Vietnam’s CRI Index on way to being improved  

The fifth edition of the Commitment to Reducing Inequality (CRI) Index (CRII-5), published by Oxfam and Development Finance International (DFI), evaluated the efforts of 164 countries and territories in addressing inequality. The report’s authors assessed performance across the three pillars of public services (education, health, and social protection), progressive taxation, and labor rights and wages. Overall, apart from labor-related areas, Vietnam has shown significant achievements in addressing inequality through policies related to education, taxation, and elsewhere.

It ranked 94th globally in this CRII-5 report, demonstrating notable progress in tax policy and education funding but facing challenges in labor policy that require further improvements.

Negative impact on sustainable development

The CRII-5 measured the commitment and effectiveness of countries and territories in reducing global inequality, comparing policies and initiatives aimed at narrowing economic, social, and environmental development gaps across different regions.

According to economic analysts, inequality has broad, adverse effects on sustainable development, impacting economic, social, and environmental dimensions. For one, inequality stunts economic growth by limiting participation from large segments of the population who lack equal opportunities. This is particularly evident when disadvantaged groups are unable to access education or stable employment, hindering their economic potential and, as a result, slowing overall economic growth.

Additionally, inequality raises social costs, increasing expenses for healthcare and social services. It also complicates environmental protection efforts, as impoverished communities often rely on natural resources for survival, leading to resource depletion and environmental harm.

Furthermore, inequality can weaken trust in political institutions and reduce national cohesion, fueling conflicts between personal, group, and shared interests, all of which hinder the implementation of sustainable development policies.

Key policies roll back

Reducing global inequality is vital for improvements to quality of life and sustainable development. Findings in the CRII-5 revealed a concerning trend: nearly all countries and territories, or 94 per cent, with existing World Bank (WB) and International Monetary Fund (IMF) loans have cut vital investments in public education, health, and social protection over the past two years.

The report also highlighted that 84 per cent of countries and territories, with or without WB and IMF loans, have cut investment in education, health, and social protection in the last two years, 81 per cent have weakened their tax system’s ability to reduce inequality, and 90 per cent have seen labor rights and minimum wages worsen.

Ms. Kate Donald, Head of Oxfam International’s Washington D.C. Office, warned that such cuts are not just dispiriting; they are dangerous and fundamentally anti-development, undermining global development efforts. “For the first time since the CRI Index’s inception in 2017, the majority of countries are backsliding across all three critical areas,” she said.

“Governments worldwide are doing even less to fight inequality, exacerbating extremism and undermining growth,” Mr. Matthew Martin, Executive Director of DFI, believes. “With the WB adopting a new anti-inequality target, the WB and IMF have a new opportunity to champion policies that cut inequality - free public services, fairer tax systems, and stronger worker rights. They must seize this with both hands.”

The report outlined various policy recommendations for governments, emphasizing the risk of allowing extreme inequality to persist, as it can dampen economic growth and strain social cohesion.

Efforts ongoing in Vietnam

Vietnam’s ranking of 94^th was down from 92nd in the previous report, CRII-4, published in 2022. The country stands out in tax policy, achieving a global ranking of 38th in CRII-5, thanks to initiatives such as a 2 per cent reduction on VAT for certain goods and services and extensions on corporate and personal income tax payment deadlines. Compared to other lower-middle-income countries (LMICs) in the Asia-Pacific and ASEAN regions, its dedication to mitigating inequality is commendable, with notable progress made in budget allocations for education, tax reductions, and effective tax policies.

Education funding has also seen consistent growth in the country, with 47 per cent of urban household spending directed towards education and a 7 per cent rise seen in household education spending from 2017 to 2022. Vietnam’s school-age population, currently at 24.5 million children, is projected to increase by 0.6 per cent by 2030. In line with Resolution No. 29-NQ/TW issued in 2013, which mandates that a minimum of 20 per cent of the State budget be allocated to education, the government has continued to adjust this figure in accordance with economic growth, aiming to enhance educational infrastructure and funding stability.

However, Vietnam’s ranking in the labor sector has declined from 104th in CRII-4 to 120th in CRII-5, indicating a need for enhancements in labor-related policies.

Within the LMIC category in the Asia-Pacific and ASEAN region, Vietnam ranked third out of 17 countries and territories in this latest edition. It has also improved its standing within ASEAN, rising from fourth place to third, surpassing Singapore and now trailing only Malaysia and Thailand. Among the five LMICs in ASEAN - Vietnam, Cambodia, the Philippines, Timor-Leste, and Laos - Vietnam held the highest CRII-5 score, reflecting a strong commitment to reducing inequality relative to its ASEAN peers.

Vietnam’s balanced approach to public service provision and progressive tax policies has aided its improved ranking. Nonetheless, the decline in the labor pillar suggests that further efforts are required to enhance the inclusivity of labor policies.

To bolster its standing, Vietnam is emphasizing alignment between education and market needs, fostering stronger partnerships between businesses and educational institutions and promoting technology adoption in labor management and production. The government also aims to ensure workers receive their full legal rights, including social insurance, rest breaks, and safe working environments. Support services such as career counseling, skills training, and financial aid are being expanded to help workers advance their careers.

This balanced approach in public services and tax policy has strengthened Vietnam’s standing in inequality reduction efforts. With a continued focus on progressive labor policies, Vietnam is poised to improve its position in future inequality reduction indices.