14430 130508 PNKB PFES brochure EN

PFES or PES?For clear use of terminology it should be mentioned that in Viet Nam the term PFES is used, be-cause the legal framework focuses on forests and consequently only refers to pa

A Policy Brief for

FOREST ENVIRONMENTAL SERVICES

in TOURISM

PFES or PES?

For clear use of terminology it should be mentioned that in Viet Nam the term PFES is used,

be-cause the legal framework focuses on forests and consequently only refers to payments for forest

environmental services (PFES) There is currently no legal framework that provides a basis for PES in other types of environments apart from forests In the international scientific discourse, the broader term PES (Payments for Environmental Services) is used

This policy brief (10/2012) draws on the outcomes of two feasibility studies conducted in Ba Be and Phong Nha-Ke Bang National Park on Payments for Forest Environmental Services (PFES)

as regulated under Decree No 99/2010/ND-CP for the environmental services “natural landscape beauty” and “biodiversity conservation” The brief aims to contribute to the discussion on the implementation of PFES in the tourism sector

PAYMENTS FOR FOREST ENVIRONMENTAL SERVICES

in Tourism in Viet Nam’s Protected Areas

1 BACKGROUND: PFES IN VIET NAM’S TOURISM SECTOR

The international scientific community understands the concept of Payments for Environmental Services (PES) as:

“A voluntary transaction where a well-defined Environmental Service (ES) … is being ‘bought’ by at least one ES buyer from at least one ES provider if and only

if the ES provider secures ES provision (conditionality)” (Wunder 2005)

In the case of Protected Areas (PAs), these environmental services are provided by the PA Man-agement Board, preferably with the support of local communities or individuals The service buy-ers are businesses who generate revenues from tourism and tourists who come to visit the PA

Government understanding of PFES in Viet Nam differs from the international discourse Firstly, the state took a strong regulatory role: PES, intended as a market-based instru-ment, is obligatory for certain conditions and embedded in governmental regulations Secondly, since poverty alleviation is one of the main goals of the Vietnamese PFES policy (Nguyen 2009), it is almost impossible to separate forest protection and conservation efforts from poverty alleviation Some critics state that PFES cannot focus on pro-poor issues since this aspect limits the efficiency of a PFES scheme; “the prime focus […] should thus remain on the environ-ment, not on poverty” (Wunder 2008) However, in Viet Nam, many communities are traditionally forest dependent communities, thus a PES scheme not considering impoverished peoples’ needs can hardly work in the long run

Decree No 99 (2010, Art 4) on Payments for Forest Environmental Services, names two en-vironmental services that are applicable to the tourism sector; these are “protection of natural landscape” and “conservation of biodiversity” Therefore, “organisations and individuals doing tourism services that benefit from forest environmental services are required to pay for services for protection of natural landscape and conservation of biodiversity of forest ecosystems serving tourism purposes” (Decree 99/2010, Art 7(4)) Businesses that benefit economically from tourism are required to pay a share of 1-2% of their revenues for Forest Environmental Services (FES) when an indirect payment scheme is applied (i.e an intermediary fund manages the collection and distribution of payments as assigned by the PPC); in a direct payment scheme the amount may be higher (but not lower than 1%) since it has to be negotiated directly between the service provider and service buyer The payments made by tourism businesses such as tour operators, restaurants, hotels or souvenir vendors are intended to financially support the forest protection activities that contribute to the conservation of biodiversity and natural landscape beauty Forest owners or actors contracted by the forest owners, such as organisations, households or village communities, are entitled to receiving payments for ecosystem services (Decree 99 2010, Art 8) Currently, the implementation of Decree No 99 focuses heavily on hydropower plants and water companies as payers for FES Solely the pilot project in Lam Dong Province includes PFES from tourism Here 14 tourism businesses pay 1% of their revenues into the provincial forest protection and development fund (FPDF)

Ba Be National Park

The “Feasibility Study on PFES inTourism in Ba Be National Park, November

2011” was conducted by the GIZ/MARD project “Preservation of Biodiversity

in Forest Ecosystems in Viet Nam” to assess how to implement the parts of

Decree No 99 relating to the environmental services “landscape beauty” and

“biodiversity conservation” Before conducting the study, PFES in tourism was

perceived as relevant in Ba Be National Park (NP) because around 23 000

reg-istered tourists (information provided by Ba Be NP) visited the park in 2010 The

study shows that PFES in the tourism sector could generate total payments of

approximately VND 260 million per year under favourable conditions

Favour-able conditions means that all the revenues from hotels, homestays, souvenir

vendors and tour operators are accurately identified and reported to the tax

office and each visitor buys an entrance ticket to the Ba Be NP This situation

is currently not given Payments for FES applying the indirect mechanism are

expected to be low These low payments would not justify the transaction costs

of a PES mechanism; neither would they provide any incentive to the service

providers The study concluded that the implementation of a PFES mechanism

based on payments from tourism businesses is not feasible under current

cir-cumstances due to various major challenges

ASSESSING THE FEASIBILITY OF THE IMPLEMENTATION OF PFES

Phong Nha - Ke Bang National Park

The GIZ project “Nature Conservation and Sustainable Management of Natural Resources in the Phong Nha-Ke Bang National Park Region” assessed the feasibility of the implementation of PFES in tourism in the project region The study was encouraged by much higher visitor numbers (in 2011: 360 000) in the Phong Nha-Ke Bang (PNKB) National Park compared to the visitor num-bers in Ba Be NP (in 2010: 23 000) and built strongly on the results and lessons learned of the

Ba Be study It was assumed that higher amounts of PFES would be generated Furthermore, the study aimed to verify the findings of the Ba Be study and to identify additional challenges as well

as opportunities for the implementation of PFES from tourism In addition to collecting PFES in tourism businesses, the feasibility of introducing an additional visitor payment for environmental services was assessed

The study showed that PFES in tourism in PNKB NP could generate approximately VND 533 million per year: including many different stakeholders, for example hotels, souvenir vendors, and tour operators This estimation, however, is vague since it is based on favourable conditions Similar to the Ba Be NP, favourable conditions are not given in PNKB In addition, this number differs significantly from the assessment of the potential tourism PFES rates carried out by DARD-Quang Binh (September 2012) They calculated annual PFES of VND 332 million based on 1% of the revenues of the PNKB PA tourism centre and the revenues of one privately managed tourism attraction These different numbers show how challenging it is to identify the payers; and that the current regulations leave much room for interpretation in terms of who are potential payers and who are not

ASSESSING THE FEASIBILITY OF THE IMPLEMENTATION OF PFES

3 Identification of Potential Payers

Organisations and individuals operating in the tourism sector that benefit from forest environmental services have to pay for protection activities of natural landscape and conservation of biodiversity of forest ecosystems serving tourism purposes (Decree No 99, Article 7)

One of the many challenges for PFES is to define which of the service users should be included

as payer; including each and every stakeholder benefitting from the environmental services would encounter many administrative challenges Stakeholders are diverse in terms of business loca-tion; business size and products (local souvenir vendors and boat operators as well as a few large-scale businesses such as private investors and hotel chains) The case of tour operators and hotel owners illustrates how challenging the identification of payers is: Tour operators offer different tourism services - a visit to a PA might be the only stop on a tour, or part of a larger tour For example, many tourist visiting Ba Be NP combine this visit with a tour through Ha Giang prov-ince In the case of the PNKB NP, the park is also sometimes part of a larger tour Consequently,

it is difficult to determine how much each tour operator benefits from each visit to the PA and to estimate the revenue for the payment for ecosystem services

A similar problem exists regarding hotels The PNKB study revealed the following: most visitors spend the night in the provincial capital Dong Hoi and organise a day-trip to the 40km off PNKB

NP It is therefore difficult to identify how much hotels in Dong Hoi should pay as PFES contribu-tions, since the hotels only generate part of their income from tourism to PNKB, but also from beach tourism and business visitors Consequently, only local hotels adjacent to the PNKB NP may remain as payers These hotels are mostly small in scale; thus making them the sole payers

of PFES would additionally burden them, while larger beneficiaries get away without any pay-ment

CHALLENGES FOR PFES IN TOURISM

Within which boundaries are the Forest Environmental Services “natural landscape beauty” and

“biodiversity conservation” provided? The studies started with the assumption that the provisioning

area for the environmental services “landscape beauty” and “biodiversity conservation” is within the bound-aries of PAs However, the question was soon raised whether it is appropriate to limit PFES to the PA boundaries, considering that the buffer zone is important for the conservation of biodiversity in the PAs, which is why they require special management A key consideration must be whether the distinction be-tween PA and buffer zone makes sense in the case of PFES, as villages within both areas can contribute

to providing ES Defining the provisioning area has consequences for the distribution of payments among the providers The current legal framework does not give guidance of the definition of the provisioning area There is a need to define the spatial dimension of landscape beauty and biodiversity conservation within the legal framework for PFES

Possible negative impact of PFES When a tourism business is charged with PFES it is likely to translate this

charge into a higher price which the tourist needs to pay If this is not possible the business would pay for FES out

of their profit Interviews in PNKB have shown that local small scale tourism businesses see difficulties passing the PFES payments on to the tourists since many cannot increase the prices of their products easily These small scale businesses are often run by locals who are pursuing alternative income opportunities to the use of natural resources Requesting these small scale businesses to pay for FES could be counterproductive to the strategy supporting local livelihoods by opening small scale tourism businesses and then putting an additional burden on them through PFES

How can this problem be addressed?

Selection of Potential Payers

A solution could be the elaboration of distinct criteria for potential payers in the regulatory frame-work These criteria could e.g refer to business location and revenue levels: small-scale busi-nesses could be excluded from the payments since their payment level would be insignificant, particularly in comparison to the contribution of larger-scale tourism businesses Furthermore, small-scale businesses often do not have adequate book-keeping records; this makes it challeng-ing to identify the revenue upon which the payments are based Includchalleng-ing all small-scale busi-nesses might lead to high administration costs compared to the payments made

PES Ticket for Tourists in PAs

Tourists use the environmental services The current regulation states that tourism businesses have to make the payments from their revenue In this context, tourism businesses are likely to hand over the costs of their PFES payments to their customers by increasing their prices

In this section, the term PES is used because the payments for environmental services are made directly by visitors, and these payments are currently not covered by Decree No 99

One option for avoiding the challenge of identifying payers and transaction costs could be the introduction of a PES Ticket for tourists visiting a PA; such an additional (on top of the normal entrance ticket) visitor payment would target tourists directly This option was identified as more feasible in regards to income level and administrative costs by both scoping studies In many PAs, visitors have to pay an entrance fee, either for entering the park itself or its different sights There-fore, asking tourists to pay directly for the environmental services at these ticket offices would not lead to much higher administrative burdens Applying this additional PES ticket needs to be ac-companied by the provision of clear information and awareness-raising among tourists about the differences between the entrance ticket and the PES ticket; this could be done at the ticket office

In order to implement this scheme, tourists need to be included in the legal framework as direct potential payers for environmental services Clear guidance on how to define the PES visitor pay-ment would be needed

8

Identification of Providers

According to Decree No 99, the PA management board is considered the forest owner and thus the provider of FES and receiver of payments The PA has the option to contract local households; thus involving them in protection activities and including them as providers of FES

One of the difficulties in defining providers is that the PA itself sometimes fulfils multiple roles:

In the cases of Ba Be and PNKB, the Management Boards of PAs are providers of FES and

payers of PFES at the same time since both include a tourism centre that sells entrance tickets for its main sights and supplies tourism services This makes the mechanism difficult

to monitor and raises questions about the usefulness of PFES if the PA ends up making payments to itself either directly or through the Forest Protection and Development Fund Ultimately, this issue needs to be addressed as it undermines the effectiveness of the PFES mechanism

Local communities and individuals only receive benefits under a PFES scheme if the PA management board has contracted them for park protection tasks Thus, the payment can fall short of contributing to the objective of poverty alleviation in cases where no protection contracts are in place

Actors entitled to receive payments for ecosystem services are forest owners and actors contracted by the forest owners that are state organisations Contracted actors can be organisations, households or village communities (Decree No 99, Article 8)

How can this problem be addressed?

A way to address this problem would be for the PA management board to sign protection

con-tracts with locals In reference to this, lessons learnt from the programmes 661 and 147 can be used in order to reduce inefficiencies in signing contract for protection with local households For example, experiences indicate that the level of income from protection activities is of high relevance for protection effectiveness: if the payments are too low, the income might not be a relevant protection incentive for the contract holders

For instance, buffer zone households can be included in park protection through co-patrolling activities including park rangers and local communities In this context, Decision No 24 (2012)

on Investment Policy for Development of Special-Use Forests promotes the inclusion of local people in protection work, but does not specify how co-management can be integrated into a PFES scheme Similarly, the national Forest Protection and Development Plan for the period

2011 – 2020 (Decision No 07) requests PA management boards to work out co-management mechanisms with local communities based on the principle of sharing responsibilities for forest protection and development

Generally, the transparency of the payment mechanism has to be ensured; especially in those cases in which the PA is payer for and provider of FES at the same time A PFES mechanism needs to be placed under the supervision of a governmental agency such as the PPC or a civil society organization, and financial records of the payment flows should be available to all actors involved and the public

Identification of Payment Mechanisms + Differentiation from other Financing Instruments

Decree No 99 gives directions on how to set up a payment mechanism under a PFES scheme; these payment mechanisms can be either direct or indirect However, in practice there are many misinterpretations of the legal regulations The PFES study in PNKB NP detected two main mis-conceptions, particularly regarding the direct payment mechanism

The direct payment mechanism for PFES is currently applied without agreeing with the payers

on the payment level For example, a misunderstanding exists in relation to tour operators The PNKB NP signs contracts with tour operators allowing them to organize group tours to a cave located inside the PA and charges VND 500.000 per group member The NP regards these pay-ments as ‘environmental services paypay-ments’, even though the paypay-ments are not based on nego-tiations between the NP and the tour operators

The direct payment mechanism is not clearly differentiated from a concession payment, which is

a different financial instrument For example, an area of 55 ha of the PNKB NP has been leased for 50 years starting in 2011 This payment mechanism is a direct payment to the NP and the payment amount is 1% of turnover for the first five years and then 1.5 % for the remaining years The main actors involved consider this contract as a PFES contract while the contract has more

in common with a concession for forest lease A concession would probably lead to higher pay-ments to the PNKB NP

PFES from tourism is paid for conserving and

main-taining the landscape beauty and biodiversity of the

PA

Tourism concessions are paid to conduct business

in the PA – like a permit to operate a business

with-in the PA Currently, the status of concessions with-in Viet Nam is still unclear and guidelines are needed PFES is a contract between beneficiaries and

pro-viders of ecosystem services The PFES can be

paid directly or indirectly via a provincial fund

Tourism concessions are a business contract be-tween the PA and tourism businesses

PFES is relevant to all tourism business which

ben-efit from the landscape beauty and biodiversity

This also includes tourism businesses that are not

directly active in the PA

Tourism concessions are only relevant for tourism businesses that directly operate and gain business within the National Park

How can this problem be addressed?

The differences between various finance mechanisms for PAs and when they are to be applied

is not well defined in the current legal framework For instance, Decision No 24 (2012) mentions different financial instruments but does not define differences

Regulations and guiding documents on PFES and concessions should make a clear distinction between PFES and concessions so that further misunderstandings can be prevented

Direct Payment (Decree No 99 (9)): “Suppliers and users of forest environmental services agree by

them-selves on the types, levels of payment, and methods of payment for forest environmental services in line with the regulations in this Decree and other relevant legal regulations […], the levels of payment must not

be lower than the levels of payment stipulated in Article 11 of this Decree.”

Indirect Payment (Decree No 99 (11)): “The level of payment for forest environmental services is 1-2% of

the revenue generated in the payment period Provincial People’s Committees are assigned to determine those having to pay …”