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

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

There are some forest funds existing in Vietnam: 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 (2006-2020); Master Plan for Forest Protection and Development (2011-2020)

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

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

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

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 SUSTAINABLE DEVELOPMENT Economically sustainable : Growth; Development; Efficiency. ECONOMICAL SUSTAINABLE DEVELOPMENT ENVIRON-MENTAL SOCIAL Environmentally sustainable : Ecosystem integrity; Biodiversity; Carrying capacity. Socially sustainable: Cultural identity; Accessibility; Stability.

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

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

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

VNFF 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) VNFF PROVINCIAL FUND (PFPDF) 100% 99,5% Extracted and kept maximum 0,5% Payment not through VNFF 100%

PFPDF LINKAGE WITH PFES POLICY (Cont’) Payment through PFPDF FOREST ENVIRONMENTAL SERVICES USERS (Hydropowers, Water supplies, Tourism companies) PFPDF FOREST OWNERS 100% 85% 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$) during payment period Water supply 40 VND/m3 (0,002$) 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

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

DETERMINATION OF K COEFFICIENT K1 – Forest condition and yield: 1.00 - reach; 0.95 - average; 0.90 - poor and rehabilitated K2 – Forest use: 1,00 - Special use; 0,95 - Protective ; 0,90 - Production K = K1* K2* K3* K4 K3 – Forest origination: 1,00 - natural; 0,90 - planted K4 – Level of difficulty of protection: 1,00 - very difficult; 0,95 - difficult; 0,90 - less difficult 17

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

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

EXISTING INCOMES OF VNFF Hydro-power Tourism Clean water suply

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’)

INITIAL RESULTS AND ACHIEVEMENTS (Cont’)

SHORTCOMINGS, DIFFICULTIES AT CENTRAL LEVEL 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. AT LOCAL LEVEL 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. AT FES USERS 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.

Q & A Thank you and willing to receive your feedbacks/comments! 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, 2nd floor , B9 building, MARD No.2, Ngoc Ha, Ba Đinh , Hanoi, Vietnam. Phone: ++(84) 912233871; Email: luong_phamhong71@yahoo.com