Presented at "National consultation workshop on Vietnam Forestry Development Strategy 2021- 2030, with vision to 2050", on 5 November 2020

1. REPORT
RESULTS FROM THE IMPLEMENTATION OF PFES POLICY,
ORIENTATION AND SOLUTIONS FOR OPERATING POTENTIAL
SERVICES, CONTRIBUTING TO THE DIVERSIFICATION OF FINANCIAL
SOURCES FOR THE FORESTRY SECTOR PERIOD 2021-2030
- H.E. Hà Công Tuấn – Acting Vice Minister of MARD.
- H.E. Nguyễn Quốc Trị - Director General of VNForest, MARD.
- Ladies and gentlemen!
On 05 Feb. 2007, the Prime Minister issued decision no. 18/2007/QĐ-TTg on
approving the Vietnam Forestry Development Strategy (VFDS) period 2006-2020,
which indicates the economic target for PFES: “increase revenues from forest services
via CDM, water resource protection, eco-tourism, etc. (achieving USD 2 bil.)”
To achieve the mentioned target, over the past months, MARD advised the
Government to issue a policy on making full use of the forest services serving
production, human life, which has been recognized by the whole society and paid for
the use of forest services. This is the PFES policy stipulated in the Decree
no.99/2010/NĐ-CP, dated 24 Sept. 2010 of the Government (currently the Decree
no.156/2018/NĐ-CP)
The PFES policy itself introduces a turning point to the sector to mobilize
social sources serving forest protection. After 10 years of operation, the policy has
been rapidly practiced in daily life and appreciated by the stakeholders and considered
as one of the outstanding achievements of the Agriculture and Rural Development
sector period 2010-2015, with the following results:
I. PERIOD 2010-2020
1. Implementation arrangements and key results
On 10th April 2008, the Prime Minister (PM) issued Decision no. 380/QĐ-TTg
on piloting PFES in Son La and Lam Dong provinces. After two years of the pilot, on
24 Sept. 2010, the Government issued Decree no. 99/2010/NĐ-CP on PFES policy for
nationwide application. The Government also stipulates the organization of the Forest
Protection and Development Fund (FPDF) under the Decree no. 05/2008/NĐ-CP to
receive, manage and use the PFES amount serving forest protection and management.
Period 2011-2020, MARD has consulted with the Government and collaborated
with other ministries to issue 20 legal papers: 1 law, 6 decrees, 2 PM decisions and 11
circulars providing legal framework for PFES operations. Meanwhile, establishing the
FPDF system with 45 provincial Funds and a national Fund.
To date, the FPDF system nationwide has signed 871 trusted contracts with
PFES users, of which: the National Fund (VNFF) signed 94 contracts and the rest was
signed by the provincial Funds.
- Revenues: Total payment amount collected during 2011-2019 was above
13,959 bil. VND (an average of VND 1,550 bil. VND/year), including (i) collections
from hydropowers: VND 13,440 bil., accounting for 96.29%; (ii) collections from clean
water suppliers: VND 386 bil., accounting for 2.77%; (iii) collections from eco-tourism:
VND 94 bil., accounting for 0.66%; (iv) collections from water for industrial facilities:

2. 2
VND 6 bil., accounting for 0.04%; (v) bank interest: VND 33 bil., accounting for
0.24%. Estimated amount for 2020 is VND 2,800 bil..
- Disbursement: To date, the FPDF system disbursed VND 11,924 bil.
achieving 100% of the plan. In 2019, 100% of PFES amount transferred to forest
owners via accounts of banks, ViettelPay and the post office services.
The PFES amount contributes to the protection of about 6.3 mil. ha of forest,
accounting for 43% of the total national forest cover; supporting 226 management
boards of protection and specialuse forests, more than 138,000 forest owners as
individuals, hhs, communities; creating incomes of 81 Forest Companies to maintain
their operations under the Logging Ban Policy context and supporting livelihoods of
172 thousand hhs, communities in mountainous regions for forest protection and
improving their lives under the tight state budget support situation.
The PFES policy implementation did not meet the target of Strategy 2006-2020,
but the policy itself has entered lives, becoming an important and sustainable financial
source of the sector, contributing effectively to the forest protection and development;
increased incomes of the forestry labors; reduced state budget burden.
2. Assessment
- Firstly, the issuance of legal documents on PFES has created a fully effective
legal corridor, covering the entire scope of regulation, subjects of application, types of
FES, operation mechanism, collection, spending, management and use of FES money,
rights, responsibilities and obligations, handling of violations, organizing the
implementation nationwide. PFES mechanisms and policies meet the requirements for
the suitability and linkage with the current forest financial policy system and forest
protection and development policies.
- Secondly, the timely directives, administration, preliminary review, review,
inspection and supervision exercises have helped to overcome the difficulties and
limitations when implementing the PFES policy, promptly solving and preventing
negative acts to be occurred, through which many valuable lessons and experiences
can be drawn. To date, the PFES policy has been implemented for 10 years, for over
250,000 different beneficiaries in 45 provinces with about 6.3 million ha of forest
managed and protected annually; hundreds of organizations, units with thousands of
officials daily and hourly implement policies but no corruption or negative actions
detected, no law violations made by organizations or individuals. This is one of the
remarkable results in the implementation of PFES policy.
- Thirdly, the policy propaganda and dissemination is carried out from the
central to local levels with many diversified and rich forms, helping to raise
awareness, understanding of policies, and specific features of FES payments,
especially the sources of revenue, payment, management and use of FES money.
- Fourthly, the support activities have helped to build capacity for technical
staff at provincial funds and PFES support units, in addition to helping forest owners
who are providers of FES to manage forests, inspect and monitor forest changes, self-
protect their interests in the implementation of FES such as managing and using
effectively the PFES money for daily life and directly protecting and developing
forests.
3. Causes of failing the set target in the strategy

3. 3
(i) FES collection of FES users is lower than the actual value of FES provided
(according to the scientific research report of the Ministry of Agriculture and Rural
Development in 2014: FES for hydropower was 63 VND / kWh; clean water is 65
VND / m3).
(ii) PFES for forest carbon sequestration has not been collected yet.
4. Lessons learned
- The State has created a new legal institutional framework for attracting social
resources to reduce the dependence on the state budget, especially in the forestry
sector (there has been few potential investors, so far).
- The process of implementing the PFES policy has been well studied, with
sufficient scientific basis, be consulted and received the consensus of all stakeholders,
from the FES users and FES providers.
- Mobilize and make full use of international financial and technical supports in
carrying out research, pilot and policy issuance.
- The Fund's organizational operations under the model of public non-business
units is relevant to the practice after 10 years of implementation in terms of a self-
financing mechanism as prescribed.
- Regularly inspect, supervise and improve transparency, promptly remove
difficulties and problems during the process of deploying and implementing the policy.
II. ORIENTATION FOR PERIOD 2021-2030
1. Targets
PFES amount estimation by 2025 is 3,500 bil. VND and 4,000 bil. VND by
2030, consisting of both current and potential revenues, of which:
(i) Collections from hydropowers by 2025 estimate 2,550 bil. VND/year; (ii)
collections from clean water suppliers by 2025 will remained with an amount of about
50 bil. VND/year; (iii) collections from industrial facilities: about 40 bil. VND; (iv)
collections from the WB result-based payment for CO2 period 2018-2025: WB
committed to buy 10.3 mil. tons of CO2 equivalent to 51.5 mil. USD. MARD acting
on behalf of the GoV negotiated and signed agreement with WB. During 4 years
between 2021-2025, the total payment amount is 51.5 mil. USD equivalent to 1,100
bil. VND. The average annual amount received from this Program is about 270 bil.
VND; (v) revenues from the forest environmental services for lease: according to
reports of the Special Use Forest (SUF) and Protection Forest Management Boards in
2019 and solutions for sustainable development of the protected areas, 60 protected
areas are operating eco-tourism, resort and creation services nationwide. By 2025, the
amount collected from leasing forest environmental services is estimated of 70 bil.
VND. (vi) collections of organizations, individuals operating eco-tourism, resort and
recreation services are about 20 bil. VND. (vii) collections of forest carbon absorption
and storage: by 2025, tentatively, this service will be applied for coal power plants and
cement factories nationwide with a collected amount of about 400 bil. VND/year from
coal power plants and 100 bil. VND/ year from cement factories. By 2030, application
will be extended to other large emitters. Collectively, the amount paid for CO2
sequestration and storage nationwide is estimated of 620 bil. VND by 2030.
2. Solutions

4. 4
The Fund for Forest Protection and Development is stipulated in the Law,
affirming the role of the Fund in the coming time in mobilizing resources for forest
protection and management. In the upcoming period, the Fund for Forest Protection
and Development must expand the task of payment collection and expenditure to
support the forestry sector. Applying modern digitalization technology to perform
tasks with lean organization and financial autonomy mechanism, specifically:
- Expand scope of the spending items to support the forestry sector in terms of
sustainable forest management and forest certification.
- Expand and increase revenue sources through researching and application of
PFES for forest carbon sequestration and storage services.
- Apply digital technology in the financial management of the Fund, ensuring
convenience, safety and transparency. Organize the implementation of FES payment to
forest owners via bank accounts or e-payments.
3. Recommendations
- Recommend MARD to give permission to carry out research and propose full
calculation of the value of forest environmental services asymptotic to its real value,
specifically: Hydropower, from 36 VND / kWh to 63 VND / kWh; clean water, from
52 VND/ m3 to 65 VND/ m3.
- Continue to allow VNFF to advise the VNForest and MARD to closely
coordinate with relevant ministries, agencies and agencies in promoting and issuing
full regulations and guidelines regarding the implementation of the PFES policy, in
particular: (i) Continue to urge and promptly providing justifications to the
Government to consider and issue the Decision on piloting carbon sequestration and
storage services of forests; (ii) Study, amend and supplement regulations on FES
implementation for ecotourism activities inside and outside forests in both direct and
indirect forms depending on specific conditions in each locality.
- Allow the VNFF to advise the VNForest and MARD to submit to the Prime
Minister to promulgate regulations on benefit-sharing mechanism on carbon
sequestration and retention of forests to manage and effectively use the revenues from
the North Central Region Emission Reduction Payment Agreement (USD 51.5
million) between the Government of Vietnam and the World Bank.
The above is a report paper on the implementation results of PFES policy,
orientations and solutions for the development of potential forest environmental
services to contribute to the diversification of financial resources for the forestry sector
period 2021-2030 of the VNFF.
Wishing all participants healthy and happy and the Workshop with great
success.
Thank you!