Determinants of households in come in planned areas, a case of my phuoc down toawn ben cat binh duong

Determinants of Households' Income in Planned AreasAbstract This study aims to investigate the impacts of land recovery for industrial andurban development on displaced people's liveliho

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VIETNAM- NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS

DETERMINANTS OF HOUSEHOLDS' INCOME IN PLANNED AREAS: A CASE OF MY PHUOC

DOWNTOWN- BEN CAT DISTRICT- BINH DUONG

A thesis submitted in partial fulfilment of the requirements for the degree ofMASTER OF ARTS IN DEVELOPMENT ECONOMICS

ByTHAI THANH PHONG

, so G1i0ovc 1:~Xo ·~o - ·-1TRIJONG f),~, HQC KINH TE TP.HCM I

HO CHI MINH CITY, OCTOBER 2009

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VIETNAM- NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS

DETERMINANTS OF HOUSEHOLDS' INCOME IN PLANNED AREAS: A CASE OF MY PHUOC DOWNTOWN- BEN CAT DISTRICT- BINH DUONG

A thesis submitted in partial fulfilment of the requirements for the degree ofMASTER OF ARTS IN DEVELOPMENT ECONOMICS

Academic Supervisor: DR HA THUC VIEN

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In the first of all, my heartfelt thank goes to my supervisor, Dr Ha Thuc Vien.His comments and suggestions on my term paper for Rural Development coursehelped me to form my research topic During the course of my thesis research andwriting, I have received numerously his kind supervision, guidance, useful commentsand encouragements My deepest thanks also go to Associate Professor Dr NguyenTrong Hoai, Co- Director of Vietnam - The Netherlands Programme for M.A inDevelopment Economics, who has always given me his encouragements and kindlyduring the course of my study and thesis research My thanks also go to my kindly andenthusiastic classmate, Mr Nguyen Ngoc Danh, who is always ready to instruct mewhile I am processing and analyzing to my data with STATA 9 1

My thesis was made possible with co-operation and supports of local people in

of My Phuoc downtown who kindly provided me useful information and ideas related

to my research I am grateful to My Phuoc downtown and Ben Cat district People'sCommittee, especially to Mrs Thuy who gave me many information which includedimportant data; Mr Tuan in ward 2, Mr Chau in Ward 3, Ms Hoa in ward 4 who tookand introduced me with local people during time conducting my fieldwork I wouldalso like to present many thanks to my cousin and my friends, who helped me toapproach project documents of My Phuoc IPs

I am grateful to my manager in Binh Duong Telecommunication, Mrs Huong,who created advantage condition in job let I had time to survey during two month Myheartfelt gratitude also goes to my wife, Ha and two girls, Nha and Thanh, who are mylove and motivation during the studying time

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Determinants ofHouseholds' Income in Planned Areas

DECLARATION

I declare that "Determinants of Households' Income in Planned Areas: A Case of

My Phuoc Downtown - Ben Cat District - Binh Duong Province" is my own work, that ithas not been submitted to any degree or examination at any other universities, and that allthe sources used or quoted are indicated and acknowledged by complete references

HCMC, October 2009THAI THANH PHONG

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Determinants of Households' Income in Planned Areas

Abstract

This study aims to investigate the impacts of land recovery for industrial andurban development on displaced people's livelihoods those who are living in industrialand urban planed areas in Binh Duong Province through a case study of My PhuocDowntown A main approach of this study is based Sustainable Livelihood Frameworkdeveloped by DFID (2001) A combination of qualitative and quantitative methods wasemployed throughout the research process, from the early stage to the data analysisstage to describe livelihood patterns of surveyed households before and afterdisplacement and to analyze statistically factors affecting their income Morespecifically, econometrics models were applied to estimate the role of livelihood assets

on livelihood outcome of displaced households

Quantitatively, linear regression model was applied to estimate the impacts ofhousehold livelihood assets, compensation (both in kind and in cash) on householdincome The estimation results show that there is positive impact of livelihood assets onlivelihood outcome (total household income) before the displacement at a 1%

significant level (wage and saving) and at a 5% significant level (farmland andresidential land) After resettlement, estimating results of simultaneous equations modelwith three-stage least-squares estimation method inform that compensated money,compensated residential land and accessed credit volume has positively determined thetotal investment for livelihood rehabilitation at 1% significant level In addition, anumber of resettled housing land transfer times are positive effect (significantly at a 5%level) to household's total livelihood investment Together with investment forlivelihood rehabilitation, total expenditure on children education after resettlement alsohas positive impact with total household's income after resettlement at a 5% significantlevel Proxy indicators of livelihood assets are positively and significantly related withtotal income after resettlement such as: education of household head (at a 5% level), anumber of working member in household (at a 1% level); a number of cell phone in ahousehold (at a 1% level); a number of meeting time per year (at a 1% level) andfinancial savings and livestock value before the displacement (at a 5% level)

Moreover, the study found that, most displaced households do not receive any priority in vocation trainings, credit for alternative livelihood development and tax

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exemplification programs from local government and urban development projectinvestors although displaced people are often promised by authorities and investors atthe beginning ofthe project initiation

Keywords: Livelihood, industrialization, land recovery, compensation,resettlement

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Contents

Acknowledgements

Abstract

Contents

List of Tables

List of Figures

Chapter 1

1 Introduction

1.1 Problem statement

1.2 Objectives ofthe study

1.3 Research questions

1.4 Outline of the thesis

Chapter II

2 Literature Review

2.1 Definitions and terminologies

2.1.1 2.2 Empirical studies of land recovery, resettlement and its impacts on displaced farm households' livelihoods

Chapter III

3 Research Methodology

3.1 Analytical framework of the study

3.2 Econometric framework ofthe study

3.3 Variables definition

3.4 Data collection and analysis

3.3 1 3.3 2 3.3 3 3.3.4 Chapter IV

4 Description of Study Area

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Determinants of Households' Income in Planned Areas

4.1 Industrialization progress ofBinh Duong province

4.2 Background of study site (My Phuoc downtown)

4.3 Regulations of Vietnam on land recovery and resettlement 24

4.4 Regulations of land recovery and resettlement of My Phuoc Industrial Park project

4.5 The implementation of policies of land recovery and resettlement in My Phuoc downtown

Chapter V

5.Displaced Households' Livelihoods

5.1 Household's livelihood patterns

5.1.1 5.1.2 5.1.3 5.2 Compensation and compensation using

5.2.1 5.2.2 5.3 Livelihood Assets

5.3.1 5.3.2 5.3.3 5.3.4 5.3.5 5.4 Households' expenses

5.5 Household's income

5.5.1 Income sources and income calculation method

5.5.2 5.6 Results ofthe econometric analysis

5.6.1 5.6.2 Chapter VI

6 Conclusions

6.1 Conclusion and recommendations

6.2 Research limitation

References

Appendices

Appendix A: Variables definition

Appendix B: Aggregated income model before the planning (Year 2000)

Appendix C: Aggregated Income Model after the Resettlement (Year 2008)

Appendix D: Questionnaires

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List of Tables

Table 3-1 : Variable definition 17

Table 4-1: Summary of compensation following regulations 25

Table 4-2: Summary of compensation in My Phuoc Industrial Park 27

Table 4-3: Policies of compensation and resettlement 31

Table 5-l: Patterns of Livelihood before the Planning 32

Table 5-2: Patterns oflivelihood activity combination before the planning 33

Table 5-3: Patterns of household's livelihood activities after land recovery and resettlement 36

Table 5-4: Number kinds oflivelihood after displacement and resettlement 37

Table 5-5: Current patterns of households' livelihoods 39

Table 5-6: Current patterns of household livelihood activity combination 40

Table 5-7: Vary in cash compensation among households 42

Table 5-8: Classification of household's cash compensation 42

Table 5-9: Vary in household's land compensation 43

Table 5-l 0: Classification of household's land compensation by area 43

Table 5-11: Cash compensation expenses 44

Table 5-12: Detail of property investment from cash compensation 45

Table 5-13: Household's investment in education 46

Table 5-14: Using compensated/resettled residential land 47

Table 5-15: A number oftimes to transfer compensated land 47

Table 5-16: Reasons of sale compensated/resettled residentialland 48

Table 5-17: Other income sources of displaced household 48

Table 5-18: Balance of compensation expenses 49

Table 5-19: Detail of household finance deficit 49

Table 5-20: Finance sources to cover deficit 49

Table 5-21: Surplus of compensation after expenses 50

Table 5-22: Land area of observed households before the planning and at the present 51 Table 5-23: Classification of household's house types before the planning 53

Table 5-24: Public service access by households before the planning 53

Table 5-25: Price of one kilowatt of electrical power 54

Table 5-26: Types of constructed house at the present 54

Table 5-27: Area of house before the planning/at the present 54

Table 5-28: Average distance to public service systems 54

Table 5-29: Saving and livestock value of household before the planning/at the present 55

Table 5-30: Household's loan access before the planning/at the present 55

Table 5-31: Household's loan sources before the planning/at the present 55

Table 5-32: Loan using before the planning 56

Table 5-33: Loan using at the present 56

Table 5-34: Friendly level of neighbours 57

Table 5-35: Security condition level 57

Table 5-36: Social environment before the planning/at the present 57

Table 5-37: Organizations/Associations before the planning/at the present 58

Table 5-38: Member of social organizations before the planning/at the present 58

Table 5-39: Age of household head in the sample at the present 59

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Table 5-40: Classification of average age of household members at the present 59

Table 5-41: Household size 59

Table 5-42: Average education of household members at the present 59

Table 5-43: Education in observed households at the present 60

Table 5-44: Composition of household at the present 60

Table 5-45: Annual expenses of households before the planning/at the present 61

Table 5-46: Detail of annual expense before the planning/at the present 61

Table 5-47: Comparison of household annual expenses 61

Table 5-48: Income sources of surveyed households 63

Table 5-49: Annual farm-based income before the planning/after displacement/at the present 64

Table 5-50: Household aggregated income 65

Table 5-51: Trends in proportion of farm-based income 65

Table 5-52: Household's non-farm income before the planning/after resettlement /at the present 66

Table 5-53: Descriptive statistics of proxy variables before the planning 68

Table 5-54: Regression results of econometric model before the planning 68

Table 5-55: Descriptive statistics ofproxier variables after resettlement 70

Table 5-56: Regression results of econometric model after resettlement 71

List of Figures Figure 3-1: Conceptual framework for the empirical study 12

Figure 4-1: Administrative map of Ben Cat district 23

Figure 4-2: Location map of My Phuoc downtown 23

Figure 4-3: Double market (Chq Doi) 28

Figure 4-4: Silent professional school in My Phuoc IP 29

Figure 5-1: Resettled house border with the cattle cage of Uncle Pham Van Hai 34

Figure 5-2: Cattle freely on non-using resettled land 34

Figure 5-3: Recruitment information pasted on the gate of a company 35

Figure 5-4: Villa of Mr Pham Van Tru with motorbike mend panel in the front 38

Figure 5-5: Internet Shop of a displaced household 38

Figure 5-6: Chain of rooms for lease of a resettled household 40

Figure 5-7: Old lady Nguyen Thi An keeping a herd ofcattle .41

Figure 5-8: Chart of compensation expenses 45

Figure 5-9: New house of the most successful displaced household 50

Figure 5-10: Average education of household members at the present 60

Figure 5-11: Trends in household income sources 64

Figure 5-12: Trends in average annual income ofhousehold 67

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"Doi Moi'' reform towards a market-oriented economy As a result, Vietnam's economyhas significantly improved and a lot of bright achievements Economy has grown over7% per year in the 90s and it still continues to present The economic growth hasimproved living standard of people, significantly; GDP per capita rising from under 100USD per year in the early of 1990 to over 800 USD per year in 2007 (WEO 2008)

The industrialization and urbanization process in line with economic reforms hasbeen taken place throughout the country As a consequence, a large area of farmland isconverted into non-agricultural land for expansion of urban areas, industrial zones, andinfrastructure Thanh· (2007) asserts that more than 73,000 hectares of farmland wasannually converted for expansion of industrial clusters and parks, urban areas andinfrastructure development Particularly, in the period of 2001 - 2005 land conversionhas suddenly increased, approximate 360,000 hectares of farmland were shifted into non-agricultural land in the whole country

Vietnam is a country with 75 percent of its population living in rural areas (Dower2004:4) Their life and livelihoods are heavily relied on agriculture or at least agriculture

- related activities Land is, therefore, one of the most valuable assets to farm households,particularly the poor It is not only the primary means for generating livelihoods, but alsothe vehicle to accumulate capital and transfer it between generations (Moore 1999:3).Therefore, land recovery by the government for industrialization and urbanizationprocess has strongly affected the life and livelihood of farm households in planned areas.Empirical evidence suggests that one hectare of farmland converted into non-agriculturalland leads ten farmers to be jobless As a

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consequence, millions of those whose land recovered for industrial, urban andinfrastructure development have become no career since adopting economic reforms in

1986 (Nga 2007)

Binh Duong is one of leading provinces in the industrialization and urbanizationprocess in Vietnam The first industrial park of the Southern provinces was founded inBinh Duong province in 1995 Currently, Binh Duong has 25 operating industrial clustersand parks with over 12,135 hectares (ICBD 2009) The industrialization and urbanizationprocess has significantly stimulated local economic development Binh Duong province'sGDP has annually grown over 14 percent and GDP of industry has grown over 36percent annually, on average in a period of 1997- 2004 Moreover, the industrializationprocess has offered dozens of thousands of jobs to local people and migrant workersfrom other provinces (ICBD 2008) The fast industrialization and industrialization hascaused thousands hectares of farmland converted in a period of 2001 - 2005 Of which,converted land was used for Industrial Parks (excluding resettlement areas) untilSeptember, 31st 2005 approximate 2,500 hectares (author summed areas of nineoperating Industrial Parks) Consequently, thousands of farm households lost their farmland

Farmland recovery for non-agricultural purposes has led those displaced farmhouseholds have to adjust partly or even totally their livelihood activities However,many displaced households have faced serious challenges in making their livelihoods innew economic and living environment since most of them have traditionally basedagriculture, rural culture and living style, have low education and lack of skillfulness ineconomic activities other than agriculture Binh Duong is claimed as one of the mostsuccessful localities in solving the compensation and resettlement for farm households inplanned areas; especially, land recovery and compensation for My Phuoc Industrial Parkproject was recognized as the most successful one in Binh Duong in terms of recoveryprogress, compensation and resettlement However, as empirically observed, displacedpeople seem to be very hard while seeking their livelihoods in the new livingenvironment

Although, the impacts of land recovery and resettlement on displaced people'slivelihoods have been widely discussed in daily rumors, newspapers, magazines, fewempirical studies on this issue have not been done In addition, comprehensive studies

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on displaced farm households' livelihoods are very rare up till now In order to enrichboth theoretical and empirical knowledge on impacts of industrialization, urbanization,land recovery, compensation and resettlement on resettled farm households' livelihoodsand recommend to policy makers strategies to resolve problems created by such policiesand development process, this work will take land recovery for the development of MyPhuoc Industrial Park as a case study The research aims at comparing and analyzing indetail impacts of industrialization and urbanization progress; more precisely the impacts

of land recovery and resettlement displaced farm households' livelihoods in My Phuocplanned areas by relying on Sustainable Livelihood Framework that developed by DFID(2001) Besides, I attempt to simulate an econometric model that demonstrates therelationship between livelihood assets and outcomes of households in the planned area.1.2 Objectives of the study

The study has both conceptual and practical relevance:

1 It is to understand the development process of industrialization andurbanization in Binh Duong province in general and farmland conversion inparticular;

2 It is to have a precise insight on the implementation process related torecovery of land, compensation, subsidy and resettlement in Binh Duongprovince (a case of My Phuoc downtown);

3 It is to describe, analyze, compare livelihoods, livelihood assets andoutcomesof households in planned areas before and after the recovery of land,compensation, subsidy and resettlement;

4 It is to assess impacts of the recovery of land, compensation, resettlement andsubsidies policies having on livelihood assets and outcomes ofhouseholds

As these objectives are fulfilled, this work aims at achieving the two following basic objectives:

1 Major policy themes related to land recovery, compensation, resettlementand their impacts on farm households' livelihoods in planned areas will be

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recommended to policy-makers to construct more effective and flexible policies and programs on the mentioned issues

2 Findings from this work will contribute to the growing discussion on thefield related to land recovery, compensation, resettlement and their impacts onfarm households' livelihoods in planned areas

1.3 Research questions

1 How does the policy of land recovery, compensation, subsidies and

resettlement implement in Binh Duong province, particularly in My Phuoc Downtown?

2 What are livelihood patterns of households in planned areas before and after implementing land recovery and resettlement?

3 What impacts do land recovery, compensation, subsidies and resettlement have on livelihood assets and outcomes of households in planned areas?

1.4 Outline of the thesis

The thesis is divided into six chapters The introductory chapter comprises of problem statement of the study, objectives of the study and research questions

Chapter II begins with some definitions and terminologies ofVietnam's Land Law

1993 and 2003 about land ownership, land allocation, land use rights, land price, landrecovery and resettlement The next section reviews empirical studies of land recovery,resettlement and their impacts on displaced farm households' livelihoods

Chapter III reviews research methodology used for the analysis throughout thiswork It begins with first section including analytical framework and econometricframework of the study The last section mentions about selection of study site, unit ofanalysis, data sources, data collection techniques and methods to analyze collected data.Chapter IV, in first two sections, presents the industrialization process of BinhDuong province and the background of My Phuoc downtown Next two sections mentionabout regulations of Vietnam on land recovery and resettlement, and policies of landrecovery and resettlement of My Phuoc Industrial Park project The last section

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discovers the implementation of policies of land recovery and resettlement in My Phuoc downtown

Chapter V presents findings of the study, it includes five sections The first sectiondescribes household's livelihood patterns in planned areas through three differentperiods: before land recovery, right after resettlement and at the present The secondsection analyzes compensation implementation and the ways in which displacedhouseholds used their compensation The third section describes five livelihood assets(natural, physical, financial, social, and human) of displaced households before theplanning and at the present Next two sections present about expenses and incomes ofdisplaced household before the planning and at the present And final section shows thedeterminants of households' income in two periods, before the planning and afterresettlement

Chapter VI summarize the findings of the study and recommends some policies implications which drawn from the research results

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2.1.3 Land use rights

Vietnam's 1993 Land Law regulated: Certification of land use rights will begranted to those who are using land on a stable basis which is certified by the People'sCommittee of rural, urban communes and commune towns Household or individual,who were land owner, can exchange, transfer, inherit, or mortgage the land use right.Vietnam's 2003 Land Law adjusted the land use right more detail: Land owners mayexercise the right to exchange, assign, lease, sub-lease, bequeath and donate land userights; right to mortgage, guarantee and contribute capital using land use rights; and right

to be paid compensation when the State recovers land

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2.1.4 Land price

Provincial authorities launched decision which regulated land price in provinceand this price was used to compute: transfer tax; fees of land using, land leasing;compensation price when the State recover land for goals of military, security,development, national benefit; Compensation land price for displaced households in

My Phuoc downtown based on the frame of land price of Decision no 24/1999/QD-UB(dated 06/03/1999) of People's Committee ofBinh Duong Province

2.1.5 Land recovery and resettlement

- Land recovery means "the issuance by the State of an administrative decision torecover land use rights or to recover land which has once been allocated to economic entitiessuch as individuals, households, economic organizations, etc." (Vietnam's 2003 Land Law).Land often is recovered for objectives of national defense and security, national interest,public interest, or economic development

- Recovered land's compensation: Decree No 2211998/ND-CP of Vietnam'sGovernment stated a principle: people, who have recovered land, will be compensatedmoney or house or new land Decree No 197/2004/ND-CP, an upgraded of Decree No.22/1998/ND-CP, regulates more detail: "Persons who have land recovered shall becompensated with new land having the same using purpose; if there is no land forcompensation, they shall receive compensation equal to the land use right value at the time

of issuance of the recovery decisions; in case of compensation with new land or

houses, if there is any difference in value, such difference shall be paid in cash."

- Resettlement means policies of compensation, relocation, assistance are provided

by the State (or the organization who using the recovered land) to displaced people, whohave recovered land (Vietnam's Land Law 2003) The resettlement policies for displacedfarmer's households after land recovery often circle these modes: cash resettlement,employment resettlement, farming resettlement, land reallocating resettlement, housingresettlement, and social insurance resettlement (ADB 2007) However, Decree No.197/2004/ND-CP of Vietnam's Government just regulates three cases of resettlement:dwelling houses resettlement, new residential land resettlement and money for acquiringnew residences resettlement Beside that, it also mentions four others subsidy andcompensation policies, they are: a) compensate or support whole

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Determinants ofHouseholds' Income in Planned Areas

recovered land, b) compensate or support all assets linked to recovered land and investedcost in the land, c) support for: moving, stabilization of living, training and transfer job, d)support for stabilization of production and life of displaced people in resettled area

2.1.6 Livelihoods

Livelihood is "a mean of gaining a living" "A livelihood comprises capabilities, and

mean ofliving, including food, income and assets" (Chambers and Conway 1991) Ellis(2000) suggests a more elaborate definition, that is, "A livelihood comprises the assets(natural, physical, human, financial, and social capital), activities, and the access to these(mediated by institutions and social capital) that together determine the living gained by anindividual or households"

2.2 Empirical studies of land recovery, resettlement and its impacts on

displaced farm households' livelihoods

During the last two decades of the 20th century, about 10 millions people per year inthe world were displaced and resettled due to development projects such as: industrial parks,irrigation, transportation highways, power generation, urban resident areas (Cernea 2000:11) In China from 1993 to 2003, about 1.7 million hectares of cultivated land wereconverted into non-farming use purposes and this impacted to approximate 3.3 millionfarmers, annually

Farm households in planned areas was recovered all or partly of their farmland, amain asset on which their livelihoods are generated Regularly, if investors or Governmentstake land from farmers, they must have some resettlement policies such as: cashresettlement, farming resettlement, vocational training programs to help displacedhouseholds rehabilitate their livelihoods However, resettlement policies applied by theauthorities still have some limitations and negative effects For example, cash resettlement iseasy to manage and often is accepted by displaced farm households But, it only suited toyoung people and farmers who are working out of horne and was not suitable to groups ofabove 45 years old or who are low skill labors, it is rather difficult for these farmers to seekjob by themselves (ADB 2007) Besides, the efficient of vocational training courses and newjob introduction services to support land loss farmers still is a big problem Most of displacedhouseholds are farmers and low education, so they have a limited to perceive and computefor their future Just few

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households invest in training alternative jobs after resettled Many displaced householdsdid not use the huge compensated money in a proper way, they used such money to buildnew and expensive house, equip luxury electric appliances and vehicles (Quang et al

2005, Nang 2006, Sen 2007) In the near future, these households certain faced difficultsituation when the compensation money was exhausted

According to recent study of Sen, although displaced households receivedcompensation, assistance and subsidies from investors or the government, but proportion

of resettled people being jobless and having unstable jobs is still very higher, occupyingover 615 respondents or 44.5 percents of sample (Sen 2007) Free time of displacedpeople increases sharply in Vo Que district (Bac Ninh province, Vietnam) due toindustrial zone development, it is higher 50 percents of working time fund, especially inyoung labors force (average age is around 26 years old) (Tho 2006)

Land recovery caused losing household's productive assets o, such as farmland,common property resources, jobs, community articulation and the changing of cultureliving (Webber and Mcdonald 2004) It also created several impoverishment risks forland-loss farmers: income reduction, employment difficulty, poor long-term livelihoodguarantees Cernea (1995: 251) shows that displaced people will loss some principalcapitals such as: natural capital, man-made capital, social capital, human capital Thefarm production and income of displaced households is major impacted by land recoveryand resettlement The household's income reduces significantly after the resettlement(Syagga & Olima 1996, Webber & Mcdonald 2004, ADB 2007) Many displacedhouseholds have difficulties in rebuilding livelihoods because of the lack of access tocommon household capital and limited farmland (Heming et al 2001 ) Especially, aproportion of displaced farm households are in a "four-no" status - no land, no job, nosecurity, and no capital for establishing business Only a half of them can be transferred

to non-farming employment (ADB 2007)

Land recovery leads to the gradually shifting of laborers to non-farming sector.However, most of them just to be employed in fields which require a relative low level ofeducation and skills and to be laid off easily due to poor adaptability after a short period(ADB 2007, Phong 2005) The sharp reduction of cultivated land and the weakness ofindustrial foundation lead to the serious surplus of rural laborers Female employees indisplaced areas are impacted firstly because most of them are farmers, not

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well educated and just do domestic works, so they face more difficult if leave their home

to find non-farming jobs (Shaoquan et al 2004)

After land recovery, people who were relocated into new farmland will face lesschanging in their livelihoods However, in industrial planned areas, displaced peoplereceived often compensated money, resettled residential land or new house They had nofarmland after resettlement Therefore, livelihoods of these affected households were verydiffering with the prior situation; they had to adopt non-farm livelihood strategies andurban living style In developed areas, some affected households used remaincompensation money to build flats for renting, or run small shops, or to buy vehicleengage transportation (Sen 2007, ADB 2007) The highest second proportion ofhouseholds in the study of Nang (2006) deposited remain compensated money in thebank and received the return of interest rate or withdrew a proportion of the depositmonthly for their daily spending Price of goods in planned areas often increases afterland recovery due to reduce cultivation land areas Therefore, displaced households inslowly developed areas will face more difficult, livelihoods is lack and poor while theyhave to spend at high price for everything, from water, electricity, coal to food, farmproducts (such as: rice, vegetable, ) (ADB 2007) Some people had to migrate to findjob after land recovery

Many empirical studies show various reasons that rural households oftendiversify their livelihoods, simultaneously participate in more than one income earningactivities However, Adi (2007) used simultaneous equation model suggested by Smithand Blundell (1986) to estimate the probability of participating in non-farm or non-agricultural activities of households, and come to conclude that, despite of high incidence

of diversification, agriculture still is highly significant to households' livelihoods in ruralcommunities of Eastern Nigeria Schwarze (2004) also have some major results after aquantitative study in Central Sulawesi (Indonesia), non-agriculture activities play animportant role in rural livelihoods but households' livelihoods principally depend onagriculture activities which generate about 70 percents of the total household income.Therefore, lost whole of cultivated land and have to adopt non-agriculture livelihoods are

a big leap or shock with displaced farmers The lack of efficient vocational trainingprograms and social insurance for displaced people who are old or do not meet thedemand of industrial jobs is one of the foremost causes of poverty because of landrecovery and resettlement (ADB 2007)

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Beside empirical studies about land recovery and resettlement, my study aims tocontribute a specifically evidence of My Phuoc downtown to understand more aboutdeterminants of households' livelihoods in planned areas before and after the landrecovery and resettlement, advantages and disadvantages that resettled households havefaced after land recovery and resettlement

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Chapter III

3 Research Methodology

This chapter sets out to deal with the study's research methodology It beginswith presenting the analytical framework of the study which developed by adoptingsustainable Livelihood Framework (DFID 2001) as well as definitions of livelihoodassets, policies and institution in the framework The following section presentseconometric framewqrk of the study in two periods, before land recovery and afterresettlement And the final section mentions about data collection for the study andtechniques of data analysis was applied

3.1 Analytical framework of the study

Vulm;rabjl!iy cvutp~t

- Loss offarmland

• Livelihoods change

-Culture living change

-Population <tensity rise

Figure 3-1: Conceptual framework for the empirical study

(Source: adopted from Sustainable Livelihood Framework ofDFID 200)

The analytical framework for this empirical work is developed by modifying the

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• Livelihood assets: there are five types of livelihood capital (assets) as follows:

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(i) Human capital [H]: "Human capital represents the skills, knowledge, ability tolabor and good health that together enable people to pursue different livelihood strategiesand achieve their livelihood objectives" (DFID 2001) Household human capital variesaccording to household size, skill levels, leadership potential, health status, etc and itchanges constantly due to internal demographic reasons or a deliberate reformulation inresponse to unexpected events or external pressure (Vien 2007) Human capital can beimproved by investment in education and training, as well as experience and skillsattained during working process

(ii) Natural capital [N]: is the term used referring to natural resource stocks fromwhich resource flows and services (such as: land, wildlife, water, forests, air quality,erosion protection, biodiversity degree and rate of change, etc.) useful for livelihoods arederived (DFID 2001 ) In rural areas, almost of household livelihoods come from all orpart of natural resource-based activities Natural resource comprises of renewable andnon-renewable; the former replenish rural people, while the latter may be used indirectlyfor making livelihoods (Vien 2007)

(iii) Physical capital [P]: includes the basic infrastructure and producer goods needed tosupport livelihoods (DFID 2001) Primarily components of physical capital are usuallyessential for livelihoods of households such as: transport, shelter, water, energy,communication, production equipment, and means (Vien 2007)

(iv) Financial capital [F]: is referred to as the financial resources that people use toachieve their livelihoqd objectives and it comprises the important availability of cash orequivalent that enables people to adopt different livelihood strategies (DFID 2001).Financial capital consist of two primarily sources: available stocks comprising cash,bank deposits or liquid assets such as livestock and jewelry, not having liabilitiesattached and usually independent on third parties; regular inflows of money comprisinglabor income, pensions, or other transfers from the state, and remittances, which aremostly dependent on others and need to be reliable

(v) Social capital [S]: represents the degree of social cohesion in

communities It

refers to the processes between people that establish networks, norms and social trust,and facilitate coordination and cooperation for mutual benefit (HDA 2004 cited in WHO1998) Key elements of social capital include: social resources - e.g informal

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arrangements between neighbors or within a faith community; collective resources - e.g.self-help groups, credit unions, community safety schemes; economic resources - e.g levels

of employment, access to green, open spaces; cultural resources - e.g libraries, art centres,local schools Communities where social capital is abundant are often characterized by: highlevels of trust between friends and neighbours; shared norms and values; local peopleengaging in civic and community life

external factors affect to livelihood options, access to livelihood assets of household Carlonialso mentioned: local institutions influence directly and indirectly to household livelihoodstrategies, by determining legal/illegal activities, by creating incentives to pursue certainactivities and choices over others, through their influence on access and control of householdassets An enabling or facilitating policy and institutional environment will assist householdaccess easier to livelihood assets In contrast, a disabling policy and institutionalenvironment may create the discrimination and obstacle household access to their capital Ifthe land recovery is attached with effective policies and institutions (reasonable ofcompensation, resettlement, training, and assistance policies), household face less shocksand difficulty in transition period of livelihood changing after land loss

Based on the analytical framework, the study mms to find out the role of livelihoodassets playing on livelihood outcomes before and after land recovery and resettlement, Icollected some proxy indicators of five livelihood assets as independent variables rely onSustainable livelihood guidance sheets of DFID (2001) Total annual income will be selected

as a proxy of livelihood outcomes of household in planned areas

Before land recovery for industrial and urban development, livelihood patterns ofhouseholds in planned areas are depended significantly on agriculture However, tounderstand specific determinants of household's livelihoods before the planning, I appliedlinear regression model with general form:

Yo= f(LAo)

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(year 2000) LAo are proxy variables of five livelihood assets in year 2000: human capital,natural capital, physical capital, financial capital, social capital

After displacement, livelihood assets of displaced households changed completely.Livelihood outcome of displaced households has not only based on new livelihood assets,but also significantly depended on formerly livelihood assets and investment afterdisplacement Beside that, investment for livelihood rehabilitation has also sharply based oncompensation factors and formerly livelihood assets Therefore, to study determinants ofhousehold's livelihood after resettlement, I used simultaneous equation model with generalform:

I = f (C , LA' o , LA' 8 )Y8 = f(LA"o, LA"8, Sectu, I)Where,

(year 2000);

2008);

The above simultaneous equation model was tested by a three-stage estimationprocedure because the endogenous explanatory variables are dependent variables from otherequation, therefore, the ordinary least squares estimations of individual equations in thesimultaneous equation model can lead to biased and inconsistent parameter estimators(Pindyck and Rubinfield, 1991: 228)

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3.3 Variables definition

livelihood outcome Dependent variables in the study comprise of: total income ofhousehold before the planning, total income of household after resettlement, total investmentfor livelihood rehabilitation after resettlement

compensations and several others factors generated after resettlement, they include:

members, average education of working members were selected as proxies of human capital.These variables have a long tradition as proxies for human capital and have often proventheir correlation with household income in empirical studies (Narayan and Princhett 1997,Wolz et al2004)

households, was collected as representations of natural capital

distance to bus stop, number of using cell telephones in household, residential land size Thepositively linked between telephone usage and income that occur at both in farm and non-farm income levels was demonstrated in the research of Chong et al (2005) using a quasi-natural experiment in Peru

credit, and wage

members, neighbour trust or friendly of neighbours (who they can borrow money, rice andoften visit each other)

compensated land

Moreover, in order to analyze determinants of livelihood outcome of displaced households, I consider several factors which were generated after resettlements

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independent variables, such as: total of investment for education, number times ofresettled land transfer

Independent varia hies

edu hhh Education of household head

workingmbr_p Number of working members in household after resettlement

working_edu Average education of working members

frmland_bp Total areas offarm land before the planning

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3.4 Data collection and analysis

3.3.1 Selection of study site

Binh Duong province is one of the earliest provinces starting industrialization

and urbanization programs after the Economic Doi Moi reform launched in 1986 Many

projects of industrial zone and new urban areas have been developed over last twodecades which shift Binh Duong's economy from agriculture base to industrial andservice base Together with urbanization and industrialization, a large area of farm landwas converted into non - agricultural land and thus this process has significantly affecteddisplaced people's livelihoods, both positively and negatively

Ben Cat is recently one of the fastest industrialization and urbanization districts

of Binh Duong province Thus, prior to 2001, Ben Cat district - a northern district ofBinh Duong province- was still a poor place with GDP dominated by agriculture Since

2007, economic growth was over 20 percents and economic structure of Ben Cat districthas been significantly shifted towards industry (77.66%) - agriculture (12.86%) andservices (9.48%) Land for industrial zone in Ben Cat district is largest as compared withother districts of Binh Duong province

My Phuoc downtown, the center of Ben Cat district, was the initial place ofindustrialization and urbanization process of Ben Cat district Development of My Phuoc

I, My Phuoc II industrial parks has converted nearly a half of total area of My Phuocdowntown, approximately 1,000 hectares This industrial park is considered as the largestone in Binh Duong province

The process of land recovery, resettlement and compensation project for thisindustrial park is recognized the most successful one that was completed within the time

of less two years However, it does not mean that this project has often brought the betterlife to all displaced people In order to understand what effects that land recovery andresettlement have on displaced people's livelihoods and to a larger extent of BinhDuong's land recovery projects for the development process, I decided to choose MyPhuoc industrial park development as the study site for empirical investigation

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3.3.2 Unit of analysis

Individual household is basically impacted by land recovery and resettlement;therefore, selecting household as a unit of analysis help us deeply understand about theinfluence of land recovery for industrialization and urbanization progress

3.3.3 Data sources and collection techniques

This study was carried out in My Phuoc downtown, Ben Cat district, Binh Duongprovince Data for empirical analysis will be relied on two major sources as followings:

zone of My Phuoc downtown by author This is the main source of primary data 86displaced households in My Phuoc downtown were selected for the deep survey with help ofboth structured and semi -structured questionnaires Variables were surveyed are described

• Area of land recovery; compensation; subsidies; training programs;

• Displaced people's assessments about the impacts of land recovery,

resettlement, compensation, and subsidy policies on themselves

• The implementation of policies of land recovery, compensation, subsidy and resettlement; opinion of respondents

Face-to-face interview method was applied with assistance of structured andsemi-structured interview, open-ended questionnaire Quantitative data was alsocollected from structured interview by well-designed questionnaire Semi-structured andopen-ended interview were yielded more qualitative data and respondents often

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comfortable to express themselves with open-ended discussion (Vien 2007) In addition,direct observations at the first visit times as well as during the survey period also wereemployed to collected complementary data for the study

and cited from projects documents, reports of people's committee of My Phuocdowntown, Ben Cat district, Binh Duong province, and other reference documents Dataincludes:

• Documents relate to development progress of Binh Duong province on theway toward industrialization and urbanization;

• General data of industrial and urban projects in survey areas;

• Regulations of the government on land recovery, resettlement,

compensation and subsidy;

• Applied policies of My Phuoc downtown (policies of land recovery, compensation, subsidy and resettlement), etc

3.3.4 Data analysis

A combination of qualitative and quantitative method was employed through thestudy, from data collection to data analysis, to assess the impacts of the industrializationand urbanization progress, more specifically that affections of the recovery of land,compensation and resettlement on livelihood assets and outcomes (base on analyticalframework) of households in planned areas, to understand the coping strategies of thesehouseholds, to analyze the living of households, and answer research questions above

- Regarding data analysis, descriptive statistics, analysis and explanation ofimpacts of the industrial and urban planning on the changing of the livelihood assets andoutcomes of resettled households in planned areas were adopted Some tools such as:explanatory; combining text discussion with tables summarizing the observation; casestudy profile to describe, explain with evidences related to a specific case, etc

- Moreover, to quantify and measure information from households that concentrate

on livelihood assets and outcomes such as: income, saving, land s1ze, compensation,subsidy, education, age of household's member, both simple statistics

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and econometric were employed STATA software version 9.1 was used to analyzequantitative data, econometrics models were tested to shows the affections of livelihoodassets, policies and institutions on livelihood outcome of households in planned areabefore the planning (year 2000) and at the present (year 2008)

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Chapter IV

4 Description of Study Area

This chapter summarizes industrialization progress of Binh Duong province,particularly in My Phuoc downtown, leading to land recovery and resettlement ofhouseholds in planned areas The chapter also mentions about regulations of Vietnam onland recovery and resettlement, policies of land recovery and resettlement of My PhuocIndustrial Park project and its implementation

Binh Duong province is located in southeastern of Vietnam It belongs toimportant economic zone in the South, the most dynamic area in economic development

of the country Binh Duong borders with provinces and cities: Binh Phuoc, Tay Ninh,Dong Nai and Ho Chi Minh City

In 1993, before the regulation of industrial park was launched, Binh Duongstarted to build the first industrial park (about 24 hectares), Binh Duong (Binh Duemg)Industrial Park In periods of 1996 - 2001, Binh Duong developed 7 industrial parks with1,437 hectares, and the total area of these industrial parks was leased approximate 80percents (average of country is 46 percents) Binh Duong authority perceived thepotential of the province in develop industrial park, in 2001 they started to develop silentdistricts in the north of province, where just depended on agriculture, become the noisyand dynamic industrial- service- residential zones with total areas over 15,000 hectares

It includes modern industrial parks such as: My Phuoc IPs, Bau Bang IP, Tan Uyen IP, and a new capital of Binh Duong City However, the place owned highest industrialdevelopment speed until now is My Phuoc downtown, an initial place in the north wherethe authority chose to start the industrial development of this zone

My Phuoc downtown is the center of Ben Cat district, a northern district of BinhDuong province It is 20 km away from Thu Dau Mot city and 42 km from Ho Chi MinhCity It takes just about one hour to travel from the center of Ho Chi Minh City to MyPhuoc Industrial Park

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Total area of My Phuoc downtown is about 2,150 hectares In 2001, population

of My Phuoc downtown approximated 10,000 people divided into 2,365 households.Farm households' livelihoods relied on subsistent agriculture, mainly paddy, vegetablesand some rubber tree

In June, 1ih 2002, My Phuoc Industrial Park was founded As a consequence,1,159 hectares of cultivated land of My Phuoc downtown were recovered and 83 8 farmhouseholds were forced to be resettled

Figure 4-1: Administrative map of Ben Figure 4-2: Location map of My Phuoc

Nowadays, My Phuoc becomes a noisy downtown Its population is over 26,000people, occupying one - sixth of total Ben Cat district's populations Over a half ofpopulation is migrant people My Phuoc' s economy has shifted from subsistentagriculture toward to industrial - services and commercial based in which the share ofindustrial, service and commercial, and agricultural sectors is 65%, 25%, 10%,respectively There are about 135 companies having registered with over 15,000 laborsemployed in My Phuoc Industrial Park The process of industrialization and urbanizationhas turned over households' traditional life and livelihoods Those resettled

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farm households are no longer practicing agriculture while non-agriculture basedactivities have become their means of living; even a number of them are jobless and rely

on their compensation

4.3 Regulations of Vietnam on land recovery and resettlement

Because My Phuoc Industrial Park started before 2003 until present, therefore, Imentioned decrees, regulations of both Land Law 1993 and 2003 It aims to comparewith policies of land recovery and resettlement applied for My Phuoc Industrial Parkprojects, I only revised some main points of regulations about land recovery,compensation and resettlement of Vietnam which respond to applied policies in MyPhuoc

Households or individuals, who are legal owners of recovered land, were

compensated and subsidized as following these scales:

- Compensation for those who lost all their land due to land recovery: Principle ofcompensation for land loss was in several ways such as money, house and residentialland for resettlement Recovered residential land per household was compensatedcounted from 100 square meters (Decree No 22, 1998), to 400 square meters (Land Law1993) Recovered farmland was compensated relying on land price defined by Decree

No 87 (1994) of the government, for example the first farmland category wascompensated from 1, 100 VND to 19,3 00 VND per a square meter; and the price frame

of residential land in the rural area for the first residential land category was from 2,200VND to 38,600 VND per a square meter Decree No 17 (1998) allowed to adjust theprice frame approaching to market price of land, but was not higher than 50 percents ofmaximum price or lower than 50 percents of minimum price

- Compensation for loss of assets attached to recovered land Principle ofcompensation for assets loss: whole assets, which linked on recovered land at the time ofrecovery, such as: house, architectures, trees, animals will be compensated;

- Subsidies for living and business if had to displace house and business to newlocation Subsidies to stabilize living and production of displaced people was calculated

in a six month period of time, an amount of monthly subsidy per person was equal to 30kilograms ofrice on average price at compensation time (Decree No 22, 1998);

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Determinants ofHouseholds' Income in Planned Areas

costs of smoothing the surface of land Compensation for moving dwelling in a provincescale is from 1,000,000 VND to 3,000,000 VND (Decree No 22, 1998)

land recovery

prioritized labor recruitment

infrastructure were built in resettlement areas to ensure that users had the same or betterconditions compared with their old places of residence

Table 4-1: Summary of compensation following regulations

Compensation

Resettled residential

land's area

Farmland price

Residential land price

Displacement fees per

household

Subsidy per a farmer

(rice/money)

(Source: Cited from regulations)

In 2001 and 2003, Binh Duong authority launched Decision No 139/2001, Decision

No 17112001 and Decision No 219/2003 regulated detail policy of compensation land andassets on land for My Phuoc Industrial Park I, II Decisions included policy of compensation

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Land compensation and resettlement policies: Most of households in rural areasdid not own residential land, their house were built on farmland However, My PhuocIndustrial Park project's policy also accepted residential land in rural equal total areas ofhouse and necessary sub-infrastructure of house, but do not higher 300 square meters.Every square meter of residential land in My Phuoc IP I was compensated 70,000 VNDand from 70,000 VND to 174,000 VND in My Phuoc IP II Beside that, household hadhouse and land in legal was compensated 300 square meters of residential land inresettlement zone Farmland and trees on it were compensated from 20 to 140 millionVND per hectare according to types of trees on farmland, the minimum price is farmlandwithout trees was exploited the surface and the maximize price is farmland had peppertrees, which was more than five years lod, on it Beside that, My Phuoc IP I alsosubsidized residential land based on total areas of recovered farmland: 1) 1,000 to 4,000square meters farmland exchanged 100 (5x20) square meters residential land; 2) 4,000 to8,000 square meters farmland exchanged 200 (1 Ox20) square meters residential land; 3)8,000 to 10,000 square meters farmland exchanged 300 (10x30) square meters residentialland; 4) if household had larger 10,000 square meters farmland, every 5,000 squaremeters added farmland would exchanged 150 (5x30) square meters residential land.However, My Phuoc IP II subsidized residential land based on the total area of recoveredfarmland with higher and fairer ratio: 1) 10,000 square meters farmland exchanged 600(20x30) square meters residential land; 2) if recovered farmland larger or smaller 10,000square meters, residential land was exchanged corresponding to above ratio If householddid not exchange residential land, they were compensated 150 millions VND per 300square meters of residential land (both My Phuoc IP I and II)

Subsidy policies consisted of: 1) Subsidy for stabilizing the living: one millionVND per individual who officially lived in displaced house; 2) Subsidy for policyhouseholds (certified by local authority) such as: mother of Vietnam Hero, woundedsoldier : one to five millions VND per household; 3) Subsidy for displacement costs:two millions VND per household;

Others support policies: Investors offered vocational trainings to farmers, wholived in planned areas, to help them to find new job and set priority for them whenrecruiting and training labors for project manager unit and factories in My Phuoc IP

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Table 4-2: Summary of compensation in My Phuoc Industrial Park

Residential land price

Displacement fees per household

Subsidy for policy household

Subsidy per a farmer

(Source: Cited from My Phuoc IP project documents)

Phuoc downtown

In the compensation list of households, they received 70,000 VND per square meter

of residential land in My Phuoc IP I (or from 70,000 VND to 174,000 VND per square meter

of residential land in My Phuoc IP II), plus 300 square meters of residential land inresettlement zone or 150 millions VND per 300 square meters However, they had to re-pay

21 million VND to investors, which were called invested fees to build new infrastructure inresettlement zone (this money also equaled compensation price of 300 square meters ofresidential land) Some household selected resettlement location near market or bus station(just saw on the detail plan map), had to pay more invested fees for new infrastructureconstruction, from 25 to 30 millions VND But in reality, investors adjusted the detail planmap, bus station converted to residential land, and investor did not re-pay any money forhouseholds Markets on the land map just were simple steel frames which were built hurry

on first phase of project but did not operate until now (Figure 4.3)

Households were granted priority when select resettlement locations m resettlementzone But most of them lost that priority because:

Firstly, most of members of displaced households were low education, they couldnot read the detail plan map; therefore, they did not know where main streets and centerareas were They selected resettled locations near old house or their neighbours, they wouldlike to live on their ancient land

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