Vietnam has implemented a nationwide payment for forest environmental services (PFES) scheme since 2010, being the first country in Asia to do so. The PFES program collects funds from users of forest environmental services like hydropower plants and water suppliers, with revenues exceeding $50 million annually by 2012. However, there are ongoing challenges with equitable distribution of funds, lack of guidance for all ecosystem services, and delays in payments from some users. Improving the national forest inventory, revising PFES policies, and strengthening communication are suggested to address equity issues and further progress payment for forest environmental services in Vietnam.

1. Viet Nam Forest protection and Development Fund – Ministry of Agriculture & Rural Development
IMPLEMENTATION 0F PAYMENT FOR FOREST
ENVIRONMENTAL SERVICES IN VIET NAM
Pham Van Trung
Trung.fssp@hn.vnn.vn
Vietnam Forest Protection and Development Fund (VNFF)
Ministry of Agriculture and Rural Development (MARD)
Jakarta, May 2014

2. Viet Nam Forest protection and Development Fund – Ministry of Agriculture & Rural Development
 Background;
 Mobilization of the
PFES payments;
 Utilization of the
Fund;
 Current
status, equity &
challenges;
CONTENT

3. Viet Nam Forest protection and Development Fund – Ministry of Agriculture & Rural Development
14/01/2008
Degree 05, on
the Forest
Protection and
Development
Fund (FPDF)
10/04/2008
Decision
380, on
payments for
forest
environmental
services
(Piloted in Lam
Dong & Son
La)
24/09/2010
Degree 99, on
policies for
payments for
forest
environmental
services
(nationwide)
Background
05/02/2007
Viet Nam
Forestry
Development
Strategy
2006-2020
Vietnam is the first
country in Asia to
initiate a nationwide
PFES scheme

4. Viet Nam Forest protection and Development Fund – Ministry of Agriculture & Rural Development
Background
Relation
PFES
Policy
Forest Authorities 2
Controlling / management of
forest quantity and quality
FUNDs
3
M&E and supervising
PFES implementation
4
Entrusted contracts
of PFES
(applies to indirect
payment)
Ecosystem USERs
Forest Owners
1
FES buyers/users
& sellers/providers
(applies to direct
payment)

5. Viet Nam Forest protection and Development Fund – Ministry of Agriculture & Rural Development
Mobilization of the PFES payments
Carbon sequestration, Aquaculture…
Hydropower
Water supply
Tourism
Industrial production
40
VND/m3
20
VND/Kw
H
1% - 2%
Annual
income
…ongoing
…ongoing
~ 98%
~ 2 %
~ 0.1 %
User of the EcosystemPayment
sources

6. Viet Nam Forest protection and Development Fund – Ministry of Agriculture & Rural Development
Year Hydropower Clean water Tourism Total (USD)
2009 5,950,302 327,655 14,535 6,292,492
2010 3,323,580 530,120 17,242 3,870,942
2011 12,728,523 689,514 31,708 13,449,745
2012 54,889,864 803,547 41,431 55,734,842
2013 49,574,948 1,136,482 52,234 50,763,664
2014 (QI) 17,323,580
PFES
Revenue
Mobilization of the PFES payments

7. Viet Nam Forest protection and Development Fund – Ministry of Agriculture & Rural Development
Utilization of the Fund
PFES SUPPLIERS
(FOREST
OWNERS)
HOUSEHOLDS, INDIVIDUALS (can
use 100% of received amount)
ORGANIZATIONS
(deduct 10% for
administration costs)
PFES Users 100%
VNFF
(Keep 0.5%
administration costs)
99.5%
Provincial FPDFs
(Keep maximum 10%
administration costs + 5%
contingency)85%
Utilization
procedure
100%

8. Viet Nam Forest protection and Development Fund – Ministry of Agriculture & Rural Development
Current status, equity & challenges
Economic impacts:
• Implementation of the PFES policy = increasing the
contributions of the forest sector in the national economy;
• Signed 281 entrusted contracts with hydropower plants
(190), water suppliers (51) and tourism facilities (40);
• 35 funds are established;
• Annual revenue above 50 million USD.
Impacts

9. Viet Nam Forest protection and Development Fund – Ministry of Agriculture & Rural Development
Current status, equity & challenges (cont)
Environmental impacts:
- Violation cases of forest management and protection have been
reduced 40%.
Violations 2008 2009 2010 2011 2012 2013
Cases 42,429 40,841 33,821 29,551 28,565 25,776
Violated area (ha) 3,172 2,072 1,747 2,186 1,164 694
- Above 4.1 million ha was determined to implement PFES, in there
around 3.6 million ha was contracted for forest protection.
Indicators 2008 2009 2010 2011 2012
Forest area (million ha) 12,84 12,90 13,03 13,14 13,46
Forest coverage (%) 38,70 39,10 39,50 39,70 39,90
Impacts

10. Viet Nam Forest protection and Development Fund – Ministry of Agriculture & Rural Development
Current status, equity & challenges (cont)
Total payment to forest owner per year =
Average unit payment per ha of forest * Forest area
managed for services * K-coefficient
(K = K1*K2*K3*K4 )
K1 – Forest volume status: 1.00 (rich); 0.95
(medium); 0.90 (poor & rehabilitated);
K2 – Forest function: 1,00 (special use); 0,95
(protection); 0,90 (production);
K3 – Forest origination: 1,00 (natural forest); 0,90
(plantation);
K4 – Difficulty of forest protection: 1,00 (very
difficult); 0,95 (difficult); 0,90 (less difficult).
Equity

11. Viet Nam Forest protection and Development Fund – Ministry of Agriculture & Rural Development
Current status, equity & challenges (cont)
K-coefficient application
People’s Committees of province will base on the specific conditions of
their provinces & cities to specify number of the sub K factors applicable
to their respective provinces. (Circular no 80/2011/TT-BNNPTNT dated
23/11/2011 on methods to determine for PFES, issued by MARD).
 K-coefficients have not fully
applied due to lack of forest
inventory data;
 Provinces have just applied K2 &
K3-coefficient; applying K=1 in
some provinces.
Equity

12. Viet Nam Forest protection and Development Fund – Ministry of Agriculture & Rural Development
Current status, equity & challenges (cont)
 Using different K-coefficients is appropriate, but it
is difficult to explain the system to communities &
can provoke conflicts between community
members;
 Due to lack of forest inventory data, so local
communities have not agreed on the value of the
K-coefficients.
Equity - Occasional Paper
Recommendations: “For PFES to have outcomes that
are effective, efficient and equitable, however, policy
makers must also work toward developing a
functional M&E system with an accessible grievance
mechanism, to ensure transparency & accountability
in the distribution of PFES revenues from central to
local levels…”

13. Viet Nam Forest protection and Development Fund – Ministry of Agriculture & Rural Development
Current status, equity & challenges (cont)
No Indicator 2008 2009 2010 2011 2012 2013
1 Electricity price
(VND/kwh)
890 948,5 1.058 1.242 1.437 1.508
2 The payment rate of
hydropower plants
compared to the
electricity selling price
(%)
2,25 2,11 1,89 1,61 1,39 1,32
Equity
Annual inflation, electricity selling price increased but the payments
of buyers have been unchanged

14. Viet Nam Forest protection and Development Fund – Ministry of Agriculture & Rural Development
Current status, equity & challenges (cont)
Equity
 The average level of payment of the amount
determined forest area for PFES in VN (2013) is
around 10,6 USD/ha/year;
 Too different levels of payments among basins
in some provinces such as Gia Lai, Yen Bai, Dak
Nong, Kon Tum…
Different levels of payments for forest owners:
Province Payment level/ha/year (USD)
Lam Dong 14- 21
Gia Lai 0.1 - 10
Yen Bai 1 - 22

15. Viet Nam Forest protection and Development Fund – Ministry of Agriculture & Rural Development
Current status, equity & challenges (cont)
Equity - Solution
 Implement the “national forest inventory
program period 2013-2016”, one of the
important objective of the program is
supporting to PFES payments;
 Propose to revise the Degree no 99 on policies
for PFES;
 Strengthen capacity for government officers &
improve communication related to PFES to
local communities;
 Finalize guidelines / policies related to carbon
sequestration, aquaculture, water for
industrial zones & factories;
 Improve the M&E system.

16. Viet Nam Forest protection and Development Fund – Ministry of Agriculture & Rural Development
Current status, equity & challenges (cont)
Challenges
 Direction for PFES implementation
is not timely;
 Mechanisms, levels of payments
for forest owners are not realistic;
 Payments of hydropower plants
are still delayed;
 Lack of guidelines for
aquaculture, carbon
sequestration, Industrial
production facilities;

17. Viet Nam Forest protection and Development Fund – Ministry of Agriculture & Rural Development
Many thanks!
Pham Van Trung
Trung.fssp@hn.vnn.vn
Vietnam Forest Protection and Development Fund (VNFF)
Ministry of Agriculture and Rural Development (MARD)