Payments For Environmental Services In Vietnam: Assessing An Economic Approach To Sustainable Forest

Payments for Environmental Services in Vietnam:

Assessing an Economic Approach to Sustainable Forest

Management

Bui Dung The

Hong Bich Ngoc

August 2006

Comments should be sent to:

Bui Dung The Chair, Department of Agricultural and Environmental Economics,

College of Economics, Hue University, 100 Phung Hung, Hue City, Vietnam. Email:

[email protected]; [email protected]

Hong Bich Ngoc, Lecturer, Faculty of Forestry, College of Agriculture and

Forestry, Hue University, 102 Phung Hung, Hue City, Vietnam. Email:

[email protected]

EEPSEA was established in May 1993 to support research and training in environmental

and resource economics. Its objective is to enhance local capacity to undertake the

economic analysis of environmental problems and policies. It uses a networking approach,

involving courses, meetings, technical support, access to literature and opportunities for

comparative research. Member countries are Thailand, Malaysia, Indonesia, the

Philippines, Vietnam, Cambodia, Lao PDR, China, Papua New Guinea and Sri Lanka.

EEPSEA is supported by the International Development Research Centre (IDRC); the

Swedish International Development Cooperation Agency (Sida); and the Canadian

International Development Agency (CIDA).

EEPSEA publications are also available online at http://www.eepsea.org.

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ACKNOWLEDGEMENTS

The authors would like to thank the following individuals and institutions that

assisted in the preparation of this study:

The Economy and Environment Program for Southeast Asia (EEPSEA), especially

Dr. David Glover, Dr. Herminia A. Francisco, Dr. Nancy Olewiler, Dr. Paul J. Ferraro and

Dr. Wiktor L. Adamowicz for their invaluable guidance, comments and suggestions during

all phases of the study.

Dr. Nguyen Van Phat, Rector of the College of Economics, Hue University for

administrative arrangements and the research team, especially Mr. Pham Xuan Hung and

Mr. Le Trong Thuc for their cooperation in undertaking research activities.

The staff of the Department of Agricultural and Rural Development, Thua Thien

Hue Province and the Agricultural Office of Nam Dong district for their institutional

arrangements and support in collecting much-needed data and information.

The people of the communes of Khe Tre, Huong Phu and Xuan Loc of the province

of Thua Thien Hue especially the farmers who joined the experiment for their support and

cooperation.

Other institutions and individuals who provided assistance in the implementation of

this study.

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TABLE OF CONTENT

ACRONYMS .....................................................................................................................................................iv

ABSTRACT........................................................................................................................................................v

1.0 INTRODUCTION.........................................................................................................................................1

1.1 The Research Problem .................................................................................... 1

1.2 Research Objectives and Research Questions ................................................ 2

1.2.1 Research Objectives............................................................................... 2

1.2.2 Research Questions................................................................................ 2

2.0 LITERATURE REVIEW..............................................................................................................................3

2.1 Payments for Environmental Services ................................................................ 3

2.2 Environmental Services....................................................................................... 4

2.3 Challenges and Issues in the Design and Implementation of PES ...................... 5

2.4 World Wide PES Experience .............................................................................. 7

3.0 PES CONTEXT IN VIETNAM....................................................................................................................8

3.1 Forest Resources.................................................................................................. 8

3.2 Legal Framework ................................................................................................ 8

3.2.1 Ownership .............................................................................................. 9

3.2.2 Forest and Forest land Contracts and Allocation................................. 10

3.2.3 Benefit Policy....................................................................................... 10

4.0 THE EXPERIMENT...................................................................................................................................13

4.1 Proposed Forest Management Practice and Stakeholders................................. 13

4.2 Project Implementation and Monitoring ........................................................... 14

4.2.1 Institutional Arrangement .................................................................... 14

4.2.2 Eligible Farmers, the Control Group and WTA Prices........................ 15

4.2.3 Contracts and Payments....................................................................... 16

4.2.4 Monitoring ........................................................................................... 16

4.2.5 Interviewing Relevant Governmental and Non-governmental

Officials ........................................................................................... 17

4.3 Selected Characteristics of the Households Involved ....................................... 17

5.0 WTA PRICE AND DETERMINANTS OF ADOPTION...........................................................................20

5.1 Distribution of the WTA Price .......................................................................... 20

5.2 Factors Influencing Adoption............................................................................ 21

5.3 Analytical Procedure ......................................................................................... 22

5.4 Regression Estimation Results .......................................................................... 23

6.0 SOCIO-ECONOMIC AND ENVIRONMENTAL IMPACT .....................................................................26

6.1 Socio-economic Impact..................................................................................... 26

6.2 Environmental Impact ....................................................................................... 27

7.0 TRANSACTION COST..............................................................................................................................30

7.1 Some Practical Considerations.......................................................................... 30

7.2 Estimated Transaction Costs ............................................................................. 30