the guidance of the MOH. The institutions operated by the MOH train around seventy per cent of all physicians. Thai Nguyen Medical University, Hue Health and Medicine University, Da Nang Medical University, Medical Faculty of Tay Nguyen University are under the chairmanship of the MOET. Pham Ngoc Thach Medical University is under the guidance of the People’s Committee of Ho Chi Minh City. The Military Medical University is under the leadership of the Ministry of Defence (MOH 2007a, MOH 2008).

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The government is trying to reduce the number of civil servants (Resolution No. 16/2000/NQ-CP, Resolution No. 09 and recently Decree No. 132/2007/ ND-CP). However, in contrast to the attempt to release older and less skilled workers, most of the civil servants resigning are highly qualified. 19 Representation of women and ethnic minorities in leading positions in the health service is rather low. Few national institutes or departments are headed by women, the Department of Health Insurance inside the MOH being an exception. The representation of ethnic minorities among health personnel varies greatly in different provinces. Some ethnic groups seem to be better integrated into the Kinh society and to be represented among health personnel, while others are highly marginalized (World Bank 2001b, pp. 125–26). 20 Chao Vietnam: “HCM City: Thousands Of Gov’t Employees Quit Jobs”, 15/07/2008, (accessed 10 August 2009). 21 Thang Van Phuc: “On the ‘Resignation Wave’ of Civil Servants”, Communist Party Central Theoretical Council, 05/09/2008, (accessed 1 July 2009). 22 Vietnam News Agency: “Doctors to work rotationally at central, rural hospitals”, 07/07/2008, (accessed 1 July 2009). 23 Viet Nam Net: “Doctor rotation cuts bed overload, brain drain”, 16/04/2009, (accessed 1 July 2009). 24 Asia Times Online: “Vietnamese feel the pinch of rising drug prices”, 16/07/2003, (accessed 1 July 2009). 25 Prime Minister of Vietnam: Decision No. 43/2007/QD-TTg, 29 March 2007, Approving the Scheme on developing Vietnam‘s pharmaceutical industry and building a model drug supply system in the 2007-2015 period, with a vision towards 2020, (accessed 15 August 2009). 26 Asia Times Online: “Vietnamese feel the pinch of rising drug prices”, 16/07/2003, (accessed 1 July 2009). 27 Thanh Nien News: “HCMC medicine man-IT expert hopes to make hospitals paperless”, 08/01/2008, (accessed 1 July 2009). 28 One of the major positive changes since the late 1980s related to SOEs has been that the system of negotiated payments from the SOEs to the government have been replaced by well-defined tax-obligations (Chi Do Pham and Duc Viet Le 2003, p. 37). 29 From January 2009 on, each taxpayer is given VND 4 million a month allowance and US$1.6 million a month for each dependant (children under the age of 18

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eighteen, unemployed spouses, the elderly, and unemployed parents) that he or she may have. This means taxable income is that which remains from the “raw income” after deducting personal and dependant allowances, which were designed to take into account the financial burden each taxpayer has to bear in supporting his family. Vietnam Financial Review: “A Taxpayer is born”, 14/10/2008. In November 2007, the first law on personal income tax (PIT) was adopted. Several kinds of income are subject to taxation: wages and salaries, incomes from business and production activities, returns on capital investment, gains from capital transfers, and gains from real estate, royalty, lottery winnings, franchising, inheritance, and gifts. Interest earnings (except on bank deposits and life insurance policies), dividends, capital gains on sales of stocks and bonds, inheritances (in excess of VND 10 million) are for the first time taxable in Vietnam, others such as tax on the transfer on land have so far been regulated under different jurisdictions. Vietnam Financial Review: “A Taxpayer is born”, 14/10/2008, (accessed 15 August 2009). In the health sector it is estimated that in 1996, bonuses constituted an average of thirty per cent of total staff income across all hospitals, with the proportion being as high as forty-six per cent for central general and provincial specialty hospitals (World Bank 2001b, p. 81). Lieberman and Wagstaff (2009, p. 98) propose that Vietnam should introduce a fully fledged property tax, which would have the twin merits of being strongly progressive and causing less distortions in economic behaviour than taxes on income, which normally discourage formalization. Government of Vietnam: Decree No. 10/2002/ND-CP, On financial regime applicable to public-service units with revenues, 16/01/2002, (accessed 15 August 2009). Government of Vietnam: Decree No. 43/2006/ND-CP, Providing for the right to autonomy and self-responsibility for task performance, organizational apparatus, payroll and finance of public non-business units, 25/04/2006, (accessed 15 August 2009). Bill Hayton: “Vietnam cuts army business links”, BBC, (accessed 1 July 2009). Public expenditure on health refers to expenditure on health care incurred by public funds. Public funds are state, regional and local government bodies and social security schemes. Public capital formation on health includes publiclyfinanced investment in health facilities plus capital transfers to the private sector for hospital construction and equipment (OECD 2001). The NHA first emerged in the United States and is now a tool used in many low and middle income countries. It is supposed to provide a systematic and comprehensive picture of resource flows in a country’s health system for a given period. For further details see Berman (1997).

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Co-payments are a fixed amount or percentage (also called co-insurance), which has to be paid for a health care service privately (OECD 2000, p. 155; Ruger 2006, p. 633). 39 Government of Vietnam: Decree No. 58/1998/ND-CP, promulgating the Medical Insurance Regulation, 13/08/1998, (accessed 15 August 2009). 40 Vietnam Economic News: “Vietnam: New Health Insurance Regulations”, 24/08/1998. 41 Government of Vietnam: Decree No. 63/2005/ND-CP, Promulgating the Medical Insurance Regulation, 16/05/2005, (accessed 15 August 2009). 42 Viet Nam News: “Health insurance cost to increase”, 20/04/2009, (accessed 1 July 2009). 43 Viet Nam Net: “Many companies in social insurance premium debt”, 30/03/2009, (accessed 1 July 2009). 44 For further information on pilot projects on health insurance in Vietnam see Carrin et al. (1993). 45 Council of Ministers: Decree No. 299-Host dated 15 August 1992, Regulations on health insurance. 46 There are debates on whether or not to force formal sector workers to enrol their families, which would increase the membership of the VSS by up to three million people (Lieberman and Wagstaff 2009, p. 93). However, there is also a possibility that parts of the economic sector slid into informality. One enticement would be to have a lower contribution rate for people joining the formal sector (Lieberman and Wagstaff 2009, p. 95). The contribution rate could be close to zero in the first year of employment and rise to the regular contribution rate over a period of for example five years. 47 Vietnam Economic News: “Vietnam: New Health Insurance Regulations”, 24/08/1998. 48 Viet Nam News: “Nation revises healthcare card system for children under six”. 08/07/2008, (accessed 15 August 2009). 49 The first phase of Programme 135 was launched in 1998 (135/1998/QĐ-TTg), the second in 2006 (07/2006/QĐ-TTg). 50 Decision 139/2002/QD-TTg of the Prime Minister on Health Care for the Poor, 15/10/2002, [Quyeát ñònh cúa thú töôøng chinh phu Soá 139/2002/QĐ-TTg: Veà vieäc khám, chuõa beänh cho ngöôøi nghèo]: (accessed 1 July 2009). 51 Decision No. 289/QD-Ttg, 18 March 2008, on policies supporting ethnic minorities, social policy households, poor and near-poor households and fishery households. Cf. Nguyen Khanh Phuong (2009, p. 128). 38

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People who have participated for more than twenty-four months consecutively can get a maximum payment of VND 10 million per person and year for heart surgery, VND 12 million per person and year for an artificial kidney, VND 300,000 per person and year for tetanus injection, animal biting, and VND 1 million in case of death. 53 The regulation provided that entire families not individuals and at least ten per cent of a district’s or ward’s population had to buy voluntary health insurance in order to increase risk pooling and decrease adverse selection. 54 VN Express: “Mua baœo hieàm y teá töï nguyeän khó nhö… lên trôΩi [To buy voluntary health insurance is more difficult than… to get in heaven]”, 27.12.2005, (accessed 1 July 2009). Tuoi Tre: “Baœo hieàm y teá töï nguyeän: Ai cuõng… than phieàn [Voluntary health insurance: everyone… complains]”, 27/06/2007, (accessed 1 July 2009). 55 Personal interviews with members of the VSS, participatory observation at training workshops of InWent, 7-11/05/2007 and 10-13/12/2007. 56 This Joint Circular replaces Joint Circular No. 22/2005/TTLT-BYT-BTC of August 24, 2005. 57 The Circular increased the premium to between VND 160,000 and 320,000 for urban inhabitants, to between VND 60,000 and 120,000 for pupils or students studying in urban areas, to between VND 120,000 and 240,000 for rural inhabitants, and to between VND 50,000 and 100,000 for pupils or students in rural areas. 58 Viet Nam News: “Health Insurance Made Voluntary”, 12 December 2007, p. 4. 59 The contributions were increased to VND 320,000 for urban inhabitants and VND 240,000 for rural inhabitants; VND 120,000 for pupils or students studying in urban centres and VND 100,000 for pupils or students in rural areas per year. Viet Nam News: “Government hikes voluntary health insurance fee”, 17 January 2008, p. 16. 60 Viet Nam News: “Government hikes voluntary health insurance fee”, 17 January 2008, p. 16. 61 Former circulars had already stated that provincial people’s committees should allocate budget to the coverage of the near poor, however in reality up until 2006 no action had been taken (VSS 2006, p. 6). 52

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5 THE PRIVATE PROVIDER NETWORK IN VIETNAM

Due to some of the deficits of the public provider network, the private provider network has been able to profoundly alter the welfare outcome in Vietnam. The private provider network comprises various actors including the family, the household, the voluntary sector and the market. In the light of the current lack of public services, the family has remained a strong social network of trust for most Vietnamese. In many cases this form of risk management through saving and borrowing works better than public services. In fact, in coherent communities, informal risk sharing seems to be preferred to voluntary health insurance. However, especially the poorest households have been unable to overcome the health poverty trap, because they have less access to information and social networks outside their immediate environment. Many Community-Based Organizations (CBOs) provide risk sharing in case of illnesses through savings schemes. However, in very poor areas such as the isolated ethnic minority villages in the North, among the urban poor, or in the natural disaster ridden Mekong Delta, the availability of community help is limited by a simple lack of means. Non-Governmental Organizations (NGOs) cooperating with mass organizations have been quite active in establishing community-based micro-insurance and savings schemes as well as voluntary health insurance for rural and urban poor. However, due to the lack of proper regulatory guidelines, NGOs such as the two main semi-formal micro-finance institutions, Tao Yeu May Fund (TYM Fund) and the Capital Aid Fund for the Employment of the Poor (CEP), work in a grey area. This guarantees them a certain autonomy, but also exposes them to the arbitrariness of the local administration. Furthermore, many donors 147

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and International Non-Governmental Organizations (INGOs) are reluctant to provide money under the current precarious conditions. While INGOs and donors have more financial means than the Vietnamese NGO sector, the fragmentation is quite high and coordination thus difficult to achieve. The Official Development Assistance (ODA) to Vietnam now accounts for less than ten per cent of public spending on health care and two per cent of all health expenditure respectively. The donor structure and the provision of ODA have changed drastically. Until the end of the 1990s, the Swedish International Development Cooperation Agency (SIDA) and the UN organizations the United Nations International Children’s Emergency Fund (UNICEF), the World Health Organization (WHO) and the United Nations Population Fund (UNFPA) provided the majority of all external health care assistance in the form of grants. In recent years, the World Bank and the Asian Development Bank (ADB) lead in terms of financial assistance to the health care system, but also in political negotiations. This is not to say that donors such as the SIDA and the UN organizations have necessarily lost ground. However, more than ever they need to find niches which allow them to influence policy. One of the major problems in terms of the donor community is its high degree of fragmentation. Even though the Paris Declaration has demanded better donor harmonization, bilateral donors are still bound by the legislation of their home country and therefore often lack options to coordinate with other donors in Vietnam. The different procedures and flow mechanisms pose a major strain on the Ministry of Health (MOH). This reduces the impact the donor community has. Even more than the voluntary sector, the for-profit sector has been able to alter the welfare outcome in Vietnam. Private pharmacists, pharmaceutical companies and health facilities, which were expropriated and forbidden in the 1960s and 1970s, gained momentum in the informal market sector in the late 1970s. By the end of the 1990s, the number of private health care facilities and practitioners exceeded the number of Communal Health Centres (CHCs). Private providers are often staff or retired staff of the public health system working outside their normal working hours. They have established a kind of semi-public sector, privatizing the public system from within (cf. also chapter 4). The blurry relation between the public and the private sector puts major restraints on the public health care system. Even though the quality of private practitioners is not necessarily better, most of them offer better working hours and more flexible modes of payment. As a consequence, the private sector has a very large clientele. As the government is not able to fully regulate and monitor the practices of private or semi-private practitioners, the marketization has negative side-effects. Fees have increased as has the resistance to drugs.

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The lack of legal regulation reflects the position of the government towards private actors: they are volunteers who carry out repairs, but not partners with documented rights (Will 2008, p. 13). This makes informal decision-making and implementation an important — often even the only way — in which “things are done”. Since poor, vulnerable and disadvantaged people are less able to access social networks, credit and information, they will be left behind if the state does not intervene.

5.1  National and International Household Since it seized power, the Communist government has tried to overcome customary ideas of blood and soil and replace them by broader terms of society and community. However, this attempt has often failed due to the lack of actual benefits available through State-Owned Enterprises (SOEs), communal work and cooperatives. As the public system has started to deteriorate in the late 1970s, the family and community have once again gained importance in situations of need. Consequently, almost seventy per cent of all health expenditures in Vietnam are from private sources.1 Almost ninety per cent of all private expenditures on health2 are out-of-pocket-payments. Seventy per cent of all out-of-pocket-payments are spend on drugs, which indicates the high number of people using self-medication to overcome diseases (MOH and WHO 2007, p. 15). Informal costs associated with health care such as transport, food, and gifts to the health care staff, pose an important barrier for poor people to access health services (ADB 2005a, p. 56). Besides the direct costs associated with being sick such as costs for inpatient stay, drugs and consultation, high costs also occur through one breadwinner being ill and the related costs of care giving. Therefore normally persons with the lowest earning such as retired people, unemployed, children, and women take care of sick family members (Hanh T. M. Hoang et al. 2008) (see Table 5.1). Relying on out-of-pocket-payments is the most regressive form of health care financing. It disadvantages poor households, who either self-medicate when being sick or rely on private providers (MOH and HPG 2008, p. 108). A common strategy employed by households to deal with high health expenditures is to sell assets or to borrow money. Around one third of all inpatients normally have to borrow money. Nearly two thirds of the poor had to borrow money and sell properties (MOH and HPG 2008, p. 72). Vietnamese in need of money borrow from commercial moneylenders, but more often from family, friends and colleagues, which spares debtors of any interest rate (Cox 2004, pp. 579–80). This practice is supported by the Vietnamese culture which encourages adult children to provide for their elderly parents

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6.7 6.4 6.9 6.1 5.5 4.7 5.1 6.8

4.9 5.4 5.7 5.2 5.3 5.7 6.0 6.6

Public Expenditure on Health (% of Total Total Expenditure Public Expenditure on Health on Health (% of GDP) 32.3 30.1 31.0 30.0 31.4 26.9 25.7 32.4

67.7 69.9 69.0 70.0 68.6 73.1 74.3 67.6

Public Expenditure on Health (% of Total Private Expenditure Expenditure on Health on Health (% of Total Expenditure on Health)

Source: for 1990 World Bank (1995), for 1995 and 2000–2006 WHO (n.d.).

1995 2000 2001 2002 2003 2004 2005 2006



Table 5.1 Public and Private Expenditure on Health

92.3 91.0 89.3 86.5 86.1 86.1 86.1 89.5

3.6 2.6 2.7 3.4 2.7 1.9 2.0 2.2

Out-of-Pocket Expenditure (% of Private External Resources Expenditure for Health on Health) (% of Total Expenditure on Health)

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living expenses. Under the current conditions of lack of publicly financed health care, this is an important option to access health care. Migrant workers who sent back money to the villages are a widespread phenomenon.3 Remittances of migrant workers are a direct cash injection into a specific rural area, providing often an important income and source of risk management in case of catastrophic health expenditures.4 Most of the remittances are used for daily living expenses, but also for education and health issues (Le Bach Duong et al. 2005, p. 253). Estimates indicate that in the North, Central, South East and Mekong Delta region, total remittances count for as much as ten per cent of total income of the surveyed households of the VHLSS. However, the provinces which are among the poorest in Vietnam such as the North West and Central Highlands have also relatively low remittances. Access to migration labour markets is still limited for them (Nguyen Thu Phuong et al. 2008, p. 23). A similar pattern emerges from international remittances. Remittances have increased between 2001 and 2008 from US$2 billion to US$5.5 billion — constituting around 7.9 per cent of GDP in 2007.5 International remittances have become a big source of income for Vietnamese, especially after the tax on overseas national currency exchange was removed by the Vietnamese government in 2001 (Tran Van Son 2006, p. 22). Remittances from the United States, Australia, South Korea and Taiwan are particularly high. Normally people who work abroad belong to the middle or upper class.6 Besides official working migrants, there are up to 30,000 Vietnamese women each year, who leave Vietnam for neighbouring countries such as Taiwan, Malaysia, South Korea and China to enter into an arranged marriage and send money back to their village (Asian Migrant Centre 2005, pp. 328–29). A large part of remittances goes to big cities such as Ho Chi Minh City, which in 2006 has received around sixty per cent of overall foreign remittances. Only 1.5 per cent of households in the lowest expenditure quintile received foreign remittances, while this figure is 18.9 per cent for the richest quintile (Cuong Nguyen Viet 2008, p. 4). The clear distinction between in-groups versus out-groups which arises from informal risk management through the household and friends, strengthens bonds among the members of the clan, but also fosters parochialism and exclusion of certain groups (Tran Ngoc Them 2001, cited in Dalton and Nhu-Ngoc T. Ong 2005, p. 36).7 Studies on the relation between informal risk sharing and voluntary health insurance have revealed that for individuals living in coherent communities with strong informal networks, voluntary health insurance offers little in the way of greater expected utility (Jowett 2003, p. 1159). However, many of the poorest households live in communes, where almost everyone is poor making

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it hard to resort to relatives and community members (Nørlund 2005, p. 79). Often, the argument against public safety nets is that they might crowd out community or family based risk management mechanisms. However, as Cox has argued, “if there are few private transfers to begin with, not much would be crowded out by the expansion of public safety nets” (Cox 2004, p. 568).8 Richer households in contrast do not only have access to help from immediate kin, but also from extended kin and other persons like friends (Beuchelt et al. 2005, p. 3). This is not to say that poor households do not have any richer kin or friends in their network. This is the actually one of the mechanisms how income can be redistributed. However, what should be clear is that “altruistic feelings are not the main reason for support but selfinterest, which is restricting the redistribution effect and the provided help. Mutuality is of utmost significance and when not guaranteed or anticipated, support is very limited” (ibid., p. 3). The poorer a household the smaller are their networks, their possibilities to borrow money and their savings. In very poor areas such as the isolated ethnic minority villages in the North, among spontaneous unregistered migrants who are normally marginalized from mainstream urban society, or in the Mekong Delta, a region with a high exposure to natural disasters and limited endowment of assets with which to cushion shocks, the availability of community help is limited by a simple lack of means (FAO 2004, p. 28). Formal lending in the form of credits through the Vietnam Bank for Social Policy (VBSP) and VBARD also excludes poor people. VBARD and VBSP — though carrying the social purpose to support the poor and rural development — tend to focus on large scale and big credit. Poor households are normally excluded from this form of credit due to their high risk profile. Furthermore, the structure of the credits needed, which are seasonal and small in scale to survive over unexpected shocks, is not attractive to the two banks (Ha Hoang Hop 2008, p. 27). Family and friends are an informal safety network of trust,9 in which family members are responsible for sick members through intra-household transfers and urban-to-rural-remittances. Private transfers are one of the main means through which income is redistributed in Vietnam. In fact, family support and the “economy of envelope”10 exceed the amount spent through the official social security system (cf. Tran Van Son 2006; Cox 2004, p. 568; UNDP 2007a). However, what should be clear is that especially the poorest households often do not have enough resources to overcome health shocks. As a consequence, Vietnam has one of the highest numbers for catastrophic health expenditures world wide. More than ten per cent of all households in Vietnam face catastrophic health expenditures (Xu et al. 2003). Average

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costs of an acute pneumonia are VND 835,000 and an appendicitis VND 1,457,000, which are high costs compared to the VND 128,000 which were spent on non-food expenditures in 2002. Opportunity costs of seeking medical care are a major source of the monthly non-food expenditures (MOH 2007a, p. 170). Hence, sick poor people are easily stuck in a health poverty trap. Poor people are at greater risk of having a poor health and poor health increases the likeliness of becoming or remaining poor (Wagstaff and Van Doorslear 2003, p. 931). The Health Care Fund for the Poor (HCFP) has reduced the private expenditures among poor people (see chapter 4.7.3), however as a study in the two provinces in Hai Duong and Bac Giang revealed, high debt rates (72.8 per cent in Hai Duong and 86.9 per cent in Bac Giang) remain a sign of household’s burden after a case of sickness, which was the second most important reason for being in debt (Axelson et al. 2005, p. 17).

5.2  National Community The tradition of associational groups or Community-Based Organizations (CBOs) goes back to the ancient period even before the Communist government introduced the concepts of co-operatives and mutual risksharing among villages. The village itself has been for a long time regarded as a mutual protection association comprising various groups, guilds and religious organizations. Each village had at least a mutual fund organization, a guild or another form of association (hoäi) providing mutual assistance in cases such as sickness, funerals, weddings, or need for credit. Associations have been regarded as a tool for community management (Toan Anh 1999, p. 90, cited in Blanc 2004, p. 156; Pike 2000, p. 271; Hy V. Luong 1992, pp. 58–60). The only organizations which had been officially active in Vietnam before Doi Moi where mass organizations such as the Women’s and Farmers’ Union. After the introduction of doi moi, a kind of mushrooming or re-emergence of local NGOs and other forms of associations revived the landscape of the voluntary sector (Le Bach Duong et al. 2004). Through the socialization campaign, civil organizations were encouraged to become active in providing health care to the most vulnerable people in society. Civil organizations were encouraged to increase health protection through small scale assistance, savings and insurance schemes.11 CBOs are required to register under an umbrella organization such as the Vietnam Scientists and Technicians Associations (VUSTA) or need to be affiliated with one of the mass organizations. Among the national voluntary sector, several categories of organizations are part of the provider network:

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• NGOs/mass organizations;12 • Community-Based Organizations (CBOs); • funds/charities. While the membership size of mass organizations is quite clear varying between eight to eleven million, exact estimates for Vietnamese NGOs, CBOs, charities and especially religious groups are difficult to obtain. Especially CBOs, charities and religious groups often are not officially registered. For 2000, Wischermann and Vinh (2003, p. 186) counted 700 registered NGOs, of which around 300 are issue-oriented organizations in Hanoi and Ho Chi Minh City alone. These organizations work among others in the sector of social welfare, charity work, and counseling.13 Besides the NGOs, there are over 1,000 self help groups operating throughout the country (Le Bach Duong et al. 2005, p. 5). In total, in 2004, more than 3,000 organizations have been registered in contrast to 450 registered ones in 1990. Of those at least one hundred NGOs worked in the sector of health — not to count the many CBOs (Council on Foundations 2008). Since 1992, a Law on Associations has been discussed and drafted under the guidance of the Ministry of Home Affairs. The draft law has been subject to intense debate. It was submitted to the National Assembly for discussion in May 2006, but so far has not been adopted. Some of the major discussion points have been the procedures for the establishment of associations. It is highly disputed in which areas associations should be allowed to operate and in which one they should be prohibited (Council on Foundations 2008). Existing regulations on the voluntary sector thus remain unspecific. Many organizations operate in a grey zone. Numbers on the budget of the national voluntary sector are also hard to estimate given the informality in which many organizations operate. NGOs often channel their money through governmental bodies such as the People’s Committees and mass organizations such as the Women’s Union and the Red Cross. Furthermore, many NGOs have activities which affect more than one policy field. This makes it difficult to disaggregate their activities in the sector of health. In terms of the activities of CBOs and charities, it is almost impossible under the current conditions to come up with reliable figures. A main strength of organizations in the voluntary sector lies in their focus on participatory, integrated approaches. The national voluntary sector normally works on the ground and in close cooperation with local health staff. People often prefer the private non-profit sector over the public sector, since they are not stigmatized or discriminated against at the organization, pagoda or church.14 Most of the voluntary organizations focus on preventive

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care. For many people, they provide first contacts with health insurance and micro-credit schemes. Since the government of Vietnam has started to relax the security regulations, some INGOs have started to work in increasingly remote areas of the country and to cooperate with the poorest and most disadvantaged ethnic groups (World Bank 2001b, pp. 115–16). However, given the fact that INGOs more often channel their resources through government agencies including mass organizations or implement projects themselves instead of relying on Vietnamese NGOs funding as well as capacity building is still a major problem (CIDIN 2006; Council on Foundations 2008). NGOs and CBOs have been in some areas quite successful in offering an alternative form of community and solidarity when traditional, familybased structures have not been able to provide social protection. They have been able to build on the Vietnamese tradition of local community-based associative structures operating beyond the reach of the state. However, the real issue emerges when these organizations try to unite among each other and raise real policy issues (Blanc 2004, pp. 162–63).

5.2.1  Non-Governmental Organizations Among Vietnamese Non-Governmental Organizations (NGOs), so-called research institutes are a common phenomenon. These organizations both do research and implement development activities subsumed under the Vietnam Union of Science and Technology Associations (VUSTA). Becoming a research institute is the easiest way how one can receive legal status in Vietnam as an organization. NGOs based in bigger cities such as the Centre for Rural Development (CRD), Rural Development Service Centre (RDSC), Research and Training Centre for Community Development (RTCCD) and Toward Ethnic Women (TEW) should therefore not only be seen as research institutes. They operate as NGOs implementing their own projects and building networks among CBOs in order to better raise policy issues (see also chapter 6). During the last ten years, NGOs have established several important insurance and savings schemes. These projects are often materialised in close cooperation with mass organizations such as the Labour Union or the Women’s Union. The administrative structure of mass organizations with branches on every administrative level allows mass organizations to cooperate very closely with local officials. Especially the Women’s Union has worked together with a row of international donors to provide land and money to Vietnamese who have become sick and risked becoming poor.15 Both, the Women’s Union and the Vietnam Farmers’ Union, have directly collaborated with the Vietnam Social Security (VSS) since 2003 and 2006,

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respectively, in the development and distribution of health insurance cards. The mass organizations help to find people who act as insurance agents. The mass organizations also encourage people to participate in the health insurance scheme and work with local agencies to provide subsidies for the near poor (ILO 2007a, pp. 32–33). Several of the mass organizations have also been active in the sector of saving schemes. Examples include the Mutual Aid Fund of Elderly Association operating in Nghe An and Nam Dinh,16 the Mutual Aid Fund of the Women’s Union in Son La, Quang Ninh, and Ha Tinh,17 and the credit life insurance scheme TYM — an institution of the Women’s Union.18 One problem with this kind of risk management is that the benefit paid is often very small. Furthermore, the diseases covered are limited and the benefits are left vague (Wagstaff 2007b, p. 86). Micro-credit in this form requires regular payments from poor families. At some level, the very cause of poverty, however, is the lack of a sustained, regular, and significant income excluding the poorest from the scheme such as homeless or disabled persons (Ha Hoang Hop et al. 2008, p. 25). An extraordinary cooperation was launched between the Capital Aid Fund for Employment of the Poor (CEP), the Ho Chi Minh City branch of the Vietnamese labour union VGCL, and VSS. CEP is a NGO and microfinance institution which provides welfare services for poor people in and around Ho Chi Minh City. The organization has been involved in fostering the participation in the voluntary health insurance. CEP’s funding comes from international organizations including the World Bank, other NGOs such as the Grameen Trust, and bilateral donors such as AusAID, German Technical Cooperation (GTZ) and Belgian Technical Cooperation. One of the major target groups of CEP of the specific project were poor — temporary or unregistered — migrant workers in and around Ho Chi Minh City. Due to their residency status they have been unable so far to access free publicly provided healthcare.19 In October 2004, CEP began to deliver health insurance to clients through an agreement between local healthcare providers in several communes and wards around districts in Ho Chi Minh City. The Project was initially financed by the GTZ through a grant of VND 205 million. It provided 1,500 CEP clients with health insurance for one year upon the payment of an annual premium of between VND 80,000 to VND 120,000. Under the terms of the voluntary health insurance scheme, the 1,500 clients would be granted access to treatment at the designated providers without the payment of an excess. The GTZ funds were used primarily to pay the premium on behalf of the clients. After the pilot project had

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finished, AusAID provided funding for a further 3,700 clients to receive health insurance premiums in eleven different districts of Ho Chi Minh City. In 2007, the Vietnam Social Security (VSS) branch in Ho Chi Minh City stopped the voluntary health insurance programme due to the lack of financial viability. Consequently, the health insurance policies held by many of CEP’s clients expired (see also chapter 4.7.4). So far the programme has not been resumed, though it was an effective and appropriate model. Through the cooperation between the CEP and the VSS, both sides were able to control the actual user fees raised in health facilities. Furthermore, administrative costs for the VSS were lowered since some of the services such as public campaigning and registration of voluntary health insured was organized through the CEP.20

5.2.2  Community-Based Organizations Besides the hundreds of VNGOs which often operate in cities, there are a variety of local Community-Based Organizations (CBOs) such as savings and credit associations, state-initiated People’s Credit Funds (PCFs)21 and informal groupings.22 They all offer various saving and micro-insurance schemes (Nørlund 2007, p. 33). Most CBOs do not yet have a direct, formal representation in the development dialogue with the government and so far have received little technical assistance from donors. The representation is normally done indirectly through partnerships with international NGOs and donors (CIDIN 2006, p. 8).23 Savings and credit associations (ho in the North and hui in the south) and the PCFs are often active in several areas such as health insurance through saving and credit, human resource development and marketing. They normally comprise five to twenty members. Savings can be made in cash ranging from VND 50,000 (US$3.5) to VND 1,000,000 (US$64) on a monthly basis, or in-kind (such as rice for farmers) on a seasonal basis of four to six months (ILO 2005, p. 12). Savings groups normally comprise close friends, relatives, or neighbours who know and trust each other. Group savings are an effective way to prepare for expected economic stresses, but it is not flexible enough when one faces a sudden financial loss. In such situations, the money is often not available when it is needed. Furthermore, as is the case with household risk managements, CBOs are only effective when health risks do not concern the whole community. As a consequence, CBOs operate best in better off areas. In cases of regional disease outbreaks or massive cases of sicknesses following a natural disaster, CBOs are unable to overcome the risks unless they are linked to central agencies which serve as a backstop.

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5.2.3  Funds and Charities Since the opening process, many funds and charity organizations have become active in Vietnam, among which religious organizations have played a crucial role. Buddhist, catholic and protestant organizations serve People Living With HIV/Aids (PLWHA), poor, disabled, chronically ill, ethnic minorities and other groups, which are not properly targeted through the public system or mass organizations. Often they are financially supported by a row of international donors, INGOs and philanthropists from abroad. While some religious initiatives are encouraged by the government, others — especially when they combine social and political work or are at least believed to do so — are harshly suppressed. Buddhist institutions whose activities had been quelled since the victory of the communist regime,24 have been able to somewhat reflourish. The government of Vietnam allows Buddhist social work groups to help the poor, but keeps a jealous watch over all activities. Buddhist initiatives run orphanages and ambulances throughout the country and are active in urban agglomerations, where state agents do serve the needs of marginalized groups such as migrant workers, PLWHA, street children and chronically poor. The Vietnamese Buddhist Sangha (Giáo hoäi Phaät giáo Vieät Nam) — comprising around ten million registered Buddhist followers in 2005 — operates over 1,000 charity and humanitarian centres of which around 120 are Tue Tinh clinics (Socialist Republic of Vietnam/Government Committee for Religious Affairs 2006, pp. 43–46).25 Buddhist monks have operated traditional medicine and Community Health Centres (CHCs) with the financial and professional support of INGOs such as the Danish Red Cross and Care International.26 For many poor people including the Khmer Krom, whose livelihood is endangered by lack of capital, heavy reliance on agricultural goods and high degrees of landlessness, pagodas offer not only a religious, but also a social site (Taylor 2004b, p. 245).27 Catholic congregations such as Daughters of Our Lady of the Rosary28 and the Dominican Sisters provide assistance to poor families, disabled people, lepers and HIV/Aids patients.29 The official Protestant Church of Vietnam — the Evangelical Church of Vietnam (ECVN) — has in cooperation with the Red Cross, commune, district and provincial authorities organized free medical check ups and opened small drug stores for poor people in remote and rural areas.30 The Unified Buddhist Church of Vietnam (UBCV) which is officially banned has also tried to become socially active. However, its work is normally

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repressed since it is believed to be in general politically motivated. Some monks continue to work secretly. Members of the UBCV including religious leader Thich Quang Do and Thich Khong Tanh have distributed money to dispossessed farmers demonstrating outside of state buildings, thereby provoking the anger of officials. Protestant groups, which are not under the direct umbrella of the ECVN such as the house churches, Hmong Protestants in the North Western provinces and Dega Protestants in the Central Highlands also provide some form of social assistance, but are often incognito since they are regularly persecuted.31

5.3  The International Community The international community in Vietnam comprises International NonGovernmental Organizations (INGOs) and donors. Only few INGOs and donors operated in Vietnam before and after the war; major aid normally came from Communist allies (Sun and Yu 1999, p. 27). In the 1950s and 1960s most aid was provided by China. Since 1979, money mainly came from the Soviet-sponsored Council for Mutual Economic Assistance (COMECON)32 (see also chapter 3.1). The U.S. Congress meanwhile forbade direct bilateral assistance to Vietnam (Niehaus 1979, p. 94). Besides the Communist allies under COMECON only the UN agencies and Sweden continued being active in the Vietnamese health sector (UNDP 1994, p. 6). Most of the sixty INGOs active in Vietnam before the war withdrew their personnel after reunification in 1975. Some however continued their work from neighbouring countries concentrating their work on relief and reconstruction efforts and the supply of medicines and hospital equipment, all of which Vietnam was in dire need. During this period, INGOs and donors could only work with the central government as a counterpart (World Bank 2001b, p. 113). Donors working with the central government at that time indicated repeatedly that they lacked even basic information on the functioning of the Vietnamese health system, which meant that they became completely dependent on the tasks which were assigned to them by the central government (Guldner/Rifkin 1993, p. 20). In 1991, Official Development Assistance (ODA) dropped from US$448 million in 1990, to US$339 million, which was mainly due to the decline in assistance from countries which participated in the COMECON, the biggest donor being the Soviet Union. To counterbalance the loss, the Vietnamese government established the People’s Aid Co-ordinating Committee (PACCOM) in 1989. This organization was supposed to facilitate the work

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of INGOs in Vietnam. In 1993, the government also invited international donors to participate in the first International Donor Conference after the end of the war. Due to the reform measures, many international donors and INGOs returned to Vietnam. External assistance in general and to the health sector in specific increased enormously. However, in recent years, in relative terms the impact of external aid has decreased against the enormous expenditures in the private health market and the private transfers between households. In 2007, the external assistance to Vietnam — combining ODA and contributions made by registered INGOs — amounted to 2.1 per cent of total health expenditures and 7.4 per cent of public expenditure on health. External assistance as percentage of total health expenditure has been quite stable for the last seven years, while the number as percentage of total state expenditure on health has been decreasing for the last two years (see Table 5.2).33 Leading donors to the health sector in the last six years have been the World Bank, the ADB, Japan and the Global Fund. The later has been quite active in Vietnam since 2002 in the area of HIV/Aids, tuberculosis and malaria. Around sixty per cent of all external aid has been in the form of grants, while forty per cent have been loans. In 2007, the MOH was managing sixty-one ODA projects with a disbursement rate of around forty per cent. Areas which received the most financial support included mother and child health care, hospital services, primary health care and control of communicable diseases. In some areas, the Vietnamese government relies heavily on the financial contributions of the international voluntary sector. In the sensitive area for example of HIV/Aids control, sixty-five per cent in 2006 and seventy-five

Table 5.2 External Assistance to the Health Sector

2000 2001 2002 2003 2004 2005 2006 2007

% of public   expenditure on   health

10.4

10.0

13.4

9.9

9.6

11.2

8.0

7.4

2.7

2.7

3.4

2.7

2.2

2.4

2.3

2.1

% of total expenditure   on health

Source: MOH and HPG (2008, p. 57).

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per cent in 2007, respectively, of the total budget of the National Target Programme (NTP) on HIV/Aids was funded by external assistance (MOH and HPG 2008, pp. 58–60).

5.3.1  Official Development Assistance Since the first International Donor Conference took place in November 1993, Vietnam has improved its relationship with international donors and multilateral organizations immensely. Through the re-establishment of official relations, Vietnam has seen a high inflow of Official Development Assistance (ODA). In 1993, the World Bank and ADB each approved three loans totaling US$224.5 million in the case of the World Bank and US$261.5 million in the case of the ADB. In January 1994, Japan announced a loan over 52.3 billion yen (US$468 million) (UNDP 1994, p. 25). Twenty-four bilateral34 and fifteen multilateral35 donors are currently operating in Vietnam. In financial terms, Japan is the biggest bilateral and the World Bank the biggest multilateral partner. The Vietnamese government has tried to facilitate the work of international donors and multilateral institutions. It has made a strong effort to strengthen the institutional framework for ODA and emphasize the importance of ODA for the development of Vietnam. Decree No. 87/CP of 1997 on the “Management and Utilization of Official Development Assistance” specified the responsibilities of involved ministries and agencies. The Ministry of Planning and Investment (MPI) is in charge of overall coordination and management, and the Ministry of Finance (MOF) is the official borrower on behalf of the government for ODA loans. The State Bank of Vietnam negotiates the form of ODA agreements (loans, memoranda of understanding, technical assistance). The Ministry of Foreign Affairs is responsible for diplomatic tasks occurring around the negotiations of ODA agreements, and the Ministry of Justice for legal matters; all other ministries including the MOH are in charge of implementing the projects and programmes. According to Decree No. 87, priorities in the use of ODA grants should be set on the social and environmental sectors as well as on the public administration reform. Meanwhile, loans should be mainly targeted at infrastructure projects. Additionally, the decree provided for the establishment of an Inter-Ministerial ODA Committee under the leadership of MPI. However, the committee, which was supposed to enhance the intra-governmental coordination of ODA, never went into operation. Government Decree No. 131/2006/ND-CP of 9 November 2006 on the management and use of the ODA further specified the relations with international donors.36

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Over the last twenty years Vietnam has seen a massive increase in the commitment of ODA. However, Vietnam still struggles with absorbing the money (see Figure 5.1). The pledged ODA in 2006 for example has been US$4.4 billion, while the actually disbursed amount was only US$1.8 billion. The low rate of absorption is related to delays in approval of projects by ministerial agencies, but also to slow implementation. In recent years, several ODA related scandals have put a strain on the relations between the government and donors. However, the situation seems to be returning to normal quickly.37 In 2004, Japan, the World Bank and the ADB accounted for eighty per cent of disbursements (Library of Congress 2005). Japan and France are the two biggest bilateral donors, with Japan investing heavily in infrastructure and France in rural development. Loans have comprised sixty to seventy per cent of ODA in financial terms between 1996 and 2003 (UNDP 2004). The six major categories of ODA are infrastructure, policy and institutional support, rural development, human development, natural resources and industry, and emergency and relief (see Table 5.3). Among ODA, infrastructure has been the largest category since 1996, with Japan being the biggest donor.38 The second major ODA category has been policy support. It added up to twenty-six per cent of total disbursements in 2003. The major projects in this category were two Poverty Reduction Support Credits of US$160 million and US$107 million. The ODA on rural development in Vietnam continued to grow. The sector increased by thirty-four per cent between 2002 and 2003. Major projects in this category were related to rural infrastructure and banking development. Smaller sectors included natural resources and industry (five per cent of total ODA; down from nine per cent in 2002) and emergency and relief (one per cent or an equivalent of just US$10 million) in 2003 (UNDP 2004). Vietnam has around 180 ongoing assisted projects in the health sector. Most of the projects are in the area of vertical disease control, primary health care, reproductive health and family planning (WHO 2003a, pp. 5–6). The total amount spent in the category of human development — including health projects — amounted to US$278 million in 2003, which equals around fifteen per cent of the total ODA to Vietnam. The financial and donor structure in the sector of health has changed immensely over the years. In 1993, the Swedish International Development Cooperation Agency (SIDA), UNICEF and UNFPA accounted for around seventy-seven per cent of all health care assistance in the form of grants. In recent years, the three largest donors to the MOH — the World Bank, the ADB and Japan — have dominated ODA in the sector of health in form

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US$ billion

Source: MPI (2008).

0

1

2

3

4

5

6

Pledged ODA

Disbursed ODA

Source: MPI (2008)

Figure 5.1. Pledged and Disbursed Official Assistance (ODA) 1993-2007 Figure Development 5.1 Pledged and DisbursedODA Official Development Assistance (ODA) 1993–2007 pledged and disbursed

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Source: UNDP (2004a).

Emergency and Relief   10   1

Australia

Denmark (24%) Japan (15%) World Bank (15%) Australia (12%)

Natural Resources and Industry   97 Water Resources Planning, Environmental Preservation and Rehabilitation

ADB World Bank Japan (16%) World Bank France ADB

Small Scale Pro-Poor Infrastructure

Human Development 278 15 WB/IDA National Health Support, WB Population and Family Health Care

Rural Development 302 15

World Bank (63%) Like-Minded Donor Group (16%) ADB (11%)

Major Donors

Policy and Institutional Support 533 26 Poverty Reduction Credits, Rural Finance

Major Projects

Japan (55%) World Bank (21%) ADB (12%)

% of Total Disbursement Power Transmission, Road Improvement, Power Plants and Transmission Lines

Disbursement (in US$ million)

Major Infrastructure 847 41

Sector

Table 5.3 Major Sectors of ODA Involvement (in 2003)

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of loans. In recent years, the Global Fund to fight Aids, Tuberculosis and Malaria has provided additional funding. The role of Sweden and UNICEF meanwhile was financially reduced. The World Bank and ADB have each disbursed around US$5 billion to Vietnam since 1993.39 The National Health Support Project (NHSP) together with its twin credit the Population and Family Planning Project (PFPP) of the World Bank amounted to US$101 million during the period 1996 to 2006. In 2003 alone, the two loans to the NHSP and the PFPP amounted to US$15 million and US$8 million respectively (UNDP 2004a). The two projects made investment in essential infrastructure for delivering public health care in sixteen poor provinces.40 The ADB has — in cooperation with UNFPA, UNICEF and WHO — implemented a rural health project with a total input of US$68.3 million for the period 2000 to 2008.41 Since the Global Fund to fight Aids, Tuberculosis and Malaria42 started to operate in Vietnam in 2003, an increasing sum of donor money has also been channeled into National Target Programmes (NTP) on epidemics. While the money is welcome, the MOH worries about the fact that the NTPs often run parallel to the official health system (MOH and HPG 2008, p. 58).43 The Global Fund for example has implemented a total of US$54 million for the period 2004 to 2012 along the lines of the NTPs.44 Even though the overall financial impact of donors such as the SIDA and the WHO has decreased, in some areas or sub-sectors they continue to play a crucial role (World Bank 2001b, p. 182). The SIDA for example has tried to raise utilization of health facilities among poor people in the Central Highlands by providing financial means for extra expenses such as meals, travel costs and support for high tech treatment (USAID 2008, p. 11). Even though such pilot projects might not be financially significant for a large part of the society, members of the MOH can invoke to the lessons learned in negotiations with senior officials. The absolute annual ODA flow of resources going to the health sector has more than doubled between 1991 and 1999. In relative terms, however, due to an increase in government spending, user fees and health insurance contributions, the share of ODA in total public health spending has declined. ODA now accounts for less than ten per cent of public spending on health or two per cent of all health expenditure (National Health Accounts, cited in MOH and HPG 2008, p. 27) (see also Table 5.2 on p. 134). The fact whether ODA is pro-poor oriented is highly disputed. A study in 2002 indicates that ODA funding in the sector of health in 2000 was strongly pro-poor with poorer provinces receiving disproportionately high shares compared to their population (ADB 2005a, p. 19). Another study by

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the WHO stated that ODA in the health sector in the 1990s seem to have been concentrated among few provinces: between 1991 and 1998, fifteen provinces received more than eighty per cent of the total ODA to the health sector, although they account for only thirty-one per cent of the country’s population. Analysis showed that ODA was not targeted on the basis of a province’s income level, but more on the basis of donor priorities (WHO 2003a, p. 6). According to another study, the number of grant projects was highest in the Mekong Delta (209 projects) and the South East (87 projects). The North West and Central Highlands, which are especially poor regions, but also have some of the highest numbers of ethnic minorities and which are politically sensitive areas, had the lowest number of projects (29 projects) (Nguyen Khanh Phuong 2009, p. 134). Grants seem to be mainly concentrated in hospital service (26.4 per cent), primary health care (22.4 per cent) and communicable disease prevention (18.5 per cent). Areas such as non-communicable disease prevention (0.03 per cent), nutrition (0.7 per cent), traditional medicine (0.5 per cent) and training (0.5 per cent) do not attract much donor money (Nguyen Khang Phuong 2009, p. 134). Almost ninety per cent of donors provide support to the health sector in Vietnam (OECD 2006, pp. 135–38). Hence, one of the major problems with ODA in health care is the high fragmentation and low rate of disbursement.45 Around sixty per cent of all health aid between 2002 and 2006 was in the form of small loans of less than US$500,000. Most health projects (around ninety-eight per cent) were funded by one single donor. Only few donors such as the EC and World Bank have cooperated (Martinez 2008, p. 14). Even though the Paris Declaration has demanded better donor harmonization, bilateral donors are still bound by the legislation of their home country and therefore often lack options to coordinate with other donors in Vietnam (MOH and HPG 2008, p. 62). The government of Vietnam has consequently faced capacity constraints given the task of coordinating 50 different donors and different procedures and flow mechanisms of ODA (WHO 2003a, p. 6). Broad regulations issued by the government on the other hand lack guidelines on how to implement projects increasing the confusion on the local level. A joint report by the MOH and the Health Partnership Group comes to the conclusion: “Some MOH departments and administrative agencies are overloaded with projects, while others have none, or only few projects. Many projects are working in the same field, and may even have the same objectives, yet they are implemented relatively independently from each other” (MOH and HPG 2008, p. 61). Project Management Units which should function as interfaces between donors and the MOH still lack management capacity.

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The completion report of the National Health Support Project (NHSP) by the World Bank highlighted the problematic: Most of the positions in the PMU were vacant at the initial stage of implementation. In later years, the project faced a high turnover of project staff and had to continuously train new staff throughout the project lifetime. (World Bank 2007c, p. 9)

The trend towards decentralization in project management is posing an additional threat to the implementation of projects. Especially at sub-national level, organizational and individual capacity can be quite insufficient to ensure project progress and performance (MOH and HPG 2008, p. 62). In addition, often little money is allocated to monitoring due to financial restraints or other priorities (see also chapter 4 and 6). Some progress has been made in donor-government relations: roles and responsibilities have been defined more clearly; the capacity to implement projects has been strengthened. The partnership groups between donors and the government have provided a forum for increased policy dialogue (WHO 2003a, p. 6) (see also chapter 6). However, as the WHO has stated, much emphasis has been put by the international community around diseases and interventions, rather than on the structural problems which private actors alone could not overcome (WHO 2008a). Several projects including a loan to the NHSP of the World Bank has focused on investing in infrastructure, without analyzing how to increase utilization among the poor and better monitoring of fee exemptions (Fritzen 2006a, p. 17).

5.3.2  International Non-Governmental Organizations In the early 1970s, sixty-three International Non-Governmental Organizations (INGOs) worked in Vietnam focusing on humanitarian and disaster relief. While most INGOs withdrew their personnel or relocated it to neighbouring Thailand and Laos after reunification in 1975, many continued providing funding. In 1989, the People’s Aid Co-ordinating Committee (PACCOM) of the Vietnam Union of Friendship Organizations (VUFO) was established to facilitate the work of INGOs in Vietnam. Throughout the late 1980s and 1990s, the number of INGOs increased steadily. In 1993, the VUFONGO Resource Centre was established in Hanoi to improve the exchange of information among INGOs (Nguyen Kim Ha 2001, p. 13). More than six hundred INGOs are now registered in Vietnam of which many come from the United States, Canada or Europe (MOH and HPG 2008, p. 60).46 Estimates show that the actual number of INGOs in Vietnam could be as

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high as seven hundred with a total annual turnover of an estimated US$150 to 160 million in 2006 (CIDIN 2006, p. 17). Spending data is seldom disaggregated by sector, because many INGOs support integrated activities, making it difficult to tell how much money is spent on health care specifically (World Bank 2001b, pp. 112–13). In the 1990s, many INGOs operated in the National Target Programmes (NTPs), the centralized and large-scale provision of commodities, or relief aid; however the small-scale nature of INGO projects limited the impact of projects on public policy. In 1999, a sample of nineteen INGOs showed that most of them had a low knowledge of the language and culture of the different ethnic minority groups. This limited the targeting of marginalized ethnic minorities; INGOs also started to become criticized for not paying enough attention to people with disabilities, the elderly, unregistered and landless workers (Nguyen Kim Ha 2001: 4). Due to improved understanding of the economic situation and the nature of poverty, since the late 1990s INGOs redirected their focus to other levels and other fields of attention — especially the local level and remote areas (Nguyen Kim Ha 2001, p. 19; World Bank 2001b, pp. 115–16). INGOs not only work with health-related governmental bodies, but often channel funds through mass organizations such as the Women’s Union, the Red Cross, Peoples’ Committees, and to a much lesser extent Vietnamese NGOs and CBOs (World Bank 2001b, pp. 112–13). Even though the INGO sector is fragmented, in more recent years it has been able to raise attention to and address problems, which have been neglected by governmental agencies and big donors (see chapter 6). Problems remain related to areas where only few ethnic minorities live. Here, language skills continue to pose a major barrier to staff of INGOs (Nguyen Kim Ha 2001, p. 38). In the sector of health, the VUFO-NGO resource centre groups the INGOs active in the area of health in the following categories: • • • • • • •

primary health care; reproductive health; disability; HIV/Aids; nutrition; water and sanitation; and health education and training.

All major INGOs including CARE International, Oxfam International, Plan International, World Vision International, Save the Children, Caritas

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International, and the International Red Cross except Amnesty International, have been active in Vietnam since the early 1990s. Table 5.4 gives an overview of the INGOs with the biggest budget in Vietnam. Most of the INGOs operate in a variety of sectors and sub sectors. However, what is striking is the high involvement in the sector of health — especially in the area of primary and reproductive health care, disability and HIV/Aids — followed by engagement in capacity and institution building, basic education, rural development and micro-insurance. Several hundred INGOs work in the sector of health, others work in health-related areas, as only few INGOs concentrate on one specific area of activity and one province. Many INGOs are based in the North Central area and in the Red River delta. The Central Highlands and the Mekong Delta are substantially less favoured. This regional bias probably has to do with the fact that few INGOs are officially able to operate in politically sensitive regions (CIDIN 2006, pp. 18–20). The areas of intervention are quite different among INGOs. Some INGOs work at the national level through national research institutes or national medical schools. Several hundreds of smaller INGOs provide health care services on the ground. Groups in this sector include international college students going into remote areas to help poor patients such as the Viet Nam Medical Assistance Programme (US medical students, physicians and pharmacists). Other INGOs support local clinics such as Vets With A Mission (since 1988) with clinics in Quang Nam province and Da Nang city. Religious groups such as the Good Samaritans also provide health services in clinics; INGOs such as CIDSE have done pioneer work in the area of local credit and saving systems.

5.4  Market Since the 1970s, the question whether states could be the only bearer of social security has become evermore pressing. Especially in the 1990s, when Thatcherism and neo-liberal ideas became popular, privatization has often become a political means for governments to overcome financial deficits. In Southeast Asia, privatization of health care has likewise been used as a way to provide additional funding for the government and as a means to serve the rising expectations about quality health care services among an emerging middle class (Ramesh 2002; Nguyen Thi Hong Ha et al. 2002, p. 62). There have been various privatization strategies, which governments have pursuit individually or as a combination. Some governments have gradually shifted the control of services from the government to the private sector, which have allowed

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Office representation Number of staff in Vietnam since (national/inter-national)

Budget in US$ per year

Source: Own compilations based on VUFO-NGO Resource Centre (n.d.).

Care International 1991 40/6 2,000,000 (2004) Oxfam Great Britain 1990 24/5 GBP 1,000,000 (2005–2006) Oxfam Hong Kong 1993 13/1 750,000 (2005–2006) Oxfam Quebec 1991 20/8 1,500,000 (average annual) Pathfinder International 1994 26/2 2,000,000 (average annual) Plan International 1993 110/3 9,900,000 (average annual) World Vision 1990 not reported 6,000,000 (average annual) Save the Children Fund UK 1990 38/1 1,500,000 Save the Children Sweden 1992 17/1 1,000,000 American Red Cross not reported 10/2 5,000,000 (2005–2006) Population Council 1996 9/2 not reported Ford Foundation 1996 8/3 7,000,000

Name of INGO

Health related activities

Education/Training HIV/Aids Primary Health Care Reproductive Health Reproductive Health

HIV/Aids None None

HIV/Aids

HIV/AIDS Reproductive Health Primary Health Care

None

Education/Training

HIV/AIDS Reproductive Health None

Table 5.4 Major International Non-Governmental Organizations (INGOs) in Vietnam (as of 2009)

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consumers to chose from different solutions for social protection; others have shifted responsibilities more to quasi non-governmental organizations, such as independent committees, commissions, trusts and boards. A third option is the contracting out of services. Prerequisite for all these market solutions are that the state is able to regulate the market outcome so that no one is left behind and to guarantee that costs are actually falling and not rising due to information asymmetries, incentives distortion and moral hazard.47 This also means that the state has to provide service in areas, where the market does not operate due to low returns (Ramesh 2002, p. 154). Besides the spontaneous privatization which has happened in the Vietnamese health care system since the last 1970s, the Vietnamese government has started contracting out selected services such as cleaning and dining in hospitals. However, the contracting out of services is still in its fledgling stages (World Bank 2001b: 103–4). The VSS normally has contracts with public providers, but has recently started to contract with private providers, too. Private hospital contracting has been piloted in a small scale. Contracting with private general practitioners and specialists has not been experimented so far (MOH 2007a, p. 30). A more widespread phenomenon of privatization is the emergence of private health care facilities. In addition, a high number of private — mostly international — pharmaceutical companies and local distributors have been opened, which effectively compete with the public sector. In rural areas, private services are provided at small clinics or through mobile practitioners. The staff often consists of former or current physicians, who have gained some training through the public health care system. In big cities such as Hanoi and Ho Chi Minh City, a small number of private hospitals exist, which are however still quite underrepresented. A third phenomenon of the Vietnamese privatization process in Vietnam is the fact that the health care system has been increasingly privatized from within through moonlighting of medical staff, informal fees and semi-public structures along the public health care system. Given the fact that the reimbursement by the VSS is based on official user fees which do not cover all costs, contracting with the VSS is not financially attractive to most private providers (Socialist Republic of Vietnam and World Bank 2005b, p. 63). In 1996, the Ministry of Health (MOH) estimated the number of licensed private health personnel in the country to be 25,698 — about a tenth of the 213,099 public health personnel. However, not all of these private health personnel can be counted as separate workers, since nearly one-half of them are actually government staff, who work in the private sector during evening and weekend hours (World Bank 2001b, p. 95).

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There exist different numbers in press and research papers on how often and for what kind of services private facilities are attended. Numbers on the inpatient sector are much more precise than estimations on the outpatient sector. The inpatient sector remains dominated by the public sector. Compared with over nine hundred public hospitals, the seventy private hospitals accounted for only 1.9 per cent in 2006 and 2.2 per cent in 2007 of inpatient visits in Vietnam (MOH and HPG 2008, p. 80). In the outpatient service, the public sector is competing heavily with private practitioners — especially since household surveys indicate that the costs of outpatient care in the private sector are comparable to out-of-pocketpayments in the public sector (Socialist Republic of Vietnam and World Bank 2005b, p. 64). A study in thirty of the 160 communes in Hung Yen revealed that there were 11.5 private providers per 10,000 population, compared with 6.7 public ones (Tran Tuan et al. 2005, p. 319). Around 30,000 private clinics, 21,600 pharmacies and distributors and 450 traditional medicine were officially registered in the communes (MOH and HPG 2008, p. 79). It is estimated that approximately, 12.6 per cent of private health facilities — particularly in the rural area — were unlicensed (World Bank 2001b, p. 96). However, given that even in urban areas human resources for monitoring private practitioners are rare, even more might remain uncovered.48 Of the officially registered private health facilities around seventy per cent are based in urban and around thirty per cent in rural areas. Despite the lack of reliable data, the rural population probably has much less access to private facilities than the urban population. Regional differences also vary enormously. The province of Lai Chau only has 100 private facilities per million persons, while Ho Chi Minh City and Hanoi have over 1,400. The supply of private health facilities and health workers therefore “tends to reinforce the existing inequalities in the rural-urban distribution of public health facilities and public health workers” (World Bank 2001b, pp. 96–97). Even though the private health care facilities in urban and rural areas might not be better in service, the private health care facilities are attractive for a number of reasons: often they have more flexible terms of payment, more flexible working hours, and less waiting time. They are often more accessible and are regarded as having a better attitude towards patients (Lönnroth et al. 1998, p. 88). For sensitive issues (in Vietnam often so-called “social evils”) such as HIV/Aids patients, the anonymity of the private sector is an important advantage over public facilities. The reasons why civil servants work in the private sector are manifold: it is not just the better payment. Lack of proper training and update of knowledge in the public sector is often stated, when asked why civil servants moonlight or leave the public sector (Dieleman et al. 2003). The public

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sector is also regarded as offering less social mobility and disincentives in terms of locality, gender, and ethnicity (Scott and Truong Thi Kim Chuyen 2004, p. 102). Private providers sell medication, including drugs such as sleeping pills, antibiotics and hormones, which should be only prescribed by doctors (MOH and UNICEF 1996, p. 2). This has harmful consequences, of which the growing ineffectiveness of antibiotic drugs is the most alarming and most visible (Trivedi 2002). Furthermore, private providers draw demand and resources away from the public sector (Smithson 1993, p. 35). Problems also exist in terms of market failures: using private practitioners who are not controlled by the state can lead to wasteful expenditure by customers unable to verify the quality of goods. Since the opening process of the Vietnamese health market, the government has tried to govern the private sector, but has been only partially successful. In 1993, the first attempt was made by the Ordinance on Private Practices of Medicine and Pharmacy (followed by specifications in Decree No. 06/CP of 1994 and Circular No. 15/1999/TT-BYT of 1999). Several other regulations and decrees regulate the minimum quality standards, the user fees allowed and the practice expected of private providers. The implementation and monitoring of these regulations, however, is less than satisfactory. “[P]rivatization of health care in Vietnam over the last 15 years seems to be more a passive response to economic reform than program or active health system privatization” (Tuan et al. 2005, p. 326). Inspections of private facilities are the responsibility of the provincial health authorities, who often lack the human capacity and the technical means to commence regular inspections of all private facilities (World Bank 2001b, p. 105).

5.4.1 User Fees and Informal Fees In 1989, Decision No. 45/HDBT introduced the concept of user fees for inpatient care, laboratory tests and technical services. The introduction of user fees urges hospitals to enhance their management system to supervise the collection of fees and the procurement of supplies and equipment (Dao Thanh Huyen et al. 2008, p. 1070). Official fees follow a hierarchy in which fees rise the higher health facility one chooses. The rule should stimulate patients to use Communal Health Centres (CHCs) as a first point of contact to overcome the overuse of provincial and central health facilities (MOH and HPG 2008, p. 94). Except some minor policy changes such as adding interventions to the list, fees have remained unchanged since 1995 (Lieberman and Wagstaff 2009, p. 123).

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According to the 2007 Hospital Report covering 731 hospitals, the main source of hospital revenues stems from user fees, drug sales, and other forms of extra payments. In total, private revenues accounted for almost sixty per cent of all income in 2007, an increase of thirty per cent compared to 2006 (MOH and HPG 2008, p. 77). Drugs are not included in the user fees. Hospitals normally negotiate drug prices with pharmaceutical companies and pass on the costs to patients or the VSS without any major oversight of MOH. As a consequence, the delivery of services with questionable necessity is a major problem (Lieberman and Wagstaff 2009, p. 123). Patients normally have to pay informal fees in addition to user fees (Dao Thanh Huyen et al. 2008, p. 1070). The inventory of hospital services does not offer any information on informal (or “under-the-table”) payments made by patients to hospitals. As a result, health expenditures and revenues by hospitals might be often underestimated. However, some of the informal payments made by patients to hospital staff actually remain with the staff and do not find their way into hospital accounts (World Bank 2001b, p. 80). Households report paying fourteen times as much in user fees at public health facilities as the government reports in its official statistics (UNDP 2003, p. 8). In the 2001–2002 Vietnam National Health Survey (VNHS), households reported an average spending of VND 91,560 at public hospitals, while hospitals stated an average user fee revenue of VND 19,000 per capita for the approximately same period of time (Socialist Republic of Vietnam and World Bank 2005b, p. 62). Decree No. 10/2002 and Decree No. 43/2006 are supposed to bring more autonomy and flexibility to decision-making of lower health care facilities in the area of human resources, capital and beds (see also 5.6.1). However, given the current lack of monitoring by the central government and the Departments of Health (DOH) in provinces, districts and communes, there is a real danger that these regulations will be exploited inappropriately in pursuit of higher incomes and lower costs. The decrees put an incentive on providing high-tech services, not necessarily good-quality services. The result of the decrees as well as the regulations, which had been put in place before might therefore be an “arms race” for medical technology (Smithson 1993, p. 36), unnecessary tests and consultations as well as an extra financial burden for patients (MOH and HPG 2008, p. 78; Lieberman and Wagstaff 2009, pp. 129–30). The introduction of official charges has “opened the flood gates” to raising additional income for health facilities, which often do not harmonize with the attempts of the central government to overcome health inequities. The lack of effective supervision and monitoring means that the official tariffs have either been ignored or can be supplemented by various extra charges

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at the discretion of health staff (Smithson 1993, p. 36). Costs for using the overcrowded toilets, charges for little extra services by staff and contractors often are double the amount stated in the contract with the hospital.49 The investment behavior follows suit. It is often only made in bigger hospitals and in sectors where extra charges for preferential and priority service can be raised (MOH and HPG 2008, p. 78).

5.4.2 Semi-Public Sector Private practice has always existed in Vietnam in the form of traditional healers and government health workers working out of hours. In fact, moonlighting is a common phenomenon in most developing countries. However, as Witter has stated, what is surprising in Vietnam is “the way in which it [the public health sector, comment K.P.] has gone private from within” (Witter 1996, p. 165). The decree on private practice of medicine allows retired health personnel to operate a full-time private health facility. Staff working in the public health sector is not permitted to operate privately during working time; however, they can apply for a licence allowing them to provide part-time private services, e.g. evening clinics (World Bank 2001b, p. 93). It is estimated that around sixty per cent of doctors in private health care facilities also work in the public sector (MOH and HPG 2008, p. 80). In this semi-public structure, services in hospitals are normally provided according to a two-tier system. The Viet Duc hospital for example offers thirty beds with better service for patients who are willing or able to pay. Patients are served in air-conditioned rooms with attached bathrooms and other amenities which are occupied only by two patients each. Some of the hospital management argue that the rationale behind double standards is that public hospitals can cross-subsidize public facilities from the revenues earned by the semi-public sector and get more independent from the central state budget. However, it is not always clear if hospitals actually cross-subsidize to provide primary health care and preventive activities (World Bank 2001b, pp. 102–103). The downside of a semi-public sector is definitely that the boundary between the public and private sphere becomes indistinct making it harder to establish regulations, which support the general goal of more health equity in the system.

5.4.3  Private Hospitals The French hospital in Hanoi was the first private hospital established in Vietnam in 1997. Private hospitals are allowed to operate both in the sector of outpatient and inpatient treatment. In the last couple of years, efforts by

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the government have increased the number of private hospitals.50 However, the inpatient sector is still very dominated by the public sector, which provides more than ninety per cent of all inpatient care (MOH and HPG 2008, p. 80). Around thirty hospitals in Vietnam operate privately. Most of them are located in bigger cities and serve affluent Vietnamese patients and expatriates. The private hospitals are concentrated especially in Ho Chi Minh City, where around fifteen of them operate, in Hanoi, and Da Nang. Other private hospitals are located in Hai Phong, Binh Dinh, Binh Duong and An Giang. Options for richer patients do not only include treatment at national hospitals, many of them also travel abroad. Medical tourists often travel to China, Thailand, Singapore, the United States and Europe. China is especially popular among visitors from provinces close to the Chinese boarder such as Lao Cai, Phu Tho, Vinh Phuc, Hai Duong, Dien Bien but also from other places as far as Hanoi and Ho Chi Minh City. One of the advantages stated by patients is that there are higher fees, but also no bribes in China.51 Thailand is especially popular among richer patients. Hospitals from Bangkok such as Bumrungrad have responded to this demand since the mid-2000s by opening up representative offices in Ho Chi Minh City and Hanoi.52 Bumrungrad International had about 2,600 outpatient and some 200 inpatient visits from Vietnam in 2006.53 Singapore’s Raffles Hospital responded somewhat later to the boom in high quality health care and opened a representative office in 2008 in Ho Chi Minh City and one in Hanoi in 2009, followed by the Parkway Health in Singapore. The latter receives around forty patients from Vietnam each month.54 A study of the MOH unveiled that more than 30,000 Vietnamese use medical treatments outside of Vietnam each year. Those patients spend an estimated US$500 million to US$1 billion abroad. Reasons which are regularly stated for deciding to go overseas include crowded hospitals, obsolete medical technology, red tape, indifferent health workers, over-prescription and lack of skills of domestic physicians.55 Private hospitals and hospitals abroad often fill a gap in areas which have been neglected by the state. As the head of one of the leading private hospitals in Vietnam, Rafi Kot, stated: “If the state health sector would not collapse, we would not need a privatization”.56 Vietnam is trying to catch up in the area of medical tourism from abroad. The Medicoast resort has opened in Vung Tau in 2007, offering over 100 beds.57 The resort offers complete holiday packages with accommodation, surgical procedures and recreational activities included in the price. Many of the cosmetic surgeons are educated and trained overseas. The facilities are normally imported from overseas.58

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The applicant for a licence to run a private hospital or a private clinic needs to be a full physician who has at least five years of experience in a public health facility (World Bank 2001b, p. 93). Government policies with respect to private hospitals are frequently changed, with the result that private investors face considerable uncertainty over the regulatory environment. No malpractice insurance exists for physicians practicing in the private sector, which exposes individual physicians or hospitals to unlimited financial liability. Subsidized public hospitals offer inpatient services well below cost to all users (World Bank 2001b, p. 101). Even though plans have been around to privatize public hospitals, this option has been much contested. Resistance towards privatization of existing public hospitals has arisen from mass organizations who are concerned about the social consequences, but also from hospital staff which might be afraid of losing extra income. Under the current health financing system, where ninety per cent of all funding is provided to central hospitals plus the additional funds from formal and informal fees, privatization in this sector seems political dynamite (see also chapter 6).59 The operation of private clinics in recent times has helped to ease the overload in the public healthcare sector, but has also led to some major problems. Since there have been no clear regulations on the financing and tasks of private hospitals or the reimbursement of health insurance, patients are not fully aware of the fact what exactly they are supposed to pay and which part of their expenses is covered by the hospital and VSS and which part they have to bear themselves. Furthermore private hospitals only concentrate their work on major urban areas.

5.4.4  Communal Private Health Practitioners Private health facilities below hospital size often come in the form of small clinics operated by hospital staff during their off-duty hours. Those clinics are allowed to offer medical check-ups and preliminary treatment, but no inpatient treatment. In rural areas, private providers often work from home. In a study conducted by a local NGO, around eighty per cent of the private practitioners surveyed sold medication. Less than twenty per cent were registered with the local government. In general the private facilities had less equipment and supplies than commensurable public facilities. The diagnosis and treatment of common health problems was much better in the CHC in contrast to the private facilities. The difference was especially significant for those who only worked for the private sector. In their study the group found out that the CHC facilities had more hygienic conditions than private

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providers in terms of clinic and toilet cleanliness, and availability of clean water (Tran Tuan et al. 2005, p. 322). More than half of the private providers did examination as well as selling medications, resulting in a major conflict of interest. As a consequence to the low quality on communal level, district and provincial health facilities tend to be overused (ibid., p. 326). Nevertheless, the private sector has been quite influential offering more flexibility in working hours and modes of payment as well as more discretion about diseases.

5.4.5  Private Pharmacies Private pharmacies have started to operate throughout the whole country. Estimates in 1999 assume that around 3,000 licensed pharmacies sell around three fourths of the total sales in Vietnam in contrast to the 1,000 state retail pharmacies (Nguyen Thi Kim Chuc and Tomson 1999, p. 326). Private pharmacies serve mainly those people who either have not enough money to see a doctor, live too far away from one and or who expect few available drugs and low quality of care at the health care facility. The privatization and deregulation of health care have made drugs more accessible, thereby encouraging self-medication (Trivedi 2002). To buy drugs at private pharmacies is regarded as being more convenient than to demand drugs from staff at CHCs or public pharmacies. Private pharmacies are favoured for offering longer opening hours (Okumura et al. 2000, pp. 1883–84) and more cheap generics than CHCs (Trivedi 2002). One of the major problems related to the spread of private pharmacies and self-medication is the lack of supervision. Provincial Departments of Health (DOHs) are in charge of licensing and monitoring private pharmacies (World Bank 2001b, p. 93). At the end of 2005, six provinces did not have a drug administration under the guidance of the provincial DOHs. In addition, twelve provinces lacked pharmaceutical inspectorates (MOH 2007a, p. 377). Antibiotics — regarded by many Vietnamese as a useful medicine against diarrhea and other common diseases — are often bought at private pharmacies and overused leading to a widespread resistance to antibiotics (Okumura et al. 2002, p. 1878; World Bank 2001b, p. 110). Several measures have been adopted in recent years to support the supervision of the private pharmaceutical sector including the Vietnamese National Drug Policy (VNDP) on 20 June 1996 in conjunction with Decree No. 37/CP on the Strategic Orientation for the Care and Protection of the People’s Health. Another step to regulate private pharmacies was done through the adoption of Decision No. 1203/BYT/QD of the Ministry of Health

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Promulgating Regulations on Medicine Registration, which took effect on August 1996. The VNDP was worked out by the Vietnamese government with support from the Swedish International Cooperation Agency (SIDA). The measure is supposed to provide a nationwide quality assurance and quality control system (World Bank 2001b, p. 111). However, in its current form it is more a general charter than a policy instrument which offers concrete regulatory guidelines (Craig 2000, p. 113).

5.4.6  Private Pharmaceutical Companies Domestic production of pharmaceuticals has increased fast over the past decade. In 1997, domestic production was approximately US$107 million — up from a level of merely US$777,000 in 1989 (World Bank 2001b, p. 106). Companies in the sector of production include 19 central enterprises, 120 local and 35 foreign owned ones. Private liability limited companies in the sector of pharmaceutical trade amount to almost 1,000 (MOH 2007a, p. 380). After the WTO accession of Vietnam in 2006, the pharmaceutical sector has seen a steady increase in the number of foreign pharmaceutical firms. According to the Head of the Vietnam Pharmaceutical Management Bureau, in 2007, the number of foreign firms operating in pharmaceutical trade rose by 58 over last year, bringing the total number to 370. Most of the foreign-earned firms in Vietnam are from the Asian region including India, South Korea and China (especially for traditional medicine). They are small- or medium-sized and normally sell medical best-sellers such as aspirins and antibiotics. More sophisticated drugs are mainly imported from France, Germany and Switzerland.61 Foreign firms make up ninety per cent of the pharmaceutical market share.62 Vietnamese pharmaceutical companies have put on the market only few innovative products for minor diseases. Further increase in drug imports are expected due to the increase in income and population growth and an overall skeptical attitude towards domestic pharmaceutical products by Vietnamese people (Socialist Republic of Vietnam and World Bank 2005b, p. 65.63 In theory, all pharmaceutical producers and distributors have to report the prices of drugs to the Drug Administration of Vietnam which belongs to the MOH. The agency can take action against monopolistic behavior. The three biggest pharmaceutical distributors — Zuellig Pharma Vietnam (ZPV) Co. Ltd, Diethelm Vietnam Co. Ltd (DKSH), and Mega Product Vietnam Co. Ltd — have been blamed several times by the government and the MOH of abusing their monopolistic position in the Vietnamese pharmaceutical market

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(see Figure 5.2).64 ZPV, which has been operating in Vietnam since 1994, for example distributes products of over 20 pharmaceutical firms including GlaxoSmithKline, Novartis and others.65 Even though the pharmaceutical sector has widened, the prices for drugs have remained high. Especially poor people have less access to pharmaceutical products due to the low domestic production and the monopole of foreign firms. Measures by the government to overcome price abuse have included inspectorate teams inspecting drug importers, wholesalers and retailers in big cities and provinces. The inspections were supposed to control drug import and export activities and pricing with the aim to detect and to take legal actions on price violations found on both locally produced and imported drugs (MOH 2005). Furthermore, the Provincial Committees have been asked to control operations of pharmaceutical companies as well as control the drug supply in hospitals. In 2007, a circular was issued by the ministries of Health, Finance, and Industry and Trade to try to get a handle on the situation.66 In practice, pharmaceutical importers were able so far to raise prices without any control from state authorities since they hold a monopoly on distribution of the imported drugs. A report released by the Vietnam Competition Administration Department in collaboration with the two organizations International Development Research Centre from Canada and Consumer Unity & Trust Society (CUTS) from India in 2009 revealed that even though the government promised to take action against the monopolies in the pharmaceutical sector, local importers and foreign suppliers continued cooperating in overpricing, setting up exclusive deals and patent pooling to block competition from new suppliers or importers.67 So far, little success in consumer protection has been achieved.68 Journalists who have investigated the negative impact of monopoles in the drug market have faced drastic measures by state agencies. Journalist Nguyen Thi Lan Anh, a reporter for the Vietnamese daily Tuoi Tre (Youth) newspaper, was sued for revealing state secrets in her series of investigative articles about manipulations of the drug market in 2004.69

5.4.7  Commercial Health Insurance Up until 1993, Bao Viet was the only company operating in the area of commercial health insurance in Vietnam. Since the early 1990s, the insurance sector has witnessed a turning point of liberalization when the government enacted Decree No. 100/1993/ND-CP in 1993, which allowed different

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Figure 5.2 Examples of the Monopole Situation of Pharmaceutical Distributors, International Pharmaceutical Companies and Local Importers in Vietnam

Name of Company

Distributor

Local Importer

Wyeth Zuellig Pharma Vietnam (ZPV) Servier Diethelm ZPV Central Joint-Stock Medicinal Herbs Co. No II Merck KGaA Diethelm Allergan Diethelm Gedeon Richter Mega Products Ltd. Boehringer Diethelm Ingelheim Glaxo SmithKlines ZPV Novartis ZPV Beaufour Ipsen ZPV Roche Diethelm Janssen Cilag Mega Products Ltd.

Phytopharma Vimedimex II Phytopharma Vimedimex II Vimedimex II Ben Tre Joint-Stock Co. Sapharco Do Thanh Pharma Co. Vimedimex II Phytopharma Phytopharma Central Joint-Stock Medicinal Herbs Co. No II Vimedimex II Sapharco

Source: MOH (2005); own compilations; left side of the ovals: international pharmaceutical companies; right side of the ovals: local importers.

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economic sectors as well as foreign companies to engage in insurance business (MPI and UNDP 2006b). In 2001, the first Law on Commercial Insurance was adopted, which permitted commercial insurers to offer health insurance as “riders” (additional coverage) to other insurance packages. Commercial health insurance is a relatively small market, but data from the Ministry of Finance (MOF) suggests that it is a growing market. Most life insurers target the middle-income market, the minimum premium being around VND 300,000 a month (ILO 2005). Hence, the private for profit sector is only beneficial for a small percentage of the population. As of 2006, seven providers, of which only Bao Viet is state-owned and six foreign owned, operated in the sector of life insurance. Bao Viet has been established in 1965 and has since then been the biggest life insurance company in Vietnam with more than 5,000 employees. In its first years of operation it offered only non-life products such as insurance in exports, imports, marine transportation. In 1976, Bao Viet began to issue personal accidental insurance and in 1996 it started to operate in the sector of life insurance. Bao Viet has a very competitive position. The company has a very low turnover rate and a broad network of 21,000 agents with long established relations into all segments of the society. Premiums start from VND 100,000 a month which is much lower than all other life insurance companies which normally have premiums around a minimum of VND 300,000 per month. Since the mid-1990s, a number of other life insurers such as Prudential (1995), Manulife (1999), AIA (2000) and New York Life (2000) have entered the market. The next wave came with the entrance of Great Eastern (2004), Prevoir (2005), ACE Life (2005) and Dai Ichi Life (2005), which was expected to result in a new development wave for the Vietnamese life insurance market. So far, the life insurance sector is still dominated by the state owned insurance company Bao Viet followed by Prudential, which both have around forty per cent market share.70 The remaining companies share twenty per cent of the market. Due to complicated procedures and strict conditions to cash in life insurance, more people in Vietnam decide to invest in banking products or to buy gold rather than to buy health insurance through the insurance market. The life insurance market has responded to the reluctance by Vietnamese customers by offering products which combine a savings and a risk component.71 Prudential for example started to offer so-called unit-linked products which are a mix of investments and protection at the same time.72 Bao Viet started the Baoviet InterGlobal Healthcare, a healthcare insurance product which covers medical fee and health service expenses, in 2008.

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5.5  Conclusion As in other informal security regimes, the institutional landscape of the Vietnamese informal security regime is not dominated by the state, but is characterized by a wide range of actors including the family, the community and the market, all involved in the implementation of social policy (cf. Marin and Mayntz 1991, p. 16). The provision of health care services is not organized hierarchically, but operates in a decentralized way through a provider network. The family is still seen as a natural social safety net providing income and security (cf. Esping-Andersen 2000, p. 45). The degree of defamilization — the economic independence of individuals from their family — remains low in Vietnam. What is most worrying in terms of health equity is that even though Vietnam has strong social networks, these are often weakest for those most in need. Especially poor people living in remote areas remain not only outside the official health care system, but also lack adequate access to family networks, and can only rely marginally on community networks. Some of the mass organizations, religious organizations, charities and NGOs have been especially successful in targeting the poor. In fact, what Wood (2004, p. 84) says about an informal security regime is highly applicable to Vietnam: the state is not the compensator for inequities of the market, rather civil society compensates for the inequities of the state and — what could be added — the market. On the downside, in particular community based and religious organizations in Vietnam often operate in a grey legal area — either since the government does not fully acknowledge their existence or since they are seen as a potential challenge to the regime. The projects thus often remained in a pilot phase or were eventually phased out as in the case of the CEP. Unlike many other informal security regimes, Vietnam has adjusted to international policy environments and policy interdependencies (cf. Kennis and Schneider 1991, p. 35) only quite recently. Not until the early 1990s did the government invite donors and INGOs to officially work in Vietnam. Since then, donors and INGOs have been quite active in improving the infrastructure of health care — especially in remote and poor areas. As in other settings, the donor community in Vietnam is quite fragmented. This poses a challenge to the government and the MOH to coordinate with all of them. Some progress has been achieved, since both sides have learned more about mutual expectations in terms of welfare outcomes and the policymaking and implementation process. This has enhanced the interdependencies between both sides (cf. Lehmbruch 1989, p. 222).

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INGOs in Vietnam work in various sectors related to health equity such as primary health care, reproductive health, disability, and HIV/Aids. The Vietnamese government has tried to bundle information about the activities of INGOs in Vietnam through the establishment of a Resource Centre (cf. 5.3.2). Indeed, it is not always easy to assess the impact of INGOs on welfare in Vietnam, nor is it easy to track all activities. Part of this has to do with the fact that unlike donors, many INGOs channel their funds through lower administrative levels, mass organizations including the Women’s Union, the Red Cross, and, to a much lesser extent, Vietnamese NGOs and CBOs. This and the fact that many INGOs operate in more than one social policy area makes it difficult to discern their actual impact on policy and health (see also 6.2.11). Preliminary findings indicate that in recent years INGOs have been able to raise attention to and address problems, neglected by governmental agencies and most donors. In the last twenty years, the market has probably had the most profound influence on health equity in Vietnam. The marketization of the provision of health care and pharmaceutical products has revealed some positive outcomes. More sophisticated medicine has become available. International companies have started to provide private health insurance for people who are able to pay. In addition, people can travel abroad to receive high-quality health care. However, the process in which the health care market has privatized in Vietnam has also had a variety of negative effects. Phenomena such as moonlighting of medical staff, informal fees and semi-public structures running parallel to and even undermining the public health care system have made it quite difficult to improve health equity. This blurring between private and public providers of health has worsened the situation for poor people who face high and catastrophic out-of-pocket-payments. Hence, poor households are particularly in danger of falling into an injury-poverty trap. The uncontrolled sale of pharmaceuticals is extremely alarming — especially for poor people who use self-medication as a low-cost measure to deal with illness. Steps to regulate the private pharmaceutical market such as the adoption of the Vietnamese National Drug Policy (VNDP) have not been as successful as expected. So far, most of the private hospitals are situated in bigger cities such as Ho Chi Minh City and Hanoi and mainly serve well off patients. Attempts to privatize public hospitals have foundered on account of the resistance of mass organizations. The increase of private hospitals could help reduce the overload of public hospitals. However, one prerequisite would be that the VSS concludes agreements with private hospitals which assure the reimbursement of poor patients. Furthermore, in order to increase the

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number of hospitals in remote areas the government would do well to cofinance public-private hospitals. At present, there are over three hundred foreign companies involved in the pharmaceutical sector. Firms from India, South Korea and China import generics and simple drugs, whereas companies from Switzerland, Germany and France sell more sophisticated ones. Ninety per cent of all sold pharmaceuticals are imported. Their distribution is monopolized by three companies. Even though the government promised to take action against the monopolies in the pharmaceutical sector and increase domestic production, local importers and foreign suppliers continue to cooperate in overpricing, setting up exclusive deals and patent pooling to block competition from new suppliers or importers. The law on commercial insurance opened up opportunities for private companies to offer health insurance. Most insurers address the middle-income market with little impact so far on poor people. The Vietnamese insurer Bao Viet offers life insurance which is much cheaper than the average of international companies, but still too high to be used as a risk mitigating instrument for poor households. If the government wants to overcome the informal nature of the welfare regime, it needs to regulate and define the roles of the different actors involved in the public-private welfare mix more precisely. Otherwise it will not be able to alter the outcome of personal, household and market interactions, thereby leaving the poorest and most vulnerable groups in society unprotected.

Notes

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Private health expenditure in Vietnam consists mostly of out-of-pocket-payment, followed by health expenditures made by social and charitable organizations and private for-profit health insurance funds (MOH and HPG 2008, p. 24). Private expenditure on health refers to privately funded part of expenditure on health activities provided by individuals, the for-profit and non-profit sector (WHO 2006a, p. 159). It is estimated that between 1994 and 1999, four million people have migrated inside Vietnam (UNDP 2007a). Findings by Cox (2004) based on the VLSS 1993 and 1998 indicate that the most private transfers occur within the vicinity, only few cross urban-rural boundaries. This figure might be outdated given the fact that the VLSS do not take migration fully into account (see Pincus and Sender 2008). Note that there are no numbers available before 2001. See World Bank: Remittances Data, July 2009, (accessed 1 July 2009). International migration has become part of the social policy strategy of the Ministry of Labour, Invalids, and Social Affairs (MOLISA). In February 2009, MOLISA offered first training courses for members of households from poor districts to be sent abroad. Look at Vietnam: “Poor workers to get support to go abroad”, 22/02/2009, (accessed 1 July 2009). Differences might exist between Kinh and ethnic minorities as well as other groups in terms of structures and behaviour inside social networks. However, as culture and social interactions are not static, but are in a constant flux, it is almost impossible to capture all ethnic, religious and other differences in time. Cox (2004, p. 588) emphasizes that the relation between sickness and private transfers is complex and needs further studying. In this family based social system, women bear a major role in providing social services. They are normally responsible for the welfare of the family including the caring of older people, bringing sick children to the health station, paying for education and health fees, marriage arrangements, taking care of family planning (Gammeltoft 1999, p. 77). The expression “economy of envelopes” dates from the tradition to exchange money on festive occasions in red envelopes. The new Ordinance on Beliefs and Religions for example encourages religious organizations to provide health care assistance for the poor, the disabled, HIV/AIDS-infected persons, lepers, mental patients (Article 33). Religious organizations are supposed to participate in all educational, healthcare, charity or humanitarian activities according to law provisions. They are allowed as long as their activities are “not contrary to the nation‘s fine traditions, customs and interests” (Article 16). Much debate has occurred whether to include the mass organizations into the description and analysis of the voluntary or third sector (cf. Wischermann 2003). Their classification as voluntary organizations is highly contested given the fact that they are normally funded and controlled by the government (cf. Kerkvliet et al. 2008, p. 17; Kerkvliet 2001; Le Bach Duong et al. 2004; Thayer 1992a). Nevertheless, given the tasks they assume in the sector of social services, they will be mentioned in this chapter. Issue-oriented organizations are also active in the areas of training and consulting, education, cultural affairs, community development, environmental protection, consumer protection, and human rights (Wischermann 2003) Anglican Journal: “Groups examine religious attitudes towards AIDS pandemic”, 21/07/2008, (accessed 1 July 2009).

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Nørlund takes the example of one poor woman of the village of Trieu Khuc. After losing her husband and being expelled from her husband’s family, the women was completely on her own. The Women’s Union helped her find a job, and apply for a piece of land and a small house (Nørlund 2005, p. 76). 16 The aid fund provides support in case of death, sickness and longevity. The membership fee varies between VND 10,000 to VND 70,000 per year. 17 The scheme provides financial support in case of death (VND 200,000) and in case of sickness (VND 20,000, twice a year maximum). The premium is VND 1,000 every two weeks. Clients in Dong Trieu expressed satisfaction with the savings service because it is flexible in term of amounts to be deposited. One limit of this savings service is that people have to inform the fund at least two weeks before they can withdraw their savings. In case of emergency, this long delay can be a serious inconvenience. Cf. ILO: ILO related activities in Microfinance, n.d., (accessed 15 August 2009). 18 The TYM scheme covers the death of the member (VND 500,000) and the outstanding loan balance, the death of spouse/children (VND 200,000) since 1996 and severe illness (VND 200,000 only once) since 2001. The premium is VND 200 per week. Cf. ILO: ILO related activities in Microfinance, n.d., (accessed 15 August 2009). In 2004, the TYM scheme covered 34,000 adults (Wagstaff 2007b: 86). 19 The CEP estimates that in contrast to the official 5.5 million inhabitants, Ho Chi Minh City’s population is as high as 7 million. 20 Information gathered via Email contact with Ms. Nguyen Thi Kim Loan, Training Officer of CEP. 21 It is estimated that there exist more than 900 people’s credit funds and 100,000 savings and credit associations nationwide. Viet Nam News: “Micro-credit project lauded for reducing rural poverty”, 08/07/2005, (accessed 1 July 2009). 22 Informal local groups are known to the administration, but so far have not been registered. Those groups active throughout the whole of Vietnam probably serve millions of members (Nørlund 2007, p. 33). 23 One suggestion which could improve networking among CBOs is to open up the VUFO-NGO Centre to VNGOs and other organizations, or to establish a similar organization/information centre for VNGOs (Nørlund 2007, p. 26). 24 Many pagodas including the headquarter of the independent United Buddhist Church of Vietnam An Quang Pagoda were confiscated and turned into factories. Statement by John Newman, Visit Of The Prime Minister Of The Socialist Republic Of Vietnam to the Parliament of New South Wales, Australia, 19/05/1993, (accessed 1 July 2009). 25 Tue Tinh clinics date back to the scholar Tue Tinh who lived in the fourteenth century. Tue Tinh is considered to be the founder of traditional Vietnamese 15

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medicine. He offered traditional medical services in Buddhist monasteries throughout Vietnam. He regarded pagodas as places where health services were offered to the public. Most of the pagoda-based clinics had medicinal plant gardens. Both the pagoda-based clinics and the tradition of family medicinal plant gardens are still existent in Vietnam, particularly in rural areas (Dung and Bodeker 2001, p. 402). Toan Nhu Tran: “Buddhism as a support mechanism for people living with HIV/AIDS in Vietnam”, presentation given at the 16th International Aids Conference, Toronto, 08/09/2006, (accessed 1 July 2009). The Unified Buddhist Church of Vietnam (UBCV), which is officially banned, has also tried to become active for the poor, but their work has been suppressed regularly and therefore have to work secretly. It was reported that members of the UBCV including leader Thich Quang Do and Thich Khong Tanh have distributed money to dispossessed farmers demonstrating, thereby provoking the anger of officials. Union of Catholic Asian News: “Low-cost medical centre a boon for poor patients”, 19/03/2009, (accessed 1 July 2009). Website of the Vietnamese Dominican Sisters: (accessed 1 July 2009); J.B. Vu: “Vietnamese Church cares for lepers amid indifference of government and people”, 25/07/2008, (accessed 1 July 2009). National Public Radio: “Vietnam Expands Protection for People with HIV”, by Richard Knox, 05/02/2007, (accessed 1 July 2009). Ministry of Foreign Affairs (MOFA): “The Protestant Church in Vietnam”, (accessed 1 July 2009). Dega Protestantism is mainly prevalent in the Central Highlands in Vietnam where around 300,000 members practice this form of Protestantism. Dega Protestantism is seen as a source of dissent, since members of this community have acted as land-rights advocates against the mass migration of kinh lowlanders and have been involved in protests against their religious restrictions and land property rights in 2001 (McElwee 2004, p. 203). Another group of forbidden Protestants are the Hmong Christians in the North Western provinces. The house church movement has around 250,000 followers in thirty different organizations. House churches are still illegal, although their existence and activities are well known to the authorities. The organization was founded in 1949 by the Soviet Union, Bulgaria, Czechoslovakia, Hungary, Poland, and Romania to promote economic cooperation among socialist bloc countries. Its headquarter was in Moscow until the organization was disbanded in 1991 and replaced by an Organization

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for International Economic Cooperation, whose functions were reduced to consultation and advise giving. COMECON members in the 1980s included the Soviet Union, Bulgaria, Czechoslovakia, East Germany, Hungary, Poland, Romania, Cuba, Mongolia, and Vietnam (Library of Congress 1988). Witter (1995, p. 26) reports that in 1992, between one quarter and one third of the health budget was contributed by external aid. Australia, Austria, Belgium, Canada, China, Denmark, England, Finland, France, Germany, Italy, India, Japan, Luxembourg, Netherlands, New Zealand, Norway, Republic of Korea, Singapore, Spain, Sweden, Switzerland, Thailand, United States. See the MPI website for a short description of donors: MPI: Bilateral Donors: (accessed 1 July 2009). ADB, EC, FAO, IFC, IFAD, ILO, IMF, UNICEF, UNDP, UNIDO, UNODC, UNFPA, World Bank, World Food Programme, and WHO. See the website of the Ministry of Planning and Investment (MPI) for a short description of multilateral donors in Vietnam: Multilateral Donors, n.d. (accessed 1 July 2009). Ministry of Foreign Affairs (MOFA): “Prime Minister assures donors of ODA efficiency”, 13/12/2007, www.mofa.gov.vn/en/nr040807104143/ nr040807105039/ns071207101424> (accessed 1 July 2009). Viet Nam News: “PM calls for speeding ODA payments”, 31/08/2006, (accessed 1 July 2009). The latest of scandals was related to the Japanese consulting firm Pacific Consultants International (PCI). The management of the company admitted that it had paid a senior official in Ho Chi Minh City a bribe of US$820,000 with respect to several ODA-funded infrastructure projects in Vietnam. In consequence, the Japanese government decided to suspend all further ODA projects until effective measures against corruption would be taken. Cf. Viet Nam Net: “Japanese ODA for Vietnam on hold”, 04/12/2008, (accessed 1 July 2009). Another serious scandal was related to the Project Management Unit (PMU) 18, which had been attached to the Ministry of Transport. In 2006, members of the PMU admitted that they had gambled with millions of dollars of ODA money instead of using it for highways, bridges and other infrastructure projects. Cf. BBC: “Vietnam ministry hit by scandal”, 04/04/2006, (accessed 1 July 2009); Viet Nam Net: “ODA provider more cautious after PMU 18 scandal”, 07/04/2006, (accessed 1 July 2009); Vietnam Investment Review: “CG to smooth over PMU18”, 05/06/2006, (accessed 1 July 2009). The distribution of infrastructure-related ODA has changed over time. From 1993 until 1995, water and sanitation projects were dominant. In recent

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years, the energy sector has experienced a substantial increase from US$150 to 283 million in 2003. See the websites of ADB Vietnam (