3rd Mekong Forum on Water, Food & Energy 2013. Policy brief from Sessions 3 & 5: Extending the benefits of hydropower: Clever suggestion or realistic goal?

1. POLICY BRIEF
Piloting Payments for Forest Environmental Servicesin
Lam Dong: Lessons for national scaling up in Vietnam
Introduction:
Deforestation has been occurring widely in Vietnam threatening the key environmental resources
and livelihoods of communities, particularly ethnic minorities living in upland Vietnam.
Payment for Forest Environmental Services (PFES) program can protect forest while also
improve the livelihoods for communities.
From 2008 to 2010,the Decision 380/QD-TTg indicated that policy on Forest Environment
Service Payment (PFES) have been piloted in Lam Dong and Son La provinces.The main
objectives are to socialize the protection of forest protection and development to improve
livelihoods of forest laborers and to eradicate hunger, and reduce poverty for the mountainous
and forest areas. Hue College of Economics has conducted the research to evaluatethe
performance and impacts of the pilot PFES program, and draw lessons learnt to build a national
policy implementation for scaling up the adoption of PFES throughout the country.
Scope of problem
Poverty and Deforestation
Viet Nam’s uplandregion has the highest rates of poverty, particularlyethnic minority
communities living in forest the incidence of poverty is highest.The livelihood of poor
households has been tend to be subsistence with access to forest is dominant practice byillegal
logging to forest for timber and woods, forest slash and burn/encroachment for agricultural
cultivation, thus leading cause to deforestation occurring widely in Vietnam.
Forests play a critical role in supporting livelihoods of the poor and providing diverse
environmental services. Deforestation is the leading cause of environmental problems such as
climate change, biodiversity degradation, and soil erosion which, inverse, have been threatening
the livelihoods of the poor in this region.
The PFES: Effective national program on forest management and poverty reduction:
The PFES is first self-reliance budget program on forest management and poverty reduction. It
generated about US$ 4.46 in which hydropower plants paid about 89 percent of total PFES Fund.
PFES program has engaged 7997 households, in which 6858 households are ethnic minorities in
forest allocation and protection. PFES has resulted in enhance protection of 209,705 hectares of
forest land. The PFES scheme has increased about 30% of total annual income of participants
(about VND 10.5 – 12 million). The participation in PFES program after two years of its
implementation has reduced about 50 percent of households from the poverty line. This shows a
strong economic impact of the PFES program to local households in Lam Dong province.
PFEShas become incentive scheme to improve the participation of households, particularly
poverty households in forest protection. PFES participants were grouped to protect the certain
forest area. Each group worked as community-based forest management. It means that more
people and more time spent for forest management as each household in each group has the same
responsibility and time allocated for forest protection.As the result, the area of forest

2. invaded/encroached has been reduced and the number of reported cases of illegal logging and
wildlife poaching decreases by 50 percent.
The following bullet points are raised for central government and provincial ones to increase the
sustainability in PFES organization and implementation:
Recommendation for action
Right household selection, better poverty reduction
Defining and selecting the right households for PFES participation will increase the
impacts of program on the poverty reduction objective.
Clear responsibility of stakeholders:
Defining clear responsibility among PFES stakeholders, particularly PFES service
providers is one of the most important factors to enhance the participatory willingness of
PFES stakeholders,
Increasing the surveillance of the quality of forest services and responsibility of PFES
providers in maintaining the quality of forest will increase the sustainability of PFES
implementation.
Diversifying the PFES service users will increase the consensus in achieving objectives
of PFES program.
Defining the K-coefficient index needto take local voices into account will increase the
equity in PFES payment rate among households living in different catchment areas.
Transparency in PFES fund allocation and management
Increasing the transparency in PFES fund allocation and management among
stakeholders, thus leading to enhance the willingness to participate in PFES program.
Eliminating the subtraction of 10% of total PFES payment for management cost, thus
leading an increase in budget for households in order to incentivize them to protect the
forest.
Increasing the stakeholders’ participation in PFES Fund collection and management will
increase the sustainability of PFES.
Incentivizing household involving in PFES:
Defining PFES payment rate for household should base on the quality of forest of
households. An application of K-index = 1 does not incentivize households to invest
more time and labor in forest protection.
Ensuring PFES payment rate for households in coming period, which should not be lower
than the payment level of previous payroll is important factor in order to incentivize
households putting more effort in forest protection.
By HCE Team
Correspondent: Bui Duc Tinh
Hue College of Economics, Hue University
100 – Phung Hung, Hue City, Vietnam
Email: bdtinh@yahoo.com.sg
Cell phone: (+84) 0914 519 058