metadata: authors: 0: author: Nga Nguyet Nguyen
count: Vietnam
docna: 0: docna: Trends in the education sector from 1993 - 98
docty: Policy Research Working Paper
subtopic: Public Sector Economics,Primary Education,Tertiary Education,Educational Sciences,Public Financial Management,Public Finance Decentralization and
            Poverty Reduction,Transport Services
teratopic: Gender
abstracts: cdata!: Vietnam has achieved remarkably high
            rates of school enrollment and has maintained good social
            indicators (infant and under-five mortality rates, life
            expectancy, fertility rate, child nutrition, and access to
            basic services) compared to other countries with similar low
            income per capita. The author documents and analyzes changes
            in enrollment and education finance in Vietnam from 1993-98.
            Enrollment rates increased substantially, but the increases
            were not equally spread across different income groups,
            regions, gender, and ethnic groups. The higher the level of
            education, the larger the gap in school enrollment among
            different socioeconomic groups. Although school fees were no
            longer compulsory at the primary level, households paid for
            many other school-related items, such as books, uniforms,
            private tutors, lunch, and transportation. These costs are a
            significant financial burden on the poor. On the other hand,
            there is considerable variation in public spending per
            student across regions that, when coupled with variation in
            enrollment rates across regions, resulted in a not pro-poor
            public spending pattern, although public spending on primary
            education was neutral in 1998. Finally, the author
            investigates whether rates of return to education in the
            private wage sector changed in the 1990s. She concludes that
            returns to schooling increased substantially between 1992-93
            and 1997-98, especially at the upper secondary education and
            university levels.
geo_reg_key: 517198,517191
repnme: repnme: Trends in the education sector from 1993 - 98
display_title: Trends in the education sector from
            1993 - 98
listing_relative_url: /research/2002/09/2026462/trends-education-sector-1993-98
topicv3: Primary Education m1326139 480,Public Finance Management m1326316 716,Tertiary Education m1326349 482,Transport m1326661 135,Education m1327048 470
publishtoextweb_dt: 2010-07-01T00:00:00Z
historic_topic: Gender
origu: Development Research Group (DECRG)
no_of_pages: 35
model_extractions: PoiLicY' Rx SEARCH WORKING PAPER 2891

# Abstract

Vietilam has achiieved remarkably high rates of school enrollmient and has mainitained good social indicators (infant and under-five mortality rates, life expectancy, fertility rate, child nutritioni, and access to basic services) compared to other coLintries with similar low income per capita.

Nga documlienits and analyzes chaniges in enrollimenit and education finance itn Vietnam from 1993-98. Enrollment rates increased substantially, but the increases were not eqLially spread across different income groups, regions, gender, and ethnic groups. The higher the level of education, the larger the gap in school enrollilenit among different socioeconomilic groups. Althoughi school fees were no longer compulsory at the primary level, households paid for many other school-related items, suchi as books, uniforms, private tutors, Iliuch, and transportation. These costs are a significanit financial burden on the poor.

On the other hanid, there is considerable variation in public spending per student across regions that, when cotipled with variation in enrollment rates across regions, resulted in a not pro-poor public spending pattern, although public spending on primary education was neutral in 1998.

Finally, Nguyen investigates whether rates of returin to edUcationl in the private wage sector changed in the 1990s. She concludes that returns to schooling increased substantially between 1992-93 and 1 997-98, especially at the tipper sccondary education and university levels.

This paper-a product of Macroeconomliics and Growth, Developmenlt Research Grotip-is part of a larger effort<sup>in</sup> the group to study household welfare and poverty reductioni in Vietnami. Copies of the paper are available free from the Woricl Bank, 18 18 H Street NW, Washiligton, DC 20433. I'lease contact Emily Khine, room MC3-347, telephonie 202-473-747 1, fax 202-522-3518, email address kkhine@worldbank.org. Policy Research Working Papers are also posted on the Web at http://econ.worldbank.org. Thc author may be conltacted at nnga@t,worldbank.org. September 2002. (28 pages) _Thec Policy, Rescarch WZorking Paper Series dissedmibyates t fieadiis Res of work io prygress to encourage tae excfafige of ideas aitt_ **_deuelo pmolent_** _isslze s._ **_Anl_** _objvectieve of tIe serie s is to get th)e finldinzgs_ **_o)zit_** _qnickIv. even if the presenztations are less_ **_zIbaii_** _fidlyv polisbeed. Th)e papers carry the_ **_nlames_** _of-tbe authors_ **_aii(d_** _sbouldt beL cited accordingly. The 1/iiditigs, initerpretattioiis, anid coircltfsionzs expressed in this parper are enrtire.1v those o)f tlve auxtbrs. Tbley do_ **_no(t_** _ntecesscarily, represenzt tl)e vietv of the Il/ovrld_ **_Bazik,_** _its Execi(tive l)irectors. or the coitittries tbe), repiresent._ Procluced **hiy** the Researchi Advisorv Staff
# Trends in the Education Sector from 1993-98

Nga Nguyet Nguyen World Bank, 63 Ly Thai To, Hanoi, Vietnam Email: nnga(worldbank.org I am grateful to Nisha Agrawal, Dominique van de Walle, Carolyn Turk, Bob Baulch, and especially Paul Glewwe, for helpful discussions on the issues covered in this paper.
# 1. **Introduction**

In the 1990s, Vietnam achieved remarkably high economic growth. It also<sup>experienced</sup> steady improvement in many social indicators, which were already high despite its low income per capita. As explained in Chapter 1, the country has seen a huge reduction in poverty incidence, a reduction that occurred for all income groups and in all regions. The<sup>Governmentof</sup> Vietnam is embarking a very challenging agenda to provide higher quality basic education<sup>for</sup> all. However, much more needs to be done ensure that this ambitious, but<sup>notimpossible,goal</sup> will be achieved.

The purpose of this paper is to document and analyze changes in enrolment<sup>and</sup> financing for education in Vietnam over the five year period from 1993 to 1998,<sup>using the</sup> Vietnam Living Standard Survey (VLSS) data collected in 1992-93 and 1997-98.<sup>Thepaper</sup> begins by looking at changes in school enrolment, focusing on primary and lower<sup>secondary</sup> education because universal enrollment at these levels is an explicit goal of<sup>theVietnamese</sup> government. Enrolment rates have increased significantly in the past 5 years at all<sup>levelsof</sup> education. The paper compares changes in enrolments for all expenditure groups, all<sup>regions,all</sup> ethnic groups, and between boys and girls, to see whether recent improvement<sup>inenrolment has</sup> been evenly spread across the population, as opposed to being concentrated in certain groups or regions.

Secondly, the paper examines education finance, including the relative role of<sup>the public</sup> and private sectors in financing education in Vietnam. Private spending on<sup>educationis</sup> compared by expenditure groups, regions, ethnic groups, and by gender, to assess any<sup>changesin</sup> the financial burden of sending children to school, especially among the poor. It also<sup>investigates</sup> possible links between household spending on education, enrolment and the quality of<sup>education.</sup> The paper also checks whether the poor benefit as much as better-off households<sup>frompublic</sup> spending on education. Does government spending reduce inequalities? Can<sup>anyunequal</sup> patterns be corrected by reallocating the government's education budget?

The final issue considered is possible changes in rates of returns to education, including whether any changes varied across different groups. This is done by estimating<sup>Mincerian</sup> earning fimctions that link wage income to the underlying determinants of earnings,<sup>suchas</sup> schooling, work experience, age, economic sector, region, and gender.

The structure of the paper follows these three questions. Section II documents and analyzes changes in enrolment. Section m looks at the pattern of financing for<sup>education,and the</sup> relative role of the public and private sectors in financing education in Vietnam. Section<sup>IVlooks</sup> at the recent changes in rate of returns to education with limited focus on wage<sup>eamersinthe</sup> private sector. Finally, section V concludes the paper with some policy suggestions.

1
# **2. Enrolment**

# _General Trends_

Vietnam made impressive progress in expanding enrolment in basic education in the 1990s. Figure 1 shows total student enrolment at the primary and secondary levels for every year from 1987 to 2000, based on official government education statistics. Vietnam has achieved high rates of literacy and school enrolment despite its low per capita income. Net enrolment in primary education was 91.4 % in 1999. Increases in enrolment rates were even higher for lower and upper secondary schools over the five years between 1993 and 1998.

Figure 1: Trends in school enrolment, **1987-98** (in millions) <!-- Start of picture text --> ,12<br>,10<br>8 +-s Prirmry<br>6 6 _ ~~~~~~~~Low er secondary<br>4~~~~~~~~ Upper secondary_<br>2 -<br>.0<br>1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000<br><!-- End of picture text --> _Source:_ Ministry of Education and Training The enrolment statistics shown in Figure '1 were collected by the Ministry of Education and Training (MOET) through its statistical reporting system. Absolute numbers of students attending primary school have increased dramatically between early 1990s to 1998, rising by 7 percent from 9.7 million in 1993 to 10.4 million in 1998. From 1998, a downward trend was observed due to demographic change. The downward trend in enrolments in the years before 1990 was reversed by the mid -1990s at secondary levels. At the lower secondary level, enrolment increased even faster by almost 43 percent, from 3 million to 5.3 million in 1998. Upper secondary school enrolment has risen even more dramatically as compared to 1993 - from 0.6 million to 1.4 million, and has far surpassed the peak in 1987.

# _Trends by Expenditure Group_

Education progress for different expenditure groups can be assessed by looking at the number of children actually in school and whether children in school are at the appropriate age'. Over the 5 year period 1993-98, net enrolments increased significantly at all levels, especially at higher general education levels. Net enrolments rates for primary schools increased from 87 1 The gross enrolment rate is defined as the ratio of the number of children currently in school at a given education level to the total number of children in the right age for that level; For example, the right age for primary school is 6-10 years. The net enrolment rate is defined as the ratio of the number of children currently in school at right age for a given education level to the total number of children in the right age for that level.

2
percent in 1993 to 91 percent in 1998. At lower secondary level, net enrolment rates more than doubled in five years, from 30 percent in 1993 to 62 percent in 1998. Increases in net enrolments rates at higher levels were even more impressive; they quadrupled at the upper secondary level and tripled at the post-secondary level (Table 1).

**Table 1: Net and gross school enrolment rates by quintile and education level in Vietnam, 1993-98** (%)

||_Pri_|_mary_|_Lowers _|_econdary._|_Upperse_|_condary_|_Postsec_|_ondary_|
|---|---|---|---|---|---|---|---|---|
||1993|1998|1993|1998|1993|1998|1993|1998|
|_Netenrolmentrates_|||||||||
|_Vietnam_|87|91|30|62|7|29|3|9|
|Poorestquintile|72|82|12|34|1|5|0|0.4|
|Richest quintile|96|96|_55_|91|21|64|9|29|
|_Grossenrolmentrates_|||||||||
|_Vietnam_|120|115|42|78|9|36|4|12|
|Poorestquintile|100|112|15|47|1|8|0|0.4|
|Richestquintile|130|104|77|105|24|75|13|37|

_Source:_ Author's estimates based on 1992-93 and 1997-98 VLSS<sup>2</sup> .

Table 1 shows that for the poorest quintile, enrolments expanded at all education levels during the five-year period from 1993 to 1998. Enrolment of poor children increased in primary schools from 72 percent in 1993 to 82 percent in 1998, and in lower secondary schools from 12 percent in 1993 to 34 percent in 1998. At higher levels, although enrolment increased, very few children from the poorest households went to upper and post secondary schools.

**Figure 2: Net enrolment rates by quintile and level, 1993 and 1998** (%)

<!-- Start of picture text --> 1w P rmary I9O Lower secondary<br>Primry -90 I! 1993<br>80- 80 - *998<br>70 - E 70-<br>*<br>60 - m 1993 so<br>70 81998<br>40 - 40<br>30 p 30<br>20 ~~~~~~~~~~~~~~~~~20<br>so- X s9-t<br>0 -- -' 0<br>I II III IV v I III .I IV v<br>1D)-<br>90- 09I93 DO-<br>80o Upper secondary U 9D98 15993<br>70 - 80 b Post secondary w b98<br>60- 60 -<br>50-<br>40 40<br>20 20<br>I II ~~~III IV V I II III IV V<br><!-- End of picture text -->

**2** Motof data used in this paper estimated from VLSS93 and VLSS98 by author, otherwise will be cited.

3
Enrolment in primary education become<sup>moreequitablein the1990s,but inequitiesstill</sup> exist: 82 percent of poor children aged<sup>6-10 were in primaryschools comparedto96 percentfor</sup> the richest children. Moreover, gaps<sup>inenrolmentinsecondaryandpostsecondaryeducation</sup> between the rich and the poor are<sup>still largeinVietnam,with thenetenrolmentrateforthe</sup> poorest quintile only about one third of<sup>that for therichestquintile at lowersecondaryschools.In</sup> 1998, 91 percent of children aged<sup>11-14yearsoldfromtherichestquintileattendedlower</sup> secondary schools, compared to only<sup>34 percentof childrenfromthe poorestquintile.Although</sup> more children from the poorest quintile<sup>wentto upperandpostsecondary schoolsin1997-98,</sup> enrolment rates for this group at these<sup>higher education levels wereextremelylow comparedto</sup> those from the richest expenditure groups;<sup>64 percentof the richestchildren aged15-17attended</sup> upper secondary schools, in contrast<sup>with only5 percentof childrenfrompoorestquintile.The</sup> gap in enrolment in post secondary schools<sup>isevenlarger, the netenrolmentrate was 29 percent</sup> for richest children as compared to<sup>0.4 percent for poorest children(Table1).</sup> In Vietnam and other less developed<sup>countries,manychildrenstart grade1 atlateage,</sup> and there were many children who<sup>repeatedgrades.This can causethenumberof children</sup> enrolled in a certain level to be higher<sup>thanthenumberof childreninthe agerangeassociated</sup> with that level. At the primary school<sup>level,Table1 showsthatover thefiveyearperiod1993-</sup> 98, net enrolment rates increased while<sup>grossenrolment ratesdeclinedfor all expendituregroups,</sup> except the poorest group. This shows<sup>that Vietnamis movingfromthe firstto thesecond phase</sup> of education development: i.e. children<sup>areincreasingly startingschoolat therightage,and</sup> fewer children are repeating grades.

However, the high gross enrolment<sup>ratesfor thepoorestquintileimplythateithertheir</sup> repetition rates were still significant<sup>and muchhigher than otherexpendituregroups,orthat</sup> many children were starting primary<sup>schoolat alateage(orperhapsleavingschoolforafew</sup> years and then returning). In 1998,<sup>about25percentof thepoorest primary-schoolchildren</sup> repeated at least one grade at the<sup>primarylevel,comparedtoonly8percentoftherichest</sup> children (Table 2). Furthermore, the<sup>poorestquintile hadthelowestrate of continuationover the</sup> period 1993-98. Less than half (50 percent)<sup>of childrenfrom the poorest quintilecontinued into</sup> lower secondary school in 1998, while<sup>about94 percentof primary childrenfrom richest quintile</sup> in 1993 moved to lower secondary<sup>schools in1998.</sup>

**Table 2: Repetition rate by level of education,**<sup>**1998**</sup> (number of students who repeated classes<sup>as% of totalstudents,for eachlevel)</sup>

|Level|Poorest|Richest|Vietnam|
|---|---|---|---|
|Primaryschools|24.6|8.0|19.2|
|Lowersecondary|28.6|14.0|21.8|
|Uppersecondary|26.0|12.4|16.0|

_Source:_ Author's estimates based on<sup>1997-98 VLSS</sup> As can be seen from Table 3, despite<sup>highratesof repeatinganddelayedenrolmentat</sup> grade 1, over the 5 years between<sup>1993and1998there hasbeena significantimprovementin</sup> age/grade matching; in 1993, about 23<sup>percentof students enrolledin primaryschools were older</sup> than 10 years old, and almost 28<sup>percentof studentsenrolledinlowersecondaryschoolswere</sup> older than 14 years old. The proportions<sup>for 1998were19and 20 percentrespectively.</sup> 4
All these trends have important implications for Vietnam. Although enrolment<sup>inbasic</sup> education (defined as primary and lower secondary education)<sup>has been improvedforpoor</sup> children, inequalities persist at primary level, and the gaps are widening<sup>athigherlevels.This</sup> suggests that poor children face disadvantaged conditions more often<sup>than dobetter-off children,</sup> such as poorer quality of education, lack of sufficient time spent<sup>studyingdue to houseworkor</sup> income earning activities, and poor health.

**Table 3: Age/grade matching, 1993 and 1998**

||A<br>|gegroup:<br>|percentage<br>|oftotal <br>|enrolledin<br>|level:<br>||
|---|---|---|---|---|---|---|---|
|Level|<6|6-10|11-14|15-17|18-24|>24|Total|
|_1993_||||||||
|Primary|4.8|72|22.1|1|0.1||100|
|Lowersecondary||1.0|71.3|25.9|1.8||100|
|Uppersecondary|||1.4|83.7|13.5|1.4|100|
|Postsecondary||||17.1|67.5|15.4|100|
|_1998_||||||||
|Primary|1.2|79.7|17.9|1|0.2||100|
|Lowersecondary||1.2|79.2|18.7|0.8||100|
|Uppersecondary|||0.7|79.1|19.9|0.3|100|
|Postsecondary|||0.2|4.2|79.7|16|100|

Source: Author's estimates based on 1992-93 and 1997-98 VLSS.

# _Gender Differences_

Vietnam has almost achieved gender equality of enrolment in<sup>generaleducation</sup> (including primary and secondary) between boys and girls. Testing<sup>hypothesisthat girlsand boys</sup> had the same net enrolment rates showed that this equality is statistically<sup>significant.In1998,</sup> 91% of school-age girls were enrolled in primary school compared<sup>with92%of boys. Gender</sup> inequality is not found at lower secondary level (NERs in 1998 were<sup>33.5%for boys and 33.7%</sup> for girls), although a gap between girls' and boys' net enrolnent in<sup>uppersecondarylevelis</sup> larger and increased slightly from 2 percentage points in 1992-93 to 3<sup>percentagepoints in1997-</sup> 98 (Figure 3).

<!-- Start of picture text --> Figure 3: School NER by Gender and Education Level, 1993 and 1998<br>90 -------------------------------- -<br>80 -- - - - - - - - - - - - - - - - - - - - -- -- -- -- - -- G irls 1---------<br>760 . -<br>50 .-<br>40.--<br>30 - -l<br>20 --.I<br>10 - . -- DR ----- - -;<br>0<br>rirrary Low er Upper Pirrory Low er Upper<br>Secondary Secondary Secondary Secondary<br><!-- End of picture text --> _5_
Table 4 shows both gross and net enrolment rates in 1993 and 1998, Vietnam had achieved a quite equal enrolment in basic education for both girls and boys using NERs though gender gap was slightly larger at upper secondary level. It is interesting that if one use GER instead of NER, then the whole picture changes significantly. GERs for girls were lower than those for boys at all levels, and much lower at the upper secondary level. For example, at the primary level, girls' NER was 99 percent of that of boys, while girls' GER was only 93 percent of boys' GER. The difference is clearer at upper secondary level. This implies that school-age boys and girls had equal opportunity to attend basic education. The fact that boys repeated classes more often than girls is one the reasons for lower percentage of GER for girls as compared to those for boys. However, it may also imply that over-aged girls were less likely to stay or go back to school than over-aged boys. This is somewhat consistent with findings from "participatory poverty assessments" done in Vietnam that girls contend with a complex mix of barriers to their right to formal education. For example, when decisions to send children to school are weighted against labor contributions, girls are often the last to be sent to school, and the first to be withdrawn. Similarly, some parents still consider that an investment in a daughter's education, especially at higher levels will be lost when she marries into another family. Gender equality for all can only be achieved and maintained by the conscious integration of gender issues within all policies, strategies and practices focused on addressing educational disadvantage, especially at higher level of education.

Table 4: Girls' enrolment rate as a percentage of boys' enrolment rate by education level

||1993|1998|
|---|---|---|
|NetEnrollmentRates|||
|prinary|101|99|
|lower secondary|93|101|
|upper secondary|73|91|
|Gross EnrollmentRates|||
|primary|96|93|
|lower secondary|80|96|
|uppersecondary|62|82|

# _Ethnic Groups Differences_

Despite recent improvements, ethnic minorities experience a much lower level of net enrolment in all levels of education compared with the majority Kinh and Chinese. In 1998, only 82% of ethnic minority children of primary school-age were enrolled in primary school compared to 93% of majority children. At the lower secondary level, the disparity is much more pronounced: in the same year, the lower secondary NER was only 37% for minority children compared to 66% for the majority. Low participation rates mean that approximately 0.4 million of the 2.8 million minority children aged 6-14 were not enrolled in school. Of these, 0.3 million were ethnic girls. Many ethnic minority girls are disadvantaged by a combination of late enrolment in grade 1 (if they enrol at all) and a tradition of early marriage. Minority people's concentration in the Northern Uplands, the Central Highland and the Mekong Delta means that they also experience the disadvantages found more generally in these locations.

Fortunately, ethnic minority children experienced a much larger improvement in enrolments in primary and lower secondary schools over five year period from 1992-93 to 19976
98, compared to the Kinh and Chinese, given their low staring points in 1992-93. Over this period, the enrolment rates of ethnic minorities increased by 18 percentage points at the primary level and 29 percentage points at the lower secondary level, compared to increases of 2 percentage points at the primary level and 22 percentage points at the lower secondary level for the Kinh and Chinese. On the other hand, the Kinh and the Chinese enjoyed larger improvement in enrolment in upper and post secondary levels. Over the same period, increase in enrolment was 24 percentage points in upper secondary level, and 7 percentage points in post secondary level for the majority, compared to 6 percentage points in upper secondary level, and 0.6 percentage points in post secondary level for the ethnics.

# _Regional Differences_

Despite overall improvement, enrolment gaps between urban and rural areas in Vietnam are still considerable, and the higher the level of education, the larger the enrolment gap between urban and rural areas. Enrolment gaps between urban and rural areas in 1998 were smaller than those in 1993 at the primary and lower secondary levels. For rural children, enrolment in primary education was improved significantly from 85 percent in 1993 to 91 percent in 1998 (Table 5). Improvement in net enrollment rates at higher levels was even more impressive, more than double at the lower secondary level, and four-fold at the upper secondary level, compared to slightly less than double at the lower secondary level, and three-fold at the upper secondary level for the urban children. However, the increase in enrolment rates at the upper secondary level over the same period was higher in urban areas than in rural areas, increasing the gap at this level. Specifically, urban-rural enrolment gap at the upper secondary level increased from 12 percentage points in 1992-93 to 32 percentage points in 1997-98.

**Figure 4: School NER by ethnicity and level of education, 1993-1998**

<!-- Start of picture text --> t o - ----------------------- ---------------------- --------------------. K inh & C hinese - .<br>90 --- --------------------------------------- m Ethnic<br>80 -- -- -<br>30 ---- -- - - - - - - - - - - - - - - - - - - - -- - -<br>40 ------ - - ---<br>2 0 - -- - - - - - - - - - - - - - - - - - - -- - -<br>1 0 -- - - - - - - - - - - - - - -- ---. . .- - - - - - -<br>30 .. .... .. . ------------ .... ....... --------- . ...... . .. .. .... . . ............ -----<br>0 -<br>Primary Lower Upper Primary Lower Upper<br>secondary secondary secondary secondary<br><!-- End of picture text --> Table 5 shows clear regional disparities at all levels of education, with the Mekong Delta and the Central Highlands below the average national net enrollment rate in 1998. Surprisingly, the Northern Uplands had very high enrolment level at primary school, stands only after the Red River Delta despite its relatively low living standards. This achievement may be a result of sizeable educational assistance that this region has received in recent years both from the government and from external aid to promote universal primary education. However, at the 7
secondary education level, this region was<sup>stillamongtheworstperformingregions.TheRed</sup> River Delta and the Southeast had the<sup>highest net enrolment ratesat all three levels of education.</sup>

**Table 5: Net school enrolment rates by urban/rural,**<sup>**region,1993and 1998**(%)</sup>

||Primar<br>|y<br>L<br>|owersec<br>|ondary<br> <br>|Upperseco<br>|ndary<br>|
|---|---|---|---|---|---|---|
||1993|1998|1993<br>|1998<br>|1993<br>|1998<br>|
|_Vietnam_|86.7|91.4|30.1|61.7|7.2|28.6|
|_Urban/Rural_|||||||
|Urban|96.6<br>|95.5<br>|48.5<br>|80.3<br>|17.3<br>|54.5<br>|
|Rural|84.8|90.6|26.3|57.9|4.7|22.6|
|_Region_|||||||
|NorthernUplands|85.7<br>|94.1<br>|22.2<br>|56.4<br>|5.6<br>|22.2<br>|
|RedRiverDelta|95.1|95.6<br>|46.5<br>|83.2<br>|10.3<br>|45.2<br>|
|NorthCentralCoast|88.1<br>|92.5<br>|30.6<br>|62.3<br>|5.8<br>|29.6<br>|
|CentralCoast|84.4|88.1<br>|38.1<br>|64.2<br>|11.6<br>|31.8<br>|
|CentralHighlands|67.8|80.2<br>|15.0<br>|43.9<br>|2.0<br>|10.5<br>|
|Southeast<br>|93.5<br>|93.4<br>|35.2<br>|71.7<br>|9.7<br>|36.3<br>|
|MekongDelta|79.0|86.9|19.4|45.0|3.6|17.4|

_Source:_ Author's estimates based on 1992-93 and<sup>1997-98VLSS.</sup> Despite the enrolment improvement for<sup>thewholecountryatalllevels, enrolment</sup> improvement was not evenly spread across<sup>all regions.Theenrolmentgapbetweenthebestand</sup> the worst performance regions over the five<sup>year period from1992-93to1997-98 wassmaller at</sup> primary level, with the gap reduced<sup>from27percentagepointsin1992-93to15percentage</sup> points in 1997-98. However, the gaps<sup>werewidenatsecondarylevels,withenrolment disparity</sup> increased from 32 percentage points in<sup>1992-93to39percentagepointsin1997-98 atlower</sup> secondary level. Worryingly, there was a huge increased in enrolment<sup>gapatuppersecondary</sup> level from only 8 percentage points<sup>in1992-93to35percentagepointsin1997-98.This</sup> widening gap at upper secondary level<sup>wasdue toconsiderable increasedenrolmentfortheRed</sup> River Delta and relatively slight increased<sup>enrolmentforthe CentralHighlands,andalsodueto</sup> low starting point for the Central Highlands<sup>(only 2%).</sup>

# **3. Financing for education**

# _Public andprivate role in providing andfinancing_<sup>_education, 1993-98_</sup>

In Vietnam, the public sector still dominates<sup>the provision of education.Even thoughthe</sup> share of the private sector in providing<sup>schoolplacesin1998increasedat thelower and upper</sup> secondary levels compared to 1993, provision<sup>of education is still dominatedby publicsector.</sup> Table 6 shows that the private sector provided<sup>more school places,anditsshareat the upper</sup> secondary level increased from 2 percent<sup>in1993 to 5 percentin1998.Surprisingly,at the</sup> primary level the private share in provision<sup>of servicefellfromabout1 percent to0.3percent</sup> and the semi-public school (joint between<sup>publicand private)share fallsfrom 2 percentto0.4</sup> percent. On the one hand, one possible explanation<sup>is that public schoolsexpand quicklydue to</sup> government efforts to achieve universal<sup>primary education. Moreover,thereis noexam</sup> requirement to enter public primary school<sup>so the demand for privateprimary schoolis not as</sup> high as that for secondary levels.

8
Table 6: Public and private shares of school enrolment by level of education, 1993-98

|(aspercent|ofgrossenrolments)|
|---|---|
|Typeofschool|Shareintotalenrolments|
||1993<br>1998|
|_Publicschools_||
|Primary|97.3<br>99.3|
|Lower secondary|97.6<br>96.6|
|Uppersecondary|95.7<br>83.0|
|_Privateschools_||
|Primary|0.9<br>0.3|
|Lower secondary|1.7<br>_0.5_|
|Uppersecondary|2.1<br>4.9|
|_Semi-public schools_||
|Primary|1.9<br>0.4|
|Lower secondary|0.7<br>2.9|
|Uppersecondary|2.1<br>12.6|

_Source:_ Author's estimates based on 1992-93 and 1997-98 VLSS and public expenditure data (from MOF) Turning to the secondary level, the most obvious explanation for the increased role of the private sector is the limited capacity by the public sector to provide education at that level. In Vietnam the private sector is still considered by households as offering an education that is of lower quality than that offered by the public sector. Demand for private and semi-public education at the secondary level has increased because many more children who want to attend secondary schools cannot gain admission to public schools due to limited space available at public school. -However, semi-public lower secondary schools developed faster than private ones perhaps as this is a better investment, compared to the pure private counterparts. In Vietnam, as the public sector cannot meet increasing demand for recurrent spending of schools, many schools were made semi-public, they could continue using public infrastructure (classrooms and facilities) but self-finance for most of its increased recurrent expenditure (such as salary for new hired teachers, top up salary for existing teachers) As a result, at lower secondary level, the private provision of education fell from 1.7 percent to a quite low level of 0.5 percent, while semi-public lower secondary school increased from 0.7 percent to 2.9 percent. Private schools at upper secondary level experienced a considerable increase from 2 % in 1993 to 5% in 1998, compared to a huge increase for semi-public schools from 2 % in 1993 to 13% in 1998.

The overall state budget expenditure for education and training (including funding from both central and local levels) increased from about 10 percent of current expenditures in 1993 to 17 percent in 1998. This implies that spending on education by the government increased from 1.8 percent of GDP in 1992 to 3.5 percent in 1998 (Table 7). Compared to 1993, budgetary spending on education has increased from 61 % of total public spending on education and training in 1993 to 76% in 1998 at the expense of spending on higher education and training. The largest share of the state budget for education and training sector (E&T), 36 percent, is allocated to primary education in 1998, an increase from 33 percent in 1993. The share of the budget expenditure on education for lower secondary schools in 1998 was the same as that in 1993 - 18 percent, while the budget share for upper secondary education increased slightly from 7 percent in 1993 to a little more than 8 percent in 1998. Government spending on higher education and 9
training dropped from 39 % in 1993 to 24 percent in 1998. Most<sup>of thereductioninhigher</sup> education and training budget came from reduction in state budget for technical<sup>andvocational</sup> training, and not from reductions in spending on universities.

**Table 7: Trends in Government expenditure on** education, 1992-1998

||1992|1993|1994|1995|1996|1997|1998|
|---|---|---|---|---|---|---|---|
|Percapitaexpenditure('000VNDat<br>constant1994prices)|39.2|58.1|71.3|82.8|80.4|100|115|
|%ofdiscretionarybudget|9.3|10.0|11.7|13.4|12.3|14.1|17.4|
|%ofGDP|1.8|2.6|2.9|3.0|2.7|3.2|3.5|
|_Shareoftotalpubliceducation_<br>_expenditureon:_||||||||
|Education|63.9|60.7|60.4|72.3|71.9|72.6|75.7|
|Primnaryschool|40.0|32.6|29.6|29.1|33.2|34.3|36.4|
|Lowersecondaryschool|14.8|17.6|17.7|19.9|19.2|19.2|17.6|
|Uppersecondaryschool|6.0|6.9|8.6|7.4|9.0|8.6|8.3|
|Highereducationand training|36.1|39.3|39.6|27.7|28.1|27.4|24.3|

_Source._ Author's estimates based on public expenditure data (from MOF) The allocation of public spending on education by level determines the<sup>availabilityof</sup> resources for primary education. Public funding for primary education<sup>iscriticalfor providing</sup> basic education skills and opportunities for the poor children to continue<sup>onto highereducation.</sup> The previous bias against primary education in the allocation of<sup>resourceswithinthe sectorasa</sup> whole in Vietnam is demonstrated by estimating how many primary<sup>studentscouldbe financed</sup> by the cost of one student in either secondary or tertiary education.<sup>In1993,alowersecondary</sup> student in Vietnam was 1.7 times as expensive as a primary-level<sup>student,anuppersecondary</sup> student in Vietnam was 4.3 times as expensive and a post secondary<sup>studentwas26.5timesas</sup> expensive. In 1998, the situation has been significantly imnproved,<sup>butbias against lowerlevelof</sup> education still exist. A lower secondary student in Vietnam was only<sup>0.9timesas expensiveasa</sup> primary-level student, an upper secondary student in Vietnam was<sup>1.5timesas expensive anda</sup> post secondary student was 6 times as expensive (Table<sup>8).</sup>

**Table 8: Share of public spending on education and** of enrolments,<sup>**1993and1998 by**education</sup><sup>**levels**</sup>

||Prima|ry<br>|Lower<br>Seconda|<br>ry|Upp<br>Secon|er<br>dary|Postseco|ndary|Total<br>leve|of4<br>ls|
|---|---|---|---|---|---|---|---|---|---|---|
||1993|1998|1993|1998|1993|1998|1993|1998|1993|1998|
|_Publiceducationspending_|||||||||||
|billions|1,152|4104|477|2096|179|968|953|2381|2,761|9549|
|%oftotal|42|43|17|22|6|10|35|25|100|100|
|_Enrolments(gross)_|||||||||||
|million|11.3|10.6|2.8|6.3|0.4|2.1|0.4|1.0|14.2|18.3|
|%|76|53|19|31|3|10|2|5|100|100|
|Perstudentpublicspending|105|388|173|346|448|568|2779|2287|||
|Primary student equivalentof<br>perstudentpublic spending|1.0|1.0|1.7|0.9|4.3|1.5|26.5|5.9|||

10
Despite its dominant role in providing school places, the public sector accounts for only slightly more than 50 percent of total expenditure on education. Expenditures by the private sector (that is, by households) have emerged as an important complement to budget outlays at all levels of education. Estimates based on the 1992-93 and 1997-98 VLSS suggest that total private spending on education has increased dramatically from about 1.7 percent of GDP in 1993 to 3.4 percent in 1998. Of this aggregate total increase, 14 % is due to the increase in total number of children enrolled in schools, and 84 % is due to increase in private spending per student. Almost all of this -- nearly 97 percent -- was spent by students enrolled in public schools.

Putting these public and private expenditures together (Table 9) suggests that the state budget finances only 52 percent of overall education expenses in 1993 and 50 percent in 1998. More importantly, as a result of the major reallocation of public spending within the education sector (as can be seen from previous paragraph), public spending plays an increasing role in financing public primary education, its share in total education expenditure for this level increased from 45 percent in 1993 to 61 percent in 1998. And private spending in public primary schools fall from 55 % in 1993 to 39 % in 1998, though the absolute level of private spending almost doubled in real terms. Similarly, the share of public spending in total spending on lower secondary education increased from 34 % in 1993 to 41 % in 1998. In contrast, the private sector played an increasingly important role in financing upper and post secondary education. Share of private spending in public upper and post secondary schools in total education expenditure for these levels increased from 60 % and 29 % in 1993 to 67 % and 54 % in 1998, respectively. This trend means that more money from public fund for education will be available for basic education levels.

**Table 9: Public and private shares of financing by level of education, 1993 and 1998 (%** of total expenditure **at** each education level)

||_Publicfinancing_|
|---|---|
|_USES:_|1993<br>1998|
|**Primary**|45<br>61|
|Lower secondary|34<br>41|
|Uppersecondary|40<br>33|
|Post-secondary|71<br>46|

_Source:_ Estimates based on government budget data (MOF) and 1992-93 and 1997-98 VLSS.

# _Privatefinancing of education_

Table 9 highlights the diminished role that the public sector now plays in the financing upper and post secondary education, as distinct from the provision of education. On the one hand, this means that the education sector has been successful in mobilizing a considerable volume of private sources to finance schooling. On the other hand it means that private costs already play an important role in rationing enrolment in public schooling -- the costs of official fees, private fees, unofficial contributions, books, uniforms, transport, etc. This factor is especially likely to influence access by students fromn poor families and may limit the scope for further cost recovery to finance expanded access and better quality of education.

Although fees were no longer compulsory at the primary level, households have to pay many other school-related costs, such as parent contribution (PTA), books, uniform, private fees, transportation, and lunch at school. Though non of these are compulsory by any regulation, they 11
are at best quasi-voluntary; many<sup>schoolsas many children were punishedand humiliatedwhen</sup> their families do not pay for these.<sup>Total privateexpensesper primaryschool child amountedto</sup> 4.4 percent of a typical poor<sup>household'snon-food expenditure(Table10). Privatecosts at public</sup> lower and upper secondary<sup>levelsaccountedfor9and21percentof totalhouseholdnon-food</sup> expenditure in 1998 compared<sup>to11.4and 21percent in1993,respectively.</sup>

**Table 10: Per student household**<sup>**expenditureonschooling,1993and1998**</sup> (as % of total household non-food<sup>expenditure)</sup>

|||Poorest quintile<br>|Richestquintile<br>|Vietnam|
|---|---|---|---|---|
|_1993_|||||
||Primary<br>|4.4<br>|3.0<br>|3.1<br>|
||Lowersecondary<br>|11.4<br>|5.1<br>|7.9<br>|
||Uppersecondary|20.9|7.6|15.8|
|_1998_|||||
||Primary<br>|4.9<br>|3.8<br>|3.4<br>|
||Lowersecondary<br>|8.9<br>|5.2<br>|6.4<br>|
||Uppersecondary|21.1|7.9|13.8|

_Source:_ Author's estirates based<sup>on 1992-93and1997-98 VLSS</sup> As a result, if a typical poor<sup>household(fromthebottom20%)hadtwochildrenin</sup> school: one at a primary and<sup>the otherat a lowersecondary school,it wouldcost this household</sup> 14 percent of its total non-food<sup>expenditurein1998comparedto16 percent in 1993.It should be</sup> noted that 75 percent of the<sup>poorest householdswere "foodpoor"(Table11).This meansthese</sup> poor households do not have<sup>enoughmoneytospendonfood to gettheminimumstandardof</sup> calories necessary for them,<sup>so 3 percentof householdspendingoneducationisconsiderableand</sup> much more difficult for them,<sup>comparedto better-off households.</sup>

**Table 11: Composition of consumption**<sup>**by the poorest,1993and 1998**</sup>

||Poores<br>|tgroup<br>|Richest<br>|group<br>|Viet<br>|nam<br>|
|---|---|---|---|---|---|---|
||||||||
||1993<br>|1998<br>|<br>|<br>|<br>||
|_Foodpoor(%)_<br>|100<br>|75<br>|0<br>|0<br>|25<br>|15<br>|
|_Totalconsumption_<br>|100|100|100|100|100|100|
|_expenditure_<br>|||||||
|Onfood<br>|70<br>|68<br>|44<br>|38<br>|55<br>|48<br>|
|non-food<br>|30<br>|32<br>|56<br>|62<br>|45<br>|52<br>|
|education|2|4|4|8|3|6|

Source: Author's estimates based<sup>on 1992-93and1997-98 VLSS</sup>

# _Composition ofprivate spending_<sup>_on primary education_</sup>

Table 12 shows composition of<sup>privatespending onprimary educationby the poorestand</sup> richest quintiles in 1992-93<sup>and1997-98.In1993,PTAandschoolcontribution(19.4%)and</sup> text books and school supplies<sup>(50%)werethelargest itemsintotal privatespending bythe</sup> poorest quintile. In contrast,<sup>better-offhouseholdsspentmostoftheirprimaryeducation</sup> expenditure on food and lodging<sup>(45%)and booksandschoolsupplies(15%)whilePTAand</sup> school contribution accounted<sup>foronly8%.In1998,PTAandschoolcontributioneven</sup> accounted for a larger share<sup>(22%)oftotaleducationspending perprimarychildfor poor</sup> 12
households. Another important feature<sup>in educationinthe1990swasgreater self-financingfor</sup> text books and school supplies in school<sup>emergedas alargest expenditureitem (46 %)incurred</sup> by poor households. In contrast, better-off<sup>householdsspentmoston privatefeesforextra</sup> tutorials (24.3 %) and on transportation,<sup>foodandlodging(28%)whichareveryimportant</sup> spending for quality education and<sup>healthand nutrition for their children.</sup>

**Table 12: Composition of private**<sup>**spendingon primary education by quintile, 1993-98**(%)</sup>

||Poorestquintile|Richest quintile|Vietnam|
|---|---|---|---|
|_1993_||||
|Fees<br>|5.1<br>|6.7<br>|5.6<br>|
|PTA&schoolcontribution<br>|19.4<br>|8.0<br>|11.5<br>|
|Uniforms<br>|9.9<br>|12.9<br>|12.7<br>|
|Text books&schoolsupplies<br>|44.9<br>|14.5<br>|25.0<br>|
|Transportation,Lodging&food|14.5<br>|45.4<br>|35.1<br>|
|Others|6.3|12.5|10.1|
|_1998_||||
|Fees<br>|0.9<br>|11.9<br>|5.6<br>|
|Privatetutoring<br>|4.9<br>|24.3<br>|14.9<br>|
|PTA&schoolcontribution<br>|22.1<br>|10.5<br>|15.4<br>|
|Uniforms<br>|12.0<br>|10.7<br>|13.6<br>|
|Textbooks&school supplies<br>|45.8<br>|16.3<br>|23.8<br>|
|Transport,foodandlodging<br>|11.3<br>|27.8<br>|30.1<br>|
|Others|7.2|5.3|6.3|

_Source:_ Author's estirates based on 1992-93<sup>and 1997-98VLSS</sup> The fact that the richest households<sup>spentasmuchas 24percentof theirtotaleducation</sup> spending on private tutors (for extra<sup>teachingoutsideschoolhoursconductedby teachers)per</sup> primary student, while the poorest household<sup>spentonly lessthan</sup><sup>_5_percent,impliesthataccess</sup> to "higher quality education" was<sup>biasedagainstthepoor. Moreover,asprimaryeducation was</sup> free, the 12 % of education expenditure<sup>the richestfamiliesspent for fees perhapsreflectsmore</sup> payments for extra tutorials at school<sup>conductedoutsideschoolhours.Thiscan helpto explain</sup> why the better-off children repeated<sup>less.As the public budget foreducationwaslimited,</sup> teachers supplementing their low salary<sup>byteachingchildrenextrahoursisquite acommon</sup> phenomenon in urban and wealthy areas<sup>in Vietnam.Children whocannot afford these tutorials</sup> are at a disadvantage, since they may<sup>not get neededguidanceon how to dohomework,ormore</sup> detailed explanation of challenging<sup>coursecontent which isover-loadedatschoolsand even</sup> incomprehensible without additional<sup>teacherassistance.Moreover,itisimportanttonotethat</sup> much of the material covered in tutorial<sup>sessionsshould infactbetaught withinthe normal</sup> school curriculum. However, teachers<sup>veryoften holdthese toteachin extra sessionstotopup</sup> their low salary. It should also be<sup>noted that extra tutorialsaretypicallyonlyof urbanand</sup> wealthy areas. In poorer and rural<sup>areaswherehouseholdscannotaffordextraclasses,teachers</sup> have to supplement their low salary<sup>bydoingotherjobs,whichalsoaffectsthequalityof</sup> education.

The composition of private spending<sup>on educationalsovariedwidelybyregion(Table</sup> 13). For the Northern regions, the highest<sup>burdenfor householdsof sending childrento primary</sup> 13
school was not the fees but textbooks and teaching aids, and PTA and school contribution in both years. It is interesting that in 1993 household expenses for textbooks and teaching aids were much higher in the north as compared to central and south regions. Households in the Northern regions spent around a half of their total spending on primary education on textbooks and teaching aids, while these accounted for around a quarter in the central and around 15 % in the South. In 1998, households in the north spent relatively less on these items, while households in central and south increased the shares of their spending on these items.

PTA and school contributions account for a quite large proportion (24 %) of total household education spending in the north and central regions in both years. There are in principal no tuition fees for primary education, but there are in practice several other fees and voluntary contribution. One example of the PTA is parent contribution for school construction expenses. These contributions are quasi-voluntary as they are not officially regulated by the government, but considered as necessary by schools and teachers. The importance of these contributions to total private spending for education varies widely between regions. The PTA and school contribution in the Northern regions was much higher than in the South and Central regions, except the Central Highlands in 1998. In the Northern Uplands and Red River Delta in 1998, items such as books, PTA contribution, and teaching aids accounted for 77 percent of total household spending per primary school child, and this accounted of 87 % in North Central. These items amounted to only 22 % in 1993 and 26 percent in 1998 in the Mekong Delta.

**Table 13: Composition of private spending on primary education by region, 1993 and 1998** (%)

||Northern<br>Uplands|Red River<br>Delta|North<br>Central|Central<br>Coast|Central<br>Highlands|South East|Mekong<br>Delta|
|---|---|---|---|---|---|---|---|
|_1993_||||||||
|Fees|3.1|3.8|5.1|4.0|1.3|12.6|2.7|
|PTA&schoolcontribution|23.5|18.7|22.8|11.7|16.7|6.8|6.7|
|Uniforms|0.1|1.0|16.0|23.1|12.2|15.8|12.5|
|Textbooks&school supplies|55.4|42.7|46.0|24.1|26.3|14.0|16.0|
|Transportation,lodging&food|13.0|11.6|3.0|16.8|39.9|43.5|57.0|
|Others|4.5|20.8|8.4|20.0|4.4|8.3|4.8|
|_1998_||||||||
|Fees|1.1|11.9|1.3|0.9|1.2|13.1|0.8|
|Privatefees|9.0|25.6|10.8|22.7|2.8|17.6|5.3|
|PTA&schoolcontribution|23.9|14.3|23.3|16.0|39.0|9.7|6.5|
|Uniforms|1.7|6.5|10.2|16.6|28.1|12.5|17.5|
|Textbooks&schoolsupplies|51.5|33.2|41.0|29.5|40.0|18.3|19.0|
|Transportation,lodging&food|5.8|7.2|4.5|16.3|12.6|26.8|46.9|
|Others|8.3|7.0|9.9|6.5|8.6|4.8|3.2|

_Source:_ Author's estimates based on 1992-93 and 1997-98 VLSS

> In contrast, in the South regions, especially in the Mekong Delta, uniforms, textbooks and transportation, food and lodging were the largest spending items. In the Mekong Delta, transportation, food and lodging accounted for about a half (57 percent in 1993 and 47 % in

> 1998) of household education expenditure per primary school child. It is very interesting that in

> south regions, PTA and school contribution were relative small (less than 10%). As data did not allow for further breakdown of expenditure on transportation, food and lodging, it is impossible

14
to draw conclusion why these were so expensive in these regions as compared to other regions and which items - transportation, food at school or lodging, was the driven factor for a such high cost of primary education on these items. And as these were so large items in primary education expense in the Mekong Delta, further study is needed to help understanding better situation in this income poor and educationally poor performance region.

The low level of public budget expenditure on education makes these additional resources essential, but they clearly have serious implications for equity, both in exacerbating existing inequalities in education finance, and in the potential barriers they represent to participation for poor children. Figure 5 shows all public and private education spending per student and by region for both 1993 and 1998. We can see a great variation in both public and private education spending across regions, though the variation in public education spending per student reduced in 1998, compared to that in 1993. In both years, the Southeast had highest level of private spending which was much higher than the rest of the country. Surprisingly, public spending per student was highest in the Southeast, the richest region in the country. This partly due to the fact that this region includes Ho Chi Minh City which has relatively more higher level education institutions than others. Other explanation is due to decentralization effect that the richer cities / provinces have more resource to spend than others, and thus it can spend much more on education. In 1998, the Mekong Delta, the North Central Coast, and The Central Highlands had lowest levels of public spending on education. There may be some link between high performance in terms of enrolment and level of public education spending per student. This can be explored more in the next section by looking at public education spending per student by level and region (Table 14).

**Figure 5: Per student public and private spending on primary education, 1993 and 1998**

<!-- Start of picture text --> 350 1200<br>300 30 *- Private- | Private -- t99S- "93r 1000 1 000 - UP Publ Rblic ~~~~~~~~~~~~~~~Eivte1998----------- ----- ------<br>250 g -- -- 200 s u FRiblic -- ----------- m8 --- ----- ---- - .00---.... - -80 . .. - ' l.-<br>100--200-.. ..<br>50-~~~~~~~~~~~~~~~~~~~<br>00<br>I I Dl m W Iv v VI vu IIII uV V VI VIl<br><!-- End of picture text -->

_Who benefits from public education spending?_ In the previous sections, we have seen that the overall picture in education is improved from 1993 to 1998, and the improvement occurred in all quintiles and in all regions of Vietnam. In response to increased enrolment, there was a sizable increase in public spending for education in the 1990s, together with intra-sectoral re-allocation towards the primary and lower secondary levels. As policy changes have increased availability of public funds at these levels, in absolute as well as relative terms, public primary and lower secondary spending per student increased. However, public spending on education varied considerably across region as a large part of 15
public education spending, especially at primary and lower<sup>secondary levels,isfundedatlocal</sup> levels as a result of decentralization process.

Moreover, poor students still have significantly lower<sup>enrolmentsthan richstudents,even</sup> after the recent surge in enrolment. Rural areas and some<sup>regionshaverelativelylowprimary</sup> enrolment rates. In general, the public sector share of total<sup>enrolmentisfairlyconstantacross</sup> quintiles, so public school enrolment rates are higher among<sup>the better-off than amongthe poor.</sup> This enrolment gap is particularly wide at higher levels of<sup>education.Thusthesmall partofthe</sup> population who obtain higher education, among whom<sup>thebetter-offareover-represented,</sup> receive a disproportionate share of the education budget.<sup>Inordertoexaminethechangesin</sup> benefits from public spending on education accrued to different<sup>groupsof populationandsee</sup> whether these changes are more pro-poor, this and the next<sup>sectionsanalyzethe distribution of</sup> per capita public spending across socio-economic groups,<sup>regions,andgenderforalleducation</sup> levels for 1993 and 1998.

This section uses the Benefit Incidence Analysis to<sup>measure how wellpublicservicesare</sup> targeted to certain groups in the population, for example<sup>the poor, particular regionsof interest</sup> and girls and women. The observed patterns of public<sup>spendingacrosssocio-economicgroups</sup> are determined by two factors. First, government spending<sup>allocations withinthe sector oneach</sup> level of public education and across region. Second, household<sup>behaviorregarding utilization</sup> rates of public education. Thus the incidence analysis integrates<sup>twosourcesof information:unit</sup> expenditure by level of education and by region (for example,<sup>theper studentannualpublic</sup> spending for primary education by region); and information<sup>onindividualutilizationratesof</sup> education at different levels disaggregated by socio-economic<sup>groups,regionand gender.Inthis</sup> way, public expenditure on education is distributed across socio-economic<sup>groupssubjectto their</sup> enrolment rates and the annual public expenditure per student by<sup>educationlevel.The incidence</sup> of public expenditure is the result of: (i) a public policy<sup>decision,the allocationof public</sup> expenditure to and within education sector across region, and<sup>(ii) a privatedecision,the behavior</sup> of households, to send their children to schools or not.

Assessing how well public spending on education is targeted<sup>to the poor requiresa profile</sup> of who uses publicly provided education, together with measures<sup>of thein-kindsubsidy received</sup> by these users. This analysis uses the VLSS93 and VLSS98<sup>data togeneratethedistributionof</sup> public school enrolment by per capita consumption,<sup>region,andgender,togetherwithper-</sup> student subsidies estimated from the public finance data.<sup>Ifpublicspendingwereequally</sup> distributed across the population, then every expenditure<sup>quintile,region,andgendergroup</sup> would receive an exact the same percentage share of total<sup>publicresourcesinthesectoras</sup> compared to their share in the total population. Lorenz Curve<sup>willbe usedtoillustratebenefit</sup> incidence of public spending for education.

In this paper, an adjusted Lorenz Curve will be used instead<sup>of normalone,as the number</sup> of school-age children was not equally distributed across quintiles.<sup>In Vietnam,the twopoorest</sup> quintiles have higher proportion of primary school children<sup>thantheir proportionin population.</sup> In 1998, 26 percent of total number of school-age children<sup>werefrom</sup> 20% of poorest households, compared to only 14% of school-age children<sup>from richest 20%households(top</sup> quintile). In contrast, the poorest households (bottom 20%) contained<sup>only18%ofupper</sup> 16
secondary school-age children, compared<sup>to 23%fromthe fourthquintile and20%from thetop</sup> quintile. Thus on the Lorenz diagram,<sup>cumulatedshareof publicspending foreducationaccrued</sup> will be drawn against cumulated<sup>shareof school-agechildren insteadof cumulatedshareof</sup> population. The diagonal line (or<sup>45line)is alsoknownas the lineof absolute equallysinceit</sup> goes through those points where<sup>thecumulativeshareofschool-agechildrenequalsthe</sup> cumulative share of total public<sup>spendingon education.</sup> Targeting of public education spending<sup>tothe poor improvedsignificantly between1993</sup> and 1998 partly due to the surge<sup>in enrolmentsby poorchildren at primaryand lowersecondary</sup> education levels and partly due to the recent<sup>policyshiftfavoringprimaryeducation.In</sup> Vietnam, the majority of school<sup>enrolment hastraditionallyconsistedof primary-levelstudents.</sup> In 1993, students at this level<sup>comprised78percentof thetotalgeneraleducationenrolments,</sup> while in 1998 the share of these<sup>students reducedto 58percent.</sup> As a result, the share of public<sup>educationspendingreceivedbythepoorincreased</sup> between 1993 and 1998. The share<sup>of allpublic educationexpenditurereceivedby thepoorest</sup> expenditure quintile increased<sup>from17percentin1993to18percentin1998whiletheshareof</sup> the richest expenditure quintile<sup>fellfrom23percentin1993to21percentin1998.Primary</sup> education observed the most dramatic<sup>shift favoringthepoorbetween1993and1998.In1998,</sup> the poorest expenditure quintile<sup>received26percentof publicprimaryeducation expenditure</sup> compared to 20 percent in 1993.<sup>Thesharegoingtotherichestexpenditurequintilefellto13</sup> percent in 1998 from 17 percent<sup>in1993.Puttingthesecumulativesharesof publicspendingin</sup> primary education against cumulative<sup>sharesof school-agechildrenin Lorenz diagramsfor1993</sup> and 1998 shows that public spending<sup>for primaryeducationin1998wasquite neutral,thoughin</sup> 1993 it was still slightly biased<sup>against the poor.In1993,publicexpenditureat the primary level</sup> was slightly biased against the poor<sup>becauseits distributionwasbelowbutcloseto thediagonal</sup> line; which means that the poor<sup>receivea bit smallershareof total educationspendingthan their</sup> share of primary school-age children.<sup>In contrast,in1998 publicexpenditureat theprimary level</sup> was pro-poor because its distribution<sup>was just above thediagonal line (Figure6).</sup>

**Figure 6: Lorenz distributions**<sup>**of publiceducation expenditure bylevelof education,1993 and1998**</sup>

<!-- Start of picture text --> .- 45 degree line --45 degree line<br>100- 1993 100 Primary 1998<br>-<br>Pr-inary<br>80 - -Low er 80 - Low er<br>secondary secondary<br>- Ulpper - Upper<br>60 - secondary 60 - secondary<br>40 -40-<br>20 20-<br>0 0<br>0 20 40 60 80 100 0 20 40 60 80 100<br><!-- End of picture text --> 17
Despite this recent progress in education spending and enrolments, by 1998 inequities in public education spending were still considerable at the secondary level. Public expenditure at secondary education levels was still against-poor because their distributions were under the diagonal line, though the Lorenz curves moved upwards between 1993 and 1998 reflecting improvement favoring the poor. The poorest quintile received a 12 percent share of lower secondary education expenditures while it consisted of 20 % of lower secondary school-age children. Similarly, in 1998 the bottom quintile received a much smaller share of public spending on upper secondary education (4%) than its share of school-age children (18 % in 1998). In contrast, the richest quintile received 22 percent of lower secondary, 41 percent of upper secondary education expenditures while it accounted for only 16 % and 20% of school-age children for these levels, respectively (Table 14). The Lorenz distribution of public expenditure at upper secondary education was most biased against the poor, compared to that at primary and lower secondary level.

**Table 14: Share of public education spending and school-age children for poorest and richest quintile 1993 and 1998**

|Educationlevel|Year|Bottom<br>|20%<br>|Top<br>|20%<br>|
|---|---|---|---|---|---|
|||Shareofpublic<br>education<br>spending<br>|Shareof<br>school-age<br>children<br>|Shareofpublic<br>education<br>spending<br>|Shareofschool-<br>agechildren|
|_Alleducation_<br>|1993|_16.5_<br>|_19_<br>|_22.9_<br>|_19_<br>|
|Primary<br>||20<br>|24<br>|17.4<br>|16|
|Lower-Secondary<br>||7.2<br>|20<br>|33.8<br>|19<br>|
|Upper-Secondary<br>||2.1<br>|16<br>|60.3<br>|21<br>|
|_Alleducation_<br>||_18.1_<br>|_20_<br>|_21.4_<br>|_18_<br>|
|Primary<br>|1998|26<br>|26<br>|12.5<br>|14<br>|
|Lower-Secondary<br>||12.4<br>|20<br>|21.7<br>|16|
|Upper-Secondary||4|18|41|20|

_Source:_ Author's estimates based on 1992-93 and 1997-98 VLSS

# _Regional benefit incidence ofpublic spending on education_

**Table 15: Per capita public spending for education by level and region, 1993 and 1998** (000' dong in constant January 1998 price)

|_1993_<br>|Northern<br>Uplands<br>|Red River<br>Delta<br>|North<br>Central<br>|Central<br>Coast<br>|Central<br>Highlands<br>|South<br>East|Mekong<br>Delta|Vietnam|
|---|---|---|---|---|---|---|---|---|
|Primary<br>|17.6<br>|16.1<br>|17.6<br>|15.0<br>|18.5|16.7|16.3|16.6|
|Lowersecondary<br>|4.9<br>|8.2<br>|6.1<br>|9.4<br>|3.8|7.8|6.0|6.9|
|Uppersecondary<br>|2.0<br>|3.2<br>|1.9<br>|4.5<br>|0.6|3.5|1.6|2.6|
|Post-secondary<br>|7.9<br>|22.8<br>|12.2<br>|15.0|0.0|22.2|6.5|13.7|
|_Total_<br>|32|50|38|44|23|50|30|40|
|_1998_<br>|||||||||
|Primary<br>|62.7<br>|44.3<br>|58.8<br>|45.5<br>|63.4|37.7|48.3|50.4|
|Lower secondary<br>|30.2<br>|33.0<br>|32.0<br>|24.2<br>|24.1|27.2|21.7|27.9|
|Uppersecondary<br>|10.0<br>|16.7<br>|13.1<br>|13.5<br>|_5.5_|15.1|7.9|12.2|
|Post-secondary<br>|16.7<br>|45.0<br>|21.0<br>|35.9<br>|7.3<br>|66.4|21.2|31.9|
|_Total_|126|144|131|120|105|143|103|126|

_Source:_ Author's estimates based on 1992-93 and 1997-98 VLSS 18
Table 15 shows public spending per capita by level of education and<sup>acrossregionin</sup> Vietnam for both 1993 and 1998. Per capita public spending for education<sup>increased more than</sup> three-fold between 1992-93 and 1997-98. Improvement in public<sup>spendingforeducationwas</sup> highest in the Northern Uplands and the Central Highlands over the<sup>fiveyear period.These two</sup> regions received highest per capita public spending in primary<sup>education, comparedtoother</sup> regions. This may be an explanation for their good performance<sup>intermsof primaryschool</sup> enrolment in 1998. The Red River Delta and the Mekong Delta<sup>had highestpercapitapublic</sup> education spending as they spent much more on post-secondary education.

Table 16 shows benefit incidence by region in 1993 and 1998. Overall,<sup>publicspending</sup> for education in Vietnam was more equal in 1998 compared to that<sup>in1993.For theregions that</sup> were disadvantaged in 1993 in terms of benefiting from public<sup>educationspending,</sup> they benefited more in 1998, and vice versa for the regions which got<sup>more in1993.Although</sup> inequalities still exist, Northern Uplands, North Central Coast, Central<sup>Highlands,andMekong</sup> Delta benefited more from public spending on education relative<sup>totheirshareof population.</sup> And in contrast, Red River Delta, Central Coast, and Southeast<sup>benefitedlessfrompublic</sup> spending on education compared to 1993, although two richest<sup>regions-RedRiverDeltaand</sup> Southeast - still received more compared to their share in total population<sup>(Table16).The major</sup> explanation is that on the one hand, the change in the allocation of<sup>publiceducation spending</sup> relatively more toward primary and lower secondary education (as<sup>opposed to uppersecondary</sup> and post-secondary education). On the other hand, these two richest<sup>regionshadfewerchildren</sup> went to schools at lower levels of schooling, such as primary<sup>and lowersecondaryeducation.</sup> Table 16: Incidence of public spending for education<sup>by region,1993and1998</sup> (as % of public spending for each education level)

|_1993_|Northern<br>Uplands|RedRiver<br>Delta|North<br>Central|Central<br>Coast|Central<br>Highlands|South<br>East|Mekong<br>Delta|Vietnam|
|---|---|---|---|---|---|---|---|---|
|Prinary|16.6|20.9|13.5|10.8|3.6|12.7|21.9|100|
|Lowersecondary|11.2|25.7|11.3|16.3|1.8|14.2|19.5|100|
|Uppersecondary|12.1|27.0|9.2|20.6|0.7|17.0|13.5|100|
|Allschools|13|27|12|13|2|16|17|100|
|_Memo:%of_pop.<br>_1998_|15.6|21.6|12.8|11.9|3.2|12.6|22.4|100|
|Primary|22.2|17.2|16.1|9.7|4.6|9.5|20.6|100|
|Lowersecondary|19.4|23.2|15.8|9.3|3.2|12.4|16.7|100|
|Uppersecondary|14.8|26.9|14.9|11.9|1.7|15.9|14.0|100|
|Allschools|18|22|14|10|3|14|18|100|
|_Memo: %_ofpop.|17.9|19.6|13.8|10.7|3.7|12.7|21.5|100|

_Source:_ Author's estimates based on 1992-93 and 1997-98 VLSS The above standard benefit incidence analysis assumes that all regions<sup>have thesame</sup> share of school-age children in the population. However, as can be seen<sup>from Table17,Northern</sup> Uplands and North Central Coast had higher proportion of primary<sup>school-age</sup> children in population than others. These are those children should be<sup>abletoattendschool,notall</sup> population. Therefore, it is better to compare public spending per school-age<sup>childthan per head</sup> of population. If this is used, then allocation of primary public<sup>spendingislesspro-poorthan</sup> before. Relative benefits for Northern Uplands and North<sup>CentralCoast</sup> lower than those benefits if one look at per head of population. In contrast, the<sup>richest regionin Vietnam,</sup> 19
Southeast, benefited more from primary public spending (12 percent) than its share of school-age children (10 percent).

**Table** 17: **Incidence of public subsidies for primary and lower secondary education by region, 1993 and** 1998 (as % of public spending for education, adjusted using regional unit cost)

||Northern<br>Uplands|RedRiver<br>Delta|NorthCentral<br>Coast|Central<br>Coast|Central<br>Highlands|Southeast|Mekong<br>Delta|Vietnam|
|---|---|---|---|---|---|---|---|---|
|_1993_|||||||||
|_%ofpublicspending_|||||||||
|Primary|22|19|11|11|3|17|17|100|
|Lowersecondary|10|30|19|13|1|12|14|100|
|_%ofpop._|16|22|13|12|3|13|22|100|
|%_ofschool-age_|||||||||
|Prinary|17|23|14|11|3|12|20|100|
|Lower secondary|14|20|12|13|3|13|24|100|
|_1998_|||||||||
|_%ofpublicspending_|||||||||
|Primary|24|16|14|9|5|12|19|100|
|Lowersecondary|24|17|13|11|4|11|20|100|
|_%ofpop._|18|20|14|11|4|13|21|100|
|_%ofschool-age_|||||||||
|Primary|17|17|14|12|8|15|17|100|
|Lowersecondary|16|17|13|12|8|17|18|100|

_Source:_ Author's estimates based on 1992-93 and 1997-98 VLSS This partially reflects a result of recent decentralization process in Vietnam which allow more authority at local level to make decision on allocation of local budget and has resulted in an increased inequality in education opportunities. In fact, the provinces which may have more public funding resources and thus can spend more on education in terms of absolute per student level and / or in terms of share of total public expenditure spent on education. In contrast, poorer provinces and districts have fewer funding resources which in turn limited their capability to spend more on education. There is a need to review and improve system of budget planning and management in general and mechanism for budget allocation in particular which allow opportunities to redirect more public resources towards poorer provinces and towards those which need more resources for social services such as education and health for the poor.

# **4. Returns to education**

This section looks at the recent changes in rate of returns to education, focusing on wage earners in the private sector. The Vietnamese labor force is relatively well educated given its low income level, and there was a clear improvement over the five years from 1993 to 1998 (Table 20
18). The average number of years of schooling of<sup>wageearnershadincreasedfrom8 yearsin</sup> 1993 to 9 years in 1998. The proportion of wage<sup>earnerswithuppersecondary level orhigher</sup> had increased from 23 percent to 29 percent<sup>in1998.Realaverageearnings (convertedto</sup> January 1998 prices) have increased 11 percent annually<sup>overthefive-yearperiod1993-98.</sup> Figure 7 shows that in 1993 there were no clear<sup>differenceinrealearningsbetweencompleted</sup> education levels. Instead, a worker who had completed<sup>uppersecondaryschooldid not earn more</sup> than those with less education. And similarly,<sup>holdingofuniversitydegreedid notmakea</sup> significant difference in one's earnings. The<sup>wholepicturechanged in1998:thehigherwasthe</sup> education level one completed, the higher was<sup>theearning.Andthisisespeciallytrueat</sup> university level: university graduates earn 50 percent<sup>higherthan thatearnedby workers with</sup> only upper secondary school diploma. For those<sup>workingintheprivatesector,university</sup> graduates can earn almost three times more<sup>thanthatearnedbyworkerswithonlyupper</sup> secondary school diploma.

Rates of returns to investment in education<sup>are estimatedherefollowing upa work which</sup> had been done based on 1993 VLSS (Moock,<sup>1998).Theestimatesin this studyarebasedon</sup> wage data from VLSS93 and VLSS98 in an effort<sup>tocapturetheimpactofrecenteconomic</sup> reforms in Vietnam. Basic and extended<sup>Mincerianearning functionsare usedto estimatereturns</sup> to schooling and levels of education. In the extended<sup>model,fourlevelsof generaleducation</sup> system in Vietnam were considered: primary, lower<sup>secondary,uppersecondary,and university /</sup> college. And impact of vocational training<sup>(withthree categories:vocationaltrainingafter</sup> primary, lower secondary, and upper secondary<sup>schools)hasbeenestimatedseparatelyfrom</sup> benefit of general education (from<sup>primaryup touniversityandcollege).Astheearning</sup> difference between public and private sectors<sup>was statisticallysignificant,modelswereestimated</sup> separately for the private as this is expected<sup>tobemoreflexible tochangesinlabormarketthan</sup> the public one in transitional period.

**Table 18: Mean of selected variables by sex and**<sup>**sectorof employment, 1993-98**</sup>

||To|tal|Pub|lic|Priv|ate|Ma<br>|les<br>|Fem<br>|ales<br>|
|---|---|---|---|---|---|---|---|---|---|---|
|Variable|1993|1998|1993|1998|1993|1998|1993|1998|1993|1998|
|Age(years)|31.3|32.9|34|37|29|30|32|33|31|32|
|Yearsofschooling|8.2|9.0|11.1|12.2|6.0|7|8|9|8|9|
|Yearsofexperience|17.1|17.9|17.4|18.8|16.9|17|17|18|17|17|
|Realearnings/month<br>('OOOVND)|342|570|311|612|365|542|383|620|279|493<br>|
|Public sector|0.43|0.40|1|1|0|0|0.39|0.37|0.49|0.45|
|Hours-worked/week|46|47|44|45|48|49|47|48|45|47|
|Numberofobservations|2251|3199|966|1293|1285|1906|1358|1942|893|1257|
|_Educationlevel(lo)_*|||||||||||
|Noeducation|22|21|6|5|34|33|21|21|24|23|
|Primary|27|26|15|14|35|34|29|27|24|24|
|Lowersecondary|28|25|36|27|23|24|29|26|28|23|
|Upper secondary|16|20|28|35|7|9|14|18|19|22|
|University/college|7|9|15|19|0|1|7|8|6|9|

_Source:_ 1992-93 and 1997-98 VLSS 21
The basic Mincerian earnings function links logarithm of average earning to the approximate determinants of earnings such as years of schooling (S), years of experience (EXP), squared experience, sex, North / South region, urban/rural location, seniority. The Mincerian earning funtion has the following semi-log form:

> mnYi = _a_ + PI _Si_ + P2 EXPi + 133 EXPi<sup>2</sup> **+ P34** SEXi + _135_ NORTH1 + **136** URBANi **+P7** SENIORi + **_Ei_**

where: Si stands for number of years of schooling that individual I had completed; EXPi and EXPi2 are number of years of experience and its square; SEXi presents sex of worker with value 1 for male and 0 for female workers; NORTHi is the residence location of worker which takes value 1 if the workers were from the north region (including the Northern Uplands, the Red River Delta, the North Central Coast, and the Central Coast) and value 0 otherwise; URBANi distinguishes workers from urban areas (value 1) from workers from rural areas (value 0); SENIOR, identifies whether worker has participated in the workforce for a period less than 5 years or more, which has value 1 if less than 5 years and 0 otherwise. In this semi-log earnings function specification the coefficient on years of schooling can be interpreted as the average private rate of return to one additional year of education, regardless of the education level to which this year of schooling refers to.

**Figure 7: Monthly earnings of Private and Public sector wage workers, 1993-98**

<!-- Start of picture text --> 2000<br>1800 -.- A1193<br>1600 Pubhc93<br>1400 -_ -Private93<br>0 C A1198<br>X 1000 Private98<br>400<br>200(<br>0<br>None Primary L-secondary U-secondary University<br>Highest education level completed<br><!-- End of picture text --> As can be seen from Table 19, returns to one additional year of schooling, regardless of the level of education increased from 3% in 1993 to 4% in 1998. Despite this change, returns to schooling in Vietnam are still low by international standards and are below those of some other developing countries such as Philippine (6.2% in 1998) (Schady, 2001). Worldwide, one more year of schooling can bring about 10 percent increase in earnings. However, low returns to schooling were observed in some developing countries in 1980s, such as the estimates of returns to schooling in China ranged from 1 to 5 percent in the mid and late 1980s. It was 2.9 percent in Poland in 1986 and 4.3 percent in Hungarian in 1987 (Psacharopoulos, 1994).

22
**Table 19: Basic earning functions based on years of schooling for the private sector workers, 1993-98**

|||1993|||1998||
|---|---|---|---|---|---|---|
||Mean|Coefficient|t|Mean|Coefficient|t|
|Years-school|6.01|0.031|5.96|6.8|0.039|8.64|
|Years-experience|16.92|0.032|6.30|17.4|0.019|2.95|
|Experience-sq|444.18|-0.0006|-6.37|440.2|-0.0004|-3.20|
|Sex((male=l)|0.65|0.380|11.38|0.7|0.292|10.51|
|North(North=1)|0.28|-0.268|-6.99|0.3|-0.389|-9.04|
|Urban(urban=1)|0.32|-0.057|-1.62|0.3|0.122|3.10|
|Seniority(Junior=1)|0.16|-0.004|-0.07|0.3|0.019|0.39|
|Constant||4.311|22.27||3.358|17.74|
|R-squared||0.200|||0.330||
|Numberofobservations||1285|||1897||

_Source:_ 1992-93 and 1997-98 VLSS Among factors other than schooling, experience, gender, region, and urban or rural location of the worker were statistically significant in determining earnings in both 1993 and 1998. An additional year of experience brings 3 % higher earnings in 1993, an amount equivalent to the impact of one more year of schooling. However, in 1998 experience was relatively less important, so that an additional year results in only a 2% increase in earnings.

Female workers are better educated than male workers. Although males and females have nearly the same level of education attainment in terms of number of years of schooling, the female workforce has a slightly higher proportion with university degree or competed upper secondary school than the male workforce. However, males' earnings are still 37 percent and 26 percent higher than females' earning in 1993 and 1998 respectively. In both years, a male worker earned much more than an identical female worker even after controlling for education, experience and the other variables in Table 19. In 1993 a male worker eamed 46 percent more than a female worker with the same (observable) characteristics. This differential decreased slightly by 1998, but it was still 40 percent. These result mean that there is still some kind of discrimination between males and females and something going on that keeps females' wage low. Further study is needed to fill gap in this area.

A structural test was used to see if there is any difference in returns to education between male and female workers for both 1992-93 and 1997-98 surveys. It is quite interesting that returns .to male workers' schooling in 1993 were higher for that of female workers, but it was reversed in 1998 when females had higher returns to schooling than males. However, the differences in 1998 were not statistically significant.

The wages of workers also varied by their location. Urban workers in 1998 can eam 12% higher than an identical worker in rural areas. Workers in the south earned more on average than those in the north even though average education level in the north is higher. Workforce in the north has on average one more years of schooling than that in the south, and it has higher proportions with upper secondary and university levels than the south. After taking into account other factors, in 1993 a worker in the south still eamed 24% higher than an identical worker in 23
the north. In 1998 the gap widened to 32 %. A variable on seniority was included in the model to see if there is any impact of recent changes in labor market. It is assumed that younger workers are more affected by the recent changes as they enter directly into a free market wage economy and higher levels of education can bring them a significant differences in earnings. The variable takes the value 1 if a worker entered the labour market for less than 5 years, and 0 otherwise. It turns out that other things being equal, it statistically does not make any difference in terms of earnings between young and senior workers.

An extended earning model was estimated to look at the rates of return for different levels of education. It estimates average private returns to different levels of schooling by converting continuous years of schooling (S) into a series of dummies variables. The dummy variables represent the completion of the respective level of general education or vocational training following general education. Following is the extended model: lnYi = a + 13IPRIMi + f32LSECi + f3 USECi + 134UNIV1 + I35VOCPi +I36 VOCLSi +P 7VOCUSi + P 8EXPj + I39 EXPi<sup>2</sup> + , I SEX1 + pII NORTHi + P312 I)RBANi + 1 3 SENIOR1 + **_Ce_** where PRIMi, LSECi, USECi, UNIVi are dummy variables indicating primary, lower secondary, upper secondary or university education completion by individual i; VOCPi , VOCLSi, **VOCUS1** reflect kind of vocational training that individual i took, whether it is vocational training after completing primary, lower secondary, or upper secondary. The private rates of return to one year at different levels of schooling then can be derived by dividing estimated rates of return to each level of education by correspondent number of additional years required at each level. For primary education, this is assumed to be equal to 1 as there will be no opportunity cost involved for a child at this level. In Vietnam a student is required to spend at least 4, 3, and 4 years at lower secondary, upper secondary and university education, respectively.

**Table 20: Extended earning functions based on level of education for private sector workers, 1993-98**

|||1993|||1998||
|---|---|---|---|---|---|---|
||Mean|Coefficient|t|Mean|Coefficient|t|
|Primary|0.66|0.153|3.75|0.67|0.143|3.86|
|L-second|0.31|0.118|2.64|0.34|0.072|2.14|
|U-second|0.08|-0.013|-0.18|0.09|0.122|1.90|
|University|0.00|-0.265|-1.01|0.01|0.940|4.17|
|P-Vocational|0.00|-0.334|-0.83|0.01|-0.025|-0.13|
|L-Vocational|0.01|0.063|0.44|0.03|0.068|0.65|
|U-Vocational|0.01|-0.027|-0.19|0.05|0.057|0.68|
|Years-experience|16.92|0.032|6.18|17.41|0.021|3.24|
|Experience-sq|444.18|-0.001|-6.29|440.22|0.000|-3.57|
|Sex(male=l)|0.65|0.389|11.65|0.65|0.300|10.81|
|North(North=1)|0.28|-0.269|-6.82|0.32|-0.369|-8.57|
|Seniority (Junior=1)|0.16|0.001|0.01|0.33|0.026|0.54|
|Urban(urban=1)|0.32|-0.048|-1.36|0.34|0.121|2.99|
|Constant||4.361|22.51||3.448|18.01|
|R-squared||0.200|||0.340||
|Numberofobservations||1285|||1897||

_Source:_ 1992-93 and 1997-98 VLSS 24
Table 20 presents regressions that allow for a different<sup>impactof differentlevelsof</sup> education. In this table, returns to different completed education<sup>levelsandvocationaltraining</sup> were used in place of schooling. Returns were calculated<sup>foreachyearof the corresponding</sup> education level. Other economic variables were kept<sup>unchanged.</sup> Investment in education at primary and lower secondary<sup>levelswere profitableinboth</sup> surveys. However, returns to primary education declined<sup>slightly from15%in1993to14%in</sup> 1998. Similarly, returns to lower secondary education declined<sup>from3%in1993to 2 %in1998.</sup> In contrast, upper secondary and university education only<sup>turnedouttobestatistically</sup> significant in 1998. While one more year attending an upper<sup>secondary schooldid not make any</sup> statistically difference in one's earning in 1993, it<sup>couldbringas muchas4 percentmore to the</sup> earning for each additional year spent in an upper secondary<sup>schoolin1998.Similarly,returns to</sup> one more year in university / college could bring 24 percent<sup>increaseinearningin1998.Itis</sup> interesting that after taking into account differences in education<sup>attainmentlevel,attending</sup> vocational training did not make any statistically differences<sup>in earningin privatesectorin both</sup> years (Table 20). In this extended model, experience, gender,<sup>numberof hoursworkedand</sup> region seemed to have similar impact on earning as in basic earning<sup>model.</sup>

# 5. **Conclusions**

Over 5 year period 1993-98, school enrolment in Vietnam<sup>increased dramaticallyat all</sup> levels, especially at higher education levels. These improvements<sup>occurred forallexpenditure</sup> groups and regions. Changes in the allocation of public<sup>spendingoneducationinthe1990s</sup> increasingly favored lower levels of education . As a result, the<sup>shareof public spendingon</sup> education going to the poor increased from 16.5% in 1993<sup>to18.1%in1998.This chapter</sup> documents major changes and conditions in the education<sup>sectorinVietnam,using dataon</sup> public expenditure on education and the Vietnam Living<sup>StandardSurvey.Itfinds fourmajor</sup> conclusions.

Firstly, the improvement in enrolment rates was not<sup>equalacrossthe different</sup> expenditure groups. At the primary level, there was a huge<sup>increasein enrolmentfor the bottom</sup> quintile, but more still needs to be done to achieve universal<sup>primaryeducationin Vietnam.For</sup> the population as a whole, 9% of primary school age children<sup>werestill notenrolledin primary</sup> school in 1998, and 18 % of the poorest children in this age<sup>range werenot enrolledin primary</sup> school. These enrollment gaps between rich and poor are even<sup>widerforhigherlevelsof</sup> education. Over the five year period between 1993 and<sup>1998,childrenfrompoorestquintile</sup> experienced an increase in enrolment in upper secondary<sup>schools from1 %to5%as compared</sup> to an increase from 21 % to 64 % for the richest quintile.<sup>Atthe post secondarylevel,thegaps</sup> were even larger as almost no poor children went to schools<sup>at this level bothin1993and1998,</sup> compared to an increase in enrolment from 9 % to 29<sup>%forchildrenfromtherichestquintile</sup> between 1993 and 1998.

Improvements in enrolment rates also varied considerably<sup>acrossregions,withwider</sup> disparities at higher levels of education. At primary level,<sup>theMekong Delta,the Central</sup> Highlands, and Northern Uplands experienced largest<sup>improvementinenrolmentoverfiveyear</sup> period as they started at much lower levels, except<sup>theNorthernUplands.Theregionwhich</sup> 25
experienced the least improvement was the Central Coast. Improvement in enrolment at lower secondary level was impressive in all regions, and was on quite an even basis. In contrast, at upper secondary level the gaps in improvement were huge, with increases in enrolment as high as 35 percentage points in the Red River Delta and as low as only 9 percentage points in the Central Highlands and the Mekong Delta. On a more positive note, improvement in enrolment were considerable and equally spread for boys and girls. However, gaps in improvement in enrolment between the majority and minority groups widened given low enrolment rates for minority children, especially at the higher education levels. This may be an area which merits special attention from policy makers, researchers and others. Considerable improvement in primary enrolment for ethnic minority groups shows that recent programs by government as well as by the international community have generated positive results. Additional efforts will be needed to provide access to higher levels and encourage ethnic minority children to enroll (and stay) in school.

Secondly, over the five years from 1993 to 1998, public spending on education more than tripled in real terms, and in 1998 a larger share of public spending was allocated to primary and lower education than in 1993. The state budget finances around 50 percent of total education expenses; the remaining cost is borne by households. Public spending pays for most of the costs of public primary education, while the private sector plays a major role in financing at the upper secondary and post-secondary levels. Although fees were no longer compulsory at the primary level, in 1998 households purchased many schooling-related items, such as books, uniforms, private tutoring, transportation, and lunch. Thus even at the primary level, paying for education can be a significant financial burden on the poor. This burden is even greater for poor children continuing on to higher levels. It presumably explains why many poor children dropped out of school at a relatively young age. This hypothesis is consistent with findings from many participatory poverty assessments in Vietnam (World Bank, 1999).

Looking at the composition of household spending on education, spending on textbooks, teaching aids, PTA and school contributions accounted for most of the spending on primary education by poor households. In contrast, better-off households spend more at the primary level on quality-related items such as private tutoring after school hours, transportation, food and lodging. This means that the poor children are not only receive less education, compared to better-off children, but the education they did receive was of lower quality. This implies that the government should make a concerted effort to make quality education available to all, in part by reducing the financing burden on poor households. It also be noted that getting these marginal children to school may be much harder than for the average child. Efforts must come from many sides: the government, civil society, the local community, and households.

The level and composition of private spending on education also varies greatly across regions. A student in the Southeast paid almost twice as much as a student in the Red River Delta. Even in the Mekong Delta and the Central Highlands, which are poor regions, private spending by households on secondary education was much higher than in the Northern Mountains and the Red River Delta. In the Northern regions, the highest burdens faced by households with children in primary schools were PTA contributions, text books, and paper. In contrast, in the South and Central regions, especially in the South East and the Mekong Delta, uniforms, transportation and lunch were the largest spending items. For example, in the Mekong Delta, transportation and lunch amounted to 50 percent of household expenditure per primary 26
school child. Spending on items like uniforms, transportation and lunch can be major impediments to enrolment of poor children, especially at the secondary and post-secondary levels.

Thirdly, this chapter considered why increases in enrollment in the 1990s were lower among poor children, despite the overall brighter picture of increased enrolment in Vietnam. Part of the answer undoubtedly lies in the high burden of private financing for education. Part of the answer may link to the pattem of allocation of public spending on education. In Vietnam, poor households are typically concentrated in poorer regions, which received relatively less compared to wealthy regions due to current budget allocation criteria. Over five years 1993-98, the share of public education spending received by the poor increased substantially due to the increase in enrolment by poor children and changes in allocation of public spending more favoring lower levels of education. Primary education observed the most dramatic shift favoring the poor between 1993 and 1998. However, in Vietnam, the two poorest quintiles have much higher proportions of school-age children than their proportions in total population, and they had more children who started school later and/or repeated classes than other better-off groups. And the proportion of school-age children in the population varies a lot between regions, with poorer regions likely to have more children in school ages. Northern Uplands and North Central Coast had higher proportion of primary school-age children in the population than other regions. These are those children need to attend school and thus should be able to attend school, not the population. Therefore, it is better to compare the share of public spending with the share of school-age children rather than with the share of the population. If this is used, the poor received just the same share of public primary education spending as their share in total primary schoolage children, not more. And they received much less proportionately from public spending on secondary education. The Northern Uplands and the Southeast benefited more from primary public spending than their shares of school-age children. In contrast, the Red River Delta, the North Central Coast, the Central Coast, and the Mekong Delta received less from primary public spending than their shares of school-age children. In addition, despite recent progress in education spending and enrolments, inequities in public education spending were much higher at the secondary level. This, together with low performance profile in some of this less benefited regions, may have implications for reallocation of public expenditure on education, especially between region, in order to improve enrolment performance in these regions.

Finally, this chapter examined changes in returns to education and schooling in the private wage sector in both 1993 and 1998. The labor market in Vietnam is changing rapidly: returns to schooling at higher levels of, education increased substantially; investment in education at all levels raised wages in the private sector, but returns to primary and lower secondary education dropped slightly between 1993 and 1998. In contrast, ifi 1998, an upper secondary or postsecondary education can lead to a huge pay-off. Linking these with findings from previous sections shows that helping the poor to complete primary education can provide them with an opportunity to improve their earnings and livingi standards (by entering secondary and postsecondary education). In contrast, vocational training had no statistically significant influence on earnings in the private sector. This results raises questions about the value of such education, which is thought to play an important role in generating technical skills to meet new demand of a fast changing market economy. Further study is needed on the quality of vocational training and its capacity to provide the right sorts of skills that new business most need 27