Project summary viet nam PFES

Updated: February 2014 Support for the National Roll Out of Payment for Forest Environmental Services PFES and Benefit Sharing Mechanisms in Viet Nam A Project of ADB’s Poverty and Env

Updated: February 2014

Support for the National Roll Out of Payment for Forest Environmental Services (PFES)

and Benefit Sharing Mechanisms in Viet Nam

A Project of ADB’s Poverty and Environment Program (PEP)

A Basics

 Total project cost: $369,605

 PEP funding: $344,605

 Approval date: July 2011

 Implementation period: October 2011 – October 2013

 Main project partner: Quang Nam Department of Agriculture and Rural Development

 Project officer: Lauren Sorkin, ADB Viet Nam Resident Mission

 Type of intervention: Pilot intervention

 Focal area: Natural resources and sustainable livelihoods

B Background

Viet Nam is one of the 10 most biologically diverse

countries in the world, possessing natural ecosystems

from tropical jungles to dry forests, mountains,

wetlands, and marine ecosystems Recognizing that

these ecosystems are essential to human life, the

government advanced a policy framework to assign

values to ecosystem services and to enable payments

for forest environmental services (PFES) to be

collected and disbursed to resource managers

PFES is a market based system under which people

receive compensation if they provide forest protection services The Safeguards benefit-sharing mechanisms (BSM) approach undertaken in previous ADB activities are mandatory People get paid whether they provide an environmental service or not The challenge is to combine both sets

of payments Under the PFES decree, payment mechanisms are more flexible In Lam Dong, households Forest Management Boards, and the DARD got together and worked out a system of payments and service provision over a period of about 3-4 months of discussions and finalization

of the mechanism

ADB had been working with the Electricity and Regulatory Authority of Viet Nam (ERAV) since

2006 to design BSMs to provide social safeguards through support for environmentally sustainable livelihood activities for affected peoples in areas of hydropower investments This work, which has been undertaken to support the 210-megawatt A Vuong hydropower project in Quang Nam province, helped pilot successful approaches to sharing the financial compensation payments provided to affected peoples as a result of the project

Viet Nam’s Decree 99/2010, issued in January 2010, mandates nationwide application of PFES schemes for the following services: (i) soil conservation, reduction of erosion, protection against sedimentation of reservoirs and river beds, (ii) regulation and maintenance of water supply for production and social life, (iii) absorption and storage of carbon, (iv) protection of the natural landscape of forest ecological systems for tourism purposes, and (v) provision of breeding grounds, food supply, and water resources necessary for aquaculture

The types of safeguards payments made under the A Vuong BSM agreements differ from PFES payments BSM payments are made to compensate households that have been physically displaced or whose economic activities have been disrupted by a hydropower investment Payment for ecosystem services mechanisms are paid to households providing forest protection services Forest protection services are provided in expectation of an increased profit to a hydropower facility through reduced plant and operating costs via avoided siltation Under the PFES Decree 99/2010, a larger group of individuals in Quang Nam Province is entitled to receive payments from ecosystems services provided to the hydropower investment, as stipulated by the PFES Decree A combination of compensation payments through BSM mechanisms and forest protection contracts under Vietnam’s PFES decree represents strong potential to strengthen ADBs safeguards approach, improve livelihoods of displaced and/or economically disrupted families, and improve returns to hydropower investments

Under Decree 99, MARD successfully assigned values for the first three services outlined in the decree and began to collect revenues However, capacity at the provincial scale, the basic level

at which Decree 99 intends the PFES to be carried out, is lacking Key challenges to the

scaling-up and widespread implementation of the PFES identified by authorities include lack of reliable forest information, and lack of financial resources and capabilities Provincial authorities particularly point to the cost and time required to survey forest resources and issue individual household contracts as a major constraint

C Summary of PEP assistance

The objective of the project was to pilot a new benefit sharing mechanism under the PFES Decree, testing and expanding the model developed in Quang Nam province with a new type of revenue stream The project expanded the existing benefit sharing mechanisms (BSM) to distribute payments for forest ecosystem services (PFES) in the forested watershed catchments upstream

from two hydropower projects – A Vuong and Song Bung 4 – in Quang Nam province In five villages, the project tested an adapted PFES approach based on PFES Groups rather than individual households, providing a model that is less resource-intensive and consequently more realistic for scaling up at a provincial level Finally, the project assisted the project preparation committee in developing a provincial plan for PFES implementation, with this plan integrated into the overall provincial plan for forest protection and development that is currently being prepared

As stated in the original proposal, the TA had four main planned outputs:

 Output 1: Economic evaluation of environmental services standardized at the provincial level The TA will analyze the valuation and pricing of environmental services in Viet Nam compared to other developing countries in the region (India, People’s Republic of China) and outside the region (Costa Rica, Ecuador, Kenya) through a desk study The TA will then carry out pilot projects to collect PFES for aquaculture and forest carbon Building on this work, the TA will produce a roadmap for integration of potential additional values in national and provincial socioeconomic development planning, including the use of decision support tools To support provincial level implementation, the TA will also develop

an assessment of management options for provincial level socioeconomic development planning and sector master planning

 Output 2: Mechanisms for PFES valuation, management, and distribution piloted and institutionalized The TA will produce a gender-sensitive streamlined regulatory framework for forest patrolling and PFES management, including guidelines for (a) integration of ecosystem service values into provincial level planning and budgeting cycles, (b) transparent accounting of PFES collection and benefit distribution, and (c) monitoring and evaluation of PFES implementation using geographic information systems for integration with existing forest inventory and land use planning efforts

 Output 3: National and provincial policymakers provided the capacity to value ecosystem services and integrate them into economic development planning A gender-sensitive impact assessment of PFES pilot schemes and an institutional mapping exercise and baseline survey of the capacity needs of target policy makers and stakeholders will be carried out so as to build support for implementation of the improved PFES approach Results of the mapping and capacity assessment will be used to develop a female-friendly capacity action plan, and a PFES “champions network” will be set up

 Output 4: Best practices and lessons captured and shared Viet Nam is a leader in PFES implementation To enable it to continue to build national and regional capacity, a communications and knowledge management plan will be developed

The project is expected to continue to collaborate closely with other related national level initiatives By supporting outputs 3 and 4, the project aimed to build more lasting capacity for continued improvement in PFES implementation

To support the achievement of these four outputs, ADB recruited a team of consultants consisting

of the following: Team Leader / Benefit Sharing Specialist; Benefit Sharing Specialist; GIS

Resource Person; GIS Specialist; and Environment / Livelihoods Specialist

The pilot intervention consisted of the following activities:

 Economic evaluation of PFES in the areas of the A Vuong and Song Bung IV

hydropower projects to determine appropriate levels of PFES payments

 Capacity Development workshops for Department of Agriculture and Rural Development

(DARD), provincial-level Departments of Natural Resources and Environment

(DoNREs), Department of Industry and Trade (DOIT) and utilities on valuation of

services and monitoring and evaluation

 Monitoring stations set up to establish a baseline and monitor PFES in project areas

 For each of the two hydropower projects (A Vuong and Song Bung IV), a plan to collect revenue from the hydropower stations and distribute revenue to households in

communes within the watershed

 For each of the projects, contracts between buyers and sellers of the PFES to implement the plan over a set period of time associated with investment and operation of the

infrastructure project

 A final report disseminated in English and Vietnamese

Using the project investment of $344,605, the project was able to establish contracts with 1,051 households in 15 villages through PFES groups and advance 3 provincial decisions supporting

PFES implementation With the same budget, a previous project established PFES contracts in only 2 villages

Obtaining government buy-in was a challenge at the outset because the project represented a departure from previous organizations support to PFES in Quang Nam However, once project activities began (in May 2012), the DARD’s establishment of PFES contracts with local communities were able to speed up by 90 percent

D Long-term impacts, sustainability, and lessons learned

The impact of the pilot intervention is increased capacity to apply PFES schemes in Viet Nam The outcome is an investment approach the Government of Viet Nam will mobilize to combine payments from social safeguards mechanisms with PFES mechanisms to improve livelihoods and increase returns to hydropower investments The project set out to benefit local communities

in the immediate areas of ADB’s ongoing hydropower investment and demonstrate that provincial authorities—in partnership with communities and other stakeholders—can scale up PFES largely

on their own The lessons from the project can spur more local actions and intensify PFES implementation across Viet Nam

Through the Provincial Decision on PFES in Quang Nam,

a new investment approach was piloted for distribution of

PFES to household groups Under the Decision, PFES

payments are made to groups every 3 months Of this

payment, 20% to 40% of the total PFES funds received are

set aside for investment in productive activities Household

groups agree on which investments are made in productive

activities, the amount of the deposit, the labor assignment,

purchases and distribution of benefits from revenues

Given successful implementation across 3 impoverished

communes in Quang Nam, Government of Viet Nam can mobilize the same approach to combine payments from social safeguards mechanisms with PFES mechanisms to improve livelihoods and increase returns to hydropower investments

The experience is instructive of the options that may be taken to speed and scale up PFES implementation at a provincial level throughout Viet Nam A group approach to PFES has many advantages Under the approach, 10 or more households from the same village are grouped together to perform forest protection and maintenance services, in exchange for which they receive payments from the Fund for Forest Protection and Development Specifically, the group approach: is much quicker, more cost-efficient, and puts less pressure on the administration, as compared to the approach of individual household contracts; fosters social cohesion and enhances the culture and traditions particularly of ethnic minorities; builds social capital and helps with contacts with outside organizations; and facilitates the establishment of communal livelihood activities The PFES beneficiaries can use these payments for group livelihood activities or as individual household incomes

GIS is a much-quicker and more accurate method for generating forest inventories than detailed ground surveys These inventories, captured in maps showing the location and condition of the forests, are essential to calculating the K-coefficients and PFES payments due to individual communes They also hasten the allocation of forest plots to PFES groups

The process for establishing the PFES contracts and monitoring systems as applied in the project and described in the final report is highly replicable across Viet Nam In addition, this type of project could, with the appropriate legal framework be applied in Lao PDR The project will be upscaled in 2014 with a follow – on grant from the Japan Fund for Poverty Reduction The results are also shared with the GMS Environment Operations Center in Bangkok for their dissemination

to relevant projects in the region

Moving beyond provincial implementation issues, a deeper understanding of payments for environmental services is required in order to mainstream resource accounting in development planning This will necessitate a broader range of ecosystem services and, as indicated in Decree

99, a shared methodology and approach to the integration of ecosystem services in provincial and national economic planning In particular, it is critical that MARD and the Ministry of Natural Resources and Environment (MONRE) cooperate to synchronize land use planning and forest master planning, including ecosystem services accounting

Improvements in provincial implementation require greater accountability at the village, provincial, and national levels To address these issues, a follow on assistance to the project is planned by ADB in 2014 That TA will support analytical studies, pilot demonstrations of payment and accounting systems, policy development, knowledge management, and capacity building