Payment is good, control is better...Payments for environmental services (PES) are globally a highly...

Payments for environmental services (PES) are globally a highly promising tool for the conservation and restoration of forests and other environmental assets. In developing countries, a series of experiments with this emerging instrument are underway. Is Vietnam one of the countries where important PES experiences have been made?

This report clearly answers this question with “no”. Based on field work in four provinces of Northern and Central Vietnam and interviews in Hanoi, the authors found important domestic concerns for environmental services in Vietnam, in particular the protection of watersheds. But there are a number of major obstacles to the use of PES. First and foremost, the State has so far allocated little forestland to households – much less areas that are critical in terms of environmental services. There is thus no real land-use choice whether or not to ‘provide’ environmental services, since protection is ensured by quite effective command-and-control policies, thus conflicting with the voluntary nature of PES agreements. Second, those conservation-oriented payments that do exist, notably Programme 327 and its successor Programme 661, are designed to cover the opportunity costs of labour in the protection of State forests; they are basically forest-guard salary payments. But they typically make up only 1-2% of rural households’ income and are often not fully conditional, and thus in most cases end up being inefficient as independent conservation incentives. Reforestation subsidies provide a more significant contribution to household incomes, but are probably in most cases predominantly motivated by concerns for increasing timber production, rather than environmental services.

Even though PES thus currently does not exist in Vietnam, it could potentially play a role in a number of future scenarios. It could be used in places where command-and-control measures do not work well, in circumstances where the State decides to extend household control to environmentally critical lands, or if new environmental service markets receive a boost, such as carbon sequestration, nature-based tourism and biodiversity protection on privately allocated lands. However, that would require a regulatory model where the State de facto delegates much more land-use responsibility to rural households.

- Sven Wunder is a senior economist at CIFOR, specialising in PES systems.- Bui Dung The is an economist with Hué University, specialising on natural resources.- Enrique Ibarra is a post-doctoral economist at CIFOR, working on forestry economics and

environmental services.

9 7 8 9 7 9 2 4 4 6 1 1 1 >

ISBN 979-24-4611-7

Why paym

ents for forest environmental services in Vietnam

have so far remained incipient

Sven Wunder | Bui D

ung The | Enrique IbarraPaym

ent is good, control is better

Why payments for forest environmental services in Vietnam have so far remained incipient

Payment is good, control is better


Sven WunderBui Dung TheEnrique Ibarra


Payment is good, control is better Why payments for forest environmental services in Vietnam have so far remained incipient


© 2005 by CIFORAll rights reserved. Published in 2005Printed by SUBUR PrintingCover photos by Sven Wunder and Enrique Ibarra

Published byCenter for International Forestry Research Jl. CIFOR, Situ Gede, Sindang Barang Bogor Barat 16680, IndonesiaTel.: +62 (251) 622622; Fax: +62 (251) 622100E-mail: [email protected] Web site: http://www.cifor.cgiar.org

National Library of Indonesia Cataloging-in-Publication DataWunder, SvenPayment is good, control is better: why payments for forest environmental services in Vietnam have so far remained incipient/ by Sven Wunder, Bui Dung The, Enrique Ibarra. Bogor, Indonesia: CIFOR, 2005.

61p.ISBN: 979-24-4611-71. private forestry 2. forest economics 3. economic analysis 4. forest policy 5. environment 6. environmental management 7. Vietnam I. Bui Dung The II. Ibarra, Enrique III. Title

Contents

Abbreviations and Acronyms v

Acknowledgements vii

Executive Summary viii

1. Introduction 1

1.1. Background 1

1.2. Objectives 2

1.3. Study Methods 2

2. Payments for environmental services 4

2.2. Worldwide PES Experiences 10

2.3. PES Challenges in Developing Countries 11

3. PES context in Vietnam 13

3.1. Forest Resources 13

3.2. Legal Framework 16

3.2.1. State Management of Forest Resources 16

3.2.2. Land Ownership 17

3.2.3. Forest and Forestland Contract and Allocation 18

3.2.4. Benefit Sharing Policy 19

3.3. PES-related National Programmes 21

3.3.1. Programme 327 21

3.3.2. Programme 661 22

4. Case studies 24

4.1. Quang Nam Province, Cu Lao Cham Island 24

4.2. Thua Thien Hue Province 27

4.3. Ha Giang Province 33

4.4. Yen Bai Province 37

Contentsiv

5. Comparative assessment 41

5.1. Vietnamese Experiences under the PES Framework 41

5.1.1. Service Buyers and Providers 41

5.1.2. Conditionality 44

5.1.3. Income Effect 46

5.2. Service-specific Remarks 48

5.2.1. Watershed Protection 48

5.2.2. Biodiversity 50

5.2.3. Carbon 50

5.2.4. Tourism 50

6. Conclusions and implications 52

6.1. Conclusions 52

6.2. A Future for PES in Vietnam? 53

References 57

v

Abbreviations and Acronyms

5MHRP 5MillionHectareReforestationProgrammeADB AsianDevelopmentBankCDM CleanDevelopmentMechanism(oftheKyotoProtocol)CIFOR CenterforInternationalForestryResearchCO2 carbondioxideCPC CommunePeople’sCommitteeCREED CollaborativeResearchintheEconomicsofEnvironmentand

DevelopmentCSERGE CentreforSocialandEconomicResearchontheGlobal

Environment,UniversityofEastAngliaDARD DepartmentofAgricultureandRuralDevelopmentDC DistrictofColumbia(USA)DFID DepartmentforInternationalDevelopmentDONRE DepartmentofNaturalResourcesandEnvironmentDPC DistrictPeople’sCommitteeed. editoreds. editorse.g. ‘forexample’etc. etcetera,‘andsoforth’FAO FoodandAgriculturalOrganizationoftheUnitedNationsFDB ForestDevelopmentBranchFPB ForestProtectionBranchFPS ForestProtectionStationFSIV ForestScienceInstituteofVietnamGSO GeneralStatisticalOfficeofVietnamha hectaresICDP IntegratedConservationandDevelopmentProjectICRAF WorldAgroforestryCenter

Abbreviations and Acronymsvi

i.e. ‘thatis’IIED InternationalInstituteforEnvironmentandDevelopmentIISD InternationalInstituteforSustainableDevelopmentIN IndianaIVM InstituteforEnvironmentalStudies,AmsterdamUniversitykm kilometresLATEN LatinAmericaEnvironmentalDivision,TheWorldBankMARD MinistryofAgricultureandRuralDevelopmentm metre(s)m.a.s.l. metresabovesealevelMB ManagementBoardNGO non-governmentalorganisationNo. NumberNos NumbersNR naturalresourcesNTFP non-timberforestproductOECD OrganizationofEconomicCo-operationandDevelopmentp. pagepp. pagesPES paymentsforenvironmentalservice(s)PPC ProvincialPeople’sCommitteePRISMA ProgramaSalvadoreñodeInvestigaciónsobreDesarrolloy

MedioAmbientePROFOR ProgrammeonForests,TheWorldBankPSA PagoporServiciosAmbientalesRAP RegionalOfficeforAsiaandthePacific,FAORRF ResourcesfortheFutureRUPES RewardingtheUplandPoorforEnvironmentalServicesSDC SwissAgencyforDevelopmentandCooperationSFE StateForestEnterpriseTTHRDP ThuaThienHueRuralDevelopmentProgrammeUCL UniversityCollegeLondonUK UnitedKingdomUNDP UnitedNationsDevelopmentProgrammeUSA UnitedStatesofAmericaUSD UnitedStatesdollar(currency)VND Vietnamesedong(currency)

vii

Acknowledgements

Wewouldliketoexpressourprofoundgratitudetoindividualsandinstitutionsfortheirassistanceinthecourseofundertakingthisresearch.WewishtothankMsTruongQuynhTrang fororganising appointments inHanoi, and inpartfortranslation.WewouldliketothankMrTruongTanQuanforhisassistanceandparticipationasaninterpreterinthefieldwork.WearegratefultoMsFionaChandler,MrWildeJong,MsKirstenSchuyt,MrJasonMorrisandMrJamesHardcastlewhohaveofferedassistanceandusefulsuggestions.

WewishtothanktheManagementBoardofMarineProtectedAreaProjectat Cu Lao Cham Island, the Forest Inspection Station of Hoi An town, andthePeople’sCommitteeofTanHiepcommunefortheirorganisationalsupportandparticipation in thefieldwork atCuLaoCham.Wewould like to thankALuoiStateForestEnterprise, theFieldOfficeof theManagementBoardofBoRiverWatershedProtectionForestProject,andthePeople’sCommitteeofthecommunesofHongHaandPhongSon,ThuaThienHueprovincefortheprovisionof informationanddata.Weareverygrateful to theDepartmentofNaturalResourcesandEnvironment(DONRE)andDepartmentofAgricultureandRuralDevelopment(DARD)ofHaGiangprovince,especiallyMrCaoHongKy,NguyenThanhHonandMrNguyenVanTuan.WewouldliketothankthePeople’s Committee of the communes of Minh Tan and Thanh Van and theManagementBoardsofPhongQuang–ViXuyenNatureReserveandBatDaiSonNatureReserve,HaGiangprovince.WewishtothanktheWomen’sUnionoftheprovinceofYenBaiandthePeople’sCommitteeofthecommunesofTanHuongandMinhQuan.

Finally,wewouldliketothankvillagerswhomwehaveinterviewedinthecommunesofTanHiep(CuLaoChamIsland),HongHaandPhongMy(ThuaThienHue),MinhTanandThanhVan(HaGiang),andTanHuongandMinhQuan(YenBai)fortheircooperationandinformation.

viii

Executive Summary

Thisstudyreviewswhatkindofschemes(directandindirect)relatedtopaymentsfor environmental services (PES-related schemes) currently exist in Vietnam,and what have been the success stories of, as well as the obstacles to, PESimplementation.Forthatpurpose,concreteexperiencesneededtobeidentified,analysedandevaluated.OurdefinitionofthePESprinciplereferstoavoluntaryarrangementwhereawell-definedenvironmentalserviceisbeing‘bought’bya(minimumofone)servicebuyerwhocompensatesa(minimumofone)serviceprovider—anddoes so if andonly if the serviceprovidercontinuously securesthe provision of that service over time (conditionality). Using this definition,weconcludethatonecanfindanumberofincentiveschemeswewillcall‘PES-likeinitiatives’,butthatthePESprincipleassuchhasnotbeenimplementedinVietnamsofar.Thefundamentalreasonsforthisare:

(1) Norealland-usechoice:Inmostsites,littleforestlandhasbeenallocatedtohouseholds—muchlesssoforforeststhatarecriticalforenvironmentalservices.IftheStatefullyownsthelandandcompletelycontrolsland-usechoices,thepaymentsbecomejust‘icingonthecommand-and-controlcake’.

(2) Thereisseldomtrueconditionality:Paymentsarenormallynottrulyconditional,inthewaythatcomplianceismonitoredandpaymentswouldbestoppedordiminishedinthecaseofnon-compliance.Wefoundnorecentfieldexampleswherevillagesorcontractedgroupshadhadtheircontractcancelledorpaymentsdeniedduetotheirnon-compliancewiththeprotectionrequirements.

(3) Too little money: Payments in forest protection contracts from theState to households (mostly under Programme 327 and its successorProgramme 661) typically make up 1–2% of total household income(withafewexceptions).Evenifthelandownerhadpropertyrightsandasignificantdegreeofland-usechoice(see1),theamountofferedwould

Executive Summary ix

normallybeinsufficienttofully‘compensate’theopportunitycostsforforegonealternativeuses.

ItisbasicallyimpossibletoconsidertheuseofPESwhenhouseholdshavenooronlyverylimitedproperleverageonlanduse.TheStatetypicallykeepsafirmgriponthoselandsthatareconsideredcriticalfortheprotectionofenvironmentalservices,andusespaymentsonlyasaninstrumentthatissupplementarytopre-existing command-and-control measures. In our fieldwork, we did not find asingle case of protection payments for land with free land-use choice. Thehouseholdswereinchargeofprotection,buthadlittleornode factoleverageonlandandresourceuse.Thus,insomecases,onecanthinkofthepaymentsasaperformance-basedforest-rangersalary.Inothercases,theyaremoretobeseenasunconditionalminorwelfaresubsidiesthatareusedtoeasetheimplementationofcommand-and-controlmeasures.Inbothscenarios,thepaymentsarenotdecisiveparameters,eitherforhouseholdwelfareorforland-usedecisionmaking.

EstablishingpilotPESscheme(s)isclearlynotanaiminitself—it’sdesirabilitydependsuponthelocalnecessities.TogointothePESdirectiononewouldprobablyneedtostartonamicro-scale,selectinganappliedcasewithclearlypre-identifiedenvironmental-servicebuyers,astrongland-uselinkagetoenvironmental-serviceproviders,andchoosingasitewherecommandandcontrolisnotworking.Thus,ifonemanages toestablish sucha successfulpilotexperienceona small scale,there might be chances of scaling up the experience and influencing policies.Hence,theneedforPEScouldariseincertaincircumstanceswhentheprevailingtoolsorapproachesdonotworkwellandPESisfoundtohaveanaddedvalueinaddressingtheproblem.EvenintheabsenceofPES,alotofusefulworkcanbedoneinVietnamintermsofbringingeconomicincentivesintothecommand-and-control system, a task thatwouldbe less ambitious and—perhaps for thetimebeing—morerealisticthanestablishingfull-fledgedPESschemes.

1

1. Introduction

1.1. BackgroundPayments for environmental services (PES) have emerged in recent years as aconcept and tool for achieving ecosystem conservation, and at the same timeimproving the livelihoods of environmental-service providers. Nevertheless,in Vietnam as elsewhere considerable uncertainty remains as to what exactlyPES means, and how much of it is currently being implemented. In broadlydefinedterms,environmental servicesrefer tothoseservices fromnaturalareasthat contribute to maintain or enhance society’s welfare (e.g. drinking water,maintenanceofmicro-climateandsoil,recreationareas).Thoughtheseservicesare often substantial, they are frequently ignored in resource-use and landmanagementdecisions.Undervaluationofforestsandothernaturalecosystemsresultsinthedepletionofnaturalvegetationcoverandsoils,damagedwatershedsandspeciesextinction,frequentlycausinglossestosocieties(Peuker1991;Kishorand Constantino 1993; Repetto 1993; Adger and Brown 1994; Pearce 1996;IISD1999;Richards2000).

Inanefforttopreventsuchdepletion,someanalystsandpractitionershavecalled for the incorporation of environmental-service provision into standardeconomic valuations (Peuker 1991; Kishor and Constantino 1993; Repetto1993; Pearce and Brown 1994; Pearce 1996; OECD 1999; Richards andMouraCosta1999;Richards2000)and,conversely,theuseofdirectincentivesin conservation (Pagiola andPlatais2002;Daily andEllison2002).The logicof theargumentunderlyingPES isas follows:Themaintenanceof those ‘free’environmentalservicesthatareatoddswithlocaldevelopmentaspirations(e.g.competing landuses)willeventuallycomeunderpressure.Whenthispressureon resources takes its course, the servicesbecome scarce,which increases theireconomicvalue.Therefore,externalserviceusersmightwanttocompensatelocalresourcemanagerstoensurethattheservicestheyneedareprovided.Conversely,thelocalserviceproviderswouldobtainanincomefortheiradditionalprotection

PAYMENT IS GOOD, CONTROL IS BETTER 2

efforts.Sincethemid-1990s,PESsystemshavebeguntoevolveinthetropics,inparticularinLatinAmerica.

1.2. ObjectivesThisstudyisanattempttoreviewwhatkindofPESschemescurrentlyexistinVietnam,andwhathavebeenthesuccessstoriesof,aswellastheobstaclesto,theimplementationofPES.Forthatpurpose,concreteexperiencesneededtobeidentified,analysedandevaluated.Theobjectivesofthisstudyare:

• toprovideanoverviewofvariousPES-relatedinitiativesinVietnam;• toanalysetheirsalientandcriticalenvironmentalandlivelihoodeffects;• toidentifytheobstaclesandenablingfactorsforPESestablishment;• toprovidepossible suggestions fordevelopingPES in theVietnamese

context.

Thepresentreportdoesnotconstituteacomprehensiveassessmentofprojectsorimpacts—neitherdoesitaimtocategorisespecificinitiativesintermsoftheirrelative overall success or failure vis-à-vis self-declared or donor-determinedobjectives.Rather,ourobjectiveistoassessthelikelyimpactsofspecificdirect-rewardschemesonlocallivelihoodsandforests,andhowtheseschemesfitintoaconceptofPESinVietnam.Also,weaimtoidentifythecircumstancesunderwhichitislikelythatPESschemescouldbeimplementedinthecountry.

1.3. Study MethodsOurmethodologyconsistedofcasestudyanalysis.Onthebasisofthefindingsofapreviousstudy(BuiDungTheet al.,2004)thatcoversawiderangeofdirectandindirectincentivesforenvironmentalservicestouplandfarmersinVietnam,itwasdecidedtofurtherinvestigatePESinitiativeswiththedirectpaymentsthatcurrentlyexist inthecountry.Theselectionofcases fortheanalysiswasbasedonadesire tocover initiativescloselyrelatedtotheprincipleofPESfoundinvarious settings—different regions and ecosystems, different environmental-servicemarkets,anddifferenttypesofbuyersandsellers.Weintentionallyavoidedrepeatingcasesthatwerereviewedbythepreviousstudy.

TheremaythusbecasesofPES-relatedinitiativesthatwehaveomitted,eitherunknowinglyorconsciously.Notably,wechosenottoincludecertifiedtimbermarkets,whichcouldbearguedtoconstituteaPES-typescheme,becausewefeltthatthistypeofinitiativerelatesmoretoforestproductsthantoenvironmentalservices.Likewise,wedidnotincludenon-forestcasesthatmightexhibitimportantfeaturesillustratingthePESmechanism,asourparticularinterestfocusesonforestenvironmentalservices.Geographically,weconcentrated(forlogisticalreasons)on central and Northern Vietnam, where most PES-like initiatives seemed tohavebeencarriedout.

Introduction 3

More than 20 interviews were made with government officials fromministries, environmental and forest-sector institutions, representatives ofdonors and international organisations. Two weeks were spent visiting sevendistricts in fourprovinces forfield interviews inThuaThienHue andQuangNamprovinces (in centralVietnam) and theprovincesofHaGiang andYenBai(inNorthernVietnam).Morethan25fieldinterviewswereconductedwithlocalfarmers,communeleaders,forestryagencyofficials,stateforestenterprises,forestmanagementboardsandothers.Allinterviewswerecarriedoutusingsemi-structuredinterviewtechniques.

Research team conducting an interview with the owner of a forest garden on Cu Lao Cham island, Quang Nam Province (Photo by Sven Wunder)

The analysis of PES-related initiatives was made using both pre-existingsecondarysourcesandinformationfromtheinterviews.Theselectedcaseswereanalysedfollowingaspectssuchasenvironmental-servicetypes,buyerandseller,modes of contract, and livelihood effects. The scope of the livelihood impactassessmentencompasseseconomicandsocialchangesthatresult fromthePESsystem for environmental-service providers. Whenever possible, economicimpactswerequantifiedtoprovidearangeofpossibleincomeeffects.Toassessthelivelihoodimpactsoftheinitiative,thebenefitsandcoststothelocalactorswereexamined.

4

2. Payments for environmental services

2.1. What are Payments for Environmental Services? ThePESdefinitionusedinthisstudyrefers toavoluntaryarrangementwhereawell-definedenvironmentalservice isbeing ‘bought’bya(minimumofone)servicebuyerwhocompensatesa(minimumofone)serviceprovider—anddoessoifandonlyiftheserviceprovidercontinuouslysecurestheprovisionofthatservice(conditionality)(Wunder2005).

The emergence of direct economic incentives for the conservation ofenvironmentalservicesindicatesashiftfromthepredominantuseofcommand-and-controlmechanisms (such aspark establishmentor loggingbans) to, it ishoped,moreflexibleandefficientecosystemprotection(Landell-MillsandPorras2002). The World Bank and the International Institute for Environment andDevelopment (IIED), for example, have identified markets for environmentalservices as a potential tool for environmental protection as well as povertyalleviation(Landell-MillsandPorras2002;PagiolaandPlatais2002;Grieg-Granet al.2005).

PagiolaandPlatais(2002)pointtoseveraladvantagesofPESthatincludemore efficient, sustainable and mutually beneficial arrangements betweenenvironmental-service providers and users. Similarly, Landell-Mills and Porras(2002) show throughglobal comparative case study analysis thatPES systemscan,undertherightconditions,resultinbothmoreconservationandimprovedlivelihoodsforpoorpeople.Rosaet al.(2003)emphasisethepotentiallypositivesocialoutcomesthat,monetarybenefitsaside,canbeachievedthroughincreasedcooperation amongparticipants in aPES system, including improved internalorganisationandstrengthenedlandtenure.

Historically, the dual objectives of increased conservation and improvedlivelihoods have also been the focus of the so-called Integrated ConservationandDevelopmentProjects (ICDPs),butunfortunatelymanyof theseprojectshavenotreachedtheirobjectives.Criticsattributethisfailuretothecoreproject

Payments for environmental services 5

assumption that enhanced economic development leads directly to improvedconservationoutcomes(Ferraro2000;FerraroandSimpson2000).PESpresentanewapproach that focusesdirectlyoncreatinga conditionalbenefit transferbetweenprovidersandbeneficiariesofanenvironmentalservice.Assuch,theydonotimplicitlyassumethatnatural‘win–win’solutionswithsimultaneousgainsinbothconservationanddevelopmentexist.Onthecontrary,thepaymentoptionisbeingpursuedinrecognitionofexisting‘hardtrade-offs’betweenconservationand development. Conversely, if both service providers and users have fullyoverlapping ex ante interests, e.g.bothwouldnaturallychoose toconserve thesameforestareas,thenthereisnorationaleforintroducingPESschemes.ItistheconflictofintereststhatprovidestherationaleforPES.

TheexistingliteraturedoesnotclearlydefinewhatisaPESandwhatisnot.HereweadoptthedefinitionofWunder(2005),whichisbasedonCIFOR’sPESfieldworkinvariouscountries.PESis:

1. avoluntarytransactionwhere2. awell-definedenvironmentalservice(ora landuse likelytosecurethat

service)3. isbeing‘bought’bya(minimumofone)environmental-servicebuyer4. froma(minimumofone)environmental-serviceprovider 5. ifandonlyiftheserviceisprovidedcontinuously(conditionality).

There are several details to note here. First, PES are voluntary not forcedagreements, which notably distinguishes them from command-and-controlmeasures.Regarding thedefinitionof thevoluntaryprovisionof a service (2),itmustbeclearwhatenvironmental service isbeingbought. In somecases, itcouldbetheserviceitself(e.g.thepreservationofnaturalbeautyaroundatouristresort).Inothercases,therewillbeacontractstipulatingacertainlandusethatislikelytoleadtothatservice—forinstance,thedownstreamurbanwateruserswantregularquantitiesofcleanwater,andplantopayupstreamfarmersneartheheadwaterstopreservetheirnaturalforests intryingtoachievethat.However,migrantfarmerscouldoccupyapartofthewatershedinbetweentheprovidersandconsumersoftheservice,andjeopardisetheservicebydivertingirrigationwaterandpollutingthestream.Orthefrequencyoftropicalstormscouldbesohighthatoverallwaterqualityiscompromised,inspiteofanyminorimprovementsinupstreammanagement.Itisthusrationalfortheserviceuserstofirst assesshowimportanttheallegedserviceisvis-à-visinterveninganthropogenicandnaturalfactors.Serviceconsumerswilloftendecideto‘buy’providers’compliancewitha certain land- or resource-use that has a probability of achieving the serviceimprovement—andonlyenterintosuchadealifthatprobabilityishigh.

With respect to thenumberofbuyers (3)and sellers (4), thewidelyusedconceptof‘marketsforenvironmentalservices’wouldsuggestthatmultipleagentsinteractinacompetitivemannertobargainfortherightpriceasdeterminedby


supplyanddemand.Actually,thismayormaynotbethecase.Ifcarboncreditsare being traded on the Chicago stock exchange, this principle certainly doesapply.Butwhenonesingleservicebuyerpaysonesingleprovider,thishaslittletodowitha‘market’.Theprinciplehereisthatthetwopartiescannegotiateabilateralagreementthatmakesbothbetteroff.Forthisreason,wepreferthemoregeneraltermof‘payments’ratherthan‘markets’forenvironmentalservices.Othertermsthathavebeenusedare‘compensations’and‘rewards’,thoughthelatterwithaslightlydifferentconnotation.1Notealsothat‘payments’neednotalwaysbeimplementedinmonetaryterms;theycouldbein-kindoracombinationofdifferentbenefitstolocallandusers.

Considering conditionality (5): payments are made only if the service isprovided.Inotherwords,paymentsareissuedbasedonmonitoringofcompliancewithcontractualobligations.ThisisafeaturethatfundamentallydistinguishesPESfromtheaforementionedICDPapproachorfromaltruisticruraldevelopmentprojects ingeneral. Inprinciple,PESconstituteacommercial transaction,andwe judge themby that standard.This alsomeans that typicallypaymentswillbemadeperiodically,ratherthanonabuy-outfashion,soastoprovideaclearincentivefortheprovidertocontinuetoadheretothecontractualobligations,andapossibility for thebuyer toexit the scheme in thecaseof theprovider’snon-compliance.

Whataretheenvironmentalservicesthataremosttypicallybeingbought,andfromwhatecosystemsdotheyoriginate?Mostattentionhasbeenfocusedonforests.First,thisisbecauseforestscollectivelyprovidevaluableservicestohumans.Second,highdeforestationratesoverrecentdecadeshaveincreasedconcernsabouttheneedtotryoutinnovativetoolsforpreservingforestecosystems.Thebroadcategoriesofforestenvironmentalservicesthatarecurrentlycommercialisedonasignificantscalearecarbonsequestration,watershedprotection,landscapebeautyandbiodiversityconservation.

Carbonsequestration:Growingtreeshavetheabilitytoabsorbatmosphericcarbondioxide(CO2),amajorgreenhousegasthatcanbeassumedtocontributetoglobalwarming.MarketsforcarbonsequestrationarecurrentlyopeningupundertheCleanDevelopmentMechanism(CDM)oftheKyotoProtocol,rewardingtheplantingoftreestocompensateforgreenhousegasemissions.Analogously,althoughthe storageofCO2 in trees thatwouldotherwisehavebeen felledor

1‘Rewards’impliesanentitlementtobepaidforanyenvironmentalservicethatisprovided.Thisisproblematicinthesensethatifthereisnopressureontheservice,e.g.whenprovidedfromlargelyuntouchedareaswithoutcrediblethreats,thennormallytherewillbenowillingnesstopayfortheservice.Paymentsarethusmorerelatedtoforegonebenefitsthatineconomicsjargonaretermed‘opportunitycosts’.‘Rewards’canalsoincludethetransferofmorepermanentrights,suchasformallandtenureinthecaseofoneSouth-EastAsianprogramme,RUPES(‘RewardingtheUplandPoorforEnvironmentalServices’).However,thismayconflictwiththeprincipleofconditionality(4).Forthesereasons,‘compensation’or‘payments’areprobablymoreadequateterms.

Payments for environmental services �

cleared—‘avoided deforestation’—has until now not been eligible under theCDM, experimental extra-Kyoto markets exist that reward active measures toconserveforestswhichonecouldreasonablyexpecttobeotherwiselost.

Landscape beauty: Forests also provide landscape beauty in recreationalareas,whichpeopleenjoyandvalue.Theclassicalvaluationoflandscapebeautyisthehedonicvaluecapturedinpropertymarkets,e.g.thepremiumpriceofahousewitha forestpanorama,comparedtotheneighbouringonewithaviewtoagarbagedeposit.‘Beauty’canherereferbothtoascenicviewingeneral,ortothe likelysightofarareandcharismaticanimal inthewild.Bothdomesticand international touristsarewilling topay for landscapebeauty,andthishasbeenthemostimportantvalueindevelopingcountries.Touristsoftenrevealtheirwillingnesstopayforthisbeautyinpartthroughelevatedtravelcostsofgettingtoanattractivesiteand,asamorereliableindicator,throughadditionalentrancefees, higher-than-normal accommodation costs and other surplus charges.Conversely, localpeoplecanberewardedforthepreservationorrestorationoflandscapebeautyeitherdirectlythroughashareinentrancefeespaidbytourists,through site-operation fees and fringe benefits paid by tourism companies, orthrough tourism-derived employment and petty trade (food, handicrafts, etc.)thatismorehighlyremuneratedthanthelocallyavailableeconomicalternatives.

Biodiversity: The increased attention on the intrinsic and utilitarianimportance of biodiversity has prompted both private conservationists andgovernmentstopayforitsprotection.Pharmaceuticalcompanieshavepaidforthevalueofbioprospectingthebiodiversitycontainedincertainspatiallydefinedareas,thoughthepaymentshavebeenlowandthenumberofschemesveryfew.Governmentspay for theoptionvalueofbiodiversity—usevalueswhichuntilnow have not been discovered. The global wildlife enthusiast may be willingto pay for the existence value of biodiversity—the knowledge that a certainspeciessurvivesalthoughheorshewillneverderiveautilitarianvaluefromthisknowledge.Donationstolargeinternationalconservationorganisationsareonewayofmanifestingthiswillingnesstopay.

Watershed protection: Since, in Vietnam, watershed functions are theclearly dominating forest environmental service, we will discuss the forest–water linkage inslightlygreaterdetail.Amongthe fourenvironmental servicescurrentlybeingpaidfor,watershedprotectionis,inbiophysicalterms,themostcontroversial.Toscientificallyprovethelinkagebetweenacertainlanduseandtheadditionalprovisionofawater-relatedservicevis-à-visapre-definedbaselinecanbecomplicated,andsometimesmoreexpensivethantheallegedvalueoftheservice itself.Thelackofscientificclarityalsomeansthattherehasbeenroomforanumberofmythsandhalf-truthsabouttheforest–waterlinkagenotonlytopersist,butinsomecasestogainsignificantinfluenceonpoliciesandnatural-resourcemanagementpractices(Bruijnzeel2004;Kaimowitz2004).

PAYMENT IS GOOD, CONTROL IS BETTER �

What is ‘myth’ versus the scientifically most likely relationship (at thecurrent state of knowledge) about thewatershed functionsof forests?There isawidespreadgeneralbelief, including inVietnam,that forestcover,comparedtomost alternative vegetation cover types,will always increase average runoff,regulate flows, increase dry-season flows, reduce erosion rates, provide cleanwater and diminish the risks of downstream flooding. In other words, manypeoplebelievethatanytypeofforestcoverisconducivetoanytypeofwatershedprotection. In fact, considerable scientific doubts remain about most of theselinkages,andmanyofthemarehighlycomplexanddependentonsite-specificconditions.Scientificassessments,includingsomeinVietnam,haveshownthefollowingregardingtheseclaims(ChomitzandKumari1998;Calder2000;FSIVandIIED2002;Johnsonet al.2002;Bruijnzeel2004;FAOandCIFOR2005;Hayward2005).

1. Belief 1: ‘Forests increase surface runoff’: Normally forest cover actuallydecreases average runoff, compared to agricultural soils—sometimessignificantly so, since trees (especially deep-rooted ones) consume andevaporate more water than crops. Trees also increase filtration, whichcan help recharge groundwater deposits. Furthermore, this reductionin runoff isusuallymoreaccentuated fornatural forests than for forestplantations,becauseof(amongotherfactors)lowerquantitiesofleaflitterand humus in the plantations. A rare counter-example is high-altitudecloudforeststhatcangenuinely‘produce’waterbycapturingcloud-bornemoisture.Thefactthatthepopularbeliefaboutforestsandwaterrunoffisrefutedbyempiricalevidencehasparticularimportanceforwaterservicesthat depend on high runoff amounts, such as hydroelectric plants andirrigationusers.

2. Belief 2: ‘Forests increase dry-season flows’:Infact,forestcaneitherincreaseordecreasedry-seasonflows,comparedtoagriculturalsoils.Thisisbecausetwooppositeeffectsareatwork:higherevapotranspirationfromforestswithanegativeeffect(asdescribedin1above)versushigherinfiltrationandwaterstoragewithapositiveeffect.Whichofthetwoeffectsdominatesishighly site-specific. InSouthAfrica, for instance, treecoverhasbeenclearlyshowntoreduce dry-seasonflows.Despitetheconflictingevidence,thewaterrunoffstabilisationeffect,withanallegedincreaseindry-seasonrunoff, is often the most powerful argument for forest plantation andprotection in watersheds. The Vietnamese case is no exception in thatrespect.

3. Belief 3: ‘Forests reduce erosion rates and sedimentation’: In somebutnotall cases, this assumption holds. Forests are effective in reducing sheeterosion,butforgullyerosionandlandslidestheeffectislessclear.Forestsmayhavelittlecomparativeprotectioneffectonrelativelyflatlands(whereerosion rates arenegligible) aswell asonextremely steep slopes (where

Payments for environmental services �

erosionratesarehighindependentoflandcover),whereastheycanmakea realdifferenceon intermediately slopedareas.However, theeffectsofforestcoveralsodependmuchonwhatalternativevegetationcoveroneiscomparingitwith.Certaincropsandpasturetypesmayreduceerosionalmostasmuchasforestsdo.Itmayalsodependheavilyonvegetation-covermanagement,e.g.whether(andhow)thatforestatsomestagewillbelogged,whichcandramaticallyincreaseerosion.

4. Belief 4: ‘Forests help provide clean water’: If we extend the argumentunder erosion and sedimentation to thefiltrationof contaminants andnutrientsaffectingthequalityof,forinstance,urbandrinkingwater,thereisrelativelygoodevidencethat‘forestsaregoodforprovidingcleanwater’.This characteristic is more valid for the conservation of natural foreststhan for forestplantations. Inaddition tourbandrinking-waterplants,breweriesandmineral-waterproducersarealsoamongtheactorsthatareoftenwillingtopayforforestprotectioninupperwatersheds.

5. Belief 5: ‘Forests reduce the risks of flooding’:Researchconfirmsthatduringheavystormsinsmallwatersheds,storm-flowvolumesarehigherfrombarelandorloggedslopesthanfromareaswherenaturalforestsremainintact.However,thiseffecttendstodissipateinlargerwatersheds(morethan50km2),becausefloodsinvarioussmallindividualwatershedswithvariablerainfall patterns are equalled out rather than accentuated when addingtoa single larger stream.Also, there isevidence thatflood frequency isrelativelyrobust,andperhapslessaffectedbyvegetationcoverper sethanbyhowthatvegetationismanaged.Massivereforestationtendstohavenoimpactofmitigatinglarge-scalefloods.

Insummary,theevidenceonforest–waterlinkagesisinsomecasesclearlycontrary to common belief (e.g. the ‘forests increase runoff’ myth), in othersindeterminate (e.g. ‘forests increase dry-season flow’). In some cases (e.g. the‘forestsreduceerosion’and‘forestsreduceflooding’beliefs),theenvironmentalserviceismoredependentongeneralvegetationcoveranditsmanagementratherthanonforestcoveritself.How‘good’forestsareforacertainhydrologicalserviceprovisionalsodependsonscaleeffectsandtowhatvegetationcoveronecomparesforestcoverwith.Ithasbeenarguedthatitmaybeimpossibleatthescaleofasingle(smaller)watershedtomakethecaseforaclear‘tradable’linkagebetweenuplandlandusesandspecificdownstreamwaterusers,becauseofsubterranean‘leakage’ effects that dissipate benefits to neighbouring watersheds (Hayward2005).2Thereisthusnotalwaysaclearscientificanswertothequestionofwhat

2Ifmoregenerallytrue,thisfindingwoulderodethescientificbasisforanylocalisedwatershedPESschemebetweenupstreamserviceprovidersanddownstreamwaterusers,thusfocusingattentionmoreonregionalandnationalscalePESschemes.


the linkagesbetweenvegetationcoverandhydrological servicesare.Moreover,the necessary studies are often too complex, time-consuming and resource-demanding. However, in some cases where the standing forest has proven toprovideasatisfactorydeliveryofservicesinthepast,thebuyersmay—evenwithoutscientific ‘proof’—opt forpromoting forest conservation fromaprecautionaryprinciple:itissafertomaintainalargeshareofvegetationcoverasitis,whentheconsequencesoferringregardingtheimpactofland-useandland-coverchangecouldpotentiallybedisastrous.

Combiningservices:SomePES systemsarebasedonpayments formorethanonetypeofenvironmentalservice,andcanthusbeconsidered‘bundled’.Bundlingisoftenconvenientwhenthepaymentsforoneenvironmentalservicefromanaturalhabitatarenotenoughtopayforitsconservation,comparedtothebenefitsderivedfromalternativeuses.Inparticular,itseemsthatbiodiversityisanenvironmentalservicethatisoftenbundledwithotherenvironmentalservices,like protection of natural forest for both species conservation and watershedservices.

Thereisno‘ironlaw’prohibitingpaymentsforotherforestenvironmentalservicesthanthefourmentionedhere.Forinstance,theprotectionfromtropicalstormsorpollinationservicesprovidedbynaturalforestsareexamplesofservicesthat canmaintainhumanwelfare.Untilnow,however,willingness topayhassimplyconcentratedinthefourareashighlightedabove,andtheyalsoprovedtobetherelevantonestolookatintheVietnamcase.

Therearethreecriticalquestions,originallydevelopedforcarbonschemes,but that in principle can be asked with respect to any PES scheme. First, towhatextentisthespecificPESadditional—howmuchdoesitchangebehaviourcomparedtowhatwouldhavehappenedwithoutit?Ifitdoeschangebehaviour,what is the relevant baseline? Second, is the mechanism subject to leakage(inadvertentdisplacementofdestructiveactivitiestosomewhereelse)?Third,isitpermanent,orcouldforeseeablelaterchangesinbehaviourpartiallyorfullynegatethebenefitsitprovides?TotheextentthataPESisnotfullyadditional,subjecttoleakageandnotpermanent,theservicesitbuyscanbesignificantlyreducedorevennullified.

2.2. Worldwide PES Experiences Where in theworldhavePESsystemsactuallybeen implemented?ManyPESsystemsindevelopedcountrieshavefocusedonagro-environmentalservicesandonregeneratingforestsbysubsidisingtheabandonmentofmarginalagriculturalareas.Inthetropics,themostprominentPESsystemhasbeendevelopedoveralmostadecadeinCostaRica.IntheCostaRicansystemofPES, landownersenrolledintheschemeagreetoconservetheirforests,orestablishforestplantationsoragroforestryareas.Inreturn,theyreceiveaper-hectareannualpaymentfroma

Payments for environmental services 11

State-runnationalforestfund,whichreceivesitsfundingfromataxonfossilfuels,frominternationalloans,aswellasfromspecificenvironmental-serviceuserssuchashydroelectricaldamsandbreweries.TheStateactsasanintermediarybetweenserviceprovidersandbuyers.

Likemostpioneerexperiences,theCostaRicanPESschemealsoflagsareaswhere there is significant space for improvement. In practice, the number offorest ownerswho apply for enrolmentof areas in the schemegreatly exceedstheavailabilityoffunds.Thisisprobablyduetoacombinationofunderfundingof theschemeand its lackof spatial targetingofpriorityareas. Inmanycases,thosereceivingPESfundsmaynothavehadgenuineintentionsofputtingthelandtoanalternativeuse,thusimplyinglimitedadditionalityofthescheme—i.e.thePESsystemsbuylessextraenvironmentalprotectionthanwouldhavebeenpossiblewithincreasedtargeting(Ibarra2003;ZbindenandLee2005).

ThereareotherPESexperiences in the tropics,manyofwhichhavebeencarriedoutinLatinAmerica.InEcuador,thewaterconsumersinthetownofPimampiropayupstreamfarmersnottodeforestanddegradethewatershedthatisgeneratingthebulkoftheirdrinkingwater(Echavarríaet al.2004).SparkedbytheevolutionoftheKyotoProtocol,carbonsequestrationpaymentshaveoccurredinmanycountries.Similarly,ecotourismisgloballygrowingrapidly,asvacationersseekoutpristinelandscapes,includingforests,andecotourismprovidesbenefitfrom increased tourist revenue (e.g. Wells 1997). Finally, attempts to protectbiodiversityhavemanifested in various schemes.Conservation concessions areschemes where environmental-service providers receive a direct payment forsettingasideprivatelandsasnaturalhabitatsthatwouldotherwisehavebeenputtoalternativeuses(HardnerandRice2002).Bird-friendlycoffeeinElSalvadorisanexampleofaproductbeingsoldtoenvironmentallyconsciousconsumerspayingapricepremiumovernormalcoffeeprices.Thispremiumflowsbacktoproducers,financingtheirextracostsofproducinginanenvironmentallyfriendlymanner(Pagiolaet al.2004).

2.3. PES Challenges in Developing CountriesThere are specific legal and social obstaclesmaking the applicationof adirectpayment approach challenging in developing countries (Kiss 2002). PESapproachesaremucheasiertousewhenlandissecurelyandprivatelyownedthanwhenit isheldcommunallyorwithoutalegaltitle.Incommunallands,theremustfirstbeaneffective,locallyrecognisedorganisationalstructuretonegotiateand implementcontractualarrangements.Another significantchallenge is thatruralpopulationsindevelopingcountriesmostlyearntheirlivingdirectlyfromsubsistenceagricultureorextractionofnaturalresources.Whenlandisdedicatedtoremuneratedconservationthroughdirectpayments,theoriginalownersmightbecomedispossessediftheirlandrightshadnotbeensecuredinthefirstplace.


Evenif the localpeoplebecomethedirectbeneficiariesofconservation-relatedpayments, largenumbersofpeopledependingon the capped environmentallydegradingactivitiesmaybecomeunemployed.Thiscouldleadtosocialdisruption,andmanyofthepeoplearelikelytocontinuetheirpreviousactivities(Kiss2002;Wunder2005).

Indevelopedcountries,thefinancialincentivesprovidedtolandownersforenvironmental services are sometimes in the formofproperty taxbreaks.Thisis not applicable in countries where property taxes do not exist or routinelygo unpaid. The financial incentives must therefore be provided as direct cashtransfers, which is usually more difficult to implement than tax reliefs. Indevelopedcountries,permanentconservationeasementscanbeimplementedandenforcedthroughthelegalsystem,butindevelopingcountriesthesemechanismsarepredominantlyabsent,sothatpaymentalwayshastobetiedtotheperiodicmonitoringofcontractcompliance(Wunder2005).

There is also the issueof enforcement and timingofpayments.Theweakjudicial systems typical of many developing countries can make it difficult toobtainandenforcelong-termlegalcommitments,sothemostlikelymethodistoprovidethepaymentsdistributedovertime.However,theup-frontopportunitycosts to poor landholders of changing land uses can be high. A balance mustthereforebestruckbetweeneffectiveshort-termincentivesandsustainablelong-termincentives.

Poor upland farmers are important potential suppliers of environmentalservices. Payments for environmental services could be a welcome addition totheir income. It is important to ensure that the poor have access to the newopportunitiescreatedbytheenvironmentalpaymentscheme.However,itshouldbenoted thatworkingwith small, dispersed farmers imposeshigh transactioncosts.Conversely,poorfarmersmayalsobearhightransactioncosts,e.g.whenmanagement plans and different paperwork are required as prerequisites forenteringaPESscheme.Organisingfarmersintobundledgroupsthroughwhichtheycanjoinanincentiveprogrammeisonepossiblewaytoreducetransactioncosts(PagiolaandPlatais2002).

13

3. PES context in Vietnam

3.1. Forest ResourcesDuringthelastdecade,inthecontextofthecountry’sreforms,Vietnam’sforestrysectorhasundergonesignificantchanges,resultingin,amongotherthings,therecoveryofforestresources.Thecountryseemstoberegainingitsforestcover,followingrapidlossfrom43%in1943to29%in1991,risingto33.2%bytheendof1999.Theforest-lossturnaroundisthusprobablyduetoacombinationof strong extrasectoral trends (a rise in lowland agricultural productivity thathas rendered highland agriculture less profitable) and active reforestation andprotectionpolicies—therelativeforceofthetwofactorsisunderdebate.Forestplantations have expanded and there is natural forest regrowth on abandonedmarginalagriculturallands.However,old-growthnaturalforestscontinuetobeunderthreatofdeforestationincertainareas,e.g.inthecentralhighlands.

In Vietnam, forests are classified into three categories: special use forest(national parks, natural reserves, historical areas, etc.), protection forest(watersheds, sandy areas, etc.), and production forest. The protection forest isfurtherdividedintothreesub-categories:highlycritical,criticalandlesscritical.The minimum forest cover thresholds for these three sub-categories are 80%,50% and 30%, respectively. At present, the country’s forest resources include1.52millionhectares of special use forest, 5.35million hectares of protectionforest, and 4.04millionhectares of production forest (Do Dinh Sam and LeQuangTrung2001).

There are differences in the management mechanisms of these forestcategories.Theforestrypolicieshavebeenrevisedandamendedwithaviewtoreconcilingeconomicdevelopmentandenvironmentalprotectionobjectives.Inthelesscriticalprotectioncategories,morelandhasbeenallocatedtohouseholds,as in thecaseofproduction forest.For someof the stricterprotection forests,households have been contracted under Programmes 327 (1993–98) and 661(after1998)topatrolandprotecttheseforeststoensuretheirregenerationandimprovingquality,typicallyforaperiodoffiveyears.Nevertheless,households


donothavecompleteownershiprightstotheforeststheywereallocated,sinceland-useoptionsaredeterminedbytheGovernment.3

In Vietnam, reforestation policies have been motivated by both woodproduction and environmental-service motives. The country’s demand forconstructiontimber,paper,furniture,etc.,isgrowingrapidly.Producerpricesforwoodhaverisen,andsohavetimberimportsfromLaos,providingmotivesfortheGovernmenttogiveprioritytoreforestationwithfast-growingnativeandexoticspecies,andgivingincentivesforruralhouseholdstogrowtrees.Therearecaseswhere people with allocated production forestland have made good economicgains fromgrowing trees—sometimes in a spontaneouswaywithout receivingany Government support, sometimes with Government credits and technicalassistance.

The species used for reforestation differ according to the forest type. Inprotection and special use forest, broad-leaved species are most commonlyplanted, like Erythrophleum fordii, Canarium species, Chukrasia tabularis,Manglietiaspecies,Peltophorum pterocarpum,Cinnamomum camphora andsomeDipterocapaceae species (Dipterocarpus alatus, Anisoptera costata). In addition,someconiferousspecies,suchasPinus kesiya,Pinus merkusii,andsomeBambusa speciesmaybeplanted.Speciesmostcommonlyplantedforproductionpurposesareacaciaandeucalyptus species.Some internationally supportedprojectsalsoselectindigenousspecieslikePinus kesiya,Pinus merkusii,Peltophorum pterocarpum andCanarium album forafforestationpurposes(DoDinhSamet al.2004).

A lot of reforestation is, even for protection forest, carried out throughplanting fast-growing species, instead of a slower—and probably cheaper—process of assistednatural regeneration.Theremaybe several explanations forthis.Itcouldindicatethattimberproductionpurposesactuallyplayarelativelylargeroleeveninprotectionforests.Yet,itcouldalsobeafasterwayofachievingreforestationtomechanicallyfulfiltheGovernment’sforestcovertargets,withouttoomuchconcernaboutwhatspecificbenefitstheseforestswouldorwouldnotprovide.Onepossibleexplanationmightbetheperceptionthattheprotectionorregenerationofany type offorestcovercouldbeconducivetowatershedprotection.Anotherexplanationforsuchpracticesisrelatedmoretothetechnicalaspectofreforestation.Thetechnicalexplanationreceivedduringthefieldworkisthatonverydegradedlanditisnecessaryfirsttocovertheareawithfast-growingspeciestorestoresoilfertilityandmicroclimate,inordertolaterselectivelycuttheexotictreesandplantlocalspecies.Uponfurtherconsultation,weremaindoubtfulif

3Propertyrightsarecompletewhentheyare:(1)comprehensive—theassetisassignedtoaspecificeconomicagentwiththerighttouseanddisposeofitatwill;(2)exclusive—allbenefitsandcostspertainingtotheuseoftheassetaccruetotheowner;(3)transferable—theownercantransferthepropertyinavoluntaryexchange.Additionally,propertyrightsmustbeenforceable,whichmeansthatpropertycannotbeheldwithoutassurancethatthereisproperenforcement(of1,2and3)bytheState(see,e.g.,WangandvanKooten2001,p.13).

PES context in Vietnam 15

Local authorities in A Luoi (Thua Thien Hue Province) explained that to restore the forest cover on degraded hillsides, exotic species need to be planted to accelerate vegetation regrowth and soil regeneration, for later replacement by native tree species (Photo by Enrique Ibarra)

thisrepresentstheservice-maximisingandmostcost-effectiveprocedure—plantedexotic treesmay reduceerosionand sedimentationcompared tocropland,buttheyalsoconsumewaterthatreducestherunoffavailableforhydroelectricpowergeneration (see discussion in Chapter 5). Finally, it might be that economicincentivesforplantationforestryaremuchmoreattractivethanfornaturalforestregeneration,makingthislandusetheagents’preferredchoice.

Under the 5 Million Hectare Reforestation Programme (5MHRP), theaimistoincreaseforestcoverto43%by2010.Asmentionedabove,increasedforest protection services have been an important motive behind massivereforestation,inparticularforwatershedprotection.Itisopentodebatetowhatextentreforestationandforestprotectionaredrivenbywoodproductionversusenvironmental-servicemotives.Protectionforestsallowforsomedegreeoftimberexploitationand,inthefield,variousexamplesofreclassificationfromproductiontoprotectionforest,andviceversawerereported.Thereisthussomeflexibilitybuiltintothesysteminordertorespondtosociety’schangingdemandsonforestresourcesinthefuture.


3.2. Legal Framework InVietnam,lawsissuedbytheNationalAssemblyarecomplementedwithvariousadditionallegaldocuments,includingOrdinances,Resolutions,Orders,Decrees,Decisions,DirectivesandCirculars.Someoftheseareinterpretationsofthelaw;others are to provide guidance for local authorities. Since 1990, the NationalAssemblyofVietnamhasissuedanumberoflawsestablishingthelegalframeworkforthemanagementoftheenvironmentandnaturalresources,includingforestresources.Major laws include theLandLawwith itsmultiple revisions (1993,1998,2000,2001),theLawonForestProtectionandDevelopment(1991)anditsdraftrevision,andtheLawonEnvironmentalProtection(1991).Importantandcoreunder-lawlegislationsrelatedtothemanagementoftheforestresourcesandPES-relatedinitiativescomprise:

• GovernmentResolution01/CP1995ontheallocationandcontractingof land for agriculture, forestry and aquaculture production to stateenterprises;

• PrimeMinisterDecision661/QD-TTg(1998)ontheobjectives,tasks,policiesandorganisationsfortheestablishmentof5millionhectaresofnewforest;

• GovernmentDecreeNo.163/1999/ND-CP(1999)concerningallocationandleaseofforestlandtoorganisations,householdsandindividualsforlong-termforestrypurposes;

• MinistryofAgricultureandRuralDevelopmentCircularNo.56/1999/TT/BNN-KL(1999)guidingthedevelopmentofregulationsonforestprotectionanddevelopmenttovillage/hamletsandcommunities;

• Prime Minister Decision No. 08/2001/QD-TTg (2001) issuingregulationonmanagement rulesof specialuse forest,protection forestandproductionforest;

• PrimeMinisterDecisionNo.178/2001/QD-TTg(2001)ontherightsandobligationsofhouseholds/individualsallocatedandcontractedforestandforestlandforbenefitsharing.

Theselegislationsdefine,amongotherthings,(1)theresponsibilitiesoftheState in themanagement of forest and forestland; (2) the ownership of forestandforestland;(3)forestandforestlandcontractandallocation;and(4)benefitsharingpolicy.

3.2.1. State Management of Forest ResourcesTheMinistryofAgricultureandRuralDevelopmentisresponsiblefornationwideStatemanagementofforests.TheGeneralDepartmentofLandAdministration(nowundertheMinistryofNaturalResourcesandEnvironment)isresponsiblefornationwideStatemanagementofforestlands.Attheprovinciallevel,theProvincialPeople’sCommittee(PPC)isresponsibletothePrimeMinisterforprotection,

PES context in Vietnam 1�

development and utilisation of forest and forestland in the province territory.ThemainforestryorganisationsintheprovincearetheForestProtectionBranch(FPB)andtheDepartmentofAgricultureandRuralDevelopment(DARD).Atthedistrictlevel,theForestDevelopmentBranch(FDB)andExtensionCentreperformthesefunctions.ForestProtectionStations(FPS)(accordingtothePrimeMinister’s Decision No. 245/1988/QD-TTg) are the agencies responsible ofcontrollingandsupervisingtheobservanceofthelegislationonthemanagement,protection and development of forests in the province. In special cases, theyshouldcoordinatewitharmyandpoliceforcesinthelocalitytopatrolandtrackdownforestpoachers,andpreventandfightforestfires.

TheFDBand theExtensionCentre arepartsof theDARDorganisation.According to the Prime Minister’s Decision No. 245/1988/QD-TTg, DARDistheprincipalagencytohelpthePPCintheStatemanagementofforestsandforestlandsintheprovince.TheExtensionCentre‘KhuyenNong’isprovidingagriculturalandforestryextensionservicestofarmers.ThePeople’sCommitteesatdistrictandcommunelevelsareresponsibletothePeople’sCommitteeofthenexthigheradministrativelevelfortheprotection,developmentandutilisationofforestandforestlandintheirterritory.

3.2.2. Land OwnershipInVietnam,thelandbelongstotheState.However,households,individualsandorganisationsareallocatedlandandwatersurfaceplannedforlong-termuseandmanagementforagriculture,forestryandaquaculture.Hence,theyhavetherighttoexchange,transfer,rent,inheritormortgagethelandthathasbeenallocatedtothem.Theseformallandallocationsareknownasthereceptionofthe“GreenBook”, a forest-land certificate that was issued by the government authoritiesbefore1999,whenitwasreplacedbyitssuccessor,the“RedBook”.Landownersarealsoallowedtocontributetheirlandascapitalforjointventureswithdomesticandforeignorganisationsandindividuals.

With regard to the ownership of forest resources, special use forests andprotection forests are under the unified management of the State. A ForestManagementBoardisestablishedforspecialuseforestswithareasofover1000ha;specialuseforestsoflessthan1000hacanbeallocatedtoorganisations,householdsandindividualsformanagementandprotection.AForestManagementBoardisalsoestablishedforthemanagementofprotectionforestsof5000haandabove.Iftheprotectionforestislargerthan20000ha,aForestProtectionUnitissetupundertheForestManagementBoard.Ontheotherhand,protectionforestsoflessthan5000hacanbeallocatedtoorganisations,householdsandindividualsformanagementandprotection.

Production forests are allocated or leased to organisations, households andindividuals.NaturalproductionforestscanbeallocatedandleasedbytheStatetoentitiesotherthanStateForestEnterprises(SFEs),suchashouseholds,individuals,

PAYMENT IS GOOD, CONTROL IS BETTER 1�

cooperatives, companies and factories. In short, there is awide variety of forestusers including:SFEs,managementboardsof specialuseandprotection forests,Provincial People’s Committee (PPC), District People’s Committees (DPC),CommunePeople’sCommittees(CPCs),andotherorganisationssuchasschools,cooperatives,armyinstitutions,villagecommunities,householdsandindividuals.

TheroleofhouseholdsandindividualsasforestholdersisclearlydefinedintheLandLaw,theLawonForestProtectionandDevelopment,andinrelatedresolutionsbytheGovernment.Oneoftherecentchangesinforestrypolicyisassociatedwiththeforestcategoriesallocatedtohouseholdsandindividuals.Inthepast,onlybarrenlandandplantationscouldbeallocatedtohouseholdsandindividuals.Now, specialuse forest (less than1000ha),protection forest (lessthan5000ha,orscatteredplots)andnaturalproductionforestcanbeallocatedor contracted to households and individuals for management, protection anddevelopment.Thoughhouseholds and individuals are ‘virtual’ ownersof theseforest categories, theyhave restricteduse rights to those forests, i.e. theyhaveincompletepropertyrights.

3.2.3. Forest and Forestland Contract and AllocationStateForestEnterprises,aswellasmanagementboardsforspecialuseandprotectionforests,contractforestsandlandforafforestationtohouseholdsandindividualslegally residing in the localities for long-term protection and development offorests.TheStateallocatesforestlandtoorganisations,householdsandindividualsforlong-termuseaseither‘landallocationwithoutland-usecharge’orforestlandlease.Thetermofforestlandallocationandleaseis50years.Thescaleofforestlandallocatedtohouseholdsdoesnotexceed30haperhousehold.Uponexpiryoftheterm, if the landhasbeenusedproperlyand the landuserwishes tocontinueusingtheland,theStatecanallowtheextensionoftheallocationperiod.TheStatealsocontractsforestlandtoorganisations,householdsandindividuals,withthedurationdependentonthetypeofforest(protectionforestsandspecialuseforest:50years; production forest: depending on the business rotations). Protectioncontractsareusuallyfor5yearsandcanalsoberenewediffundsallow;however,theyarereviewedannually.

Recently, attentionhas beenpaid to community forestmanagement.TheMinistry of Agriculture and Rural Development (MARD) issued Circular56/1999/TT/BNNKL,guidingthedevelopmentofrulesfortheprotectionanddevelopment of forests by village communities. The rules and regulations areproposed,discussedandfinalised/agreedthroughcommunitymeetingswiththeparticipationofall villagersor representativehouseholds.Therulesgovern theprotectionandthemobilisationoflocalresourcestotend,maintainanddevelopforests allocatedorcontracted tovillageorhamlet communities.According totheForestProtectionDepartmentwithinMARD,uptoJune2001,some1023communesin146districtsof24provincesandcitieshadestablishedcommunity

PES context in Vietnam 1�

The production of bamboo is highly valued in Yen Bai Province, as local farmers can boost their income by selling bamboo-shoots as part of the benefit-sharing policy (Photo by Enrique Ibarra)

forestmanagementplansencompassingatotalforestareaof2.35millionhectares(DoDinhSamandLeQuangTrung2001).

3.2.4. Benefit Sharing PolicyUnder Programme 661, the Government reserves budget for investment inprotectionandestablishmentof specialuse forestsandprotectionforests,whileloansareprovidedtoproductionforests.Theannualpaymentforforestprotectionis typically VND50000 (equivalent to USD3.3)4 per hectare per year. TheGovernment finances VND2.5million per hectare for planting and tendingprotectionforests(i.e.forestplantations).Thepaymentsaredistributedoverthefirst3years.Likewise,itpaysVND1millionperhectarefornaturalregenerationcombinedwithadditionalplanting,andVND2millionperhectareforplantingandtendingproductionforestsofrarepreciousspecieswithhigheconomicvaluewithrotationperiodsofmorethan30years.Thisconstitutesonlysupplementaryfunding, it does not cover the full investment for one hectare of protectionforest.Individualsandorganisationsthatinvestinreforestationorregenerationcombinedwithadditionalplanting,enjoypreferentialregulationsasstipulatedintheDomesticInvestmentPromotionLaw(VietnamGovernment1994).

Decisions Nos 08/2001/QD-TTg and 178/2001/QD-TTg were issuedto detail regulations of benefit sharing and the obligations of the beneficiaryhouseholdsandindividualswhichhadbeenallocatedorcontractedasstewardsof

4Exchangerate:USD1=VND15500


forestandforestlandinthecategoriesofprotection,specialuseandproductionforests (Vietnam Government 2001a,b). The benefit sharing policies cover allthreetypesofforestandforestland.

1. Special use forest: HouseholdsandindividualstowhomspecialuseforestsareallocatedbytheStateformanagement,protectionandestablishmentarefundedbytheStatetocarryouttheirworkandareallowedtoconductscientific,culturalandsocialresearchservices,andecotourism.Householdsandindividualstowhomcontractsofprotectionorregenerationofspecialuseforestaregrantedareentitledtopaymentforplantation,protectionandregenerationprotection,andtheyareallowedtoparticipateintouristorserviceactivities.

2. Protection forest: Household and individuals who are allocated withprotection forest for management, protection and establishment areentitledtopaymentforprotecting,regeneratingandplantingforests.Theyareallowedtoharvestnon-timberforestproducts(NTFPs),drytimber,dead trees, and toharvest bamboowithmaximumcutting intensityof30%whentheforestcoverreaches80%.Theyarealsopermittedtoharvesttimberbyselectivecuttingwithmaximumcuttingintensityof20%ofthetotalstandvolume(andnotexceeding10%ofthebasalarea)whentheforestsareallowedtobeharvested,andto‘enjoy’85–90%oftheharvestedproductsaftertaxes.

Householdsandindividualstowhomtractsoflandwithoutcurrentforestcoverareallocated,butwhichareplannedforprotectionforests,areentitledtofinancialsupportbytheStateforplantingandtendingforests.Theycanalsobenefit fromavarietyofby-products like supplementarytrees, additional planted trees and thinned trees (provided that thevegetationcoverremainsover60%afterthinning).Theyareallowedtoharvesttimberbyselectivecuttingwithacuttingintensitynothigherthan20%. In addition, they are allowed to use a maximum of 20% of thenon-forestcovered,intendedforestlandareaforagriculturaloraquacultureproduction.Ifhouseholdsorindividualsinvesttheirownfunds,theyareentitledtoreap100%oftheproductswhentheirforestsreachharvestingage.

3. Production forest: Householdsandindividualsallocatedwithnaturalforestfor production management are allowed to undertake agroforestry andsilvopastoral practices. They have the right to collect dead trees, treesdamagedbyfireorothernaturalcauses,andothertrees(orpartsthereof )during the process of applying silviculture technologies; they may alsoharvest forest products to meet their own family consumption needs.They can submit for approval their wood requirements to construct ahousefornewlyestablishedfamilies,withalimitof10cubicmetresperfamily being granted. Following permission, they can harvest the trees


andare entitled to100%ofproducts frompoor regeneration forestor70–80%inthecaseofregeneratedforest(aftershiftingcultivation).Inthecaseofbambooforest,theyareentitledto95%offorestproducts.Wherenatural production forests are contracted (not allocated) to householdsforsecuringprotection,thehouseholdsareallowedtousetheforestby-productsresultingfromsilviculturaltreatments,tointerplant,andtograzecattle.Whenthetreesreachharvestingage,householdsreceive1.5–2%oftheharvestforeachyear(aftertaxes).

Households and individuals who are allocated with plantationsestablishedwithState funds are entitled to75–80%of the total forestproducts, inadditiontothebenefits frominter-plantingandherbs, forhouseholdneeds.Ifhouseholdsareallocatedwithforestlandforproductionforestdevelopment,theyarefinanciallysupportedbytheStatetoplantthetrees.Ifhouseholdsusetheirownfundstoestablishplantations,theyhavetherighttodecideonthetreespeciesandplantingtechniques,toharvestandusealloftheforestproducts,aswellastomarketthem.Wherelandforproductionforestsiscontracted(notallocated)tohouseholdsforforestdevelopment,thehouseholdsarefundedforplanting,tendingandprotecting the forest. They are allowed to carry out inter-planting andagroforestryandarealsoentitledto2–2.5%ofeachyear’sharvest.

3.3. PES-related National ProgrammesThethreemajornationwideprogrammesofforestrehabilitationinVietnamaretheUnitedNationsWorldFoodProgramme,Programme327andProgramme661 (the so-called 5 Million Hectare of Reforestation Programme, 5MHRP).However, only Programmes 327 and 661 have elements related to the PESconcept(discussedearlier).InthesetwoProgrammes,directpaymentshavebeenmade for reforestation and forest protection. Rural people have been offeredcashincentivesthroughforestcontractstoreplanttreesandtoprotectexistingforests.StateForestEnterprises,managementboardsofspecialuseandprotectionforests, and forest-product inspection stationshave signed forest rehabilitationand protection contracts with different individuals and organisations such asarmyunits,communities,groupsofhouseholds,aswellasindividualhouseholds.There are community-based forest protection contracts where payments andother incentivesor supportareavailable to thevillageorcommunity.Primarybeneficiariesarehouseholds,groupsofhouseholdsandcommunitieslivinginornearforests(BuiDungTheet al.2004).

3.3.1. Programme 32�Programme327isaGovernment-sponsoredprogrammethatstartedin1993andterminatedin1998.Atitsinception,Programme327coveredforestry,agriculture,


aquaculture,resettlementandneweconomiczones.Withintheforestrydomain,Programme327focusedonre-greeningbarrenlandandhills,includingprotectionofexistingforestareas,naturalregenerationandforestplantations.In1994,theProgrammewasamendedandshifteditsfocusmainlytowardsforestprotectionincriticalareas,andareaswhereslashandburncultivationpersisted.From1995,theProgrammefocusedonlyonprotectionforestsandspecialuseforestsinareaswherelocalfarmerspractisedslashandburncultivation.From1996to1998,thescopewasagainnarroweddowntoprotectionandestablishingnewprotectionforestsinspecialuseforestlands,forestprotectionthroughnaturalregeneration,and forest plantations. In short, during its life, Programme 327 narrowed itsobjectivesandprogressivelyconcentratedonprotectionofforests.

Duringits6yearsofimplementation,theProgrammecostVND2.981billion(USD213million). All financing for this Programme was allocated from theGovernmentbudget.ProjectfinancingwasmainlychannelledthroughSFEstoindividual projects that were implemented by SFEs either directly or throughsubcontractswithfarmersandcollectivebodies.

Cashincentivesweregiventofarmerstoestablishforestplantationsonbarehillsandtoprotectandmanagenaturalforests.ThesubsidiesfortreeplantingwereVND2.1millionperhectare,includingestablishmentandmaintenancecostsforthenext3years.Lateron,theincomefromforestswassharedinaccordancewiththeproportionstipulatedintherelevantlegaldocuments.Regardingprotectionandspecialuseforests,thelegislationstipulatesthattheyshouldbeallocatedtoandmanagedbyState-runmanagementboards.However,inrealitylargeareasofprotectionandspecialuseforestsareunderSFEs,whichhavebeenencouragedtooutsourcetheirmanagementtoSFEworkersandlocalfarmers.Programme327providedsuchcontractorswithafixedpaymentofVND50000perhectareperyearforforestprotection.Mostobserversareoftheopinionthatthisamountwastoolittletoprovideadequateincentiveforthecontractortoprotectandmanagetheareaeffectively(NguyenXuanNguyenet al. 1999;ChuHuuQuy2002).

Programme327hadseveralweaknessesinitsimplementation.Theallocationof land and the provision of forest management contracts to households,organisations and individuals for forestry uses was fragmented. Likewise,allocated forestland to each contractedhousehold was small (5ha on average)andtheboundariesofeachownerwerenotclearlymarked inthefield.Forestplantationsfocusedonprotectionpurposesonly,andignoredeconomicviabilityandbenefitsharingmechanisms.Flatper-hectareratesresultedininefficientuseoffunds(NguyenXuanNguyenet al. 1999).

3.3.2. Programme 661Programme661,or5MHRP,isacontinuationofProgramme327.Programme661 started in 1998. The general objectives until year 2010 are: (1) to plant5millionhectares of forest, as well as to protect the existing forests in order


to increase forest coverage to 43% of the country’s land area, contributing toenvironmental security, alleviation of natural disasters, increase of aquaticlife, and conservation of genetic pools and biodiversity; (2) to make efficientuse of ‘wildlands’ and bare hills, to create more rural jobs, contributing topoverty reduction,human settlements, income increaseofupland inhabitants,sociopoliticalstability,andnationaldefenceandsecurity,especiallynearnationalborders;(3)toprovidewoodasmaterialforpaperproductionandplywood,andtomeettheneedsfortimberandotherforestryproductsfordomesticconsumptionandproductionforexports,aswellastodeveloptheforestryprocessingindustryinordertoincreasetheeconomicimportanceoftheforestsector,contributingtosocio-economicdevelopmentinmountainareas.

The 5MHRP allocates forestland and forests to different organisations,households and individuals. The validity of the allocation or lease of land toorganisationsandallocationoflandandforesttohouseholdsandindividualsis50years.Iftheorganisations,householdsorindividualsstillneedthelandafterthatperiod,andtheyhavebeenusingitforthecorrectpurposes,theallocationor lease will be prolonged. If the land user has established a forest plantationwitha rotationperiodofmore than50years, thevalidityof theallocationorleasewillbeprolonged,inthe50thyear,fortheperiodremaininguntilharvest.After landhasbeenallocatedor leased,LandTenureCertificatesare issued toorganisations,householdsand individuals.TheProgrammeprovides incentivesincludingcashpaymentstoorganisations,householdsandindividualsengagedinforestprotectionandreforestation,asstipulatedinDecisionsNo.08/2001/QD-TTgand178/2001/QD-TTg(seeabove)(VietnamGovernment2001a,b).

24

4. Case studies

4.1. Quang Nam Province, Cu Lao Cham IslandTheprovinceofQuangNamislocatedincentralVietnam.Theprovince’sareaisnearly11000km2withapopulationofnearly1.4millionpeople.QuangNamhas429921haofnaturalforestwithimportantprimatepopulationsdistributedinallforestareas(Longet al. 2004).

Cu Lao Cham is an archipelago with one large island and seven smallerislands,lyingabout12kmoffthecoastoftheprovinceofQuangNam(seeFigure4.1).ThetopographyofCuLaoChamisdominatedbytwopeaks:a517-mpeakin thecentreofthe islandanda326-mpeakat thewesternend.TanHiep istheonlycommunesituatedonHonLao,theonlyislandinthearchipelagowithpermanentfreshwater.Thecommunecomprises602householdsand(atthetimeofthestudy)apopulationof2728people.Themajorityofthemmaketheirlivingfromfishing.Administratively,thecommuneisorganisedintofourvillages.

CuLaoChamhasbeenproposedtobecomeamarineprotectedareaby2010.Ithasatotallandareaof1535ha,ofwhich562haarespecialuseforest,shrubscoverabout100haandtheremainingareaisbarehillandresidentiallands.Thenaturalvegetationoftheislandsislowlandevergreenforest,although,at lowerelevations,thisforesthasbeenheavilydegradedorreplacedbyshrubs.AnimalslikemacaquesMacaca spp.,monitorlizardsVaranus spp.andpythonsPython spp.havebeenreported.Todate,265vascularplantspecieshavebeenrecorded(ADB1999).Furthermore,aspeciesof swiftletCollocalia sp. isnestingonHonKhoislandwithinthenaturereserve(BirdlifeIndochina2004).Thiswasonereasonwhy the forest ofCuLaoChamwas classified as special use forest, and cameunderthemanagementoftheForestInspectionStationofthetownofHoiAn;otherreasonswerethatforestcoverprovidesstormprotectionforthemainland,the importance of the forest for local water supply, and the convenience of aprotectedareaforeasiercontrolofaccesstohighlyvaluablenaturalresource—thebirds’nestingcaves(seebelow).

Case studies 25

Figure 4.1. Map of Quang Nam Province

The main threat to the terrestrial biodiversity of Cu Lao Cham wasreported by ADB (1999) to be the continued degradation of the forest. Thisdegradation was largely a result of overexploitation of timber and fuelwood.Overexploitationisunderpinnedbythelackofeffectivemanagementofthearea,and limited awareness of conservation issues among local communities (ADB1999).Typhoonsarealsobelievedtohavenegativeimpactsonthebiodiversityof thenature reserve.Overexploitationof swiftletnests is apotential threat tothepopulationofthesebirdsinthenaturereserve.However,theharvestingofswiftletnestsisstrictlymanagedbyamanagementbodyunderHoiAn’sPeople’sCommittee—harvestingislimitedtotwoperiodsperyear,andthenestingcavesareguardedallyear.

Before1994,theforestofCuLaoChamwasoverexploitedbothbypeoplefromthemainlandandbythoselivingontheisland,mainlyfortimberharvesting.Theforestresourcewasdegradedandwatershedqualitywasreduced.SincetheforestonHonLaoprotects thecatchmentsof the fourpermanent streamsontheisland,forestprotectionisessentialiftheconditionsrequiredforpermanenthabitationare tobemaintained.Localpeoplehave suffered fromthe shortageoffreshwaterfordomesticconsumption.Sincetheimplementationofthe327Programme,theforestresourcesinCuLaoChamhavebeengraduallyrestored.BecauseoftheirlocationclosetoHoiAn,theislandshaveahighpotentialfortourismdevelopment(ADB1999).Infact,thefirsttourisminfrastructurewasconstructedontheislandsin2003.

Between 1994 and 1998, Programme 327 funded a number of forestryactivities inCuLaoCham, including forestprotectioncontracts, allocationof


forestlandtolocalhouseholds,establishmentofforestplantations,andplantingofscatteredtrees.Since1999,Programme327hasbeenreplacedbyProgramme661asthemainsourceoffundingforforestryactivitiesinCuLaoCham.

As part of the implementation of Programme 327 in Cu Lao Cham, theforestinspectionstationofHoiAnsignedreforestationandprotectioncontractswithindividualhouseholdsandorganisations.Theprotectioncontractwasannualandrenewable.Onaverage,eachhouseholdinvolvedwascontractedtoprotectaforestareaofabout5haatanannualpaymentrateofVND50000perhectare.In theseareas, contractedhouseholdswereallowed tocollectonlybrokenanddeadtreesfromcontractednaturalforestsandtopruneplantedtreesforfirewood.ThecollectionofotherNTFPsandhuntingwereprohibited.

Inouron-site interviews,wewereinformedthatthepastmodelofforestsprotectioncontractstomanyindividualhouseholdshadnotbeenveryeffective.Since thecontractedareaperhouseholdwas small,and thepayment rate low,the income from forest protection contracts was rather trivial. Consequently,contractedhouseholdswerenoteconomicallymotivatedanddidnotputmuchworkintoforestprotection.Theforestinspectionstationterminatedseveralforestprotection contracts with households that failed to comply with the contractregulations.Illegalloggingandhuntingremainedaproblem.

Toincreasetheeconomicincentivetocontractedhouseholds,in2000thelocalforestprotectioncontractsystemwaschangedtoanewmodelwithfewerhouseholds/guards,whoweremaderesponsibleforsurveyingalargerforestarea.Thiswasdonetoensurethatasignificantandstableincomeisprovidedtotheforestguard’shousehold,constitutingamoreweightyincentiveforprotection.Itseemsthatthenewsystemhasbeenmoreeffectiveandtheproblemsofillegalloggingandhuntinghavebeenstopped.Atthetimeofoursurvey,12householdswereengagedinforestprotection.Thougheachhouseholdhaditsownprotectioncontract,theywereorganisedinthreegroups,eachcomprisingfourhouseholds.Forest patrolling and surveying is done jointly by group members. The areaunder household protection contracts was about 930 ha, including 535 ha ofmedium-richnaturalforestand395haofdegradedareasthatareintendedforregeneration.IncomefromforestprotectioncontractpercontractedhouseholdwasaboutVND300000permonth,equivalentto14–25%ofthehousehold’smonetaryincome(ownfieldinterviews).

ThepaymentforforestprotectiononCuLaoChamisactuallynotapaymentforforestenvironmentalservices,butforthelabourinvestedinforestprotection.Whilethisresemblesperformance-basedprotectioncontractsrelatedtotheuseoftheland,thecontractedhouseholdcannotchoosealternativelanduses—neitherpriortonoraftertheterminationofthecontract.Theopportunitycostforthathousehold is in termsof labour time,not returns to theuseof the land.Onecansaythatthisisacommand-and-controlinstrument‘spiced’witheconomicincentives.Thoughthecontract,tosomeextent,indicateslegitimateaccessrights

Case studies 2�

Fishery is currently the main economic activity in Cu Lao Cham, but the island also has good potential for tourism development, including because of its remarkable forest cover. A dozen of households allocated with forest-monitoring contracts are protecting the State forest efficiently, and improving their livelihoods (Photo by Enrique Ibarra)

ofthehouseholdtotheforestandtheexclusionofothers,itprovidesnoauthorityoverhowtomanagetheland.

Who actually carries opportunity costs from effective forest protection inCuLaoChamandelsewhere,andaretheselossessomehowbeingcompensated?Theprimelosersaretypicallyloggers,whocanbeeitherexternalorlocallybased.Inprinciple,huntingisalsoprohibited,butseemsoftentobetolerated—whichseems understandable if the main overall purpose is watershed protection,notbiodiversityprotection.Note that all losers, fromexternal loggers to localhunters,areillegalforestusersinprinciple,althoughonecoulddiscussthede factolegitimacyofeachoftheirclaims.

4.2. Thua Thien Hue ProvinceThuaThienHueisoneoftheprovincesoftheCentralCoast(seeFigure4.2).Theprovinceis127kmlongand60kmwideonaverage,withmountainsandforestsaccountingforupto70%ofitsterritory.ThuaThienHueProvincehasanareaof5009km2,andapopulationof1.1million,ofwhomabout52000areethnicminoritieslivingmainlyinthemountainareas.


ThuaThienHue is shaped like abowl to thewestwithmountains risingabruptlytoanaltitudeof700–1500m.MainriversincludeHuong,Bo,TruoiandOLau,runningeastwardacrosstheprovince.Thecatchmentsdrainingtotheseahavealengthofonlyabout50km.Therefore,duringthemonsoonseasoninOctoberandNovember,whenlargeamountsofrainfallsinthemountains,hazardousfloodconditionsariseinthelowlands.

InThuaThienHue,wevisitedtwodistricts,ALuoiandPhongDien.ALuoiisamountainousdistrict,locatedinthenorth-westofThuaThienHueprovinceat anelevationof about580mabove see level (m.a.s.l.). Its territory stretchesalongtheTruongSonmountainrange,ontheborderwithLaos.ThedistrictliesinthewatershedsoftheBoandHuuTrachrivers(HuuTrachisatributarytotheHuongRiver).PhongDienhasadiversifiedtopography,stretchingalongtheTruongSonmountainrangetothesea,andlieswithinthecatchmentsoftheBoandtheOLaurivers(seeFigure4.2).Theimplementationoftheprogrammes327and661inALuoiandPhongDienismanagedbytheManagementBoardoftheBoRiverandthedistricts’SFEs.

A Luoi DistrictWeinterviewedstaffofthefieldofficeoftheManagementBoard(MB)oftheBoRiverWatershedProtectionForestProject,basedinthecommuneofHongHa.TheMBwasestablishedin1991andunderthestewardshipoftheDARDoftheprovince(NguyenHuyDunget al.2001).TheMBisimplementingtheproject‘WatershedProtection,Re-andAfforestationoftheBoRiver,1999–2010’,withsupportfromProgramme661.Theprojectencompasses29943ha,including30forestblocksinthethreedistrictsofALuoi,PhongDienandHuongTra.

ThecommuneofHongHahasatotalareaofabout14500km2,ofwhichone-thirdliesinthePhongDienNatureReserveandtherestinitsbufferzone.Atthetimeofthestudy,only10farmersofthecommuneofHongHahadforestprotectioncontractswiththeMB.Thecontractswereindividual.However,theyworkedinagroup(includingtheBoard’sstaff)toprotectthecontractedforestareaofabout1000ha.Theselectionofforestareasforprotectioncontractisbasedonseveralconsiderations.Theforestshouldbothhavegoodqualityandbetrulyatrisk,i.e.beeasilyaccessibleandpronetoillegalloggingandfirehazards.Thecontractedforestareasareconsideredstrategicaccesspoints,i.e.the‘entrygates’totheforest.Therefore,effectiveprotectionoftheseareasshouldalsoreducethethreatstoother,moreremoteforestareas.Onaverage,thegrouppatrolstheforestthreetimeseverymonth,andeachfieldtriptakesabout3days.Patrollingismorefrequentduringtheperiodofhighriskofforestfires.

TheforestprotectioncontractisfinancedbyProgramme661.Onaverage,themonthlyincomefromaforestprotectioncontractisVND300000(aboutUSD20)percontractedhousehold,whichisquitesignificantcomparedtotheper-capita monthly average monetary income of the ethnic minorities (about

Case studies 2�

Figure 4.2. Map of Thua Thien Hue province

C

VND80000, equivalent to USD5). However, it should be noted that theopportunities for obtaining a forest protection contract with the MB are verylimited.Duetobudgetarylimitations,onlyaboutone-quarteroftheBoRiver’swatershedprotectionforestisunderprotectioncontracts.

In A Luoi, we also visited a SFE, and interviewed its manager and themain departmental and section officers, as well as households members. TheEnterprise manages protection and production forest and forestlands with atotalareaof33331ha.TheprotectionandreforestationcostisfinancedbytheGovernmentbudget throughProgramme661and itspredecessor,Programme327.TheEnterprisesignsreforestationandprotectioncontractswithindividualhouseholds.Thecontractsareannualandrenewable.Typically, thecontractedannualreforestationareais100–150haandthenewlyplantedforestareaundercontractisabout400–450ha.Atthetimeofthestudy,theareaofplantedandnaturalforestunderprotectioncontractswasabout1000ha(600haofplantedforestand400haofnaturalforest).Thisimpliesthatonlyasmallproportionofprotectionforestisunderprotectioncontract.

Theforestareaunderprotectioncontractperhouseholdrangesfrom13hato 33ha, with an average of about 25ha. The payment for reforestation isVND1.5millionperhectare(USD97),andfortendingtheforest(distributedover the first 3years after planting) it is about VND2million per hectare(USD129). The main species for plantation establishment have been Acacia auriculaeformis,A. mangium andPinus kesiya,providedbytheSFE.Theincomefromreforestationandprotectioncontractsaccountedfor50–75%ofhouseholds’


income,asreportedbytheinterviewedhouseholds.Inthehouseholds’perception,the payment is compensating for the labour cost, not for the environmentalservicesthatthecontractedforestlandgenerates.

Howwellisthecontractedforestprotected?Itwasreportedthattheforestunderprotectioncontractisdoingwell.TheSFEhasamonitoringteamof13stafftosupervisethecontractedhouseholdsandtoprotecttheforestnotcontractedto households or other entities. As discussed above, reforestation and forestprotectioncontractsprovetobeasignificantsourceofincome.Giventhelimitedavailabilityofalternativeincomesources,thecontractedhouseholdsdotheirbesttocomplywiththecontract.

Weobservedthattheforestwildlifeiscurrentlyunderpressurefromillegalhunting. We noticed that many restaurants in A Luoi town serve bush meat.Huntingandtrappingofwildlifehavelongbeencustomaryactivitiesinthisarea.Hunting remains a common activity, and may now pose the most significantthreattoanumberofmammalandbirdspeciescriticalforconservationpurposes.However,thisisnottosuggestastrongcausalrelationshipbetweenpoachingandtheperformanceofprotectioncontracts, sincetheareaunderforestprotectioncontractsaccountsforonlyasmallproportionoftheareamanagedbytheSFE.

Hilly terrain in the former demilitarized zone (DMZ) between North and South Vietnam. This area was allegedly deforested by Agent Orange, and its vegetation cover has still not recovered. A Luoi District, near the Lao border (Photo by Enrique Ibarra)

Case studies 31

Phong Dien DistrictThe district of Phong Dien is located approximately 40 km north-west ofHuecity.PhongDienhasanareaof95735hawithaforestareaestimatedat24299ha,alargepartofwhichbelongstothe34000haPhongDienNatureReserve.WevisitedPhongSoncommune,whichliesentirelyinthebufferzoneofthenaturereserve.ThecommunehasbeentargetedbytheThuaThienHueRuralDevelopmentProgramme (TTHRDP), financed by the Government ofFinland,forapilotparticipatoryforestlandallocationproject.

Theprojecthasassistedlocalauthoritiesinallocating100haofbarelandto50households,evenlydistributedwith2haperhousehold.TheareaisplannedforproductionforestanditisnotentitledtosupportunderProgramme661.Theallocationwasdoneinademand-drivenmanner.Villagerswhowishedtohaveforestlandsentrequeststothecommuneauthority.Of120applicants,only50householdsreceivedland.Thesefavouredhouseholdswerethoselivingnearthelandtobeallocated,withlabouravailabilityandexperienceinforestryactivities.ThedistrictauthorityissuedRedBooklandusecertificatestothehouseholds.

TheTTHRDPofferedtrainingontreeplantingandprovidedVND900000perhectarefortreeplantingtoeachhousehold.Inaddition,theTTHRDPalsopaidthecostoftendingthenewlyplantedforestatanannualrateofVND230000perhectareforthefirst3years.Thetreespeciesplantedisanexoticacaciawitharotationofabout8years.Theinterviewedvillagersexpecttoharvestthetreesandsellthetimbertoapulpfactory.Whenaskedwhytheydidnotgrowagriculturalcropsontheallocatedland,theyansweredthatthelandwaspooranddegraded.Theyplantousethelandforagriculturalpurposeslater,whensoilfertilityisrestored.

Given the more accentuated ownership status of the allocated land, thehouseholdswouldthusadoptaseriesofdifferentlandusealternativesinthefuture.ThepaymentsmadebytheTTHRDParenotintendedtoproduceenvironmentalservices,butarerathertobeseenastraditionalreforestationsubsidiesstimulatingtimbersupply.Furthermore,the intendedbenefitofthereforestationactivitiesisinthiscasetimberincome.Forestenvironmentalservicesarenotthetarget,asalsoreflectedbythefactthattheallocatedlandisclassifiedasproductionforest.

With the support of the TTHRDP, the local authorities have allocated403haofnaturalproductionforesttoagroupof51householdsintwovillages,Son Quang and Thanh Tan. Prior to the allocation, the forest area was, inprinciple,underthemanagementofthecommuneauthorityandthelocalforestinspectorate. However, as reported by the interviewed villagers, the forest isactuallyanopen-accessresource.Sincetheallocatedforestisaproductionforest,there is no protection fee for the group. The future production benefit thatthesehouseholdsexpectistimber.Giventhecontractualterms,thegroupsendsa request to the provincial DARD to get permission to harvest the trees. ThesharingofbenefitsbetweenthevillagecommunityandtheStateisbasedonthePrimeMinisterDecisionNo.178/2001/QD-TTg.


Concerning protection forests, our interviews indicated that the mostimportant forest environmental service is watershed services. It is argued thatthatlossofforestcover,especiallyonthesteeper,upperslopesofthecatchmentsofmajorriversystemsinthearea,islikelytoincreasetheseverityoffloods(e.g.comparedto1999).Theforestsarebelievedtocontributetomaintainingwaterflowsduringthedryseasonandare,therefore,likelytohavearoleinprotectingwatersuppliesfordomesticandagriculturaluses.Improvedprotectionofforestsonthesteepslopesoftheuppercatchmentsisseenbylocalgovernmentofficialsasacost-effectiveapproachtoimprovingfloodanderosioncontrol.Exploitationand degradation of forests has resulted in excessive soil erosion, and it seemslikelythattheresultingsiltationhassignificantlydecreasedthelifeexpectancyofirrigationreservoirs.

In the district of Phong Dien (Thua Thien Hue Province), acacias are the most common tree species used for the establishment of plantations. In this picture, the farmer is holding an Acacia Mangium (Photo by Sven Wunder)

Case studies 33

Figure 4.3. Map of Ha Giang province

4.3. Ha Giang ProvinceHa Giang is located in the northernmost part of Vietnam. Its terrain is verymountainous with altitudes ranging from 200 to 2400m.a.s.l. About 38%oftheprovincehasaslopegradientof35°ormore.Thetotal landareaoftheprovinceis7884km2andtotalpopulationis632500peopleof22ethnicgroups.Administratively, Ha Giang is divided into 10 districts, including Ha Giangtown. Based on geographical, climate and land characteristics, the province isdividedintothreedistinctivezones:Zone 1isthenorthernhighrockymountainareaconsistingoffourdistricts,DongVan,MeoVac,QuanBaandYenMinh;Zone 2is thewesternhighhillyareaconsistingoftwodistricts,HoangSuPhiandXinMan—naturaltopographyismixedlowlandandhighlyslopedareas;Zone 3 isthelowmountainousareaconsistingofthreedistricts(BacQuang,ViXuyen,BacMe)andHaGiangTown.

InHaGiang,weinterviewedkeyofficialsoftheprovincialDepartmentofNaturalResourcesandEnvironment(DONRE)andtheDARD.About80%offorestlandintheprovincehasbeenallocatedwithlandusecertificatestodifferentorganisationsandindividuals.Atthetimeof thestudy,42%oftheprovince’sareawas coveredwith forest.During the last several years, the average annualreforestation was 16000ha, including 5500ha of newly planted forest and10000haofassistednaturalregeneration.

In the province, there are three SFEs, four provincial forest enterprises(formally under DARD), 11 management boards of protection forest and 4management boards of special use forest. The Enterprises have been involved


mainly in reforestation activities through Programmes 327 and 661. In theseProgrammes,theEnterpriseshavehadshort-termcontractswithhouseholdsonforestplantationandprotection.TheseEnterprisesactasimplementingunitsofforestprojects.Programme661hassetatargettoincreasetheforestcoverintheprovinceto50%bytheendof2010.Thismeansthatthelandunderforestshouldbeincreasedfromthepresent215300hato394200ha,i.e.atotalincreaseof178900haandareforestationof16300haperyear.

Itisreportedthattheforestlandallocationandtheforestprotectioncontractshavecontributedtobettermanagementoftheforestresources.Theconversionofforesttoagriculturalusesthroughslashandburnhasbeenstopped.Withclearlydefined landuse rights, itinerant farminghasbecome impossible. Inaddition,the local authoritieshavehelped farmers to reclaimwasteland toestablish riceterraces to ensure food security. Improved crop yields and food security havereducedpressureontheforest.However,illegalloggingremainsaproblem.Forestinspectionstationsintheprovincereportaremarkablenumberofcasesofillegalloggingandtimbertransportanditsseizure.

Governmentforestryofficialsreportedthattherehabilitationandprotectionof forests intheprovince ismainly intendedtoprotectwatershedsfeedingtheThac Ba and Tuyen Quang hydroelectric dams. Biodiversity conservation ismainlyassociatedwithspecialuseforests(protectedareasandnaturalreserves).ForcommunesinthedistrictsofQuanBa,DongVan,YenMinhandMeoVac,theprotectionofforestismainlyjustifiedbytheconservationofdrinkingwatersourcesforlocalusers.

Vi Xuyen DistrictAtthesuggestionoftheofficialsofDONREandDARDinHaGiang,wevisitedthedistrictofViXuyen(inZone 3)andinterviewedthemanageroftheForestManagementBoardofPhongQuang–ViXuyenNaturalReserve.WealsovisitedthecommuneofMinhTanandinterviewedthechairofthePeople’sCommitteeof thecommuneandseveralhouseholds involved in forestprotectioncontractwiththeManagementBoardofthenaturereserve.

The Management Board of the Phong Quang–Vi Xuyen Nature Reservehadcurrentlycontractedmorethan4000haofprotectionforesttovillagesandindividualhouseholds.Theprotectionforestcontractedtoindividualhouseholdsispoorandclosetothevillages;theforestcontractedtovillagesisofbetterqualityand more remote. Depending on the local context, forest areas contracted todifferentvillages ranged from500 to1500ha.Before2002,contractdurationwas3years;nowitis5years.Tocertifythevillages’andhouseholds’compliancewiththecontractualterms,theManagementBoardstaffcheckthequalityofthecontractedforestmonthly.ThemanagerofthePhongQuang–ViXuyenNaturalReserve reported that about 85% of the protection contracts were within thecontractualterms.Therewerealsocasesofnon-compliance.

Case studies 35

In the commune of Minh Tan (Vi Xuyen District, Ha Giang Province), the payments for protection forests are pooled into a communal fund to undertake investments for collective use, like the cement path depicted in the picture (Photo by Enrique Ibarra)

ThecommuneofMinhTanhasatotalareaof11275ha,ofwhich7140haisforest.Thecommuneisorganisedinto13villages,withatotalpopulationof4906 inhabitants in 876 households, mainly from the H’Mong ethnic group.ItsvillagesandindividualhouseholdshaveforestprotectioncontractswiththeManagementBoardof thePhongQuang–ViXuyenNaturalReserve. Intotal,morethan540householdsinthecommunewereinvolvedinforestprotection.Thehouseholdsinthevillagestaketurnstopatrolthecontractedforestingroupsof4–5people.TheannualprotectionpaymentisVND50000perhectare,madeintwoinstalments.Thepaymenttothevillagecontributestoavillagefundtocovercommunalactivitiesorinvestments.Inadditiontothepayments,villagersareallowedtocollectNTFPsandtoharvesttimberfordomesticconstruction.

VillagersinterviewedatMinhTansaidthattheforestareaisincreasing,andbarelandisbeingre-greened.Itwasobservedthatsomewildlifewascomingback.However,theforestismuchpoorerthan30–40yearsago.Plantsandanimalsarefewerthantheyusedtobe.Someforestanimalsthatwereabundantinthe1980sarehardlyfoundnowadays.


In the district of Quan Ba (Ha Giang Province) protection forests are concentrated in areas unsuitable to agriculture. Sometimes, due to the closeness of the protection forest to the agrucultural land, farmers are able to monitor the forest while attending their agricultural chores (Photo by Enrique Ibarra)

Quan Ba DistrictInQuanBa(Zone 1),we interviewedthemanagerof theForestManagementBoard of the Bat Dai Son Nature Reserve, who is also chair of the People’sCommittee of the commune of Thanh Van, whose villages and villagers haveprotectioncontractswiththeManagementBoardofthenaturereserve.Wealsovisitedandinterviewedseveralhouseholdsinvolvedinforestprotection.

The Bat Dai Son Nature Reserve has an area of about 10000ha and islocatedamongstthecommunesofThanhVan,BatDaiSonandCanTy.Thenaturereserveisabove1000m.a.s.l.;itshighestpointis1645m.a.s.l.Itissituatedinthewatershedof theGamRiver,and it supportsahighdiversityofconiferspecies, including Pseudotsuga brevifolia, Calocedrus macrolepis, Taxus chinensis andPodocarpus brevifolius (VuVanCan et al. 1999a). In addition, in1999 anewspeciesofconifer,Thuja quanbaensis,wasdiscoveredthere—thisspeciesisthoughttobeendemictothearea(VuVanCanet al. 1999b).

TheManagementBoardof theBatDaiSonNatureReserve signed forestprotectioncontractswithvillagesandhouseholdsinfourcommunes.Thetotalforest area under the contracts was estimated at around 9000ha, comprising6600haunderprotectioncontractand2400haunderassistednaturalregeneration.Thecontractedvillagesestablishedgroups(4–8peoplepergroup)topatrolthecontracted forest.The annual protectionpayment isVND50000perhectare(USD3.3).Theannualpaymentismadeintwoequalinstalments,thefirstafter6monthsandthesecondattheendoftheyear.Inaddition,thenaturereserve’sManagementBoardalsosignedaforestprotectioncontractwithaborderarmy

Case studies 3�

unitforanareaof299haatthehigherpaymentrateofVND85000perhectareperyear(USD5.5).Thepaymentwassaidtobehigherbecauseofthecomplicatedtopographyoftheborderarea,whichmakespatrollingmoredifficult.

In2003, themonitoring teamof theManagementBoard identified eighthouseholdsviolatingthecontract,intermsofbeingcaughtintheactofloggingtimbertosell.Theunderlyingmotivewasreportedtobefoodshortagesstemmingfrom a lack of suitable agricultural land. This raises some doubts about theeffectivenessoftheforestprotectioncontractualarrangements.

In1994,thelocalauthorityallocated376haofforest(withRedBook,i.e.landusecertificate)tohouseholdsintheThanhVancommune.Theallocationwasonaverage0.2–0.5haperhousehold.Atthattime,theforestwasclassifiedasproductionforest.In2001,theallocatedforestlandwasre-classifiedasprotectionand special use forest that should remain under forest cover without logging.Since then, an annual payment of VND40000 per hectare (USD2.6) hasbeenpaid for forestprotection. In thiscase,aquasi-PEScaseemergesbecausefarmerswithmoresubstantiallandrights(asimpliedbytheRedBook)arepaidtoundertake—andmaintain—adifferentlandusethantheonetheyoriginallyplanned.Still,thehouseholds’land-usedecisionaftertheprotectiondeclarationmustbeinaccordancewithGovernmentregulationswithrespecttoprotectionforest, even though theyhave landuse certificate. In this regard, thepropertyrightsgiventofarmersinthefirstplaceremainedincomplete.

SixvillagesofThanhVancommunehaveforestprotectioncontractswiththeManagementBoardoftheBatDaiSonNatureReserveforatotalforestareaof1115ha.Theforestcontractedtothevillagesisnaturalforestofgoodquality.ThevillageofLungLangisoneofthevillageswithforestprotectioncontracts.Thevillageheadreportedthatfourgroups,eachofthreepeople,hadbeenestablishedtopatrolthecontractedforest.Eachgroupwasassignedtoprotectacertainarea.Itshouldbenotedthatnotonlythefourpatrolteams,butallvillagerscarryoutforestprotection.Eachvillagerhastowatchovertheforestwheneverpossible,forexamplewhiledoingagriculturalactivitiesintheareasneartothecontractedforest.Theforestwassaidtobewellprotected,andapparentlyillegalloggingnolongeroccurs.

4.4. Yen Bai ProvinceYenBai is located intheuplandregionof theRedRiverbasin,approximately200kmnorth-westofHanoiandisoneofthepoorestprovincesinthenorthernmountainousareaofVietnam.Itisadministrativelydividedintosevendistricts.The province has a total area of 6882.9km2, of which 80% is classified asforestland.Atthetimeofthestudy,45%oftheprovincewascoveredbyforest.The province is inhabited by several ethnic minorities including the H’mong,Dao,Tay,Thai,Nung,SanChay,PhuLaandKinh.


In the1960s,about60%of theprovincewas forested.During the1970sand 1980s, the forest cover of the province declined; about half of the forestdisappearedduringthatperiod,to30%bytheearly1990s.Programme327hashaltedthedownwardtrendandforestarea isnowincreasing.Programme661hassetatargettoincreaseforestcoverintheprovincebackto60%bytheendof2010.Thismeansthatareforestationaverageofabout12000hectaresperyearhastobeachieved.TherearenineSFEsintheprovince.Likeinotherpartsofthecountry,theseEnterprisesact,amongotherthings,asimplementingunitsofforestprojectsundertheProgrammes327and661.WithintheseProgrammes,theEnterpriseshavehadshort-termcontractswithhouseholdsforforestplantationandprotection.Thevicedirector of theprovince’s forest developmentbranchreportedthattheforestprotectionpaymentisVND30000perhectareperyear(USD1.9) insteadof theVND50000perhectareper year (USD3.3) foundelsewhere.Heexplainedthatthepaymenthadbeenreducedinordertoenablemoreforesttobeenrolledunderprotectioncontracts,aswellastoprolongthecontractperiodbeyondtheusual5years.ThisreflectsacertainflexibilitybuiltintothelocalimplementationofProgramme661.

We visited the Tan Huong commune (Yen Binh district) and the MinhQuan commune (Tran Yen district). Interviews with representatives of theCommunePeople’sCommittees andhouseholds involved in reforestationandforestprotectionwerealsoundertaken.Mosthouseholdsinthetwocommunesengagedinreforestationforeitherprotectionorproductionpurposes.

Figure 4.4. Map of Yen Bai province

Case studies 3�

The protection of hydroelectrical dams from sedimentation caused by upland agriculture on degraded lands is the main reason stated by government officials for large-scale hillside reforestation efforts. The Thac Ba dam, Yen Bai Province, is one of the alleged beneficiaries (Photo by Enrique Ibarra)

Yen Binh DistrictHouseholdsinTanHuongcommunesignedreforestationandforestprotectioncontractswithYenBinh’sSFE.Interviewedfarmersreportedthatthepaymentfor reforestation is VND2.4miliion per hectare (USD155), which includesVND1.8million(USD116)fortreeplantingandVND600000(USD39)fortending the forest for thefirst3years afterplanting.Hence, the income fromreforestationcontractsisquitesignificanttohouseholds.Householdsalsoreceivefinancial and technical support for reforestation for production purposes. ThesupportcouldbefromProgramme327orfromspecificprojects.Forprotectioncontracts,thepaymentthatcontractedhouseholdsreceiveisonlyVND25000perhectareperyear(USD1.6),ratherthantheVND30000(USD1.9)reportedbythevicedirectoroftheprovince’sforestdevelopmentbranch.Theexplanationof the reduction by VND5000 (USD0.33) is an administrative cover costassociatedwithforestplotdelineation.

The number of households with forest protection contracts depends ontheforestareathatneedstobeprotected.InthecaseofthecommuneofTanHuong,only100households(lessthan15%oftotalnumberofhouseholdsinthecommune)hadforestprotectioncontracts.Contractedforestperhousehold


rangedfrom1to7ha,withanaverageof2.5ha.Onaverage,theincomefromforestprotectioncontractsistrivial,ascomparedwithotherhouseholdincome.

Tran Yen DistrictOurfindingsfromMinhQuancommune(TranYendistrict)aresimilartoourfindings from Tan Huong commune (Yen Binh district, discussed above). Anumberofhouseholdsinthecommunehadforestprotectioncontracts.AsinYenBinh,theprotectionpaymentisVND25000perhectareperyear(USD1.6).The households in the commune of Minh Quan also received support fromProgramme327 andother projects for tree planting for productionpurposes.Forexample,in1995and1996about90householdsinthecommunewerepaidVND1millionperhectare(USD64.5)toplantcinnamon.OnefarmerinMinhQuanwascontractedtoprotect40haofforestin1996.HereceivedprotectionpaymentsofVND30000perhectareperyear(USD1.9),butonlyfortheyear1997.Sincethenhehasnotreceivedanyfurtherpayments,anddoesnotknowwhythepaymenthasstopped,buthecontinuesprotectingtheforestevenwithoutpayment.

In Yen Bai Province, reforestation contracts can be highly remunerative for rural hoseholds, due to a combination of state subsidies and rewarding timber prices. In the back of the picture, a small tree plantation has been created (Photo by Enrique Ibarra)

41

5. Comparative assessment

5.1. Vietnamese Experiences under the PES Framework

5.1.1. Service Buyers and ProvidersTheanswertothequestion“whoaretheenvironmentalservicebuyersandsellers?”isassociatedwithwhohascontrolovertheresourcesgeneratingtheservices.Whatproductionfactorscreateenvironmentalservices,andshouldthusbecompensatedfortheirprovision?Laboureffortsandcapitalinvestmentscancertainlycontributetotheproductionofenvironmental services,but inmostcasesenvironmental-serviceprovisionis tiedto landuse:whoevercontrolsthe landalsohasa largedegreeofpowerovertheprovisionoftheenvironmentalservice.InVietnam,landisnotprivatelyowned.Byconstitution,alllands(includingforestlands)belongtotheGovernment.Althoughforestandforestlandcanbecontractedorallocatedtofarmerhouseholdsandvillagecommunitiesforaperiodof50years,theoveralluseofthelandshavebeenpredeterminedbytheGovernment.Especiallyinthecaseofprotectiveandspecialuseforests,householdsandvillagescannotmaketheirownlandusedecisions.Inthiscontext,theprovisionofenvironmentalservicesisdictatedbytheGovernment.ContractedhouseholdsandvillagecommunitiesarepaidtomanageorguardtheState’sforestinaprescribedwaytogeneratemoreservicestosociety.

Though farmers or communities are provided with long-term ownership(RedBook)ortemporaryownership(contract)ofthenaturalresources,forestandforestland,theirrightstomakedecisionsonforestmanagement,protectionandutilisationinconformitywiththeirownbenefitsarelimited.ThecommunitiesareactuallyprotectingtheGovernment’sforests,ratherthantheirownforests.

Despite the revised Land Law (1998), forestland allocation has beenimplemented slowly and many farmers have still not received their land usecertificates. In many areas, the forestland is either under the responsibility of


timbercompaniesorthelocalauthorities.Regardinglandusecertificates,ofthoseinvolvedinforestryorloggingactivities,62%haveaRedBookand17%haveaGreenBook.Oftheone-fifthoffarmerswhoholdneither,halfofthemhaveaskedforoneandhavebeenwaitingforaboutayear,theotherhalfdonotthinktheyneedone(MARD2003).TheprocessofforestlandallocationisaprerequisitefortheimplementationofPESorPES-likeschemes,butprogressvariesconsiderablyacrossprovinces.5

Itshouldbenotedthatsecurelandtenureisanecessarybutnotasufficientcondition for more efficient and sustainable use of natural resources. UplandfarmersinBacCanprovincesadoptsoilconservationpracticesmainlytoobtainlong-termlandusecertificatesunderthenewLandLaw.Incontrast, intensivelanduseundermonocroppingwithoutsoilconservationpracticesisfoundinSonLaprovince,wherelanduserightsarerelativelysecureduetorecentlandreforms.Improvedlandtenuresecuritydoesnotautomaticallyleadtohigherlong-terminvestmentortoamoresustainablelanduse(Neefet al. 2000).Inmostcases,forestscontractedorallocatedforprotection(criticalandlesscritical)havelowormediumregenerationcapacity.Landallocatedtohouseholdstendstobetreelesslandorbushylandwithfewtrees.Landallocatedtocommunities,however, isnormallyeitherforestlandorlandthatcanberehabilitated.

Thepaymentlevelisdeterminedbygovernmentalorganisationsatdifferentlevels.Forforestprotection,paymentratesofVND50000perhectareperyear(USD3.3)orlowerwerefound.Therateswereperceivedbymostrecipientsastoolowtohavesignificantlivelihoodimpacts—andthusalsotoolowtotriggerchanges in resource-usebehaviour.Theexception fromthispatternwerecaseswherelargerforestareaswerebeingallocatedtohouseholdswhichbecamemorespecialisedinforestprotection,asintheCuLaoChamandALuoicases.Itislikelythatthesehigherrateswereestimatedonthebasisoftheopportunitycostoflabourtopatroltheforest.

Forreforestationandtendingthenewlyplantedforest for thefirst3yearsincriticalandverycriticalwatersheds, thepayment isup toVND2.5millionper hectare (USD160). In the sites we visited, these incentives seemed to beworkingwell,forseveralreasons.Sincetheyalsoprovideasignificantlivelihoodcontribution,theytendtomakearealdifferenceforhouseholdwelfareandarethusbeing taken intoaccount.Theyarecoupledwith technicalassistance thatdoesseemtogetouttoruralhouseholds.However,reforestationandafforestation

5Byearly2001,LaoCaiprovincehadallocated49%of its total forest land (267505ha)andissuedlandusecertificatestohouseholdsandorganisations.HaGianghadallocated32%ofitstotalforestland(165345ha)andissuedlandusecertificatestodifferenttypesofowner.Bythattime,TuyenQuangprovincehadonlycarriedoutforestlandallocationwithRedBookonapilotscale;only1%oftheprovince’stotalforestland(4823ha)hadbeenallocated.Comparedwiththeotherprovinces,PhuThowasquiteadvanced,as54%oftheprovince’sforestland(108787ha)hadbeenallocated(GilliussonandNatura2001).

Comparative assessment 43

areinallcasesdoneonStateland;hence,oneshouldinterpretthepaymentsasacaseofforestryemploymentratherthanpaymentsforenvironmentalservices.Theindividualwhoplantsandtendsthetreeshasnoinfluenceoverthechoiceoflanduse:heorsheisrewardedfortheopportunitycostsoflabour,notofland.Also, thecontracted farmersandvillagecommunities,clearlyperceive that thepaymentsaremadetocompensatefortheirlabourdevotedtoforestprotectionandreforestation.

IntheVietnamesecontext,underStateownershipoflands,theGovernmentis thus themost importantproviderof environmental services. SFEs,nationalparks and management boards of special use forest and protection forests arekeyplayersundertakingtheprovisionofenvironmentalservicesonbehalfoftheGovernment.Giventheincipientpolicytrendtowardssocialforestry,ruralvillagesandruralhouseholdsarebeginningtoplayamoreimportantroleinsecuringtheprovisionofenvironmentalservicestosocietyonState-ownedlands.

If the Government is indeed the main actor providing environmentalservices,whoarethebuyers?Inprinciple,thebuyersshouldbethosewhobenefitfromtheenvironmentalservices.Thiscoversawiderangeofbeneficiaries—bothdomesticandinternational.IntheVietnamesecontext,givenProgrammes327and661,thebuyershavebeenthetaxpayers(andexternaldonorswhohaveco-

For many farmers in Yen Bai Province (like this one in the district of Tran Yen), forest protection contributes little to household income, compared to production forestry and agriculture. In this case, land allocated for agricultural production was being prepared to plant cassava (Photo by Sven Wunder)


financedpaymentprogrammes),notnecessarilythosewhobenefitmostfromtheenvironmentalservices.Ontheservicedemandside,theVietnameseversionofPESisthusnotconsistentlybuiltona‘beneficiarypays’principle.

5.1.2. ConditionalityGiven thedefinitiondiscussedearlier,PESare tobemade if, andonly if, theservice provider secures the provision of that service continuously over time(conditionality). To what extent have the protection payments in the twoprogrammesdescribedabovebeenconditional?Letuslookatthisquestionforthethreetypesofcontractsfoundinourfieldsurvey:individual,groupandvillagecontracts.

In an individual or household contract, one household or farmer is heldliableforprotectionof1–30haofforest—onaverageabout5hapercontract.Wefoundthatinmostcases,fromthefarmers’viewpoint,conditionalityismuchlessassociatedwiththeprotectionpaymentsthanwithgovernmentalregulationsprescribinglanduseconditions.Thisfindingissupportedbyseveralobservations.Sanctionsduetocontractinfractions,suchasnon-payment,paymentreductionorcancellationofthecontracts,wereextremelyrareinthehistoryofalmostalltheschemeswevisited—evenwhentheirhadbeenclearcasesofnon-compliance.Temporalcomparisonsreinforcedthisimpression:paymentsforforestprotectionaremadeannuallyovera5-yearperiod,butanumberoffarmersweinterviewedhadconductedforestprotectionfor5yearsalready,inwhichcasetheywerenolongerreceivingprotectionpayments.Yet,theycontinuedprotectingtheforest,althoughperhaps somewhatmorepassively than theyhaddonebefore.Whenaskedwhytheydidsowithoutpayments,theiranswerwasthatforestprotectionwasmandatory.Whenquestionedwhetherthatwasnotunfairwithoutpayments,somehouseholdsrespondedtheywouldstillgainfromaccesstosomeNTFPsandtimberbenefits,asstipulatedbythebenefitsharingpolicy.

Thecomparativeroleofpaymentsandcommand-and-controlmeasurescanbe suitably illustrated by a story from the field, using hypothetical questions.WeinterviewedafarmerinaH’MongvillageneartheChineseborder(ThanhVan commune,QuanBadistrict,HaGiangprovince).Hehad1haof forestenrolledinaprotectioncontract,beingpaidVND40000peryear(USD2.6),whichcorrespondedtolessthan1%ofhishousehold’smonetaryspending.Thelandhadoriginallybeenallocatedtothehouseholdforproductionpurposes,buttheStatehadlaterdeclareditaprotectedwatershedthatshouldremainunderforestcoverwithoutlogging(acaseof‘quasiPESbychance’).Ourquestion:If,hypotheticallyspeaking,therewasnoforestprotectioncontract,wouldhemanagethelanddifferently?Hisanswer:Hewoulddevotethetimenowspentonforestmonitoringtoagriculture.Question:Wouldhecutthetimber if therewasnolongeranypaymentforprotection?Answer:NotaslongastheGovernmentlawsstillprohibitedtimbercutting—hewouldjustleavetheforestalone.Question:


Butwhatiftherewasnotonlynocontractbutalsonolawprohibitingtimberextraction?Answer:Thenhewouldharvest the largest trees,but still keep theothertreesonthelandtoavoidthedegradationofhisagriculturalland,whichtheforestmanagementboardhadsaidwouldhappenifhedeforestedthehillside.

Thisdialoguedemonstratestheoverwhelmingimportanceofthecommand-and-controlregimeinland-usedecisionmaking.ItalsoillustratesthatthefarmerclearlyseesthePES-likepaymentasarewardforhislabourefforts,whichhewoulddirectelsewhereiftherewasnopayment.Thecontingencyofthearrangementisalso relatedmore tohisefforts toprotect the forestagainstpotential threatsfrom outsiders, not so much compensating his own opportunity costs in theexploitationofthelandforprivatebenefits.Thelatterwouldbeconditionedbythepre-existingrules,ratherthanthepayment.

We found that the incentive structure for household land-use decisionmaking is mostly driven by command-and-control measures, much less so byeconomic incentives. In this regard, landusedecisionsarepartof a top-downdecision-makingsystem.Paymentsareseldomtrulyconditional,inthewaythatcompliancewouldbemonitoredandpaymentsstoppedordiminishedinthecaseofnon-compliance.Mostindividualcontractsthusalsohadprobablyverylittleadditionaleffect,inthesensethatlittleextraoftheenvironmentalserviceswasproducedthanwouldhavebeenthecaseiftherewerenoindividualcontracts.

Inagroupcontract,severalhouseholdsjointlysignaforestprotectioncontract.The number of people and the forest area per contracted group varied muchacrosslocalities,fromfivehouseholdsand250hapergroupinCuLaoChamto12individualsandabout1000hapergroupinALuoi.Groupcontractsseemedtohaveslightlymoreconditionality,andwerealsosomewhatmoreeffectiveintermsofforestprotection.Welearnedfromthefieldsurveythattheperformanceofcontractedgroupswasoftenmoresatisfactory.Oursampleofobservationsisextremelysmall,butifthistrendwasreallymorewidespread,whatcouldbetheexplanation?

Thereareseveralpossibilitieshere.Firstandforemost,thegroupmodelwascombined with larger forest area per household than the individual contracts,thustheincomefromaforestprotectioncontractisalsomoresignificant,sothehouseholdswithinthegroupareeconomicallymoremotivated.Second,onlythosewhohaveappropriateskillsandhavethegovernmentofficials’trustareallocatedthemorespecialisedgroupcontractsinthefirstplace.Third,itisalsolikelythatthegroupdynamicsmake‘cheating’moredifficultthanforindividuals,especiallyifcommand-and-controlsanctionsexistandatleastoneofthehouseholdsinthegroupismarkedlyloyaltothepublicforestadministrationentities.InCuLaoCham,forinstance,themovefromindividualtoorganisedcollectivemonitoringby thegroupwasclearlyassociatedwithan improvedprotectionperformance,althoughthecontractsthemselvesremainedindividual.


Theconditionalityofvillagecommunitycontractsisclearlytheweakestofthethreecontracttypesunderanalysis.Wefoundnohistoricalexampleswhereentirevillageshadhadtheircontractcancelledorpaymentsdeniedasaresultofpoorcompliancewiththeprotectionrequirements.Thereisoftenaconsiderable‘marginoferror’(e.g.degradationofupto15%offorestarea)thattheauthoritieswill tolerate, yet these administrative rules are not explicitly communicatedto households—and often they appear to be unclear, and subject to variableadministrativeinterpretation.Thereareseveralexplanationsforthis.First,itmaybehardorimpossibletocancelthecontractwithonevillageandgiveitinsteadtoanother(e.g.theneighbouringvillage),becauseusuallythecontractedvillagewaschosenbecauseofitsstrategiclocationoritsparticularlyarticulatedclaimvis-à-visaspecificforest—thereislittlesubstitutability.Second,evenwhenanotherequallyqualifiedvillagecanbe identified foraprotectioncontract, thecancellationofthecontractwiththeoriginalvillagecouldcreateconflictbetweenthevillages.Moreover,inthecasesinvolvingminoritygroups,contractcancellationorreducedpaymentsduetoviolationisnotimplementedbecauseofpoliticalsensitivity.

5.1.3. Income EffectFor reforestation activities on protected lands, subsidies have typically beenVND1.5million(USD95)perhectare.Dependingontheareaundercontract,thesepaymentscanconstituteanimportantlivelihoodcontribution,especiallyinthepoorerregions.Yet,inthevastmajorityofcases,theindividualwhoplantsandtendsthetreeshasnoinfluenceonlanduse,i.e.heorsheisrewardedfortheopportunitycostsoflabour,notofland.Notethattreeplantingfortimberproductionalsooccurs‘spontaneously’andwithoutsubsidiesonnon-protectedlands,whicharemorelikelytobeallocatedtohouseholds.

Thesecondtypeofpayments—theforestprotectioncontracts—arethoughtofaspaymentsformonitoringbyhouseholdsthatpatroltheseforestsonaregular(e.g.dailyorweekly)basis and report irregularities to the forest authoritiesortheSFEs.Onecanthinkofthemasaperformance-basedforest-rangersalaries.In most cases of individual and village community contracts, the livelihoodimportanceofprotectionpaymentsisminimal:accordingtoourroughassessment,VND50000(USD3.3)perhectareperyeartypicallyrepresentsaround2%ofahousehold’scashincomeandmaybe1%oftotalincome(i.e.takingintoaccountsubsistenceincome).Inaddition,therecanbeminorgainsfromaccesstosharedbenefitsfromNTFPs,suchasfirewood.Whyarelivelihoodbenefitssorestricted?First,thisresultsfromthelowpaymentrate.Second,thecontract’stimehorizonisnormallyonly5years;afterthat,thepreviouslydegradedprotectionforestissupposedtohaveincreaseditsquality,sothatotherforestareascanbetargeted.Inonecase(YenBaiProvince),forestprotectionpaymentswerebeingprolongedfrom5to10years,butwithafixedbudget,theratepaidwasthencorrespondinglylower (VND30000 per hectare per year). Third, the area contracted to each

Comparative assessment 4�

household(orthevillageaverage)isnormallylimitedto1–5ha—insomecasesjustfractionsofonehectare.

On the other hand, the households’ income effect of group protectioncontractswas significant in twocaseswevisited (CuLaoCham,QuangNamprovinceandtheBoRiverwatershed,ALuoidistrict,ThuaThienHueprovince).Incomefromforestprotectioncontractsheremadeupmorethanone-thirdofthecontractedhouseholds’income.InthecaseofCuLaoCham,since2000,theallocationoflargerareasofprotectionforests(50haperhousehold)hadbeenmadetojustadozenhouseholds,becauseofthelowefficiencyofthepreviousmulti-household,fragmentedscheme.Thenewmodalityseemstoachievebetterforestprotectionandmoresignificantlivelihoodbenefits.Obviously,thedownsideofthisspecialisationisthatpaymentsarealsolessequitablethanbefore.However,alsointhiscase,thehouseholdswerebeingremuneratedforlabourand‘effort’,notfortheopportunitycostsofforestlands,sincetheyhadnoauthorityover,andverylimitedinfluenceon,theuseofeitherlandortrees.

WhoactuallylosesoutfromeffectiveforestprotectioninCuLaoChamandelsewhere, and are their losses somehowbeing compensated?Theprime losersaretypicallyloggers,whichcanbeeitherexternalorlocallybasedextractors.Ifshifting cultivation or other agricultural activity were being undertaken priorto land protection, then farmers would carry opportunity costs. In principle,huntingcanalsobeprohibitedbutseemsinmostcasestobetolerated—whichisunderstandableiftheoverallpurposeiswatershedprotection.

Arethelocalcommunitiesbetterorworseofffromforestprotection?Obviouslythisdependsonthecircumstances. InthecaseofCuLaoCham,for instance,thereclearlyseemedtobeuncompensatednetlossesfromforestprotectionatthevillagelevel,althoughitwasperceivedthatsomeadditionalpublicinfrastructuralinvestmentsontheislandhadbeenmadebytheStateinrecentyears,possiblyinparttocompensateresidents.Thereactionoflocaleconomicagentstolostforestincomewas,inthiscase,toshiftextractionpressuresfromtheforesttothesea—fisherieshadexpandedsimultaneouslywiththedeclineofforest-basedactivities.

Besidespayments forplantingprotection forestsand for theprotectionofstanding forests, there is a third category.These are caseswhere theStatehadchanged land-useclassification, i.e.where landthathadalreadybeenallocatedto households for production purposes was later changed by a protectiondeclaration.WewitnessedthissituationinQuanBadistrict,HaGiangprovince,andinYenBinhdistrict,YenBaiprovince.Inthesecases,itwasfeltnecessarytoofferhouseholdsmorefavourableconditionsinmakingtheex post situationmorepalatable,sincetheyalreadyhadarighttothelandandwouldlikelyforgorevenuesbyprotecting it. Inakindof sharecroppingarrangement, some treeswereplantedaspropertyoftheState,whileotherswouldbelongtothehouseholdandcouldbeharvestedforprivatebenefits,alongwithreforestationsubsidiesfromProgramme661.Harvestingstillhadtobeauthorisedbythelocalcommuneand


bytheforestmanagementboard,thatalsotechnicallyassiststhedifferentstagesofforestryproduction.Moreover,thelandwouldhavetobereforestedaftertreecutting.

TheselattertypesofarrangementsareprobablytheonesthatcomeclosesttotheprincipleofPESinVietnam.Whilenormallyareascriticalforenvironmental-serviceprovisionarenot allocated tohouseholds, these areashadalreadybeenallocated ‘byaccident’.Thismeantthat thecompensationgiventohouseholdsto set theseareasasidealsoneededtobe somewhatmoregenerous,given thatthey were intended for production purposes, typically agriculture. One couldsaythattheseexamplesconstitutecasesof‘quasi-PESbychance’—inthesensethat,withoutthelandreclassification,thesamebenefitpackagewouldneverhavebeenofferedtohouseholds.Yet,eveninthiscase,landuseremainslegallyfixed;householdsarenotfreetochoosenot to protectthelandornottokeepitunderforestcover.

5.2. Service-specific Remarks

5.2.1. Watershed Protection Watershed protection is clearly the predominant concern among forestenvironmentalservicesinVietnam.In2002,some6millionhectares(morethan95%ofthetotalprotectionforestarea)correspondedtouplandareasdescribedaswatershedprotectionforests(FSIVandIIED2002:p.4).ThisillustratesthatprevailingwatershedprotectionisamongtheenvironmentalservicesthatforestsareexpectedtoproduceinVietnam.Butwhatmorespecifichydrologicalservicesarethesenaturalorplantedforestssupposedtoproduce?

Our interviews revealed a widespread belief that the protection orregenerationofany type offorestcoverwasthoughttobeconducivetoany type of watershed protection. Increased water availability, reduction of soil erosionandsedimentation,controlof landslidesandfloods,andimprovementof localmicroclimatewerementionedmostfrequentlyasmotivesforspecificprotectionor establishment of (planted or regenerated) forests. The provision of cleandrinking water—the scientifically most solidly grounded of the forest–waterbenefitlinkages—wasslightlylessemphasised.Thisfindingmayormaynotbebiasedbyourlimitedsampleofcases.

Amongthevariouswatershedfunctions,hydroelectricpowerplantsclearlyhavetoppriority(atleastfortheGovernmentfromaneconomicpointofview).The Hoa Binh dam, about 80km from Hanoi, fed by the Song Da River,producesalmosthalfofthecountry’selectricity.Theaimofconserving,plantingandregeneratingforestsintheupperwatershedsofstreamsfeedinghydropowerdamsistoreduceerosionandreservoirsedimentationcompared,inparticular,tohillsidecroppingasthepredominentland-usealternative.Mucheffortisaimedat

Comparative assessment 4�

replacingformercultivationareaswithforestplantationsandprotectedregrowth.TheHoaBinhdamhasbeenpayingtwoprovincesinthewatershedoftheSongDaRiverforsecuringforestprotectionandreforestationunderProgramme327.Variousotherdamsarebeingplannedorbuilt,justifyinganincreasedemphasisonprotectionforestsinVietnam.

HowlikelyisitthatPEShaveachievedthedesiredlandusechange?AlthoughwedidnotvisittheHoaBinharea,ourinterviewsofkeystakeholdersindicatedthatthesepaymentsper seprobablyhadbeenlittlecost-effectiveinachievingthetargeted landuse changes.The receivingprovinces used a large share of themfor general infrastructural and development projects, rather than allocatingpaymentsdirectly to achieve landuse targets.Elsewhere, the impactof forest-protectionpaymentsunderProgrammes327and661dependedmuchon theorganisationandmodalityoftheprotectiongroups.Yet,itseemsclearthatmuchof the impressive reforestation thathasbeenachieved is tobeattributedmoreto traditional management and governance tools than to the efficient use ofinnovativeeconomicincentives.

Nevertheless,anothercorequestionistowhatextentthetargetedlandusechanges(reforestation,afforestation,forestregeneration,forestprotection),oncetheyhavebeenachieved,actuallyliveuptothehighexpectationsintermsofalltheenvironmentalservicestheyaresupposedtoproduce.AsindicatedinSection2,anumberof‘myths’regardingthegeneralisedhydrologicalbenefitsofforestsexist. In particular regarding the assumed hydrological benefits of upstreamreforestationforprotectinghydroelectricdamsfromsiltation,furtherresearchisneededtodetermineiforwhenthisistheoptimalland-usestrategy;resultsfromelsewhereseemto indicateotherwise.For instance,a frequentlycited in-depthstudyfromaCentralAmericanwatershedshowedthatwell-managedpasturecanbealmostequallyeffectiveasforestsincontrollingerosion,consumeslesswaterthantreecover,andprovideshigherincomestolandusers(Aylwardet al.1999).Intermsofreducingfloodrisks,themassiveVietnamesereforestationeffortsareunlikelytohaveanymitigatingimpactonlarge-scalecatastrophicfloodevents,buttheymayreducetheseverityofmorelocalisedfloodsinsmallerwatersheds(ChomitzandKumari1998;FAOandCIFOR2005).

Moregenerally, as summarised inFSIVand IIED (2002), the in-countryevidence on the alleged watershed benefits from forests is either contrary tocommonbelief (e.g. the ‘forests increase runoff’myth), indeterminate (‘forestsincreasedry-seasonflow’)or,inthecaseofthe‘forestsreduceerosion’and‘forestsreduceflooding’beliefs,theenvironmentalserviceismuchmoredependentongeneral vegetation cover and its management than on forest cover itself. Thisindicates that massive efforts of ‘reforestation for watershed protection’ mayeitherbeslightlymisguided,orbemoreofadiscoursejustifyinghighertimberproduction on protected lands. Other well-managed vegetation types couldprobablyoftenachievesimilarresultsintermsofserviceprovision.


5.2.2. BiodiversityBiodiversity protection outside protected areas (‘special use forests’) seemsbasicallyofnoconcern topolicymakers. Inallour interviews, asking forestryofficialsatdifferentdecision-making levelsaboutpriorityareas forbiodiversityconservation, we were always exclusively referred to special use forests. Thisindicates that organisations aiming to take a more integrated, landscape-levelapproach to conservationareprobably facinganuphill struggle in influencingdecisionmaking.

5.2.3. Carbon Markets or initiatives for forest carbon sequestration and storage have notbeendevelopedinVietnamsofar.TheFSIVhasreceivedamandatefromtheGovernment tobring forward the topicofenvironmental services,andcarbonsequestration in particular. A Japanese project has looked into forest carbonmeasurement, but has not made much progress so far. A German carbon-sequestration project seemed to be under preparation. On another front, theVietnam Coal and Mining General Company sets aside 1% of its revenue tooffsetenvironmentaldamages,whichisalsobeingusedforreforestation—bothtoregenerateareasdamagedbyopen-pitcoalminingand(allegedly)tocompensateforairqualitydeterioration.Nevertheless,alltheseinitiativesareincipient.

The two examples mentioned above describe ‘buyers’ of environmentalservices,thereforeitispossiblethatthepotentialtoestablishacarbon-basedPESmechanisminVietnamexists.Nonetheless,weseethelinkbetweenprovidersandsuppliersofenvironmentalserviceshamperedbytheGovernment’sinstitutionalframework,inparticularlandpropertyrights.

OnemightsuspectthatcarbonforestrycouldhavealargepotentialtofinancereforestationinVietnam.WiththecurrentCDM’scarboncreditrulesforforestsfocusingentirelyonreforestationandafforestation(thusclassifyingonlyincreasesinforestcoveras‘additional’),acountryaimingtofurtherincreaseitsforestcoversubstantiallycouldgainalotfromparticipatingincarbonmarkets.ACDMofficehasbeensetup,butapparentlyitisnotyetimplementingprojects.However,onemight fear thatpromotionof carbon forestry could reinforce the existingbiastowards monoculture forestry with fast-growing species, marginalising furtherbiodiversitygoalsinparticular.

5.2.4. TourismPESarrangementsforforestnaturalbeauty(forest-basedrecreationandecotourism)havealsonotbeendevelopedsofar,mainlybecausethereisnoframeworkforcommunity-basedtourism.Therearesomeincipientefforts,butwedidnotvisitany of them ourselves. A newspaper article describes how ecotourism in andaround Phong Nha Cave, a 275000-ha World Heritage Site in Quang Binhprovince,“hasgiventhevillagersastakeinthebeautyoftheforest”andallegedly


turnedthemfrombeingillegalloggerstoboatmenandphotographersthatlivemainlyofftourism(Viet Nam News,Wednesday15September2004,p.5).

Althoughthisdoesnotseemtobea‘pure’PESscheme,andwedidnothavethepossibilityofverifyingtheinformation,itwouldappeartobeanexampleofnaturalbeautyfunctioningasacentralincentiveforchangedlocalresourceuseinfavourofconservation.Thereareanumberofsimilarembryoniceffortsaroundotherprotectedareas.Ineachofthesecases,thefocusofthebusinessoperationismoreonnationalthanonforeigntourists.

Directtourism-relatedpaymentshavealsobeenmade,atleastinonecase.The Swiss NGO Caritas started a pilot project in 2004 where Swiss touristspay an additional USD500 per-capita for visiting villages for a week. This‘responsibletourism’premiumgoestoavillagedevelopmentfund.TheprojectisimplementedinthreecommunesinQuanBadistrictinthenorthernprovinceofHaGiang.However,althoughthistourismtoacertainextentdrawsonnaturalbeauty and environmental quality, thepaymenthas ‘no environmental stringsattached’—itisnotconditionaluponlocalpeople’slandorresourceuse.ItisthusnotaPESinitiative,butanexamplethatdirect,tourism-motivatedpaymentstocommunitiescanbeimplementedinVietnam.

52

6. Conclusions and implications

6.1. ConclusionsWhentheUK-basedIIEDscreenedthesituationinVietnamwithregardtofutureworkonPES(intheearly2000s),theycametotheconclusionthatPESwasatthisstageanon-starterinVietnam,sincethefundamentalpreconditionsforPESwerenotmet(J.Hardcastle,personalcommunication).Ourassessmentbasicallyconfirmsthisview.WeencounteredseveralconditionsthatexplainwhyPESarenotimplementedinVietnamsofar.Theseare:

1. Fewoftheenvironmentalservicesprovidedarepaidfor:Thefocusofforestenvironmentalservicerewardshasbeenexclusivelyonwatershedprotection; other services from forests outside of protected areas(biodiversity, landscapebeauty,carbonstorage)arenotbeingpaidfor,andhavebeenlargelyignored;

2. Fewenvironmental-serviceusersarepaying:Ingeneral,nodirectuserpayments are in place. Even for watershed protection benefits, exceptfor theHoaBinhhydroelectricpowerdam, there isno applicationofthebeneficiarypays’principle.ThefewpaymentsthatdotakeplacearefinancedthroughtheStatebudgetorthroughdonorprojects,ratherthanserviceuserspayingdirectly;

3. Noprivateownershipanduserightstoprotectionlands:SincealllandisState-ownedandlandwith(watershed)protectionvaluesisnormallynot allocated to households, households have no legal rights to makevoluntary decisions regarding their own land or forest use. This is atoddswithaPESconceptthatisdesignedasavoluntarymechanismtoinfluencelocallandandresourceusers’independentchoices;

4. Command and control works: Potentially, there could be privateresourceusesonpublic land that arenot strictly legalyet toleratedby

Conclusions and implications 53

theState—e.g.asisthecaseinIndonesiaorinmuchofLatinAmerica.Therestrictionofthesesemi-legalusesdoesthencreateopportunitycostsforusers,whichonemightneedtocompensateifonewantstoinducethem to other activities. But in Vietnam, the State is much strongerthan, for instance, in Indonesia. If ‘commandandcontrol’ isworkingrelativelywellinmostplaces,whatthenwouldbetheState’smotivationforexperimentingwithPES?

5. Payments are non-contingent and too low to matter: The existingforestprotection contracts arenormallynot really contingent, the feesaretoolowtomakeadifferenceforfarmers(inmostcases),andfeesarenormallynotbeing targeted to those facinggenuineopportunity costsfromprotection.Thus,theyareprobablynotadecisionparameterthatmakes a realdifference—protection feesdonot ‘buy’ additional forestenvironmentalservicesbychanginglocalpeople’sincentives.Theymightbeinterestingintermsofsettingageneralprecedenceprincipleofpaymentsforprotection,butmostlikelytheyplaytheroleof‘oilingthecommand-and-controlwheels’,i.e.theylegitimisetheState’smonitoringoflocal-level compliancewith top-down rules, and can sometimesmake theserulesmorepalatabletothelocalpopulation.Inotherwords,‘paymentisgood’asanauxiliaryinstrumentfacilitatingpolicyimplementation,but‘controlisbetter’—itisthebackboneofland-usepolicies.

6.2. A Future for PES in Vietnam?Adherence to the theoretical PES principle, as described in Section 2, is notnecessarily‘desirable’ initself; itcouldwellbethatsomehybridsbetweenPESandmoretraditionalcommand-and-controltoolsprovidethebestanswerstotheVietnameseenvironmental-servicecontext.Avoidingaone-size-fits-allapproachby tailoring tools to specific contexts is rarely a bad idea. However, the factthatno‘purist’PESschemehasbeencarriedoutinVietnam,andthatmanyoftheexisting schemesareonlymarginally related to thePESconcept, reflects ageneralVietnamesescepticismtowardsmarket-orientedtoolsforenvironmentalmanagement.

ThereisnosenseinstubbornlytryingtoimplementaPESsysteminVietnam,justforthesakeofapplyingthePESconcept.APESsystemwouldneedto‘addvalue’toenvironmentalprotectionorlocallivelihoodbenefits.Onecansaythatif the State is a good representative of external agents’ environmental-serviceinterests, then these interests aremore likely tobe taken intoaccount than inmanymarket-orientedtropicalcountrieswithaweakState.Atthecurrentstateofaffairs,itwouldseemunlikelythattheVietnameseStatewoulddeliberatelyloosenitsgripontheuseofprotectionforestsbyallocatingtheselandstohouseholds.This is simplybecause, in a countrywith a substantialplanning tradition and


only an incipient market orientation, the established command-and-controlmeasuresprovideamuchgreaterlikelihoodofsecuringthedesiredlanduse.Whycomplicate things by allocating critical land to households, if you can keep itdirectlyunderawell-organisedsystemofStatecontrol?Twodifferentdriversofchangecouldpotentiallyinthefuturegainimportancehere.

First,totheextentthatnewenvironmental-serviceneeds(carbon,tourism,biodiversity protection outside of protected areas) develop and receive greaterofficialrecognition,boththerequiredamountofforestprotectionandthedegreeof required differentiation would increase: what forest is needed where, how much ofit(comparedtootherlandcover)andunderwhat managementshoulditbe?Increaseddifferentiationinneedsandland-useobjectivescouldalsoopenupagreaterwillingness toexperimentwithnewandmoreflexible tools.Evenforthecurrentprimeenvironmentalservice,watershedprotection,thesituationcouldprovetobemuchmoremultifaceted.Inmanycases,thecurrentpracticeof maximal reforestation with fast-growing species is probably not the bestresponse tocomplex land-use–water service linkages.Theremightbe space formoreparticipatoryandeconomic-incentivetypesoftools.ButintheVietnamesecontext, it is the perception of the State, as the de facto representative of theserviceusers,whichultimatelymatters.

A second potential driver of change would be if, under the simultaneousprocessesoflocalpeoples’empowermentandsociety’sincreasingdemandforforest,localvillagesandhouseholdsstartedtoresistthecommand-and-controlmeasures,forinstancebecausetheopportunitycostsforputtingmorelandunderforestcoverbecame toohigh.This could raisemorepowerfuldemands forhigherfinancialcompensations.SuchhighercompensationsareunlikelytocomeoutoftheStatebudget or donor pockets, so environmental-service users would need to pay ahighershare.Yet,usersareonlylikelytobepersuadedtostartpayingifpaymentsareconditionalupongenuinechangesinnatural-resourcemanagement.

Both of these drivers could become important in the medium term, butfromthefieldrealityweexperiencedwedonotseeindicationsthatanyofthiswouldhappenintheshortterm.ThisassessmentisalsoreflectedintherelativelylowinterestthatthePESconceptreceivesamongpotentialVietnamesepartners.There is very limited knowledge about what PES are and, among those whoknow the concept, there is seldom recognition of what it could do for them.SubstantialcurrentinterestinPESisbasicallyconcentratedamongafewforeignrepresentatives(donors,conservationagencies,etc.).

ThequestionisthenwhethertherearescenarioswherecommandandcontrolatpresentdoesnotworkwellbecauseStatecontroloverlanduseisdeficient.Ifsuchscenarioscanbeidentified,wouldthisgivetheGovernmentanincentivetoexperimentwithnewtools?Forinstance,therearestillopendeforestationfrontsinareas intheCentralHighlandswhere landoccupationbymigrantshappensoutsideofthecontroloftheState.Wedidnotvisittheseareas,soouropinion

Conclusions and implications 55

maybepremature.However,onemightsuspectthatundersuchscenariosoflowgovernanceandrapidland-usechange,theestablishmentofPEScontractsthatgenerallyrequiretrustbetweenserviceprovidersandusersandeffectivecontrolovernaturalresourcesmightalsobeextremelychallenging.

WhatpotentialrolecouldPES-relatedresearchhaveinVietnam?ItcouldwellbethatsuchresearchwouldnotbemuchaboutPESasdevelopedintheliterature,butmoreabouthowtointroduceeffectiveeconomicincentivesatthemarginofaState-runland-useplanningsystem.WhiletherelevanceofthatefforttothecurrentglobaldebateaboutPESwouldbelimited,researchinthisareacouldpotentiallyhavepositiveimpactsonconservationandlivelihoodsinVietnam.Inaddition,thelessonscouldberelevanttoothersocialistsystemsopeningthemselvestomarketforces—notablytothelargenorthernneighbour,China.

Onesuchareaofexperimentingwithchangesatthemarginoftheexistingsystemistodifferentiatepaymentratesforprotection.Ourresultsshowedthatpaymentsinthenameofequityaretypicallybeingdistributedtoalargenumberofruralhouseholds,buttheper-householdamountsthusbecomesosmallthattheyareinsignificantformostrecipients’livelihoods.Inaddition,whileasystemof flat per-hectare rates may be equitable, it is not necessarily fair: dependingon the distance and accessibility of the forest, labour time of patrolling thecontractedforestareawillbequitevariable.Itwouldlikelybemoreefficienttoreducethenumberofcontracts,andinsteadpayahigherrateinthosecontractswherepatrollingcostsarehigh,andwherethedegradationrisksandthebenefitsarehighest,i.e.favourthoseforestareasthataremoststrategic.Ourresultsalsoindicatethatamodelwith(groupsof)householdsspecialisinginforestprotectionprovedtobemoreefficientthanthefullyegalitarianmodel,eitheronahouseholdorvillagebasis.

Both CIFOR and the RUPES programme (‘Rewarding the Upland PoorforEnvironmental Services’) of theWorldAgroforestryCentre (ICRAF)havetried to assist efforts to establishPES trials inVietnam.So,what typeof sitesshouldonelookforregardingprospectivefutureworkonPESinVietnam?Asacaution,itisnotcertainwhetheronecanfindanysuitablesiteatalltocarryoutafull-fledgedPESexperiment.Butfromthisreport,threesuggestedsite-selectioncriteriaemerge,inorderofpriority:

1. Payments are feasible: First priority should be to choose a site wherethere is a well-defined demand for environmental services that can betransformed into a clear willingness and ability to pay. This is mucheasiertoaccomplishifthereisasingleservicebuyerwithanestablishedrevenueflow,e.g.ahydroelectricdamdependingonlowsedimentationandupstream land-use controls.Conversely, this is amuchharder taskif potential buyers are multiple and poor agents that need to first bepersuadedaboutthevalidityofland-uselinkages,e.g.coastalfishermenpotentiallyharmedbythesameuncontrolledupstreamsedimentation.


2. Commandandcontroldoesnotwork:Iftherearesiteswherecommand-and-controlmeasureseitherhavefailedalready,orareunlikelyto(continueto)succeed,itwouldprobablybemucheasiertogetofficialbuy-infromtheVietnameseauthoritiestoanexperimentalschemethaninsiteswheretheState’sadministrativesystemisalreadywell-establishedandrelativelysuccessful.

3. Smallscale,clearland-uselinkage:ApioneerPESschemeismorelikelytobe establishedand to succeed inanareawhere there are few servicebuyers, fewproviders,andwherethe land-use–serviceprovisionlinkageissolid.Oncesuchapilotschemehasbeenestablished,itcouldpossiblyserveasademonstrationsiteshowingthatPEScanworkinVietnam,withapotentialforreplicationandforeventuallyinfluencingpolicyandland-usedecisionmaking.

5�

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The Center for International Forestry Research (CIFOR) is a leading international forestry

research organization established in 1993 in response to global concerns about the

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around the world.

Donors

The Center for International Forestry Research (CIFOR) receives its major funding

from governments, international development organizations, private foundations

and regional organizations. In 2004, CIFOR received financial support from Australia,

African Wildlife Foundation (AWF), Asian Development Bank (ADB), Belgium, Brazil,

Canada, Carrefour, China, CIRAD, Conservation International Foundation (CIF), European

Commission, Finland, Food and Agriculture Organization of the United Nations (FAO),

Ford Foundation, France, German Agency for Technical Cooperation (GTZ), German

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International Development Research Centre (IDRC), International Fund for Agricultural

Development (IFAD), Innovative Resource Management (IRM), International Tropical

Timber Organization (ITTO), Italy, Japan, Korea, Netherlands, Norway, Organisation

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of Agricultural Sciences (SLU), Switzerland, The Overbrook Foundation, The Nature

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Nations Environment Programme (UNEP), Waseda University, World Bank, World

Resources Institute (WRI) and World Wide Fund for Nature (WWF).

Payments for environmental services (PES) are globally a highly promising tool for the conservation and restoration of forests and other environmental assets. In developing countries, a series of experiments with this emerging instrument are underway. Is Vietnam one of the countries where important PES experiences have been made?

This report clearly answers this question with “no”. Based on field work in four provinces of Northern and Central Vietnam and interviews in Hanoi, the authors found important domestic concerns for environmental services in Vietnam, in particular the protection of watersheds. But there are a number of major obstacles to the use of PES. First and foremost, the State has so far allocated little forestland to households – much less areas that are critical in terms of environmental services. There is thus no real land-use choice whether or not to ‘provide’ environmental services, since protection is ensured by quite effective command-and-control policies, thus conflicting with the voluntary nature of PES agreements. Second, those conservation-oriented payments that do exist, notably Programme 327 and its successor Programme 661, are designed to cover the opportunity costs of labour in the protection of State forests; they are basically forest-guard salary payments. But they typically make up only 1-2% of rural households’ income and are often not fully conditional, and thus in most cases end up being inefficient as independent conservation incentives. Reforestation subsidies provide a more significant contribution to household incomes, but are probably in most cases predominantly motivated by concerns for increasing timber production, rather than environmental services.

Even though PES thus currently does not exist in Vietnam, it could potentially play a role in a number of future scenarios. It could be used in places where command-and-control measures do not work well, in circumstances where the State decides to extend household control to environmentally critical lands, or if new environmental service markets receive a boost, such as carbon sequestration, nature-based tourism and biodiversity protection on privately allocated lands. However, that would require a regulatory model where the State de facto delegates much more land-use responsibility to rural households.

- Sven Wunder is a senior economist at CIFOR, specialising in PES systems.- Bui Dung The is an economist with Hué University, specialising on natural resources.- Enrique Ibarra is a post-doctoral economist at CIFOR, working on forestry economics and

environmental services.

9 7 8 9 7 9 2 4 4 6 1 1 1 >

ISBN 979-24-4611-7

Why paym

ents for forest environmental services in Vietnam

have so far remained incipient

Sven Wunder | Bui D

ung The | Enrique IbarraPaym

ent is good, control is better






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