MINISTRY OF AGRICULTURE AND RURAL DEVELOPMENT VIETNAM ADMINISTRATION

MINISTRY OF AGRICULTURE AND RURAL DEVELOPMENT VIETNAM ADMINISTRATION OF FORESTRY RAISING CAPITAL AND REVENUES FOREST FUNDS THROUGH PAYMENTS FOREST ENVIRONMENTAL SERVICES (PFES) CASE STUDY ON VNFF IN VIETNAM Bonn, May 31, 2013

OUTLINE OF PRESENTATION 1 Background 2 PFES Legal framework and Objectives 3 Linkage of VNFF with PFES 4 Potentials and Initial Results and Achievements 5 Difficulties, Solutions and Recommendations 6 Lessons Learnt

BACKGROUND There are some forest funds existing in Vietnam: • Trust Fund for Forests (TFF); • Vietnam Conservation Fund (VCF); • Vietnam Forest Protection and Development Fund (VNFF). Besides, still need for new other funds to meet the expectations from donors and governments through new initiatives such as REDD+ Fund. Vietnam Forestry Development Strategy (20062020); Master Plan for Forest Protection and Development (2011 -2020)

BACKGROUND (Cont’) TFF Established: 2004; Source: ODA/Donors; Objective: Sector support; Results: 35 Projects Pilot/Scale up VCF Established: 2005; Source: ODA/Donors; Objective: Support for Special Used forests; Results: 70 Projects VNFF Established: 2008; Source: ODA, State Budget, trust and Voluntary Contribution, ect; Objective: forest protection and development; Results: 29 PFPDF REDD+ Integrated Tentatively Established: 2013; Source: REDD+ domestic and International; Objective: Support for REDD+ programme.

BACKGROUND (Cont’) Vietnam is a typical country pioneering in Asia as well as in the world formulating the legal framework on Forest Protection and Development Fund and the policy on Payments for Forest Environmental Services (PFES). Set up the fund 14/01/2008 Government issued Decree No. 05/2008/NĐCP on Forest Protection and Development Fund (Decree 05) Pilot PFES 10/4/2008 Prime Minister issued Decision No. 380/QĐ-TTg on piloting PFES policy (Decision 380) Official PFES 24/9/2010 Government issued Decree No. 99/2010/NĐ-CP on PFES policy (Decree 99) Implementation of PFES 13/12/2010 Prime Minister issued Decision No. 2284/QĐ-TTg approval for PFES implementation plan

BACKGROUND (Cont’) FORESTRY SECTOR Forest Protection and Development fund (Fund) OPPORTUNITY Policy on Payments for Forest Environment al Services (PFES)

LEGAL FRAMEWORK RELATED TO PFES Law on forest protection and development (2004); Forestry development strategy 2006 -2020. Decree No. 05/2008/NĐ-CP; Decree No. 99/2010/NĐ-CP. Decision No. 380/QĐ-TTg; Decision No. 2284/QĐ-TTg. Circulars and guiding documents for implementations.

GENERAL OBJECTIVE OF PFES POLICY Economically sustainable : Growth; Development; Efficiency. ECONOMICA L SUSTAINABLE DEVELOPMEN T ENVIRONMENTAL Environmentally sustainable : Ecosystem integrity; Biodiversity; Carrying capacity. SOCIAL Socially sustainable: Cultural identity; Accessibility; Stability.

PURPOSE OF DECREE No. 99 1 Renovating management practice of forestry sector, creating financial sources forest protection & developmen; 2 Improving and step-bystep increasing income of stakes directly participate in forest protection & developmen; 3 Socializing forest protection & developmen; 4 Contributing to better protection of forest.

LINKAGE WITH PFES POLICY 4 FES USERS 1 FOREST PROTECTION AND DEVELOPMENT FUND PFES POLICY FOREST OWNERS 3 FORESTRY AUTHORITIES 2

LINKAGE WITH PFES POLICY (Cont’) 1. 2. 3. 4. Relation between FES buyers/users and sellers/providers (apply for direct payment type); Relation in controlling and management forest quantity and quality; Relation in M&E and supervising PFES implementation; Relation in signing entrusted contracts of PFES (apply for indirect payment type). 4 FES USERS 1 FOREST PROTECTION AND DEVELOPMENT FUND PFES POLICY FOREST OWNERS 3 FORESTRY AUTHORITIES 2

LINKAGE WITH PFES POLICY (Cont’) Example: Trust fund for PFES according to Decree No. 99/2010/NĐ-CP Payment through VNFF FOREST ENVIRONMENTAL SERVICES USERS (Hydropowers, Water supplies, Tourism companies) 99, 5% 100% VNFF Extracted and kept maximum 0, 5% Payment not through VNFF 100% PROVINCIAL FUND (PFPDF)

LINKAGE WITH PFES POLICY (Cont’) Payment through PFPDF FOREST ENVIRONMENTAL SERVICES USERS (Hydropowers, Water supplies, Tourism companies) 85% 100% FOREST OWNERS PFPDF Extracted and kept maximum 15% 100% Payment not through PFPDF

POTENTIAL SERVICE USERS Hydropower Waster supply Industrial production Tourism (organizations or individuals) Other organizations, individuals

FES USERS AND PFES SCALE Hydropower 20 VND/kwh (0, 001$) during payment period Water supply 40 VND/m 3 (0, 002$) during payment period Industrial production Will be regulated later Tourism (organization, individuals) 1%-2% of total income of period subject to payment Other organizations, individuals (carbon sequestration, aquaculture) Will be regulated later

CALCULATING PFES Average Total payment to unit payment forest = owner in for 1 hectare the year of forest (VND) (VND/ha) x Area of forest contracted with forest owner for protection (ha) Kx coefficient K is coefficient to adjust payment rate for each lot of forest based on forest condition

K = K 1* K 2* K 3* K 4 DETERMINATION OF K COEFFICIENT 17 K 1 – Forest condition and yield: 1. 00 reach; 0. 95 - average; 0. 90 - poor and rehabilitated K 2 – Forest use: 1, 00 - Special use; 0, 95 - Protective ; 0, 90 - Production K 3 – Forest origination: 1, 00 - natural; 0, 90 - planted K 4 – Level of difficulty of protection: 1, 00 - very difficult; 0, 95 - difficult; 0, 90 - less difficult 17

STEPS TO IMPLEMENT PFES POLICY EVALUATION IMPLEMENTATION PREPERATION 1. Establish steering committee, task forces and fund(s); 2. Awareness raising; 3. Develop, approve projects and prepare implementation plan. 1. Implement PFES projects; 2. Sign contracts and commitments forest protection; 3. Payment, consolidation. 1. Review and evaluation, lessons learned; 2. Recommendation s, amendments, perfection of PFES policies.

OVERALL MODALITY ON POLICY FOR PFES Contractees FES providers (receivers) Forest mngmnt Provincial VNFF Central VNFF Trust fund for PFES Forest receivers FES users (payers)

EXISTING INCOMES OF VNFF Hydropower Clean water suply Touris m

INITIAL RESULTS AND ACHIEVEMENTS SUPPORT ISSUANCE OF LEGISLATIONS • Circular guiding calculation of PFES (Circular 80); Circular guiding consolidation of PFES (Circular 20); • Circular guiding Fund financial management (Circular 85); Inter-ministry Circular guiding PFES management and utilization (Circular 62); • Circular guiding calculation of forest area of watershed (Circular 60). GUIDANCE AND SUPPORT TO LOCAL LEVELS • Establishment of task forces, preparing instruction documents, supervising establishment process (total 29 Funds established); • Guidance on procedures to register and sign contract (Decision 119); • Support, provide advance for provinces; organizing guidance on fund operation. IMPLEMENT PROFESSIONAL ACTIVITIES • Provide offices, recruit personnel, procurate equipment; • Sign trust contracts for PFES (total 30 contracts); • Income from PFES in 2012 is nearly 60 million USD (Central 50 million, provincial 10 million); • Developed database and website for manageemnt.

INITIAL RESULTS AND ACHIEVEMENTS (Cont’) 2000000. 000 PFES REVENUES OVER YEARS (VND) 18000000. 000 16000000. 000 Revenues 14000000. 000 12000000. 000 1000000. 000 8000000. 000 6000000. 000 4000000. 000 2000000. 000 Hydropowers Water companies Ecotourim companies Total 2009 209989934453. 000 9552066907. 000 305763424. 000 219847764784. 000 2010 98267201340. 000 8506719131. 000 362693135. 000 107136613606. 000 2011 267717747006. 000 14324809366. 000 667025562. 000 282709581934. 000 2012 1154663170720. 000 16903422986. 000 871535000. 000 1172438128706. 000 Total 1730638053519. 000 49287018390. 000 2207017121. 000 1782132089030. 000

INITIAL RESULTS AND ACHIEVEMENTS (Cont’) Water companies 3% Ecotourim companies 0% Hydropowers 97%

SHORTCOMINGS, DIFFICULTIES AT CENTRAL LEVEL AT LOCAL LEVEL AT FES USERS • Inter-minitry circulars for guiding implementation of Decrees 05 and 99 not yet developed; • Project for determining forest area in emerging inter-provincial watersheds not yet completed. • Policy dissemination, awareness communication, training and capacity building have not been sufficient; Disbursement quite low. • Lack of financial resources to implement PFES projects as well as to organize and operate fund. • Awareness on policy compiance still weak. Some private or join-ventured hydropowers still reluctant or finding reasons to not pay.

SOLUTIONS AND RECOMMENDATIONS ENHANCE THE ISSUANCE OF IMPLEMENTATION REGULATIONS AND GUIDELINES Guidance documents for Decree 99: (1) PFES in aquaculture; (2) Conttribution of water users in industry Circular for guiding Decree 05: Determining compulsory contributions ENHANCE GUIDANCE AND SUPPORT TO LOCAL LEVELS Supervising and guiding the establishment, organization and operation of the fund and policy enforcement Support and advance finance for provincial funds to implement projects and operate fund STRENGTHEN POLICY AWARENESS, COMMUNICATION AND DISSEMINATION Implement awareness, propaganda and dissemination over mass media channels Organize meetings, workshops, conferences and trainings, public awareness campaigns

LESSONS LEARNT FROM OPERATION OF FUNDS Objectives of funds must be clear, consistant with the sector’s priorities and donors’ cooperation strategy. Need strong commitments from Government and closely cooperation among in-side and out-side sector bodies. Tools, instruments developed, ageed by consultation of parties. Frequently discuss and have unofficial meetings to obtain understanding and trust among partners. Funds only effectively operational with full legal framework and detailed guidances; Training and raising awareness need regularly taken place. Establishment of M&E system helps supervising fund management and utilisation properly.

VNFF and PFES – Green future of Vietnam Q&A Thank you and willing to receive your feedbacks/comments! For more information, please contact: Mr. Pham Hong Luong – Deputy Director, Dept. of Planning - Finance, VNFOREST, Deputy Director , VNFF. Address: 207, 2 nd floor , B 9 building, MARD No. 2, Ngoc Ha, Ba Đinh , Hanoi, Vietnam. Phone: ++(84) 912233871; Email: luong_phamhong 71@yahoo. com