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3.3. Assessment on changes in poverty line


GSO provincial poverty rates in 2008 are used as an allocation norm to distribute capital expenditures from the central to provincial state budget, as stipulated in the decision 60/2010/QD-TTg. According to the decision, each 5 percent of provincial poverty gets a point. In 2010, however, the new poverty line was applied. This section is to investigate how change in the poverty line would affect capital expenditures distributed from central to provincial budgets. Data from the Finance and Budget Committee of National Assembly have shown that total poverty scores used to allocate capital expenditures for budgetary stability period of 2010-2015 was 210.7 points. It would be 231.9 points, a 21.2-point increase when the new poverty line was used to calculate poverty rate in 2010.

Table 12: Scores of poverty for capital expenditure allocation of central to provincial state budgets during 2011-2015 due to a change in poverty line

Provinces

Scores of provincial poverty-GSO 2008

Scores of provincial poverty-MOLISA 2010

Change in poverty scores

North Mountainous

83.70

95.51

11.81

Red River Delta

19.42

19.21

-0.21

North Central and Central Coast

49.22

50.89

1.67

Central Highlands

22.16

24.72

2.56

South East

5.28

4.08

-1.20

Mekong River Delta

30.90

37.44

6.54

Total

210.68

231.85

21.17

Source: Consolidation from data provided by the Finance and Budget Committee of National Assembly

Using the new poverty line would be favorable to the poor provinces, which currently have higher poverty rates. For example, disadvantage regions like North Mountainous and North Central and Central Coast regions have higher scores when the new poverty line applied; while some such as Red River Delta and South East regions have a decrease in their poverty scores. In terms of poverty scores, the new poverty line seems to be supportive to the poor provinces.

When investigating the relationship between provincial capital expenditures and poverty rate, a negative relationship has been found, and it is true for both GSO provincial poverty rates and the “new poverty line” poverty rate. The results imply that the poor provinces would receive less capital expenditure or allocation norm is not pro-poor. The regression results presented in the table 13, however, show that the new poverty line seems to be favorable to the poor than using GSO poverty rates.

Table 13: Regression results between differences in per capita capital expenditures allocated to province on provincial poverty rates, 2010-2011

Poverty identification

Intercept

Provincial Poverty Rate Coefficients

R-Squared

GSO

0.0910232**

0.0007205*

0.002

MOLISA

0.0944076**

0.0004708*

0.001

Note: *** means that the coefficients are statistically significant at 1 percent level, ** for 5 percent level, and * for 10% level

Relationship between changes in share of provincial capital expenditure and provincial poverty rates has been shown in the figures 5 and 6. The results do not show a clear relationship when negatively affecting richest but positively affecting middle-classed provinces, while modest positively affecting on the poorest provinces. To understand this relationship, regressions of change in share of provincial capital expenditures on GSO provincial poverty rate and the “new poverty line” poverty rates are applied, and results are presented in the table 14.

Table 14: Regression results between provincial shares of capital expenditures and poverty rates when poverty line changed

Poverty identification

Intercept

Provincial Poverty Rate Coefficients

Adjusted R Square

GSO

-0.2004139

0.0119861

0.0355

MOLISA

-0.2045585

0.0111169

0.0382

Note: *** means that the coefficients are statistically significant at 1 percent level, and ** for 5 percent level, and * is for 1 percent level.

The regression results show that both coefficients of GSO provincial poverty rate and the “new poverty line” rate are positive but not statistically significant at the conventional significance levels. Thus, no clear relationship between those two variables has been found.



In the budgetary stability period of 2011-2015, GSO provincial poverty rate has been used as one of the allocation norms to distribute capital expenditures to the provinces. Using this norm, several findings have been found:

  • Using the new poverty line would be favorable to the poor provinces, and in terms of poverty scores, the new poverty line seems to be supportive to the poor provinces.

  • Concerning about the amount of per capita capital expenditure allocated to the province, the poor provinces would receive less incremental of per capita capital expenditure. This implies that allocation norm is still support the poor, but not as strongly pro-poor as using the GSO poverty rates. The new poverty line, therefore, seems to be unfavorable to the poor than using GSO poverty rates.

  • Using changes in share of capital expenditures allocated to the provinces, the change in the poverty line does not have statistically significant effects on changes in share of provincial capital expenditures. When considering the coefficients, however, GSO provincial poverty rate still pro-poor than the “new poverty line” poverty rate of MOLISA


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