Income Diversification and Poverty in the Northern Uplands of Vietnam

Urbanization and income growth within developing countries have created large markets for meat, milk, fish, fruits, and vegetables, while trade liberalization and foreign investment have connected farmers in developing countries with high-income consumers in other countries. In the first half of the 1990s, the International Food Policy Research Institute (IFPRI) carried out a series of studies on the impact of agricultural commercialization on farm income and nutrition, finding that the effects were generally positive. More recently, IFPRI research explored the “livestock revolution” and its effect on small farmers, as well as the dramatic growth in international trade in fish and seafood, in which developing countries play an increasingly important role. This report continues IFPRI’s research into high-value agriculture, examining income diversification and its contribution to poverty reduction in the Northern Uplands of Vietnam, the poorest region of the country. Three aspects of the approach used in this study merit attention. First, unlike many studies of income diversification that use cross-sectional data, this study looks at household-level changes in income sources over a period of rapid economic growth. Second, this study makes use of both qualitative and quantitative data, combining information from three nationally representative household surveys, secondary data, and surveys of farmers and local officials to better understand their perceptions of the relationship between income growth, diversification, and poverty reduction. Third, the report presents a new method for measuring the contribution of diversification into higher-value crops to income growth for different types of households. The results indicate that rural households in the Northern Uplands have participated fully in the economic growth of Vietnam, though poverty remains high. Income growth among rural households has occurred through proportional increases in crops, livestock, and nonfarm income. Surprisingly, poor rural households have benefited largely from crop income growth. Furthermore, yield increases account for the largest share of crop income growth, particularly among the poor. Crop diversification played a relatively small role in rural income growth in the Northern Uplands, though it accounted for more than 25 percent of the crop income growth in other, more commercialized, regions. Local authorities manage a range of programs aimed at promoting new crops. Marketing problems with these new crops are common, however, suggesting the need for greater attention to marketing and profitability. IFPRI continues to carry out research on the potential for high-value agriculture to reduce poverty in developing countries. In particular, IFPRI is examining institutional mechanisms to link farmers, processors, and buyers with the aim of helping the poor participate as producers, laborers, and consumers in rapidly growing markets for high-value agricultural commodities.