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MEETING REPORT
Steering Committee Meeting for ACIAR Project ADP/2014/047
Improving policies for forest plantations to balance smallholder, industry and environmental needs in Lao PDR and
Vietnam
Hue, Vietnam, 17-18 January 2017
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1. INTRODUCTION
The project “Improving policies for forest plantations to balance smallholder,
industry and environmental needs in Lao PDR and Vietnam” (ADP-2014-047) is
funded by Australian Centre for International Agriculture Research (ACIAR) and
being undertaken with research and government partners in Lao and Vietnam.
The project aims to provide policy options that achieve national goals for tree
plantation industry development in the two countries through improved linkages
between commercial investment and smallholder production and improve the
capacity of researchers in Lao PDR and Vietnam in policy research and economic
and social analyses. This can lead to improved economic, environmental and
community livelihood benefits from plantations. The project has a total funding of
$999,866 AUD and officially commenced its activities in April 2016.
As specified in the project document, a Project Steering Committee was formed
to provide advice and guidance on the implementation of the project and on the
adoption of project outputs in policy. Members of the Steering Committee are
Prof. Vo Dai Hai (VAFS, Vietnam) Mr. Le Van Bach (VNForests, Vietnam), Dr
Chansamone Phongoudome NAFRI (Lao PDR) and Mr. Bounpone Sengthong
(Deputy Director General Department of Forestry, Lao PDR).
Mr Bach could not attend the meeting due to an emerging commitment.
2. MEETING OBJECTIVES
• To inform Steering Committee members on the progress of project
activities.
• To exchange knowledge on recent developments in forest plantation
policies in the two countries and consider the relevance of the project to
these developments
• To discuss the mechanisms for adoption of project outputs and findings
in policy processes in Laos and Vietnam.
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3. PARTICIPANTS
Twenty participants from government agencies and partner research institutions
and from Australia, Lao and Vietnam attended the meeting. List of participants
and their contacts is provided in Annex 1.
4. PROGRAM
The meeting was opened by Professor Vo Dai Hai. The program included
presentations on developments in policy in Lao PDR and Vietnam, presentations
on progress and achievements and discussion of policy adoption pathways. The
agenda with details of presentations is provided in the Annex 2.
On the 18th January, meeting participants went on a field tour to look at
smallholder plantations and processing facilities in the Huong River valley near
Hue.
5. KEY POINTS FROM PRESENTATIONS 5.1 Project Relevance
The project ADP-2014-047 remains highly relevant in both countries. Specifically:
• It will provide information to support new Lao Government forest policy
especially: Forest strategy 2020, Forestry Law review, PMO 15. Decree
96/PM, PMO 13.
• Priorities are to (i) continue data collection from local farmers, who are
affected by and may affect policy implementation (e.g. plantation
registration, land concession issues); (ii) participate in various meetings
to understand new issues (challenges from current situation) and (iii)
present and share research findings with policy makers and other
stakeholders
• The GOV of Vietnam has a stronger focus on Sustainable Forest
Management demonstrated in the new policies (see the table 1 below).
The revision of Forest Development Law is underway. In addition,
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Vietnam is working towards PEFC adoption and VAFS is playing a key
role in designing a national set of PEFC criteria. REDD+ policy is also
under development this year. This is a key opportunity for policy input in
2017.
5.2 New policy development and priorities in two countries (Presented by Dr Tran Dai Nghia and Dr. Somboune Sayavong)
Table 1 below is a summary of the new policy developments and priorities for 2016.
Table 1: Policy Development and Priorities in 2016
Policy developments New developments and priorities
LAO PDR
Overall Objectives of FS 2020: • To contribute to achieve the indicative targets of the national
socio-economic plans, • To provide goods and services to the economy and the
society, • To reduce dependence and increase concrete efforts to
manage sustainably the country’s natural resources. • To bring forest cover back to historic levels (70%) by 2020 • To stop shifting cultivation; completing land use planning and
allocation; strengthening the legal framework, forest management and law enforcement; increasing local peoples’ participation and benefits from forest management;
Outcomes of FS2020 • Outcomes of the recent review of FS2020 implementation
suggest that about 60% of the proposed 146 action plans have been completed and are ongoing.
• 268,000 ha of rubber and 74,000 ha of eucalypts have been established.
• As is required of every sector in Laos now, the forestry strategy will be redesigned to 2025 with a vision formulated for 2030. The current policy does not include new mechanisms such as REDD+, and does not address some of the major deforestation and degradation drivers that impact the forests at the current time such as hydropower, mining, cash crops and other development projects, as well as the high regional timber demand and improved road access leading to uncontrolled logging. These will be integrated in the new policy.
• Prime Ministerial Order No.15 (PMO 15) bans the export of unfinished products made from wood harvested from natural forests. Plantation-grown wood was included in this ban although some measures are being made to allow some plantation wood exports to recommence.
• Forest Strategy is under review and new vision to 2030 is under development.
• Restructuring of agencies is occurring with Department of Forest Resource Management (and consequently responsibility for all forest categories) moving back to DOF. Agency mandates not yet clearly specified.
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• Some projects had not complied with initial agreement of concession for investment in forestry plantation. They had not implemented as in the agreement/objective of the project, more land acquisition, change ownership.
• Lack of coordination between concerned local and central authorities. Consequently, approval on land use for forestry plantation is not consistent. This has resulted in some concession areas covering local people’s land. Compensation has not been adequate
• Land allocation process to families is incomplete. • Lack of coordination between provincial/district and central
governments. • Comprehensive rule and regulations. e.g plantation
registration – barrier for small holder plantation
Priority Policy Areas in Laos • Review of Decree 96/PM o plantation promotion and investment • Review of the Forestry Law • Review of the Land Policy and Land Law
VIETNAM
• Forest sector growth is 6.5%, compared with general agricultural sector growth of about 1%. Priorities are to scale up the area of plantation timber, motivate timber firms in supply chain partnerships.
• Payment for Ecosystem Services increasing from US$60M to US$85M in 2017. Primarily through tax on electricity producers.
• New Policies in 2016 • Decision No. 83/QD-BNN-TCLN (2 Jan. 2016) on project for
SFM & Forest certification. • Resolution No. 73/NQ (28 Aug. 2016): Target program on
sustainable Forestry Development
• Scaling up area of plantation timber by establishing Grower Association of Tree planting;
• Motivating Timber industry firms involving in Supply chain of timber production through partnership mechanism;
• To issue a number of policy documents for specifying the provisions of the New Forest Law
• To providing scientific evidence for revising and improving existing forest policies
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• Decision No. 38/2016/QĐ-TTg (14 Sep. 2016): forest protection, development and forestry infrastructure support toward 2020
• Decree No. 119/2016/NĐ-CP (23 Aug. 2016): sustainable management and development of costal forests to response to CC
• Decision No.49/2016/QĐ-TTg (1 Nov. 2016): Regulations/Rules of forest production management
• Circular No. 21/2016/TT-BNNPTNT • Decree No. 147/2016/NĐ-CP (2 Nov. 2016): revising several
article of Decree 99 on PFES; • Revision of Forest Development Law is underway – key
opportunity for policy input in 2017.
5.3 Project Progress, Outputs and Challenges Project is generally on track. Most activities are ahead or meeting the target
output dates. Key challenges
• Coordination across multiple partners and activities
• Rapidly developing policy scene in both countries
• Changing company arrangements in Lao PDR
• Engaging with and avoiding duplication and overlap with other activities
5.3.1 Component 1.2 - Policy analysis (Presented by Hilary Smith) Framework documents have been produced that provide a detailed description
of current policy and regulation covering tree plantations in both countries.
Key issues emerging from interviews with policy makers in Lao PDR were:
unclear and inconsistent policies, the capacity to develop and implement policy,
conflict and coordination between departments and levels of government,
coordination with industry, sound information on which to make decisions, market
access and transport, land allocation and concession issues, certification and
environmental standards, wood quality and value adding.
Key recommendations for both countries:
• Clarify vision for plantations, & align policies to support this vision
• Continue current reviews of plantation-related policy
• Differentiate plantation from natural forest policies
• Policy & agency coordination; communicate outcomes
• Review impacts of policies related to woodchip exports
• Improve relevant inventory and statistics
• Critically assess legality and certification options
• Explore options to enhance cooperation between actors
• Build capacity in policy development/ implementation
5.3.2 Component 2.1 - Household benefits and livelihood assessments (Presented by Huynh, Barney, van der Meer Simo)
Table 2 below is a summary of the three presentations on household benefits and livelihood assessments conducted in Lao and
Vietnam
Table 2: Household Benefits and Livelihood Assessment in Lao and Vietnam
LAO PDR VIETNAM • Focus of concessions is on degraded land, but this may not
actually be under-utilised or un-productive land. • Company investment is benefitting communities through
employment, land rent payments and village development funds but this is relatively limited and not a major contributor to household livelihoods.
• Evidence of limited involvement of most households in the decision to grow trees near the village. Most decisions driven by village heads. The mixed use plantation model of Stora Enso is not well understood.
• Debatable whether plantation development is providing for land use ‘modernisation’ or significant contribution to poverty alleviation.
• Growing populations in villages may mean current shifting cultivation practices are unsustainable. New plantations on fallow land that has been identified as degraded may result in ‘leakage’ and the pioneer clearing of other forest areas.
• About 80% of surveyed households had less than 6 ha of plantations. In one village about 26% of average HH income was from plantations and a further 10% was from labour in the forest sector.
• Significant benefits of plantations to household livelihood (i.e. housing, education, stable employment) income security and diversity (i.e. risk mitigation), financial security (i.e. saving; retirement) and access to loans (both formal and informal)
• Psychological/spiritual benefits in providing hope (i.e. better future; wedding; bigger house), improved self-esteem/confidence (i.e. debt payment; inheritance for children and better offering to the dead; ability to help others; not having to borrow; not having to migrate; social status in community)
• Perceived environmental benefits: soil management, disaster mitigation, regulating climate;
5.3.3 Component 2.2 - Value Chain Analysis (Presented by Tek Meraseni)
Table 3: Value Chain Analysis
LAO VIETNAM
• Communication between the value chain actors is poor • The horizontal and vertical linkages and relationships
between the actors are not strong • FSC certification is not a preferred option for the
Burapha Company
• Demand for woodchip is high, with many buyers. Plantations are providing good financial returns.
• Growing market of certified products: Getting FSC certified saw logs is difficult but selling certified products is easy. For certification to be viable need a minimum unit of 30,000 ha for assessment and a price premium of 12%.
• Many middlemen in a village: Growers are getting benefits due to their competitive nature but there is pressure on traders.
• Growing trend of increasing planting density: Growers believe that the high density plantations will lower the risk of damage by typhoons and hurricanes.
• Timing of thinning for acacia plantations is a little late • NPV and IRR are higher for longer rotation regimes producing larger logs, but
smallholder generally want quick returns and are concerned about the risk of typhoons.
• Smallholders are growing trees at high stocking and not thinning, therefore value of trees is low.
• Virtually no communication among supply chain actors
5.3.4- Component 2.4 - Environment and ecosystem services assessment (Presented by Himlal Baral)
• Planted forests can provide wide range of ecosystem services
• Project team has developed a framework for assessing ecosystem services
from planted forests. This was recently published as a journal article.
• Quantity and quality of ecosystem services may differ – depending on type
of planted forests and management options
• Wide range of approaches and tools available to quantify and value ES from
planted forests
• Policy instruments play important role to encourage landowner to enhance
ES form planted forests
• Financial and regional economic analysis
5.3.5 Component 2.3 - Analysis of economy wide effects of plantation development (Presented by Somvang Phimmavong) Some initial results of financial analysis for different types of investors in Lao PDR
and the framework for regional economic analysis were generated. See
presentation.
5.4 Policy adoption pathways The meeting split into two groups to discuss policy adoption pathways for the two countries.
Table 4: Policy Adoption Pathways
LAO PDR VIETNAM
The policy environment is very dynamic. We need to raise the profile of the project and outputs to get access to the policy making process so that we can: • Provide input into the revision to Decree 96/PM on Plantation
Promotion (draft to be submitted to NA March 2017) • Provide input into the revision to the Forestry Law, which is
occurring through 2017. For example, provide specific contribution with respect to the inclusion of a chapter on plantations (HS is advisor to the review committee so we have good foot in the door)
• Provide input into the review of the Forestry Strategy to 2030 and next Forest Development Plan
• Identify best way to provide recommendations to the review the Land Policy and Land Law, in the context of land allocation and availability for plantations for individuals and companies.
• Meet with other agencies and organisations who are working on plantations and planted forests issue: for example, GiZ, World Bank, FAO, JICA, IFC, INDUFOR, SUFORD, to understand what they are doing, how plantations fit in and to coordinate with them to maximise policy messages to government.
• Explore other avenues such as the Forestry Sub-sector working group and the land issues working group - does ACIAR sit on
• Certification is important. Recent studies in VN have found increased value and market demand for FSC. However, after twenty years of implementing FSC, there is only 200K ha of certified forest. Forestry sector needs to establish a national certification system, aiming to apply PEFC. The country wants its own logo/system. VN has learned from other regional countries that PEFC is a good system and may be suitable for VN. The country is planning to adopt the system this year.
• Another focus is VPA and FLEGT, we will officially sign FLEGT in March with EU. This will have significant impacts in the country.
• Forest Law will be approved end of 2017. This is prime time for us to list a few proposals, its potential content, prepare evidence for these decrees.
• We need to follow the whole the VCA process. This is our key strength and opportunity.
• PM decision on NRAP will be issued this year. Sustainable forest management by HH is important. How can we store more CO2 in forests and improve livelihood? Encouraging more sustainable plantation is our job. What is that the project can contribute realistically?
• International evidence/lessons learnt are important for certification work in Vietnam. For other issues around plantations,
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either of these? • Undertake and communicate some comparative analysis
between Laos and Vietnam – use the case of Vietnam to tell a story to Laos policy makers.
• Provide feedback to participants in the policy interviews to keep them engaged in the project/process – include “this is what you told us, have we heard you correctly?” type statements
• Focus policy and info briefs on key/current issues - e.g. PMO15 and PMO 13 to help government solve problems.
domestic evidence is sufficient (to convince policy makers). The key difference now is that policy makers seek stronger scientific evidence. It is hoped to select suitable models for Vietnam
• Activities around processes on forest law, PEFC, FSC include: (i) missions to assess different topics of forest law, results/impacts, weaknesses and strength; (ii) consultation workshops with policy experts (iii) open public consultation for inputs from local level (extensive round). After MARD has issued a draft, it is circulated to different ministries for comments (many rounds of comments). Right now it is the third round of consultations with other ministries for the Forest Law. How can we influence the fourth draft of the new law? What are the sticking points or challenges?
• We have already identified policy cycles and entry points. We can produce policy briefs on evidence of effectiveness of value chain and send it to Mr Bach for feedback.
• Working with the media is also effective in Vietnam. We need to be creative with a media campaign We could publish on VNs scientific journals (i.e. MARD journals; VAFS journals) we then use the same materials to write articles on newspapers. Articles in the Agriculture News Paper are useful, aiming for the highest policy makers.
• Last year, VAFS invested in a policy dialogues in TV. It was very successful. Most agencies will meet up with media once a month (e.g. IPSARD). We need to participate in these events and brief the media. ACIARVN also publishes their issues and works with media.
Short-term interventions include short policy briefs on: • Requirements under PEFC: assessment of whether smallholders in
VN can meet that requirement? What needs to change for HH? Mechanisms to support PEFC.
• Forest Law is in priority of National Assembly and will be
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submitted together with other Laws from MONRE. Draft content for a decree under the Forest Law, with a focus on the social aspect and supporting SFM for smallholder tree growers and the financial instruments and educational processes that can achieve this.
• REDD+: There is a negative view on plantations in REDD+; produce a short report about how plantations can increase CO2 and provide co-benefits and analysis of implications for inclusion in REDD+.
• Produce a short report on mechanisms to support value chain partnership models
6. General Discussion
Steering Committee members provided feedback on the project activities and
direction. Key points:
• The team needs to indicate how the different components of the project will
fit together to provide policy recommendations
• There is considerable policy development activity in both countries this year.
The team needs to generate short-term outputs based on current
understanding, even if the analysis of data from the project is not complete.
• In Lao PDR, there is a need to generate options for plantation development
in designated Production Forests. How can plantations be used to support
the Government objectives of large-scale forest restoration and village-level
engagement and employment benefits?
7. Next meeting
16-17 November 2017. Vientiane
The meeting concluded at 17.00. Participants enjoyed dinner.
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7- Field Trip On Wednesday 18 January, participants travelled to the Huong River valley to
inspect smallholder plantations and timber processing facilities.
ACKNOWLEDGEMENT The project team would like to thank ACIAR for ongoing financial support and Ms.
Hoang Nguyen Viet Hoa of VAFS and colleagues at Hue University of Agriculture
and Forestry for excellent logistical arrangements.
ANNEX 1: MEETING AGENDA
Agenda Items Responsible persons
Content Start Finish
Coffee/Tea and Registration of participants VAFS
8.00 8.30
Welcoming Remarks Prof Hai from VAFS
Speech 8.30 8.45
Presentation 1: Re-examining Project Relevance/Significance Country’s Latest Policy Development (forestry; investment; development…) and Project Objectives: How can we continue to be relevant?
Two country representatives (15 mins each)
8.45 9.15
Q&A All Plenary Discussion 9.15 9.30
Presentation 2: 2016 Project Progress and Achievement/and Budget (?)
RK Presentation 9.30 9.45
1. Policy Frameworks PK, RK Presentation, Comments/Discussion 9.45 10.00
2. Policy Challenges (at different levels) – Preliminary Analysis (from policy interviews)
PK, RK & TBH Presentation, Comments/Discussion 10.15 10.30
Coffee Break (Group Photo and Slide Show of 2016 Project Activities) 10.30 11.00 3. Community Livelihoods and Impacts from Plantations -
Preliminary findings TBH, KB, AV Presentation, Comments/Discussion 11.00 11.20
4. Value Chain Actors - Overview GC, TM Presentation, Comments/Discussion 11.20 11.40
Reflection on Project Achievements and Lessons Learned What have we learned in 2016? What has informed/inspired us?
RK and TBH (facilitators)
All 11.40 12.00
Lunch 12.00 13.30 Group Discussion 1: Policy Adoption Pathways In the context of the presentations 1 and the potential policy products from presentation 2: Where are some of the possible and immediate entry points to influence policy formulation and implementation (2017-2018)?
Facilitators (TBD)
Two groups (country specific) 13.30 13.45
Reporting; Q&A Facilitator (TBD) All 13.45 14.15
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Agenda Items Responsible persons
Content Start Finish
Presentation 3: Local level and regional level economic modelling
SP
14.15 14.45
Group Feedback/Comments Facilitator (TBD) 14.45 15.00
Coffee Break 15.00 15.30 Presentation 4: Environment and ecosystem services assessment
HB 15.30 15.45
Presentation 5: Proposed 2017 WP and Timelines
RK 15.45 16.00
Group Discussion 2 Feedback, Risks/Issues
RK and PK (facilitators)
16.00 16.30
Conclusion Next Steps
Lao SC Representative
16.30 16.40
Dinner
ANNEX 2. PARTICIPANTS
No. Name Organization
1 Prof. Vo Dai Hai VAFS, Steering Committee member
3 Dr Chansamone Phongoudome NAFRI, Laos. Steering Committee member
4 Mr. Bounpone Sengthong Department of Forestry, Laos, Steering Committee member
5 Dulce Carandang Simmanivong ACIAR Region/Country Managers
6 Nguyen Thi Thanh An ACIAR Region/Country Managers
7 Professor Rod Keenan University of Melbourne
8 Dr Thu Ba Huynh University of Melbourne
9 Professor Peter Kanowski Australian National University
10 Dr Hilary Smith Australian National University
11 Dr Keith Barney Australian National University
12 Prof Neil Byron Independent consultant 13 Dr. Tek Maraseni University of Southern Queensland
14 Dr Himlal Baral Centre for International Forestry Research
15 Alexander Van der Meer Simo Australian National University
16 Dr. Somvang Phimmavong NUOL
17 Dr. Chittana Phomphila NUOL
18 Mr. Vilay Phimphasone NAFRI
19 Dr. Somboune Sayavong Forest Science R.C, NAFRI
20 Dr. Hoang Lien Son VAFS
21 Ms. Hoang Nguyen Viet Hoa VAFS
22 Dr. Tran Dai Nghia IPSARD
23 Dr. Hoang Huy Tuan HUAF
24 Dr. Pham Ngoc Dung Sub – Department of Forest Protection
25 Ms. Nguyen Thi Lieu VAFS- Quang Tri
26 Assoc. Prof. Dang Thai Duong Head of Forestry Faculty, HUAF
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ANNEX 3. PRESENTATIONS
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Lao Project Advisory Group
MEETING REPORT
ACIAR Project ADP/2014/047
Improving policies for forest plantations to balance smallholder, industry and environmental needs in Lao PDR and
Vietnam
Vientiane, Lao PDR, 21 March 2017
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1. INTRODUCTION
The project “Improving policies for forest plantations to balance smallholder, industry
and environmental needs in Lao PDR and Vietnam” (ADP-2014-047) is funded by
Australian Centre for International Agriculture Research (ACIAR) and being
undertaken with research and government partners in Lao and Vietnam. The project
aims to provide policy options that achieve national goals for tree plantation industry
development in the two countries through improved linkages between commercial
investment and smallholder production and improve the capacity of researchers in
Lao PDR and Vietnam in policy research and economic and social analyses. This can
lead to improved economic, environmental and community livelihood benefits from
plantations. The project has a total funding of $999,866 AUD and officially
commenced its activities in April 2016.
As specified in the project document, a Lao PDR Project Advisory Group was formed
to provide advice and guidance on the implementation of the project and on the
adoption of project outputs in policy. Members of the Steering Committee are Dr
Chansamone Phongoudome NAFRI (Lao PDR) and Mr. Bounpone Sengthong
(Deputy Director General Department of Forestry, Lao PDR), Mr Xaylpladeth
Choulamany Director General, Department of Planning and Cooperation, Ministry of
Agriculture and Forestry and Mr Saikham Phoutthavong, Director of Economic
Division, Prime Minister's Office.
MEETING OBJECTIVES
• To inform the Advisory Group members on the progress of project activities.
• To exchange knowledge on recent developments in forest plantation policies in the
two countries.
• To discuss the mechanisms for adoption of project outputs and findings in policy
processes in Laos and Vietnam.
2. PARTICIPANTS
Lao Project Advisory Group Dr Chansamone Phongoudome, Deputy Director General, NAFRI Mr. Bounpone SENGTHONG, Deputy Director General of DoF
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Mr Xaylpladeth Choulamany Director General, Department of Planning and Cooperation, Ministry of Agriculture and Forestry Mr Saikham PHOUTTHAVONG, Director of Economic Division, Prime Minister's Office ACIAR Dulce Carandang Simmanivong, Regional Manager, SE Asia Dr Ejaz Qureshi, Program Manager, Agricultural Development Policy Project team members - Australia Professor Rod Keenan Professor Peter Kanowski Dr Hilary Smith Project team members- Lao PDR Dr Somvang Phimmavong, NUOL Mr Vongvilay Vongkhamsao
3. KEY POINTS FROM DISCUSSION
Dr Qureshi described the expectations from ACIAR for this Group were to review project activities and outputs, to fine tune activities in response to emerging issues, to support the impact of the research in policy and to play a bridging role between research and policy. This would demonstrate a clear buy-in to the research. Dulce Carandang Simmanivong emphasized the point made by the Australian Ambassador at the policy forum that the Lao Minister for Agriculture had requested concrete advice from ACIAR research to help the government meet its policy objectives. Professors Keenan and Kanowski provided an overview of the research project. Dr Xaypladeth - the current focus of MARD on food security and agricultural modernization and the need for information to inform new policies on land and water, of extension and agricultural cooperatives and finance for the agricultural sector. Where does forestry fit in these developments? Dr Xaypladeth - indicated that this was a very good project. A lot of research was being done but not used in policy, information is needed for decision making, for example to inform investment promotion. This type of project is needed. My Saikham described his role in the PM’s office, the fact that there are many different regulations related forests and timber production, that plantations were important to given reduced timber supply from native forests and that macro-level policy is critical. While Lao and Vietnam are similar in some ways, there are important
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differences from a policy perspective. The Government of Lao PDR wanted to encourage more participation from local communities in plantation development. Mr Saikham described the process for development of Decree 96 on plantation investment:
1. Drafting had been completed. 2. The draft has been submitted to MOJ for review and checking for consistency
with other laws. 3. Once this has occurred the PM will sign and the Decree. 4. When the Decree is public, DOF will provide legal guidance on the
implementation and technical guidance to support the adoption of the decree.
The Project could provide valuable support and input for the development of legal guidance and technical guidelines. To be of greatest benefit, the project could provide more specific recommendations on how to simplify approval processes for plantation establishment, harvesting and transport of plantation wood and how this would reduce costs to industry. This should be supported by evidence of costs savings and potential for increased investment and wood flows from the changed regulations. There was further discussion on other recommendations from the current project documents. The Group agreed that this discussion has been very valuable and that the group would meet again later in the year as part of the Project Steering Committee meeting in Vientiane in November.
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ANNEX 1: MEETING AGENDA
ITEM Responsible persons
Content Start Finish
Lunch (following Plantations Policy Forum) 12.00 13.00
Introductions 13.30 13.45
Overview of project objectives, activities and outputs
Rod Keenan 13.45 14.00
Policy Recommendations from project Peter Kanowski
14.00 14.15
Policy Adoption Pathways
Discussion of some of the possible and immediate entry points to influence policy formulation and implementation in 2017-2018
14.15 15.15
Review of agreed actions and next steps 15.15 15.30
Dinner (TBD)
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Tree Plantations in Lao PDR: Policy Framework and Review
Authors: Hilary Smith, Keith Barney, Neil Byron, Alex Van Der Meer Simo, Somvang
Phimmavong, Rodney Keenan, Vongvilay Vongkhamsao
5 December 2016
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ABOUT THE PROJECT
This project “Improving policies for forest plantations to balance smallholder, industry and
environmental needs” is being supported by the Australian Centre for International Agricultural
Research (ACIAR), together with the Governments of Lao PDR and Vietnam and is being undertaken
by Australian universities and research partners in the two countries. The aim is to provide policy
options that achieve national goals for forest plantation industry development in Lao PDR and
Vietnam through improved linkages between commercial investment and smallholder production.
The project has three objectives:
1. To develop policy and institutional options for plantation development;
2. To understand the positive and negative social, economic and environmental impacts
associated with different approaches to tree plantation development;
3. To create a network for policy learning that builds capacity in plantation sector policy
analysis, development and implementation.
These objectives require research to evaluate current policies, policy options, and their likely impacts
on policy goals.
How well do current policy arrangements for tree plantation development in Lao and Vietnam support
national development goals for smallholder involvement and what are the challenges and gaps in
policy to meet these goals?
This research project will evaluate current policies and identify key issues for resolution in order for
plantation development to meet the goals of national governments and local communities.
Teak Plantations, Pak Ou District (H. Smith 2015)
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DISCLAIMER
This report was prepared as a research output from Project FST/2014/047, “Improving policies for
forest plantations to balance smallholder, industry and environmental needs in Lao PDR and Vietnam”
funded by the Australian Centre for International Agricultural Research (ACIAR). The Project’s aim is
improve policies for forest plantations, to balance smallholder, industry and environmental needs. The
contents and views represent the views of the authors and do not necessarily represent the views of
the Government of Lao PDR, the Australian Government, or of ACIAR.
The statements and opinions contained in the report are given in good faith but, in the preparation of
this report, the authors have relied, in part, on information supplied from other sources, or from
documents and interviews held in Lao and translated into English. The report has been prepared with
care and diligence, however, except for those responsibilities which by law cannot be excluded, no
responsibility arising in any way whatsoever for errors or omissions (including responsibility to any
person for its negligence), is assumed by the authors or contributors for the preparation of this report.
Limitations upon use: This report is for the use of the party to whom it is addressed. No
responsibility is accepted to any third party who may use or rely on the whole or any part of the
content.
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CONTENTS
1. Executive summary .......................................................................................................................... 3 2. Preliminary Recommendations ........................................................................................................ 4 3. Synopsis Of Plantations In Lao PDR to 2015 .................................................................................. 5
What is a Plantation? ........................................................................................................................... 5 Plantation Area .................................................................................................................................... 8 Plantation ownership ......................................................................................................................... 10
4. Plantation Policy Setting .................................................................................................................. 1 Strategies, Plans and Policies ............................................................................................................. 1
National Socio-Economic Development Plans ................................................................................ 1 The NSEDP Planning Process ........................................................................................................ 2 The Round Table Process ............................................................................................................... 2
Forestry Strategy 2020 ........................................................................................................................ 3 Forest Sector Development Plans ................................................................................................... 4
Strategies, Plans and Policies that impact or influence plantation policy ........................................... 2 National Growth and Poverty Eradication Strategy (NGPES) ......................................................... 2 National Environmental Strategy to 2020 and Environment Action Plan ........................................ 2 The National Land Policy ................................................................................................................. 2 The Strategy for Agricultural Development 2011 to 2020 ................................................................ 4 Agriculture and Forestry Research Strategy ................................................................................... 4 National Export Strategy 2011-2015 ................................................................................................ 4 Strategy on Climate change ............................................................................................................ 4 Biodiversity Conservation Action Plan ............................................................................................. 5
5. Policy Drivers ................................................................................................................................... 6 Domestic Policy Drivers ....................................................................................................................... 6 International Policy Drivers .................................................................................................................. 6
6. The Legal Framework for Forest Plantations ................................................................................ 11 Analysis of the legal framework ......................................................................................................... 13
7. Governance ................................................................................................................................... 15 Government Agencies ....................................................................................................................... 15
Ministry of Agriculture and Forestry ............................................................................................... 15 Department of Forestry Inspection ................................................................................................ 16 Department of Forest Resource Management .............................................................................. 16
Ministry of Natural Resources and Environment ............................................................................... 16 Department of Environmental and Social Impact Assessment ..................................................... 16
Ministry of Industry and Commerce ................................................................................................... 16 Department of Industry and Handicraft .......................................................................................... 17 Department of Import and Export .................................................................................................. 17 Provincial Office of Industry and Commerce ................................................................................. 17
Ministry of Finance ............................................................................................................................ 17 Ministry of Planning and Investment ................................................................................................. 17
Investment Promotion Department ................................................................................................ 17 Ministry of Public Works and Transport ............................................................................................. 17 Ministry of Justice .............................................................................................................................. 18 Local Administration .......................................................................................................................... 18 Enforcement agencies and roles ....................................................................................................... 19
Department of Forestry Inspection ................................................................................................ 19 Environmental Police Department ................................................................................................. 19 Economic Police Department ........................................................................................................ 19 Customs Department ..................................................................................................................... 19 Ministry of Natural Resources and Environment - Department of Inspection................................ 19 The Government Inspection Authority and Anti-Corruption Organisation ..................................... 19 Village Forestry Units ..................................................................................................................... 20
8. Stakeholders/actors and interests/positions .................................................................................. 21 9. Enabling environment .................................................................................................................... 22
Incentives, disincentives and finance ................................................................................................ 22 Technical support and assistance ..................................................................................................... 23
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Research and Extension ................................................................................................................ 23 Capacity building ............................................................................................................................ 23 Public education and promotion campaigns .................................................................................. 24
10. Land Tenure and Plantation Development ............................................................................... 25 Concessions and leases .................................................................................................................... 25 Smallholder plantations ..................................................................................................................... 26 Plantation Development Process ...................................................................................................... 26
Concession based plantations ....................................................................................................... 26 Environmental and Social Impact Protection Measures ................................................................ 27 Individual owned plantations .......................................................................................................... 28
Plantation Registration ...................................................................................................................... 29 Temporary Ban on some new plantations ......................................................................................... 29
11. Markets ...................................................................................................................................... 32 Wood Supply and Production ............................................................................................................ 32 Demand for wood .............................................................................................................................. 32
Teak ............................................................................................................................................... 32 Eucalyptus and Acacia................................................................................................................... 33
Processing ......................................................................................................................................... 33 Certification, legality and Other Standards ........................................................................................ 35
Certification .................................................................................................................................... 35 Legality Verification ........................................................................................................................ 37
12. Risks .......................................................................................................................................... 39 Market risks ....................................................................................................................................... 39 Policy and Regulatory risks ............................................................................................................... 39 Technical and Environmental Risk .................................................................................................... 39 Livelihood Risk .................................................................................................................................. 39
13. Concluding remarks and recommendations ............................................................................. 40 Concluding remarks ........................................................................................................................... 40 Recommendations ............................................................................................................................. 41
References ............................................................................................................................................ 42 14. Appendices................................................................................................................................ 47
LIST OF FIGURES
Figure 1: Annual Plantation Establishment in Lao PDR 1975-2015 ....................................................... 5 Figure 2: FAO definitions of forest types ................................................................................................. 6 Figure 3: Area of plantations in Lao PDR in 2015 .................................................................................. 9 Figure 4: Location of Forestry Sector Investment Projects ..................................................................... 8 Figure 5: Overview of the History Forest Policy Development ............................................................... 1 Figure 6: Domestic Policy Drivers ........................................................................................................... 6 Figure 7: Policy discourses and forces ................................................................................................... 8 Figure 8: Land Allocation to Plantations ............................................................................................... 30 Figure 9: Plantation Approval/Development Process ........................................................................... 31
LIST OF TABLES
Table 1: Typology of Plantation regimes ............................................................................................... 10 Table 2: Foreign investment in timber plantations in Lao PDR ............................................................. 11 Table 3: Plantation investment models of major plantation species ..................................................... 12 Table 4: Major legal sources relevant to Plantations ............................................................................ 11 Table 5: EISA requirements for Plantation Projects ............................................................................. 28 Table 6: Forest Certification and Verification initiatives in Lao PDR..................................................... 37 Table 7: Performance of plantation against policy objectives ................................................................. 9
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1. EXECUTIVE SUMMARY
The Government of Lao PDR has social, economic and environmental objectives for tree plantations
that are derived from national socio-economic development goals. Achieving these objectives
requires a well-designed and enabling policy environment. This document provides an overview and
review of current policies. It will be used for further policy analysis by identifying key issues, gaps and
leverage points and to identify options for improving policies for plantations.
Lao PDR has transformed through development over time, from the pre-colonial and colonial eras
through the Indo-China war period, to independence in 1975 and as a result of increasing exposure to
regional and global trends and opportunities. These trend are reflected in past and current policies
which have also been influenced by and linked to the receipt of development assistance, and
therefore to motivations of donor countries and organisations. Policy also reflects the overt or,
sometimes hidden, motivations of the policy makers and their complex internal relations as well as
with neighbouring countries.
Forest policy in Lao PDR has evolved from an initial focus on subsistence use and local trade in forest
products, to poverty alleviation via forest land allocation to villages and households and subsequently
increased industrial development based on exploitation of natural forests and government revenue
from log exports. More recently there has been a focus on forest conservation. Tree plantation policy
has similarly followed this path of supporting contributions to local livelihoods through to industrial
development via foreign investment and landscape level restoration.
The Forestry Strategy 2020 (FS2020) is the primary sectoral strategy for forestry, including
plantations. It was initiated as one of the policy dialogue activities at the 7th
United Nations
Interagency Round Table Meeting in September 2000. The objectives of this strategy are capacity
building, reducing the deterioration of forest resources, development and enforcement of laws and
regulations, sustainable management of production forests, promotion of commercial tree planting by
individuals, groups, organizations, small and medium scale companies and foreign and national
investors, sustainable wood supply and domestic processing, forest ecosystem and soil and water
conservation, effective use of forest revenue, and sustainable management of non-timber forest
products. It includes a target to restore the extent and improve the quality of the forest estate through
supporting natural regeneration of 6 million hectares of forest and establishing 0.5 million hectares of
tree plantations on unstocked forest areas.
The Five-year Agriculture and Forestry Development Plan (2016-2020) supports certification of
production from native forests, village forest development, procedures for sale of forest carbon credits
and the development of improved regulations, rules and strategies for forests.
Strategies on National Growth and Poverty Eradication, Environment, Land, Agricultural
Development, Exports, Climate Change and Biodiversity also impact on forest and tree plantation
management.
Many of the forest and broader development related strategies are underpinned by target-driven
indicators that may send a clear signal of commitment, but which may not be particularly useful in
understanding policy effectiveness or in pointing to areas that need reform. For example the
plantation area target has become a key indicator of success but, in reality, this provides little
indication of whether policies for plantation development are achieving their desired objectives.
The implementation and enforcement of these strategies and laws is complicated by an administration
and governance structure based on a principle of ‘centralised decentralisation’ that gives authority to
provincial and district agencies to make locally specific rules but which is based on centrally
determined procedures. This has also created a convoluted regulatory process for plantations and
plantation grown wood. Many of these arrangements were designed to provide control over the
harvest and sale of timber from natural forests and to provide a flow of revenue to support provincial
and district agencies.
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The result is a complex combination of policies, laws and agency responsibilities that govern the
establishment and management of tree plantations and the sale, transport, processing of plantation
timber in Lao PDR and export to other countries. The perception is generally that these arrangements
have failed to deliver their anticipated benefits, they lack legitimacy, are inaccessible, often
unknowable or unenforced, with a resulting lack of compliance. Meeting the standards demanded by
consumer countries remain a challenge.
Under past and current arrangements a diverse set of plantation production systems has emerged in
which many actors may participate in the production of plantation grown wood. Different systems
involve different investments of land, labour, capital, technology and markets by different actors. The
current resource is consequently diverse in terms of species, age-class, condition, ownership
arrangements and availability to market.
Plantation timber also flows along several value chains that may generally quite distinct and easily
separated from natural forest wood. Plantation wood is used locally, by domestic industries or is
exported mostly as raw logs or in marginally processed forms. The domestic wood products industry
is immature and typically unable to compete with international markets. Transaction costs along
supply chains are relatively high and a significant proportion is made up of taxes and charges by
government at all levels.
There is a clear need for reform and simplification of current policies and regulations if investment in
tree plantations by larger industry participants or smallholder growers is to meet national goals for
industry development, poverty alleviation, forest restoration and environmental protection.
Investment in institutional capacity at the central level is needed to develop and facilitate the
implementation of plantation policy.
2. PRELIMINARY RECOMMENDATIONS
Based on the review of policies undertaken a number of preliminary recommendations can be made,
that the Government of Lao PDR:
1. Continue its current review of tree plantation policy to provide a simpler and more transparent
policy framework for the promotion, establishment, management and production and use of
plantation grown wood.
2. Clearly indicate an overall vision for the tree plantation sector, spelling out the multiple objectives
for plantations, the ways in which these objectives can be achieved and how the benefits and
costs of different types of plantations will be distributed.
3. Clearly differentiate tree plantation policy and regulations from those governing management,
harvest and use of wood from natural forests.
4. Simplify and clearly indicate the agencies and levels of government responsible for different
aspects of plantation development and use of plantation wood.
5. Develop mechanisms to clearly communicate these policy arrangements and responsibilities to all
levels of government and other industry and community stakeholders.
6. Build capacity within these agencies based on a new governance rationale aimed at facilitating
plantation growing and wood use rather than capturing revenues for government. This includes
investment in research and extension and advisory capacity to smallholder growers.
7. Invest in broader inventory of tree plantation resources and their capacity to contribute to potential
wood supply, including trees on farms, village plantations and different levels of private ownership
and undertake regular assessments of the usage and value added to plantation grown wood.
8. Consider potential financial mechanisms to support cooperative research between the processing
industry, and larger private and smallholder growers.
9. Establish mechanisms for regular evaluation and review of tree plantation policies
10. Provide for ongoing investment in the process of policy making
11. Build capacity in the enforcement of plantation regulations.
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3. SYNOPSIS OF PLANTATIONS IN LAO PDR TO 2015
There has been a concerted program of plantation development in Lao PDR since 1975 (Figure 1)
and rates of establishment have generally increased in the past 40 years. By 2015 there were an
estimated of 446,000 ha of plantations in the country (DoF 2015).
Figure 1: Annual Plantation Establishment in Lao PDR 1975-2015
Of the current plantation area, over 50% is rubber plantation with smaller areas of teak, eucalyptus
and acacia, agarwood, and other, mostly indigenous, species.
WHAT IS A PLANTATION?
There are various definitions of plantation that are applied in policy and in literature. The terminology
remains somewhat ambiguous, and confusion leads to misunderstandings and to suboptimal policies
(Batra and Piraud 2015).
Currently, the international definition of forests adopted by FAO on the advice of its member states
identify “planted forests” as part of the spectrum of forest types - it covers a range of ecosystems from
semi-natural forests where trees were planted with subsequent light management, to strictly man-
made tree plantations with short rotations (Batra and Piraud 2015). Under this definition, “tree
plantations” are a subset of planted forests, corresponding to the “Productive Plantation” category of
“Planted Forests” (Figure 2, after Carle and Holmgren 2008).
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Figure 2: FAO definitions of forest types
In Lao PDR there is no specific definition of a ‘plantation’ in the Forestry Law, although subordinate
instruments define planting parcels and planting systems. Assessment of forest cover applies the
FAO classification, thus as defined by MAF current forests includes natural forest and plantations of
parcels at least 0.5 ha in size, of which at least 20% of the crown cover comprises trees that will reach
a height of at least 5 m after maturity. Plantation forests include rubber plantations but exclude coffee,
tea and fruit tree plantations. Contrary to the definition of “forest” (above), however, young tree
plantations with less than 20% crown cover are also considered Plantation Forest and consequently
included within the ‘current forest’ estate (Lestrelin et al. 2013).
Tree plantations may be established in a variety of planting patterns and silvicultural arrangements
including:
Mono-culture plantation – single wood producing species
Mixed species - more than one wood producing species planted together
Intercropping - one or more wood producing species inter-planted with non-wood producing
trees or plants (e.g. coffee, rice, cassava)
Complex agroforestry - multiple wood producing and non-wood producing trees/plants
established in an area, often resulting in a complex multi-layered structure
Scattered/boundary plantings - one or more species of wood-producing trees planted in low
densities to demarcate property boundaries or protect land (e.g. paddy boundaries, wind
rows).
Tree planting parcels are defined in Regulation No 196/MAF (2000)1 as an ‘operation approved by the
State to plant trees on an area of degraded forestland >1600 m2’. Agroforestry (intercropping) and
scattered planting systems are also recognised under Regulation No. 0196/MAF (2000) which
specifies that there are only two formally recognised tree planting systems:
• ‘Planting in a parcel’, which includes:
o a defined planting pattern (1.5m x 1.5m or 2m x 2m or 2.5m x 2.5m), with an initial stocking of not less than 1100 trees/ha, with trees planted in a monoculture.
o an agroforestry planting method with defined spacing of not more than 6m x 2m or not less than 800 trees/ha in the lowlands and 8m x 2m or not less than 600 trees/ha in the mountains, intercropped.
1 Regulation No. 0196/MAF concerning the development and promotion of long-term plantations 2000
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• ‘Scattered planting’ with trees planted in clusters, rows or scattered.
Regulations also determine those arrangements which make planted trees eligible to be registered as
a plantation. Directive No. 1849/AF (1999)2 concerning the registration of tree planting parcels
requires that tree planting parcels must meet the following conditions in order to be registered as a
plantation:
• have an area of 1,600m2 (or 1 rai) and more,
• trees must be not less than 3 years old,
• survival rate of trees must be higher than 80%,
• spacing is dependent on tree species but must be at least 2 x 2m, 3 x 2m, 3 x 3m, 5 x 2m,
• tree height must exceed 5m and 3m for fast growing and slow growing trees respectively.
Scattered trees and boundary plantation are not eligible to be registered as plantation but their ownership may be certified.
Both long and short rotation plantations occur in Lao PDR with the variation based on the species, the
desired products and the investment goals and ownership of the plantation or plantation land.
Investment in plantation has dominantly been through the establishment of smallholdings by famers
or through corporate investment by domestic and foreign entities. While corporate investment has
been aimed at the production of specific wood products, plantations established by households have
been integrated into livelihood strategies for a variety of purposes.
Plantations are geographically dispersed throughout the country and the location of plantation
investment projects (not including household plantations) have been mapped (
Figure 3: Location of Forestry Sector Investment Projects
Figure 3, Source Lao Decide, current in 2010). Significant areas of plantation smallholdings,
established by individual households also exist, including, for example, around 15,000 ha of teak
plantations in Luang Prabang Province (Boer and Seneanachack 2016), but these have not be
comprehensively mapped across all provinces.
2 Directive No. 1849/MAF concerning the registration of tree planting parcels 1999
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Figure 3: Location of Forestry Sector Investment Projects
Historically the main products from plantations have been round logs, square logs and semi-
processed timber for direct export. Domestic processing and manufacturing has developed slowly and
while the contribution of plantation grown wood has increased, the volume has remained
proportionally low when compared with timber from natural forests.
PLANTATION AREA
Data from the Department of Forestry (DoF 2015) indicates the total area of planted forests in Lao
PDR to be approximately 446,000 ha, comprising, teak, eucalyptus and acacia, agarwood, rubber and
other species (Figure 4). Of this over 50% is rubber plantation.
The main known sources of plantation grown wood are smallholder teak plantations (Tectona grandis;
‘mai sak’) and Eucalyptus and Acacia from largely investor owned/managed plantations. Other
species grown in plantations such Agarwood (Aquilaria Crassna; ‘mai ketsana’), Benzoin (Styrax
tonkinensis, ‘mai nyarn’) and Yang (Nothalphoebe umbellifiora, ‘mai bong’) are not typically grown for
timber products, but rather are harvested for aromatic wood, resin or bark for processing into incense
or oil. Pink Mampat (Cratoxylum formosum/ Cratexylon prunitfolium ‘mai tiew’) is grown under
(typically) a coppice system for white charcoal, and other native species that have been planted
include Pterocarpus macrocarpus, Afzeleia xylocarpa and Alstonia scholaris although the exact areas
and production volumes are unknown. Several of these species are promoted for planting during
National Arbor Day but precise records of the area of plantings and survival are no kept.
Rubber is established principally for latex, and there is currently no formal value chain for rubber-
wood in Lao PDR, although anecdotally rubber wood logs are being exported to China from northern
Lao PDR, in areas where plantations are being harvested due to low latex prices.
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Figure 4: Area of plantations in Lao PDR in 2015 and target to 2020
Around 54,000 ha of new plantations are needed to be established between 2016 and 2020 to reach
the 500,000 ha target within FS2020.
There are potential inaccuracies with the plantation data:
Concessions may be issued for a timber plantation (a known total of around 117,000 ha, refer
Table 2), but for a variety of reasons, trees have not been planted or, in the case of
smallholdings may have failed. A 2002 survey of E. camaldulensis plantations established
with ADB finance in Vientiane and Savannakhet provinces found frequent failures or very low
growth rates in smallholder plantations and higher growth rates and survival in plantations
established by commercial firms and self-financing planters. The low growth rates
experienced were not representative of the potential of the sites, rather a symptom of
inexperienced management by small growers.
Statistics on areas planted are held in district records, however the precise area of a
plantation is not known until it is registered, at least three years after planting. For smallholder
teak plantations it has been is estimated that less than 10% are registered (Smith 2014). In
many districts records have been lost or have deteriorated.
Registration may overstate the area that is planted in order to increase the area to which land
tax exemptions apply. For example, areas that have not yet been planted may be included or
areas that have been recently harvested remain within the registered boundary.
Registration may include areas that have not been planted in order to provide for boundary
demarcation and tenure security, including with respect to potential claims for compensation
due to compulsory land acquisitions and the granting of concessions
Areas planted under complex agroforestry arrangements and which do not meet the
specifications for plantations in the regulations, are not included although they may contribute
to timber supply.
Other horticultural systems, such as mango orchards, may contribute to wood supply, but
may not be included in the plantation statistic because they are viewed as an agricultural
crop.
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Plantings of scattered trees, although legally recognised, are difficult to map (Boer and
Seneanachack 2016) and are unlikely to be formally registered.
Data may not take into account plantations that have been harvested or converted to another
land use type.
Central databases and inventories may not be up-to-date.
PLANTATION OWNERSHIP
Castella et al. (2009) describe a typology of ownership and investment arrangements for rubber
plantations, which is useful to explore other types of plantation regime (Table 1), including those that
have emerged in Lao PDR.
Table 1: Typology of Plantation regimes
Regime Land Labour Capital Market Technology
Smallholder (5+0) with own capital ● ● ● ● ● Smallholder (5+0) with government officials
● ● ● ● ●
Contract Farming 4+1 smallholders (credit)
● ● ● ●
Contract Farming 3+2 ● ● ●
Contract Farming 2+3 ● ● ●
Contract Farming 1+4 ● ● ● ● ● Concession Farming
Note: ● = farmer inputs; company inputs
Plantations have been established under a variety of ownership and investment arrangements; they
may be planted and owned by the Government, domestic or foreign companies, as joint ventures (as
joint ventures with the government, by organisations, groups or individuals). Applying the typology
proposed by Castella et al. (2009) these include, for example:
• 5+0 smallholder plantation established with their own capital, e.g. teak farmers in Luang Prabang
• 4+1 smallholder plantation establishment financed through a bank loan/credit
• 4+1 smallholder plantation established with government or development partner inputs, e.g. teak farmers
• 2+3 contract farming in which the land and labour are provided by the famer/village, e.g. e smallholders in Luang Namtha
• 1+1+3 in which the land is provided by the village, labour by households and other inputs provided by the company, e.g. Eucalyptus plantations in Vientiane province
• 1+4 contract farming, in which only the land is provided by the famer, which is leased by the company, e.g. in Hinheb District, where individual households are paid for a 30 year lease of land and other inputs are provided by the company
• 1+4 in which famers provide only the labour and the company provides the other inputs, for example Birla Lao eucalyptus plantations
• 0+5 Concession farming - in which company (foreign or domestic) rents the land from the government and provides all other inputs
Table 2 provides an overview of foreign company owned timber plantations in Lao PDR. Some of
these also include arrangements with smallholder and villages for access to land under contractual
arrangements. For example Burapha Agroforestry promotes extension activities that focus on
plantation management and marketing skills for smallholders. They have plantation areas that are
established on village land and for which local people are a source of labour. Oji also supports up to
3000 ha of smallholder Eucalyptus and Acacia plantations, while Birla Lao Pulp & Plantation has a
eucalyptus plantations grower scheme of 500 ha for which the land is owned by smallholders.
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Table 2: Foreign investment in timber plantations in Lao PDR
Company/Activity Site Area (ha)3 Concession
period (years)
Sun Paper Savannakhet 9, 235 50
Birla Lao Pulp & Plantation Savannakhet/
Khammouane
50,000 75
Oji Lao Plantation Forest Company. Bolikahamxay,
Khammouane
50,000 50
Oji South Lao Plantation forest
Company.
Champasak/ Saravahn/
Xekong/Attapu
24,974 40
Burapha Agroforestry Vientiane Province 2,000 30
Stora Enso Company. Savannakhet/
Saravahn
2,000 50
TOTAL 115,732
Smallholder plantations are also diverse. The majority of teak plantations are owned by individual
famers, with an average parcel size of less than 1 ha (Smith et al. 2016). In Luang Prabang it is
estimated that there are possibly over 15,000 plantation owners. Larger areas, up to around 20 ha in
size may be owned by absentee owners, who may be either farmers who have recently moved into
more urban centres or which have been acquired overtime by entrepreneurs. For many of these
plantation owners securing land use rights is a primary benefit.
Sikor identifies three “ideal types of household” to illustrate the range of practices associated with
investment in and financing of plantations by households:
• ‘Survival-focussed households’ concentrate on meeting their immediate needs, primarily food and basic consumer items, and possibly saving a small surplus as a buffer against unexpected expenses.
• ‘Surplus oriented households’ are more likely to integrate plantations into the household economy, each year, seeking to maximise surplus from all their activities combined.
• ‘Investment-oriented households’ make decisions about plantations independently of other livelihood decisions.
Understanding this differentiation is important because it impacts the effectiveness of policy measures
designed to influence the behaviour of plantation owners particularly those that are aimed at
increasing length of plantation rotations, altering the types of products and the timing and magnitude
of harvesting events. It may also influence how they comply with regulations (Smith et al. 2016, Smith
2016).
Table 3 summarises the major plantation investment models of major plantation species in Lao PDR.
3 These represent approved total areas, and progress is not reported for all companies.
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Table 3: Plantation investment models of major plantation species
Species Model Ownership
arrangements
Products Rotation
Length
Labour
Arrangement
Intent Investment
perspective
of owner
Investment
timeframe
Livelihood
perspective
Teak
5+0
Farmer
Sawlog
Poles
Rounds (offcuts)
15-30
years
Self-employed
Land Security
Cash needs
Income
Integrated
Long
Surplus,
Survival
Teak
4+1 Absentee
owner
Sawlog
Poles
Rounds (offcuts)
15-30
years
Contracted Land Security Standalone Long
Investment
Agarwood
2+3
1+4
Farmer
National
Company
Joint venture
Resin
Wood
7-10
years
Contracted Revenue
generation
Standalone Long Investment
Pink
Mampat
2+3 Joint venture
National
Company
Charcoal 6 year -
coppice
Contracted Revenue
generation
Unknown Short Investment
Eucalyptus
1+4
Foreign
Company
Sawlog
Woodchip/pulp log
Poles
Round log
7 years Contracted
Revenue
generation
Standalone Short Investment
Eucalyptus
2+3
Joint Venture
(GoL + FDI)
Sawlog
Woodchip/pulplog
Poles
Round log
7 years Contracted Revenue
generation
Standalone Short Investment
Eucalyptus
0+5
National
Company
Sawlog
Woodchip/pulplog
Poles
Round log
7 years Contracted Revenue
generation
Standalone Short Investment
Eucalyptus 4+1 Farmers Energy 7 years Self-employed Income Integrated Short Surplus
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Species Model Ownership
arrangements
Products Rotation
Length
Labour
Arrangement
Intent Investment
perspective
of owner
Investment
timeframe
Livelihood
perspective
(charcoal/firewood)
Woodchip
generation Survival
Acacia
1+4
2+3
Joint Venture
(GoL + FDI)
Sawlog
Woodchip
Poles
Energy
(charcoal/firewood)
7 Contracted
Revenue
generation
Standalone Short Investment
Rubber 5+0
Farmer Latex
30 years Self-employed
Land Security
Cash needs
Income
Integrated
Long Surplus
Rubber 1+4
2+3
Foreign
Company/Joint
Venture
National
Company
Latex
30 years Contracted Revenue
generation
Standalone Long Investment
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4. PLANTATION POLICY SETTING
Policies for tree plantations in Lao PDR have their basis in national socio-economic development
objectives. The role of plantations has transformed overtime as the country has transitioned through a
development process, influenced by increasing exposure of regional and global trends and
opportunities. This history is summarised in a schematic overview in Figure 54.
The following sections describe in more detail the relevant recent national strategies, plans, policies
and processes that apply to plantations in Lao PDR.
STRATEGIES, PLANS AND POLICIES
As a signatory to the Paris Declaration for the Least Developed Countries for the 1990s Lao PDR
implemented a Program of Action for socio-economic development. Following policies in favour of
market-oriented economic reforms and liberalisation that emerged in the late 1970s, and which were
promoted through the “New Economic Mechanism” (NEM) in 1986 (see Yamada 2013), efforts were
focused on macro-economic stability, fiscal adjustment, the introduction of defined property rights, the
promotion of private sector activities and restructuring of the public sector to improve efficiency in
meeting the demands of the new market economy. Some state owned enterprises were privatised,
banking sector and prices were also liberalised with foreign investment promoted under more liberal
policy regimes. Legal and governance reforms were undertaken with the aim of supporting the new
market-oriented approach.
NATIONAL SOCIO-ECONOMIC DEVELOPMENT PLANS
In 1996 the National Assembly adopted a Long-Term Strategy of Socio Economic Development to the
Year 2020 as the overriding development policy, defining broad goals, strategies and guiding
principles for the country. Within this plan, the Government of Lao PDR (GoL) set up 8 national
priority programs:
• Food production;
• Commercial production;
• Eradication of shifting cultivation and resettlement of shifting cultivators;
• Rural development;
• Infrastructure development;
• Foreign economic relations;
• Human resources development;
• Services development (covering tourism, trade, banking and finance).
Ongoing implementation of the Long-Term Strategy of Socio Economic Development is supported by
five-yearly National Socio-Economic Development Plans (NSEDPs), which provide more detailed
sectoral strategies and frameworks for prioritizing the Government’s expenditure programs,
expressed in its annual budgets. Arising from the five-year plans are short-term (annual) development
plans which are aimed at transforming Party policies into government policies, development programs
and projects, and which may be used to monitor and adjust the implementation of the Five-Year plan.
Meeting the targets set out in the various strategies has been a key driver in the development of
policy measures in Lao PDR.
The 8th NSEDP (2016-2020) formulation process coincided with the conclusion of the Millennium
Development Goals (MDGs) and the roll out of the post-2015 development agenda “Sustainable
Development Goals” which were adopted at the UN General Assembly in September 2015.
The 8th NSEDP (2016-2020) was launched in April 2016 and highlights many issues learned from the
implementation of previous plans including:
4 Sources: Ohlsson and Inthirath (2001), Phimmavong et al. (2009), Smith 2014, Kim and Alounsavath (2015)
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With respect to economic development, it notes that “socio-economic development based on
[a] market economy mechanism that [is] managed and regulated by the government with[in a]
comprehensive system is a key for the development of socialist orientation”.
With respect to sustainable development, it observes that “[E]conomic growth has mostly
been based on the natural resource sector which is unsustainable. Economic development in
the future should give more priority to non-resource sectors, particularly development of small
and medium-sized enterprises both in terms of quantity and quality”.
The main approaches of a sustainable development strategy for Lao PDR include an increasingly
integrated market economy, sound macroeconomic policies, highly skilled labor, functioning
institutions and strong basic infrastructure. The plan recognises challenges to doing this in limited
development funds and high public debt, insufficient and weak institutions and a poor legal
framework. Social drawbacks persist and climate change related natural disasters, such as droughts
and floods, continue to impede development.
Modernization and industrialisation are key themes within the plan which focusses on industry,
services and food security, with environmental protection and more effective use of natural resources.
This requires a strong political and governance system under the leadership of the Lao People’s
Party, working under the premises of government for the people and by the people with effective rule
of law protecting people’s rights and an enhanced administrative system which follows the Sam Sang
directive.
THE NSEDP PLANNING PROCESS
The NSEDP development planning process is intended to be an integrated area based approach to
ensure the consideration of initiatives across different sectors in a given geographic area. The
process begins with the issuance of an instruction from the Party congress outlining overall national
policies, priorities, targets and guidelines for the next plan period from the government to line
ministries/sectors, provincial and district (refer Appendix 1). Ministries/Sectors prepare and issue their
guidelines to their line organisations (Departments) for the development of provincial level plans. The
sectoral plans derived from the provinces are reviewed during three regional meetings (northern,
central, southern) and separately forwarded to line ministries. Based on the regional and ministerial
plans, the State Planning Committee (SPC) prepares the National Plan and an Investment
Programme for submitting to the government for consideration and endorsement. Once the National
Plan and Investment Plan have been reviewed and endorsed, they are forwarded to the National
Assembly for adopting, and instructions are prepared for implementation.
As a result of policies of decentralization, authorities have recently been instructed to enhance the
participation of local communities in the formulation and implementation of development plans. This
strategy reflects a move towards de-concentration of planning and budgeting responsibilities
associated with the Sam Sang policy (the “3 Build directive” described further below). At the same
time, it articulates the dual function of disseminating top-down directives and guidelines to the village
level, while identifying and integrating local development needs and problems from the “bottom-up”
into national socio-economic development plans. In 2013 Guidelines on District Socio-Economic
Development Planning (DSEDP) were issued by the Ministry of Planning and Investment (MPI 2013)
and these describe the process through which village and Kumban participation should occur.
THE ROUND TABLE PROCESS
Since the 1950’s Lao PDR has had history of connection with foreign providers of financial support.
The relationships between Lao PDR and its development partners show many of the shortcomings of
other developing countries and there have been significant social, economic and political impacts
associated with aid dependence (Phraxayavong 2009). Important among these is the conditional
nature of aid and finance and the ways that this influences policy making in recipient countries.
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Since 1983, Lao PDR has been participating a the United Nations Interagency Round Table Process5
which is viewed as the national mechanism for enhancing mutual understanding and development
coordination between the Government of Lao PDR and its development partners, towards achieving
Lao PDR’s development goals. Sector and sub-sector working groups support the round table
process. A Forestry Sub-sector Working Group (FSSWG), which comprises representatives from
Government, national organisations, development partners and industry, is responsible for
contributing to the planning and review process of the Forestry Strategy 2020 (FS2020) and Forestry
Development Plans. It provides a platform to discuss and exchange information on thematic issues
which are priorities set in the FS2020, to simplify and harmonise procedures and practices in
implementing development partner assisted initiatives in the forestry sector, and increase the use of
government channels to implement long term activities.
FORESTRY STRATEGY 2020
The Forestry Strategy 2020 (FS2020) is the primary sectoral strategy for forestry, including
plantations. FS2020 was initiated in September 2000 as one of the policy dialogue activities in the 7th
Round Table Meeting process. The main objectives of FS2020 are to define and agree on a set of
policy and institutional arrangements, and to allocate relevant roles and responsibilities among the
main stakeholders to achieve sector objectives and targets through implementation of the chosen
strategies, policies and actions. The overarching objective of FS2020 is poverty eradication.
The major objectives of forestry sector development are:
1) To build the capacity of government organisations and concerned parties for the
implementation of FS2020.
2) To control and correct various actions which lead to the deterioration of forest resources in
terms of both quantity and quality and at the same time achieve livelihood improvements for
poor farmers in rural areas and protect forest cover.
3) To develop and enforce laws and regulations related to forest.
4) To ensure sustainable management of Production Forests with the participation of local
people and to promote commercial tree planting by individuals, groups, organizations, small
and medium scale companies and foreign and national investors with government providing
policies,
5) To take a balance between wood processing industries and wood volumes approved annually
for harvest based on scientific calculation, and to strongly promote domestic processing of
finished products.
6) To contribute to conservation of forest ecosystems, habitat and all plant and animal species in
danger of extinction.
7) To protect soil, watersheds and the environment and to secure the durability of important
infrastructure by forest conservation.
8) To use revenue from forests in the most effective ways for development of the economy and
other sectors according to government’s priority development plans, and to contribute to
poverty eradication.
9) To ensure sustainable management of Non-Timber Forest Products (NTFPs) and their
contribution to livelihood improvement of rural villagers
The major forest sector targets, which must be achieved to contribute to poverty eradication, are:
5 See http://portal.unesco.org/ci/en/ev.php-URL_ID=21370&URL_DO=DO_TOPIC&URL_SECTION=201.html
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1) To improve the quality of the existing forest area, which is about 70% of the total land area,
by naturally regenerating up to 6 million ha and planting trees up to 500,000 ha in unstocked
forest areas, as an integral part of a rural livelihood support system encompassing stable
water supplies and prevention of natural disasters.
2) To provide a sustainable flow of forest products for domestic consumption and to generate
household income through sale and export, thus contributing to livelihood improvement, fiscal
revenue and foreign exchange earnings whilst increasing direct and indirect employment.
3) To preserve the many species and unique habitats, which are, for different reasons,
threatened both within the country and elsewhere.
4) To conserve the environment including protection of soil, conservation of watershed and
climate.
The priority policy and programs as set out in the Forestry Strategy 2020 are described in Appendix 2.
With respect to plantations these include a policy to:
“promote tree planting and management by setting clear purposes with relevant target owners
and markets, and investment schemes to strengthen wood supply base and farmers’ income
base”.
This is to be implemented via specific programs and actions including:
• Formulation of a National Tree Plantation Development Plan with comprehensive coverage from tree breeding to plantation management and processing, with clear target groups and incentives. The incentives include tax exemptions, access to plantation inputs and extension services.
• Improving tree plantation profitability by improving tree growing technology and securing better prices.
• Improving the legal and regulatory framework.
• Improving funding and incentives.
• Marketing development.
FOREST SECTOR DEVELOPMENT PLANS
A secretariat within the Ministry of Agriculture and Forestry prepares and submits five-year plans and
annual plans for the forestry sector.
The five-year plan from 2006 to 2010 included:
Priority actions for implementation during the five-year period.
Coordination/facilitation of the means and measures necessary for implementation of the
priority actions.
Monitoring of FS2020 implementation.
Mobilization of international assistance for FS2020 implementation.
The Ministry of Agriculture and Forestry (MAF) adopted the Five-year Agriculture and Forestry
Development Plan (2006-2010) in Sep 2007. It includes four targets and 13 measures. The four
targets were Food Security, Commercial Production, Shifting Cultivation Stabilization and Sustainable
Forest Management and Balance between Utilization and Conservation.
A draft report against the implementation of the 2006-2010 plan makes several observations for forest
plantations (MAF 2007):
The tree plantation area for 05/06 and 06/07 was 35,000 ha and 25,800 ha respectively;
assumed to be new plantations established during those years.
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Forest land use investment in crop and tree plantations, especially large scale investment in
the form of state land concession, was rapidly increasing. The requested land area for
investment proposals in plantations at the central level was close to 2 million ha. Various
conflicts related to land use and concessions were been reported and the GOL temporarily
suspended new concessions in order to review the approval process and field operations of
all existing concessions. The GOL gave priority to investment proposals, which provide
benefits to local villagers including the 2+3 system.
While commercial crop/tree plantations was a priority areas for the promotion of foreign
investments, relevant Ministries and Provinces were not well prepared or equipped to
manage and control investment in plantations. Rules and regulations concerning investment
appraisal, selection of land for concessions including consultation with local villages and
monitoring of actual investment were not fully developed or enforced. Consequently there
were many cases of the conversion of intact forest or village forest/land, without subsequent
plantation establishment, and inconsistent application of fees and land rental charges.
MAF was preparing Ministerial regulations on management of tree plantations and a Code of
practice on plantation forestry to form a part of the comprehensive legal framework, but this
was never completed.
The annual harvesting of planted trees was increasing but remained limited. Nevertheless,
perceived strong demand for certified products in the US and Europe coupled with maturing
teak resources in Northern Provinces resulted in a program for FSC group certification of
small holder teak plantation – the Luang Prabang Teak Program (LPTP). This program
suspended its FSC certification in 2016 but continues to operate to provide support to teak
smallholders.
The Lao Tree Plantation and Cash Crop Owners Association had been formed and it was
expected to play a key role in providing technical and market information and to promote
good practice through the dissemination of GOL laws and regulations. At the time of writing
the association was not known functioning.
The current Five-year Agriculture and Forestry Development Plan (2016-2020)6 includes the following
expected outputs:
Manage, protect and develop forest under MAF’s responsibility in order to contribute to forest
cover of 70%, through reforestation of degraded forest in production forest area of 650,000
hectares and planting of the trees over 100,000 hectares.
Increase the area of forest certified forest to 20% of total forest production area.
Establish and manage village forest in 1,500 villages across the country.
Carry out the 2nd
National Forest Inventory (NFI).
Prepare and develop techniques and standard procedures to access (sell) carbon credits
beyond 2020.
The Implementation Plan on Forest Management for 2015-2016 includes the following activities:
Develop and improve regulations, rules and forest strategy and disseminate to related sectors
and the public.
Strengthen and improve organizations from central to the local level.
Build capacity of technical staff and villages in forest management, protection, development
and forest/NTFPs utilization.
6 Based on a summary presentation translated from Lao. An English copy of the Plan was not available.
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Mobilize funds through aid grants, investment from both local and foreign entities of at least
50 billion kip and US$25 million.
Carry out monitoring and evaluation on implementation plan in each period.
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Figure 5: Overview of the History Forest Policy Development
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STRATEGIES, PLANS AND POLICIES THAT IMPACT OR INFLUENCE PLANTATION
POLICY
NATIONAL GROWTH AND POVERTY ERADICATION STRATEGY (NGPES)
The National Growth and Poverty Eradication Strategy (NGPES), adopted in 2004, is a national
development program aimed at enhancing growth and development and reducing poverty, particularly in
the 47 poorest districts in the country. More broadly, it contributes to the overarching national
development goal of progress towards graduation from LDC status by 2020 by strategically identifying the
sectors that are most important for poverty reduction, and formulating national action plans for these
sectors in response to poverty reduction priorities. The NGPES focuses on four main sectors:
1) Agriculture/forestry,
2) Education,
3) Health, and
4) Transport.
It further identifies trade, tourism, manufacturing and energy as supporting sectors necessary for poverty
reduction, – and environment, gender, population and capacity development as key crosscutting sectors.
It addresses the importance of forest and biodiversity conservation as a main source of livelihood and
income for rural households, the need to better manage river basins and watersheds to minimize flooding
and other natural hazards, while also addressing the low government spending and budgeting for
environmental management and conservation as a result of it being seen as a low priority.
NATIONAL ENVIRONMENTAL STRATEGY TO 2020 AND ENVIRONMENT ACTION PLAN
The National Environment Strategy and Action Plan (NES-AP) aims to secure sustainable development
and contribute to poverty eradication through sound environmental management and sustainable use of
natural resources. The plan recognises that environment management should be implemented in a
systematic and effective manner to ensure environmental protection and natural resource conservation,
and should be balanced with economic and social development together with requirements for national
defence and public security. This should be undertaken through the development of appropriate policies,
legislation, institutional and capacity development, education and awareness, financial mechanisms and
opportunities for international cooperation. The NES-AP includes seven focused programmes including,
of particularly relevance to plantations, the promotion and enforcement of environmental and social
impact assessments and environmental management of development projects.
THE NATIONAL LAND POLICY
The National Land Policy establishes, as a principle, the legal equality of all Lao citizens, ensuring their
rights and interests in relation to the possession of land use rights. It aims to protect the rights and
interests of the state, organizations, individuals, entities, collectives, communities, local and foreign
investors that use land, including customary land use rights of people.
The Lao Government is re-drafting the Land Policy with the following purposes7:
• To protect land use rights of individuals, entities, organizations, collectives, and communities.
• To clearly allocate, zone, and classify land.
• To make land management and administration strong, transparent and effective.
7 (Draft) National Land Policy October 2015
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• To broaden investment promotion policy by allowing foreigners of Lao origin and foreign investors to purchase land use rights for residential or business purpose, so that improved socio-economic development and sustainable natural resources conservation can be fostered, and eventually help erase the country from the least developed country list by 2020.
The Land Policy reiterates the policy of “turning land into capital by determining land use areas for the
highest benefits.” The Policy will influence the revisions to the Land Law and Forest Law which will have
consequential implications for plantations. Of particular relevance to forest plantations are the recognition
of customary land use rights, the allocation land use rights including customary rights, and measures to
recognise and compensate for the loss of land use rights.
Through the land policy and the draft Land Law the State expressly recognises and clarifies the
customary land use rights of Lao people who have occupied, protected, developed, and utilized land in a
peaceful, regular, transparent, continuous, and long-term manner, with or without documents regarding
the right to use such land, provided that there is valid certification thereof and the land is not within state
reserved or conserved areas. It also provides for the granting of a lease or concession over communal
land, subject to the approval from the majority of community members and authorization from the state.
This is significant in several ways. Firstly it acknowledges customary land use rights, where previously
this right was tenuous. It then permits the holders of such rights to utilise this land in a manner that allows
for commercial use, including by lease or concession to a third party. Finally it introduces an, albeit
limited, measure of control over how the land is to be used and transferred; simultaneously allowing
approval by a majority of community members but also by the state at the District level. Thus, use of
communal land remains centrally managed by the State who assigns such land for use for the highest
benefits of the communities.
The managment of communal land will be dertemined in specific regulation. Communal land and land use
rights are distinct from collective land that belongs to cooperatives, production groups or associations that
have lawfully received a joint land use right over the land.
The draft Land Law, made in response to the Land Policy, makes changes to the authorities to approve
the conversion of land from one category to another. Plantations are included within the Agricultural Land
category. As before, this allows for land allocation to individuals/households (up to 3 ha per labour force,
based on capacity) but also introduces allocation to domestic private juridical entities (up to 30 ha) and
collective enterprises (up to 40ha). Larger allocations of land require a lease of concession. New, specific,
provision have been proposed for plantation concessions and the draft law specifies the administrative
level at which application for concession of different scales (size and duration) can be approved: Districts
<100ha/20 years; Province 100-150ha/30 years; Ministry 15-500ha/40 year; National Assembly >500ha.
While both the Land Policy and Land Law were in draft at the time of writing these amendments will
impact both the availability of and access to land for plantations.
Villages may have some opportunity to enter into concession/leasing arrangements with third parties,
but unlike concession for plantations there is no stated limit to the area or duration of the
arrangement.
For concessions over state land the law goes some way to clarifying the roles of offices of Natural
Resources and Environment and the Local Administration Authorities, at the different levels.
Industrial plantations are included as a land use in the Agricultural Land category for which land can
be allocated to individuals in households but does not allow for the allocation of forest land to
individuals in households. This suggests, although it is not clear, that plantation could be treated as
an agricultural crop which could have flow on implications for representation under the Forestry Law
and associated regulations.
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THE STRATEGY FOR AGRICULTURAL DEVELOPMENT 2011 TO 2020
The Strategy for Agricultural Development 2011-2020 has been a long term guiding framework for the
development of the agriculture sector. The strategic direction includes ensuring a gradual transition from
subsistence to commercial smallholder production with the aim of reducing rural poverty by increasing
productivity, channelling production inputs and finance, and facilitating links to regional and global value
chains. In operational terms it is intended that the framework will translate into appropriate measures of
value chain governance ensuring that smallholder and local small and medium scale enterprises can
retain a fairer share of the valued added their products. ‘Pro-poor’ and ‘green’ value chains are
emphasised within that plan, and an appropriate regulatory framework is viewed as essential for enabling
this transition. One important observation made in the Strategy is that there is no legally established nor
consistent operational definition of a ‘smallholder’ and that the absence of such a definition is an
important barrier to achieving the goals of that Strategy as well as other national plans.
In 2015 a new Agriculture Strategy to 2025 with Vision to 2030 was introduced with the aims of achieving
food and nutrition security, contributing to the SDGs with zero hunger by 2025, suitably commercialized
production systems, protection of rural livelihoods and poverty alleviation, and sustainable forest
utilization and conservation. This Agriculture Strategy does not specifically include timber plantations, and
it is unclear whether a new forestry strategy will also be developed or whether this represents a shift in
thinking about the role of forestry in Lao PDR’s agri-based economy.
AGRICULTURE AND FORESTRY RESEARCH STRATEGY
In response to the Agriculture Sector Strategy to 2025 the National Agriculture and Forest Research
Institute (NAFRI) developed an Agriculture and Forestry Research Strategy 2025 and ‘Vision up to 2030’.
This strategy sets key research areas across six programme areas:
1. Sustainable agro-biodiversity
2. Improved agriculture productivity
3. Agriculture adaptation to climate change
4. Agriculture and forestry policy research
5. Capacity building
6. Information and Communication
NATIONAL EXPORT STRATEGY 2011-2015
The Government of Lao PDR has developed a National Export Strategy through which nine sectors, that
have the potential to generate foreign exchange to boost economic growth, are targeted. These sectors
are hydropower, tourism, organic agriculture, minerals, garments, silk and cotton handicrafts, wood
products, medicinal plants and locally produced products.
STRATEGY ON CLIMATE CHANGE
The Government of Lao PDR ratified the UNFCCC in 1995 and the Kyoto Protocol in 2003, and has
developed a Strategy on Climate Change in 2010. A National Adaptation Plan of Action (NAPA) was
released in May 2009 and contains 45 priority projects across four sectors: agriculture, forestry, water and
water resources and health.
National Adaptation Program to Action for Climate Change 2009
The National Adaptation Program to Action for Climate Change 2009 addresses the urgent needs for
climate change adaption. In the program related to forestry this includes the strengthening of village
through village forestry volunteers in forest planting, caring and management techniques as well as the
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use of village forests, raising public awareness on wildlife conservation, including a public awareness
campaign to disseminate information on forest and wildlife regulations and laws, strengthening the
implementation of these regulations and building research capacity on wildlife pests and diseases and
outbreaks of animal diseases.
BIODIVERSITY CONSERVATION ACTION PLAN
The National Biodiversity Strategy and Action Plan (NBSAP) outlines the issues, goals and actions
needed to protect biodiversity resources and ensure their sustainable use. It contributes to
implementation of the International Convention on Biological Diversity (CBD), which Lao PDR ratified in
1996. The goal of the NBSAP is to maintain biodiversity as a key to poverty reduction and to protection of
the current asset base of the poor.
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5. POLICY DRIVERS
The above summary shows that Lao PDR has a complex planning process to progress its national socio-
economic development strategies. The making of strategies, planning and policy formulation has
remained tied to development assistance and with it to the motivations and agendas of donor countries
(Phraxayavong 2009) - whether these are economic, social, humanitarian, environmental or political.
Efforts to simultaneously join the global community but retain elements unique to Laos have resulted in a
hybrid approach to policy making – sometimes called centralised decentralisation - and this has
implications for the formulation and implementation of development goals and policies.
There is certainly no shortage of high-level statements on priority issues, and many of the sectoral
strategies and implementation plans have been developed with international donor support and are
heavily laden with content and language in support donor country and global aspirations. Broad policy
statements satisfy the expectations of donor partners but appear to be at the expense of approaches
specific to the needs of Lao PDR. It is possible, however to untangle domestic and international drivers
for policies to support strategic goals.
DOMESTIC POLICY DRIVERS
The overarching drivers for plantation policy in Lao PDR are national goals for socio-economic
development and poverty eradication. Underpinning these are more specific goals for the development of
export markets for finished products supported by domestic wood processing with job creation, and
income generation for the rural poor underpinned by resettlement programs that promote permanent
agricultural production, reduced shifting cultivation, reduced land degradation and the protection and
increase of forest cover (Figure 6).
Figure 6: Domestic Policy Drivers
INTERNATIONAL POLICY DRIVERS
Increasing exposure to global markets and participation in international programs has also influenced
forest policy in Lao PDR. United Nations Conventions and treaties, many of which Lao PDR is a signatory
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to and some of which have also been ratified (refer Appendix 7)8, international processes, such as United
Nations Forum on Forests (UNFF), International Tropical Timber Agreement (ITTA) and Montreal
Process, and political summit recommendations, such as the Group of Eight Largest Economies (G8),
Asia-Pacific Economic Cooperation (APEC) and Association of Southeast Asian Nations (ASEAN),
provide a strong political message. Those funding the forestry sector, including multilateral and bilateral
donors, development banks and international commercial banks have principles, policies, safeguards,
guidelines and procedures to which their clients increasingly must conform if they want to retain access to
funding or markets. Additionally, non-governmental organizations (NGOs), forest and forest industries
investors, wholesalers, retailers, buyers and governments, particularly in industrialized countries of
Europe, North America, Oceania and Japan, are increasingly demanding proof of legality and
sustainability through verification and sustainability certification (World Bank 2012). Surrounding these is
discourse on forestry and forest management and it is possible to extract key narratives that have
influenced forest and plantation policy in Lao PDR.
These concepts contribute to pressure on policies and influence their implementation and Some narratives provide the driving forces for change while others may create resistance to change (
Figure 7). Some examples are:
Plantations are seen a means to address land degradation, by providing an alternative production
system to slash-and-burn/swidden agriculture, which in turn is viewed as a cause of poverty,
particularly in the uplands (see Lestrelin et al. 2012; Fox et al. 2009).
Agricultural development is needed to support a growing population.
Plantations produce wood, which provides a source of income to the rural poor (see ACIAR 2010,
but see Newby et al. 2014)
Policies to increase plantation development are likely to increase the household welfare across
the Lao region with both rural and urban household increasing real income per person. The
incidence of poverty will decrease slightly across all types of household groups, and overall, a
small increase in inequality is likely (Phimmavong, 2014).
Smallholder plantations are a potential resource that needs to be mobilised to meet the needs of
industry and contribute to national development policies (see Midgley 2016).
Plantations provide an opportunity to encourage permanent settlement or resettlement, which is
also promoted through the provision of land use rights (but see Lund 2011).
Land policies allow for the categorisation and zoning of land, which can then be allocated for use;
degraded forest land can be allocated for plantations (see. Barney 2009).
Land allocation enables the privatisation of land use and the development of formal and informal
land markets (Dwyer 2007, but see Lestrelin 2010).
Land availability facilitates opportunity for foreign investment in large scale plantations, which
generates government revenue through land rental as well as provides timber and employment
(see GTZ 2005; GTZ 2006).
Concessions for industrial plantations have resulted in land grabbing (see Hanssen 2007)
8 e.g. United Nations Framework Convention on Climate Change (UNFCCC), United Nations Convention to Combat Desertification
(UNCCD), Convention on Biological Diversity (CBD), Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) and Convention on Wetlands of International Importance (RAMSAR)),
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Conversion of land to plantations may have negative environmental impacts (see Baird 2014)
Allocation of land to plantations can have negative impacts on local people through the loss of
use rights or land access (see Kenney-Lazar 2012).
Concessions and modern production systems will propel rural into a wage based modern
economy (but see Baird 2011)
Plantation grown wood can be substituted for timber harvested from natural forests. This helps to
address unsustainable harvesting and reduces illegal logging.
Legally sourced wood is more acceptable to export markets.
Certified wood attracts a price premium (see https://ic.fsc.org/en/news/id/66 and
http://www.ecosmagazine.com/paper/EC155p8.htm , but see Flanagan and Laity 2015)
Legality verification and certification will help build the timber industry by diversifying timber
products and increase revenue through placement in sensitive markets (c.f.
http://www.euflegt.efi.int/Lao PDR ).
Plantations increase forest cover (see MAF 2005)
Plantations are not forest (see https://www.rainforest-rescue.org/petitions/772/plantations-are-not-
forests)
Plantations contribute to climate change mitigation and adaptation.
Figure 7: Policy discourses and forces
There are differing perceptions about how well plantations have contributed to the stated policy
objectives. Table 4 summarises some of those identified during interviews with policy makers, industry
and other stakeholders in Lao PDR.
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Table 4: Performance of plantation against policy objectives
Primary policy objective Level of success Comment
Poverty reduction Inconclusive Localised plantation development may improve the income or livelihood conditions of individual households but makes little contribution to national targets for poverty reduction. Poverty reduction due to plantation may have occurred in some specific areas (e.g. Luang Prabang Province) but not everywhere. Poverty reduction will not occur through plantations alone. There needs to be integration with other sectors.
Income generation Inconclusive Income generation for some plantation owners may occur where they are already able to meet other livelihood needs. Land availability remains the primary determinant of this. Plantation management systems for smallholders may be based on immediate need rather than long term income strategies. Plantation production systems need to include other short term crops to meet farmer’s annual needs. Teak plantations have reduced poverty through better access to land but have not improved income generation.
Land allocation Inconclusive There have been challenges with respect to the allocation of land for smallholders and corporate plantations. While some farmers have been able to acquire land and establish plantations others may have experienced land scarcity as a result of plantation establishment. Some farmer may have less access to land and have become poorer. Land use competition continues to be a significant barrier to plantation development. There is inadequate land use planning and the positive and negative impacts of providing land to plantation concession are not well understood. Poor implementation of government policy and the provincial level has caused problems in the past. New policies to suspend concessions require land use planning but this is not occurring quickly enough which discourages investment.
Permanent production/stopping swidden
Inconclusive The establishment of plantations on agricultural or fallow swidden land may have resulted in new areas of intact forest being cleared for swidden, particularly in areas where there are land shortages. The use of agricultural land for plantations may shorter rotations and increase land degradation.
Forest cover Inconclusive The area of plantation has increased and has improved forest cover. Plantations do not necessarily represent permanent forest cover if they are to be harvested under optimal plantation rotations, particularly short rotation species such as Eucalyptus and Acacia. Where plantations have resulted in new areas of forest being used for swidden these may offset any increases in forest cover from plantation establishment. The environmental benefits of plantations are not clear. The requirement that plantation are only established on degraded land is not strictly followed so forest has been cleared for plantation.
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Primary policy objective Level of success Comment
Wood production Unsuccessful Many corporate-owned plantations are still immature and their future contribution to wood supply is unknown. Wood supply from smallholders is unpredictable. It is not clear if the existing plantation types and species are appropriate for long term processing and manufacturing strategies. The strategy regarding land suitability and plantation species is inadequate. There is no long term strategy for wood supply from plantations.
Job creation Limited Jobs have been created through the development of domestic wood processing, however much of this has occurred on the basis of harvesting of wood production from natural forests. In some areas employment has been created through concession-based projects (plantation labour, which is not permanent) or in association with ancillary services such as nursery work. However this cannot not be viewed as a sustainable in all cases; employment may be short term or seasonal.
Domestic wood processing Limited There has been some investment in domestic wood processing specifically for plantation grown wood, however, most domestic processors utilise timber from plantations and natural forests. The national processing standards are inadequate and need to be reformed. Many factories do not meet national standards. There is a lack of capacity and low level of skill in domestic processing. Government policies have created a disincentive to invest in domestic wood processing.
Export Limited Most plantation-grown wood is exported without significant domestic processing. Export driven requirements for legality, together with complex and costly regulatory processes, constrain the ability for smallholder plantation owners to participate in export markets. All plantation products are impacted by policies intended to address illegal and unsustainable harvesting and export of wood from natural forests.
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6. THE LEGAL FRAMEWORK FOR FOREST PLANTATIONS
The multi-faceted expectations held about plantations in the socio-economic development policies of Lao
PDR have been translated into an extensive and highly complex legislative and regulatory environment
for forests, plantations and the timber value chain; over 200 regulatory steps have been mapped along
the plantation wood value chain from establishment to export. This framework is described in detail
elsewhere: in the Forestry Legality Compendium for Lao PDR (Smith and Alounsavath 2015) and for
smallholder plantations in particular (Smith 2014). The major legal sources and their relevance to the
plantation sector are listed in Table 5. The process for making law is presented in Appendix 4 and a
comprehensive list of legal instruments relevant to the plantation value chain is provided in Appendix 5.
Table 5: Major legal sources relevant to Plantations
Legal Source Purpose Matter relevant to Plantation
Law No. 04/NA on
Land 2003
Categorises and defines all
types of land
Regulates access to land
and land use rights
Provides for land use rights for individual, families
and organisations
Provides for state land concessions and the leasing
of state lands
Provides for the conversion of land categories to
allow for concessions
Law No 06/NA 2007
on Forestry
Regulates the management
and use of Forest Land (as
defined under the Law on
Land)
Allows for the use of Forest Land for plantations
Specifies the types of forest land that can be
allocated for plantations
Sets the general requirements for the management
of plantations and the plantation timber value chain
Law No. 29/NA on
Environmental
Protection 2012
Regulates for
environmental protections,
particularly with respect to
develop
Establishes the requirement for Environmental
Compliance Certificates for development
Establishes the requirement for Environmental and
Social Impact assessments
Law No. 02/NA
Investment Promotion
2009
Promotes investment
activities by domestic and
foreign entities
Establishes the requirements for investment
approvals and sets the procedures for investment
activities
Law No. 46/NA on
Enterprise 2013
Regulates all business
activities
Establishes the basis for the registration of
enterprises, including plantation and forestry
businesses.
Law No. 48/NA on
Industrial Processing
2013
Regulates all processing
and manufacturing
activities including wood
processing.
Sets the standards for processing industries
Classifies processors and sets the approval
requirements
Limits small scale processing
Law No. 04/NA on
Customs 2011
Regulates Exports and
Imports
Sets high level regulations with respect to the export
and imports of wood and wood processing equipment
Law No. 05/NA on Tax Provides for the collection,
payment and exemptions
Allows for tax exemptions to encourage plantation
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Legal Source Purpose Matter relevant to Plantation
2011 from tax development and domestic processing.
Order No 15/PMO On
Strengthening
Strictness of Timber
Harvest Management
and Inspection,
Timber Transport and
Business 2016
Suspends to export of logs
and unfinished wood
products
Applies to wood from plantations:
to reduce the risk that consignments of plantation
wood are used to conceal the export of illegally
harvested timber from natural forests;
to reduce the export of plantation wood that does
not comply with the regulations.
Order No. 13/PM
Regarding suspension
of consideration and
approval for new
investment projects in
connection to mineral
ore exploration &
survey, rubber and
eucalyptus Plantation
in whole country 2013
Temporarily cease the
approval of new
development activities in
order to constrain adverse
outcomes.
Prohibits the approval of new eucalyptus and rubber
plantation investment projects.
Does not prohibit the approval applications in the
pipeline
Decree No. 96/PM on
Industrial Tree
Plantations and
Environmental
Protection, 2003
To promote tree planting for
commercial timber
production and
environmental protection
Reiterates the incentives for plantation development
such as land tax exemptions and the provision of
technical assistance.
Decree No. 135/PM
on State Land Lease
or Concession 2009
Sets the conditions and
process for the approval of
concessions and leases on
state land
Applies to plantation projects approved as a lease or
concession.
Directive No.
1849/MAF concerning
the registration of tree
planting parcels 1999
Establishes the
requirement for plantation
to be registered
Provides the process and criteria by which
plantations must be registered.
Regulation No.
0196/MAF concerning
the development and
promotion of long-term
plantations 2000
Promotes investment in
tree plantations
Establishes the procedures for development of
plantations under different land and investment
arrangements.
Describes the governance and administrative
arrangement for tree plantation approvals.
Decree No. 192/PM
on the Compensation
and Resettlement of
the Development
Project 2005
Establishes the
requirements for the
payment of compensation
and standard for are-
settlement for people
affected by development
projects
Plantation investors must pay compensation and may
be required resettle people affected by the plantation
development project.
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Legal Source Purpose Matter relevant to Plantation
Decision No.
2005/MOIC.DOIH on
Timber Product
Standards 2015
Establishes the
requirement for timber
processors to meet
standards in processing
and for wood products.
Requires for evidence of chain of custody in the
processing of plantation grown wood.
ANALYSIS OF THE LEGAL FRAMEWORK
To a great extent the now extensive and complex formal regulatory requirements for plantations in Lao
PDR emerged in concert with the introduction and cyclical reviews of national policies and development
programs.
The introduction of new laws and legal reforms are a common mechanism for ‘enabling policy’ often by
constraining rather than encouraging action, and the topics of policies and development programs may be
used, either overtly or less transparently as an entry point for law reform. The same can be said for
Governance reform and policies for institution building in developing countries. Thus, in Lao PDR as
elsewhere, development funding and support may be contingent on legal reform and that legal reform
must meet certain standards. Laws may be developed locally but are frequently transplanted, at least in
concept, from elsewhere; the assumption being that because it worked in one setting it will work in
another. The source may be another country (e.g. France), a donor or funding body (e.g. the World
Bank), and increasingly the private sector (Gillespie 2008).
The Government of Lao PDR has undoubtedly embarked on a comprehensive program of law reform and
law making, and has committed to establishing ‘Rule of Law in accordance with national realities’. These
local realities are significant. In the same way that markets in Lao PDR are ‘managed by the government’
other sectors are regulated on the basis of ‘rule by law’ – the principle that whatever the government
does, it should do through laws (Tamanaha 2004). More law is viewed as better and since national
liberation in 1975 the National Assembly (NA) has passed more than 100 laws; this is still seen as
insufficient to govern the state and society and to respond to the nation’s development needs. The
National Assembly has indicated a need to pass more laws in order to respond to these needs and
facilitate economic growth despite a perceived insufficiency of law enforcement and a high level of non-
compliance. At the first session of the Seventh Legislature in 2011, the NA set a five-year plan to pass 92
laws by 2015 to facilitate development needs and the country’s integration with the region and the world.
Thus, the first response to a policy failure in Lao PDR may be the introduction of a new law or
subordinate instrument to constrain action, often without repealing a previous order.
This, compounded by an administration structure based on ‘centralised decentralisation’ which gives
authority to decentralised agencies to make locally specific rules, has created a convoluted regulatory
process for plantations and planation grown wood. Numerous approvals need to be obtained from various
levels, often with associated transaction costs. The level of red tape may force people from the formal
sector (Katz 2010) and impact the efficiency of value chains. It also complicates law to such an extent
that successfully navigating it becomes almost impossible for many, resulting in innocent non-compliance
and illegality.
The convoluted and sometimes contradictory legislation also variously enables and constrains National,
Provincial, District and Local authorities, creating ‘gridlock’ (Katz 2010, see for example Order 15/PM
2016). The perception may be that laws have failed to deliver their anticipate benefits, they lack
legitimacy, are inaccessible, unknowable or unenforced, resulting in lack of compliance. As a
consequence pre-existing customary laws and institutions may be retained and continue to function
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(Smith 2014). While contrary to earlier land and development efforts, this legal pluralism is now being
embraced by the development sector and at least acknowledged by the Government, and Lao PDR has
recently begun to consider the ‘harmonization of state and customary laws’ (UNDP 2011). While it would
be premature to suggest that Lao PDR has embraced the concept of legal pluralism, it is the case that
customary law may remain the de facto mediator of access to land where statutory law has failed or is
inaccessible.
Negotiating what is ‘law’ in such plural legal situations presents challenges for people, States and their
international counterparts as they undertake law reform programs; different laws make competing claims
of legitimacy and authority, they impose conflicting demands on norms and they have different styles and
orientation. Where two or more of these meet there can be friction and the potential for competition can
generate uncertainty for individuals or groups who cannot be sure in advance which legal regime will be
applied in their situation (Tsing 2005). This is further complicated by the overlay of supra-state laws to
which the Government of Lao PDR is signatory.
This legal diversity also creates opportunities for selection from among coexisting legal sources and
authorities forum shopping, which provides avenues for people choose legal pathways to reduce costs or
minimise taxes. (Said 2015, Savathvong 2010). The need to simplify the regulatory environment has been
recognised by the GoL, it has recently enacted a Law on Making legislation, clarifying the process for
making laws and established an Official Gazette for laws that are in force.
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7. GOVERNANCE
GOVERNMENT9 AGENCIES
Responsibility for the plantation sector sits several Ministries and line agencies which regulate all aspects
from land allocation to wood exports. These are:
• The Ministry of Agriculture and Forestry (MAF)
• The Ministry of Natural Resources and Environment (MONRE)
• The Ministry of Industry and Commerce (MOIC)
• The Ministry of Justice (MOJ)
• The Ministry of Finance (MOF )
• The Ministry of Planning and Investment (MPI)
• The Ministry of Public Works and Transport (MPWT)
MINISTRY OF AGRICULTURE AND FORESTRY
The structure and functions of Ministry of Agriculture and Forestry (MAF) are set out in Decree No.
262/PM (2012) on the organization and function of the Ministry of Agriculture and Forestry. According to
its mandate, MAF is responsible for “ensuring food security; forest management, supplying raw materials
for processing industries, sustainable, modern commodity production and the creation of permanent jobs
for ethnic groups in order to reduce dependence on shifting cultivation and to eradicate poverty across
the country”.
Department of Forestry
The Department of Forestry (DOF) is a central agency under MAF which provides advice to MAF in
relation to the management, conservation, protection, development and use of forest resources within
production forest areas, plantation forests and village forests, as well as for forestlands which are not yet
classified. The main functions of DOF are to develop and implement strategies, programs and policies on
forestry activities, undertake forest planning, zoning, surveys, monitoring, formulate forestry laws and
other legal instruments related to forestry and to operationalise these through regulations, policy and
technical instructions.
Within DOF the Plantation Investment Division, together with the Division of Technical Standards, is
responsible for the development of regulations with respect to plantation investment and plantation
management. It also collates and maintains plantations statistics.
Provincial Agriculture and Forestry Division
At the provincial level, the Provincial Agriculture and Forestry Offices (PAFOs) are responsible for
implementing the functions of DOF as well as helping to perform sectoral activities at the provincial
administrative level. This includes developing the provincial harvesting quota for submission to MAF,
issuing harvesting licenses, developing harvesting contracts, supervising harvesting operations, preparing
log source documentation, undertaking the scaling and grading of logs and creating the lists of logs at
Landing 2, prior to transport and consolidating District level information for reporting to DOF.
9 “The Government” is defined under the Law on Government as the executive branch of the State, approved by and responsible to
the National Assembly and the President of the State. Members of the Government are: the Prime Minister, Deputy Prime Minister, the Prime Ministers’ Office, Ministers, Deputy Ministers, Ministries and Ministry-equivalent organisations which may act as the secretariat to the government. And so formally one can distinguish between the ‘Government’ and the ‘Party’ even though the widespread use of the term pak –lat (the Party-state) highlights their near inseparability.
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District Agriculture and Forestry Office
Within each Province each District has a District Agriculture and Forestry Office (DAFO) reporting to the
relevant PAFO. Their functions include the registration of plantations, providing advice on plantation
management and planning, pre-harvest surveys, the approval and monitoring of harvesting operations
and the preparation of log origin documentation by measuring and marking harvested logs from all areas
(Production Forest Areas, Infrastructure projects, Plantations, and Village Forests). In the past both
PAFOs and DAFOs have been responsible for finding “degraded land” for investors (and can be awarded
with financial incentives to do so).
DEPARTMENT OF FORESTRY INSPECTION
The Department of Forestry Inspection (DOFI), under MAF, is responsible for monitoring, investigation
and enforcement activities under the Forestry Law No. 06/NA 2007 and the Wildlife and Aquatic Law
No07/NA 2007. DOFI is directly accountable to the secretary body to the Minister of Forestry, providing a
direct line of reporting to the Ministerial level, thus measure of independence outside of DOF and other
agencies. The responsibilities of DOFI are described further below.
DEPARTMENT OF FOREST RESOURCE MANAGEMENT
The Department of Forest Resource Management (DFRM) is responsible for conducting surveys and
determining the areas and the measures on management, prevention, protection, development,
restoration, and registration of forestry resources in protected and reserved forest areas. It also monitors
and inspects the use of forests, forest exploitation, and collection of non-timber forest products and
biodiversity.
MINISTRY OF NATURAL RESOURCES AND ENVIRONMENT
The Ministry of Natural Resources and Environment (MONRE) was established in 2012 by merging the
Water Resource and Environment Administration (WREA) with the National Land Management Authority
(NLMA) and the Geology Department, as well as with two Divisions previously located within DOF:
Protection Conservation and Forest Protection and Regeneration (now Department of Forest Resource
Management).
Within MONRE there are ten Departments; including the Land Allocation and Development Department
(LADD) which is responsible for the administration of land, land registration, surveys and the issuing of
land titles, the Land Management Department (LMD) which is responsible for the participatory land use
planning (PLUP) process during which it consults with stakeholders to propose and issue land use
permits, land transfers, lands lease or land concession, and coordinates with related line agencies and
local administration. MONRE is also responsible for the implementation of the Law on Environmental
Protection No 29/NA 2012.
DEPARTMENT OF ENVIRONMENTAL AND SOCIAL IMPACT ASSESSMENT
The Department of Environmental and Social Impact Assessment reviews, confirms and approves the
environmental and social impact assessments of investment projects, including for tree plantations,
before concession agreements are signed. It monitors and inspects the implementation of environmental
management plans, including the promotion of the participation of all stakeholders and people affected by
investment projects.
MINISTRY OF INDUSTRY AND COMMERCE
The Ministry of Industry and Commerce (MOIC) regulates all types of industry and trade in Lao PDR. It
oversees the sale, transport, processing and export of logs, processed timber and finished wood
products. The relevant Departments that fall under the MOIC include
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• Department of Industry and Handicraft
• Department of Production and Trade Promotion
• Department of Import and Export
• Department of Foreign Trade Policy
• Department of Domestic Trade
• Department of Inspection
• Lao National Chamber of Commerce and Industry
• Economic and Trade Research Institute
DEPARTMENT OF INDUSTRY AND HANDICRAFT
The Department of Industry and Handicraft (DOIH) is responsible for the regulation of the timber industry
sector, including industry standards including environmental impacts, products standards, chain of
custody for wood products, and developing policy and incentives for investment in processing.
DEPARTMENT OF IMPORT AND EXPORT
The Department of Import and Export (DIMEX) is responsible for issuing import and export licenses for all
products that require them, as well as Certificates of Origin for countries that are part of a preferential
trade agreement. It collects and maintains national statistics on imports and exports and maintains the
Lao PDR Trade Portal which is the Government's website that provides a single reference point for all
trade related information including laws, regulations, procedures and tariffs. The Lao PDR Trade Portal
can be found at: http://laotradeportal.gov.la.
PROVINCIAL OFFICE OF INDUSTRY AND COMMERCE
Provincial Industry and Commerce (POIC) Offices are responsible for timber and forestry enterprises in
each Province. Their responsibilities commence after harvesting has occurred and logs have been
transported to Log Landing 2 (sanam 2) through to the point of export.
MINISTRY OF FINANCE
The Ministry of Finance (MOF) is responsible for the collection of taxes and royalty payments. Within the
Ministry of Finance the Department of Customs is the agency tasked with determining and collecting the
duties on goods exported from Lao PDR. The Department of Customs also has an enforcement role,
which is described further, below.
MINISTRY OF PLANNING AND INVESTMENT
The Ministry of Planning and Investment (MPI) regulates foreign and domestic investment in Lao PDR
including plantation investment projects.
INVESTMENT PROMOTION DEPARTMENT
The Investment Promotion Department (IPD) administers the foreign investment system and reviews
investment applications. IPD is the lead agency in the process of assessing applications for investment
activities seeking access to land through leases or concessions, and it coordinates the participation all
other relevant sectoral agencies in the decision-making process such as the issuing of the concession
registration certificates.
MINISTRY OF PUBLIC WORKS AND TRANSPORT
The Ministry of Public Works and Transport (MPWT) is responsible for developing national and provincial
roads, civil aviation, urban transport systems, river wharves, and river and road transport. MPWT consists
of six departments:
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• Department of Civil Aviation,
• Department of Housing and Urban Planning,
• Department of Inland Waterways,
• Department of Planning and Cooperation, Department of Roads (DOR), and
• Department of Transport.
MINISTRY OF JUSTICE
The Ministry of Justice (MOJ) has the primary role in the preparation of legislation. It also carries out a
number of legal support functions including in the overall dissemination of legislation, administering the
lower courts, coordinating judgement enforcement, regulating and overseeing the legal profession and
the Lao Bar Association (LBA), and monitoring the work of Village Mediation Units (VMUs). The MOJ has
branch offices at the Provincial and District levels (UNDP 2011).
LOCAL ADMINISTRATION
Provinces, Districts, and Villages are delegated the responsibility “to manage the territory, natural
resources and population in order to preserve and develop a modern, civil and prosperous society”. They
have authority:
• to implement the Constitution, laws, resolutions, orders, socioeconomic development plans and State budget plans within its area of responsibility;
• to prepare a strategic plan incorporating socio-economic development plans, State budget plans and defence and security plans based on national strategic plans;
• to manage political, socio-economic and cultural affairs, natural resources, the environment and national defence and security;
• to issue resolutions, decisions, orders, instructions and notifications regarding socio-economic and cultural management, and national defence and security within its area of responsibility in accordance with the laws and regulations;
• to supervise the performance of the organisations under its responsibility;
• to collaborate and cooperate with foreign countries as assigned by the government; and
• to exercise such other rights and to perform other duties as provided by the laws.
Local divisions are defined on the basis of geographic boundaries being Province, District and Village and
headed by local authorities (Governor, District chief, and Village head). At the local level, offices of the
line ministries, such as MAF, are part of the organisational structure of the local administration and are
required to manage their own sector’s responsibilities as assigned by the line ministry and to implement
legal acts of higher-level authorities and the socio-economic development plans for the province, capital
city and district. Thus, PAFO and DAFO report both to DOF and relevant local administrative offices.
In 2004 the GoL re-introduced an organizational level between the village and the district: Village
Development clusters (Kumban Pattana).
Foppes (2008) provides the following summary of the structure and function of Kumbans.
Villages are grouped into clusters of on average nine villages per cluster, by Province and
Government taskforces. The grouping largely follows a pre-existing structure called “khet”, which is
used to organize political meetings among groups of village leaders at sub-district level. The main
structure for governing village clusters is the Kumban committee. All members of the committee
have to be Party members. Most committees have 7-8 members; roughly half are district officials,
the other half village leaders. Members are selected, not elected; the leader is always a senior
district official. Kumban committees may have a small Kumban office. In some Kumbans there is
also a Kumban police station, a Kumban health post or an Agricultural Technical Service Center.
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The main function of the Kumban committee is to produce the Kumban Development Plan, which is
submitted to the District with a request for funding to support local development activities. Districts
sometimes provide funding, depending on their available budget. The Kumban committees can be
assisted by a temporary taskforce of District Technical Specialists “long hak than”. Other functions
of the Kumban committee include dissemination of Government policies, implementing the Kumban
plan, local conflict resolution and support of producer groups.
ENFORCEMENT AGENCIES AND ROLES
Responsibilities for monitoring, inspection, enforcement and prosecution with respect to forest,
plantations and the timber supply chain are distributed amongst various government departments.
However, plantations and plantation grown wood currently represent a very small proportion of the law
enforcement effort, which is focussed on timber from natural forests and wildlife. Systems are currently
being developed that will facilitate the collection of information, including about enforcement efforts
associated with plantation grown wood, but at present there is no information available that specifically
relates to this sector.
DEPARTMENT OF FORESTRY INSPECTION
The Department of Forestry Inspection (DoFI) is a key agency in the enforcement of forestry related law.
DoFI was established in 2008. DOFI is empowered to conduct forest control operations, investigate illegal
logging, wildlife crime over forest landscapes, make arrests and pursue prosecutions in Court.
ENVIRONMENTAL POLICE DEPARTMENT
The Environmental Police Department (EnPD), created in 2012, is part of the General Police Department
and operates under the Ministry of Public Security (MoPS). The EnPD has the duty of preventing,
supressing, investigating and arresting offenders who commit crimes related to natural resources and the
environment. The EnPD shares jurisdiction over these crimes with other regulatory agencies across Lao
PDR.
ECONOMIC POLICE DEPARTMENT
The Economic Police Department (EcPD) is part of the General Police Department and operates under
the Ministry of Public Security (MoPS). The EcPD has the duty of preventing, supressing, investigating
and arresting offenders who commit economic related crimes including those pertaining to natural
resources and the environment.
CUSTOMS DEPARTMENT
The Lao Customs Department (LCD), under the Ministry of Finance; is responsible for revenue collection
from dutiable goods imported into Lao PDR. It is also responsible for identifying and seizing contraband
smuggled into and from Lao PDR. This includes illicit timber trafficking.
MINISTRY OF NATURAL RESOURCES AND ENVIRONMENT - DEPARTMENT OF INSPECTION
MONRE Department of Inspection has the power and duty to inspect, research, and resolve
administrative disputes; attend, and propose the competent organizations to resolve disputes of a civil
and criminal nature relating to natural resources and the environment.
THE GOVERNMENT INSPECTION AUTHORITY AND ANTI-CORRUPTION ORGANISATION
The Government Inspection Authority and Anti-Corruption organisation are responsible for investigating
cases of corruption across government, including those related to the forestry sector. With respect to The
Forestry Law the powers of State Inspection agencies and the Anti-Corruption Authority include the
implementation of any aspect of that law or actions taken by individuals with the forestry agency or sector.
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VILLAGE FORESTRY UNITS
The Forestry Law (Article 108) grants Village Forestry Units (VFUs) the right to take a leading role in
monitoring and preventing adverse activities that may cause harmful effect to the forest, NTFPs, water
resources in forests and the environment, such as illegal cutting of trees, forest burning and any actions
that caused damage and destroy the forest on time. However no formal terms of reference have been
developed that allow VFUs to function as a component of DOFI and in the existing terms of reference for
District Forest Inspection their role is limited to a liaison function10
10 c.f. Agreement No 1987/MAF on the Terms of Reference of District Forest Inspection Unit (DAFO), 2013
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8. STAKEHOLDERS/ACTORS AND INTERESTS/POSITIONS
The following stakeholders and actors are involved in the plantation and plantation wood value chain in
Lao PDR.
• Farmers and household plantation owners - who plant and grow trees for the purpose of timber production and other uses and benefits, on land allocated to them.
• Plantation Growing Companies - Lao or international companies that seek to establish plantations and produce timber.
• Grower Groups and Cooperatives – formed by smallholders to facilitate wood sales, price negotiation, improved market, share technical knowledge etc.
• Harvesting contractors - business enterprises that undertake timber harvesting through contracts with farmers, grower groups, timber merchants or plantation companies.
• Wood Traders/merchants/brokers - business enterprises that are formally, or informally, set up to purchase timber from farmers and sell timber to processors, or export timber directly.
• Transporters and logistics companies -enterprises, which may operate independently or under contract with timber merchants.
• Primary Processors –receive and process round logs and squared logs for sawing into boards or veneer
• Secondary Processors - receive square logs and sawn wood for processing into furniture components and semi-finished products
• Furniture Manufacturers - square logs, sawn wood for processing into furniture components and semi-finished for manufacturing into finished products
• Exporters
• Industry Associations such as the Lao National Wood Industry Association, the Lao Chamber of commerce and Industry, Lao Furniture Association
• Non-Government Organisations – that support the government and plantation enterprises, particularly farmer based activities e.g. TFT, RECOFT.
• Civil Society - may participate in consultative activities (e.g. Pro-FLEGT), has opportunity to provide comment on draft strategies and laws and provide feedback t the National Assembly.
• International Development Partners – that provide funding in support of plantation programs, e.g. World Bank, FAO, ADB, ACIAR, GiZ, JICA, SUFORD
• Certification Bodies – that aim to certify plantations to international standards, e.g. FSC, PEFC. They main influence operational plantation management activities in areas where certification is sought, e.g. Luang Prabang teak Program Standard Operating Procedures were developed to FSC requirements.
• Certification Auditors - the audit certification and legality programs under standards such as PEFC and FSC, which may influence how planation activities are perceived.
• Importing Countries/Companies - may place specific demands for sustainability or legality on domestic producers and processors, and influence policy and regulatory reforms to facilitate market access, e.g. Vietnam, China,Thailand, EU, Australia.
• Banks – May provide loans for plantation or plantation wood processing and may allow for the use of plantations as collateral for loans for other purposes.
• Consumers and consumer countries– influence processing through requirements for product quality, standards and design.
• Government – policy making, strategy development, regulations, administration, monitoring, enforcement, revenue.
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9. ENABLING ENVIRONMENT
INCENTIVES, DISINCENTIVES AND FINANCE
The Government of Lao PDR promotes tree planting through the following programs and mechanisms
(Decree No. 0196/PM 2000, see also Smith 2014; Savathvong 2010):
• Land Tax Exemption - Land used for plantations is exempt from land tax if planted in accordance with Article 34 of the Forestry Law and formally registered. The aim of this incentive is to encourage plantation establishment and registration. There are, however inconsistencies in the application of this exemption (Smith 2014) and it has had limited effect on plantation registration (Smith 2014; Smith et al. 2016).
• Profit tax incentives are provided for investment projects including production for export, agriculture and forestry, agro-forestry and handicraft processing, activities relating to industrial processing, industry using modern technology, scientific study and analysis activities and development, activities relating to environmental protection and biodiversity. MoF taxes plantations and most provinces collect tax from tree growers in contradiction to exemptions and incentives provided by MAF.
• Compensation is payable to tree growers in cases where their land is to be used for public benefits (such as roads). Although the formula for calculating compensation does not recognise the true (long term) value of plantations, and can only be claimed if plantations are registered.
• Simplified and expedited permissions - policies exist that are intended to facilitate investment in tree planting and expedite requests for logging and export permits for planted timber. In reality permissions remain complex and costly despite reform efforts (MOIC 2013, Smith 2014, Smith and Alounsavath 2015).
• Fee exemptions for household use and public benefits, felling of planted timber is exempt from reforestation fees, forestry resources fees and other taxes.
• Fee exemptions for timber from plantations for domestic use and for export - reforestation and forestry resources fees no longer apply; however income tax must still be paid;
• Technical assistance for collecting seeds and nurseries; and
• Consideration of government supplied credit for tree planting and the supply of saplings; although these have not always of high quality;
• Finance and lending, insurance and risk management tools - Early financing for tree planting came partly from a firms’ own equity or cash flow or from farmers’ savings and own labour but also from bank credit. Only one bank (the Agriculture Promotion Bank, APB) has participated in on-lending of the project’s funding, since when Lao commercial banks ceased lending for this purpose. Specific instructions/rules (e.g. Directive 0234/MAF regarding the management of plantations and planted forests 1995) were provided for plantations establishment in cases where funding was by way of a bank loan. However, the APB lending program faced issues due to the extent of non-performing loans associated with the ADB Industrial Tree Plantation project, reportedly requiring recapitalisation from the central government (Barney 2008).
• Profit Sharing System (PSS) - The Government initiated a Profit Sharing System (PSS) for farmers who lacked capital or tree planting experience/capacity. The system, was initiated in 1997, was piloted in two Districts of Vientiane Province under the assistance of the GOL/JICA Forest Conservation and Afforestation Project (FORCAP). Under PSS, plantations were jointly established by the Government and farmers; DAFO provided the initial funding in kind (seedlings, barbed wire, technology, expertise) and participating farmers provided their own resources, mainly land and labour, for planting and maintenance. Profits from thinning and final harvest were shared on a ratio of one fifth to DAFO and four fifths to participating farmers.
• Donor assisted activities - such as the funding of plantation registration through the LPTP.
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TECHNICAL SUPPORT AND ASSISTANCE
RESEARCH AND EXTENSION
The plantation sector in Lao PDR is supported primarily by the National Agriculture and Forestry
Research Institute (NAFRI). NAFRI is a technical department in MAF and was established in 1999 to
consolidate agriculture and forestry research activities within the country and develop a coordinated
National Agriculture and Forestry Research System. The Forestry Research Centre (FRC) and the
National Agriculture and Forestry Research Centre (NAFReC) are both centres within NAFRI. FRC
maintains programs related to silviculture (including rehabilitation of degraded lands and agroforestry),
non-timber forest products (NTFP) and tree seed and tree improvement research. NAFReC is located at
Ban Huaykot, 30 km south of Luang Prabang, and was established in 2004 as the first regional research
centre established by NAFRI in its strategy to develop decentralised, multi-disciplinary research. Its roles
include conducting studies and technical research on agriculture and forestry production technologies that
have high productivity and ensure sustainability to meet the needs of the North (Midgley et al. 2011).
NAFReC provides technical advice and extension services for the establishment and management of
plantations, such as teak (see Hansen et al. 1997).
The National Forestry and Agriculture Extension Services (NAFES) was established in 2001 and was
responsible for all forestry extension programs in Lao PDR. NAFES was supported by provincial and
districts offices for the provision of technical services, inputs such as seeds, seedlings and stumps,
together and advice on plantations. In 2012 Department of Agriculture Extension and Cooperatives
(DAEC) was established to support districts and provinces to provide effective extension services. DAEC
is a Department of MAF and supersede NAFES. The main duties of DAEC are to:
1) Promote farming for commodity production and food security; promote contract farming moving
forward to establish new agriculture cooperatives or associations enabling development of a
stronger economy at the grassroots level
2) Establish and improve technical service centres and extension staff at all levels (national,
provincial, district and village)
3) Support and promote development of integrated agriculture production utilizing new scientific
results, machinery and advanced technology of farming practices and potentials of commodity
productions and integrated farming to increase productivity, improve quality and reduce
production costs
4) Establish a system to dissemination and provide information services on production techniques,
processing, marketing, utilization of water and prevention of plants and livestock disease
5) Promote sustainable development of cooperatives operating agribusiness and provision of
services to access credit, use of scientific production techniques, access to domestic and
international markets and exchange experiences within the country and abroad;
6) Develop a mechanism to cooperate with research institutes, other departments and development
partners to mobilize resources and technical supports for development and implementation of
programs and projects on agricultural extension, group and cooperative development. DAEC is
also mandated to coordinate with development partners within and outside the country to
contribute the development of agricultural sector in Lao PDR.
CAPACITY BUILDING
The National University of Lao PDR (NUoL) and Souphanouvong University both have forestry faculties
with graduate degree courses across a range of topics. The National University of Laos is the premier
Lao tertiary educational institution, with the highest quality and quantity of teaching staff within the
24 | P a g e
country. Within NUOL, the Faculty of Forest Science’s (FFS) mission is to (a) organize teaching and
training, (b) conduct scientific research, (c) provide academic services to society, and (d) conserve and
promote traditional Lao culture, as well as selecting good culture and practices from other nations.
Consistent with its mission statement, the FFS plays an important role in the management of forested
areas within Lao PDR. Both MONRE and MAF, among other public and private entities in Lao PDR,
recruit a large portion of their staff from the FFS.
Both universities are also partners in several ACIAR plantation projects on wood processing, marketing,
silviculture and policy development.
Donor funded programs, including through ACIAR, have provided capacity building across a number of
areas. For example:
The LPTP, supported by TFT, has been undertaking training with farmers and farmer groups on a
range of issue including plantation management and silviculture, plantation registration, log
grading and log sales.
The Provincial Forestry Section in Luang Prabang has built capacity in the use and interpretation
of high resolution digital aerial imagery and Geographic Information Systems for mapping and
classification of plantations.
PUBLIC EDUCATION AND PROMOTION CAMPAIGNS
Lao National Tree Planting Day (Arbor Day) is a mandated annual event, on June 1st, when the
population is encouraged to plant trees. Article 47 of the Forest Law specifies establishment of a forest
and forest resource development fund to promote tree planting. Officials use the occasion of Arbor Day to
raise awareness of the need for increased forest cover, particularly among young people.
The most popular tree species planted are the Indian devil tree or mai tinpet (Alstonia scholaris), New
Guinea rosewood or mai dou (Pterocarpus indicus), mai taekha (Afzeleia xylocarpa), mai khaen (Shorea
talura), mai sack (Tectona grandis) teak and mai khaen, as they fetch a high price when felled and sold.
Each year, the government teams up with companies and the public to prepare about 50 million saplings,
with funding of 2 billion Kip (around $250,000USD) from the forestry development fund to publicise the
Arbor Day tree planting.
National Arbor Day is primarily an awareness raising campaign, with the day providing an opportunity for
announcements by both the Government and also development partners11
. Arbour day efforts are
included in national targets for reforestation but the effectiveness of the program has been questioned,12
particularly with respect to survival rates; it is estimated that 70-80 percent of government-planted
seedlings survive after planting due to lack of maintenance.
11 http://www.leafasia.org/leaf-news-notes/laos-arbor-day-support-leads-planting-over-6000-trees
12 http://www.asianews.network/content/laos-unlikely-meet-tree-planting-targets-year-17224
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10. LAND TENURE AND PLANTATION DEVELOPMENT
The areas in which plantation can be developed are determined through the Law on Land (No. 04/NA
2003) which regulates the categorization of land and the allocation of access and use rights to land. The
land allocation process for plantations is summarised in Figure 8.
Land is categorised as:
• Agricultural land;
• Forest land;
• Water area land;
• Industrial land;
• Communication land;
• Cultural land;
• Land for national defence and security;
• Construction land.
Land can be changed from one category to another category only if it is considered to be necessary
without having negative impacts on the natural or social environment and must be with the prior approval
of the concerned management authorities.
Plantations can be established on forest land that has been allocated to individuals and households, or on
State land or village land that is granted by concession or lease.
Generally, land areas for plantation projects should never include any of the following:
• Protection Forest
• Conservation Forest
• Local Production Forest
• Watershed Areas
• Forestlands with more than 20% of forest coverage
• Areas with slope more than 35% for tree plantations
• Military strategic areas
• Historical or tourist sites
• Other Government approved land concession project land.
In all cases plantations are to only be approved on land that is classified as ‘degraded forestland’ or
‘barren forestland’ located in rural or suburban areas.
CONCESSIONS AND LEASES
State land concessions for industrial tree plantations, forest rejuvenation, reforestation and non-timber
forest product collection can only be granted on land appropriately zoned as:
Zone 1: mountains, plateaus, plains without economic infrastructure which encourages the
investment.
Zone 2: mountains, plateaus, plains with partial economic infrastructure which encourages the
investment.
Zone 3: mountains, plateaus, plains with good economic infrastructure which encourages the
investment.
Except for in necessary cases concession land areas should not cover land which is:
• Land held on private land title;
• Land that is under collective title;
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• Paddy land;
• Agricultural land for growing rice (not including swidden) or annual crops by local farmers; and
• Land on which people are residing or making a living, whether on a periodic or permanent basis.
In the event such land exists within a concession or state lease area, consultation must occur with the
affected persons and compensation must be paid. In the case of paddy land, specific approval from MAF
and the Land Management Department, MONRE must be obtained.
Where ever possible the use of Agricultural Land13
for concession based plantations should be avoided,
unless is it is in excess to current and future agricultural requirements.
The processes through which applications and approvals for concessions and leases are to be made are
articulated in many legal sources and administered through several agencies at different administrative
levels. MAF, MONRE, Local Government and MPI all have responsibilities for approving plantation
investment projects, allocating land, registering plantations and managing the timber arising from them,
compounding the costs and time required for investments to commence, become productive and provide
a return.
SMALLHOLDER PLANTATIONS
Plantations may be established by individuals, household or businesses on land allocated to them
through the Land and Forest Allocation Process. In accordance with the Land Law (Article 21) up to 3 ha
of degraded or bare forestland many be allocated to each labour unit per household for timber plantation
development or agroforestry (refer Smith 2014 for further details). Temporary Land Use Rights were
provided for with plantation establishment which could be converted to permanent land-use rights, on
application. More recently the issuing of TLUCs have been suspended and new participatory land use
planning processes recognise a variety of documents to demonstrate existing land use rights (MAF and
NLMA 2010).
The allocation of forestland areas greater than 3 ha for plantations must be by way of lease or
concession.
PLANTATION DEVELOPMENT PROCESS
The process for plantation approval and development follows a number of pathways depending on the
scale of the plantation project, the nature of the investment and the land allocation process. These
processes are summarised in Figure 8. These factors also determine the level of environmental and
social impact assessment that is required.
CONCESSION BASED PLANTATIONS
Concessions or leases are granted under agreements with National, Provincial, District and sometimes
village authorities as detailed under the Law on Investment Promotion No. 02/NA 2009, the Forestry Law
No. 06/NA 2007, and Land Law 04/NA 2003. The Presidential Decree No 135/PM on State Land Leases
and Concessions 2009 establishes a set of general principles for the granting of leases or concessions of
state lands, and Presidential Decree No. 02/NA provides a guide for range of land lease rates for
concessions in the country. In line with the Prime Minister’s Decree No. 67/PM on the Organization and
Function of the National Land Management Authority (2004) and Decree No. 135/PM on State Land
Leases and Concessions 2009, approval for concessions of State land can be granted by the National
Assembly, with agreement by the GoL, or at local level (Provincial Governors or Capital Mayor). A
supervising committee, chaired by MPI has oversight of the concession or lease process (Smith and
Alounsavath 2015).
13 As defined under the Law on Land
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ENVIRONMENTAL AND SOCIAL IMPACT PROTECTION MEASURES
Specific measures have been introduced to minimize and mitigate the negative social, economic and
environmental impacts associated with different tree plantation development approaches. These are
articulated in Law, regulations and guidelines as well as within codes of practice and standards for
sustainability certification and corporate social responsibility.
Environmental and social management and protection measures are implemented at the landscape level
though national, provincial, district and village planning processes and at the project level. Landscape
level measures tend to be aimed at restricting the types of activities that may be undertaken in areas with
defined characteristics to limit impacts, protect remaining environmental qualities or values or restore past
degradation. For example, limiting plantations to areas that are already degraded is intended to prevent
further deforestation and simultaneously restore forest cover. In terms of social or economic impacts,
landscape level measures may be intended to protect high quality agricultural land and ensure that
strategies for enhancing agricultural production and food security are effective.
At the project level, environmental and social management and protection measures tend to be focused
on local level impacts and are based on considerations about the type of activity, the scale and the
magnitude of the risks involved (Table 6).
In 2012 the Government of Lao PDR enacted the Environmental Protection Law (Revised), No. 29/NA as
the framework law for environmental management. It incorporates the concept of an environmental
impact assessment (EIA) as a key tool for the protection of environmental and social values and provides
“principles, regulations and measures related to environmental management, monitoring and protection.
Environmental Impact Assessment Guidelines have been developed to support the integration of the two
objectives of ‘protection’ and ‘development’. These Guidelines provide a common framework for an Initial
Environmental Examination (IEE) or for an Environmental and Social Impact Assessment (ESIA). They
also guide project developers and their environmental consultants on the structure, content and scope of
necessary reports, and ensure that reporting is consistent with legal requirements, good practices and
professional standards (UNDP 2014). Environmental and social impact assessment and mitigation have
been articulated in legal texts and guidelines. The roles, responsibilities, obligations and requirements are
outlined under the Ministerial Agreement on Endorsement and Promulgation of a List of Investment
Projects and Activities Required for Conducting Initial Environmental Examination or Environmental
Impact Assessment, No. 8056/MONRE 2013; Ministerial Instruction on Initial Environmental Examination
of the Investment Projects and Activities, No. 8029/MONRE 2013, and Ministerial Instruction on
Environmental and Social Impact Assessment of the Investment Projects and Activities, No.
8030/MONRE 2013. While these guidelines are reasonably comprehensive current implementation is
largely based on the level of knowledge of the consultant company that is engaged to undertake the
assessment. Government employees who are responsible for the ESIAs have limited capacity in terms of
their expertise, experience and knowledge. Some are from non-forestry or natural resource management
backgrounds. In addition the level of resourcing is inadequate.
Forestry plantation projects are divided into two categories for environmental and social impact
assessment and reporting purposes: Category I - Small scale investment projects with minor
environmental and social impacts requiring an initial environmental evaluations (“IEE”); and Category II –
Large-scale investment projects which are complicated or create significant environmental and social
impacts requiring an environmental impact assessments (“EIA”). Industrial tree plantations of 20-200 ha
are considered to be Category I projects while plantations >200 ha are considered to be Category II
projects. Projects that are outside of the above listed categories will either be considered too small scale
to require an IEE or EIA, or will be individually screened by MONRE based on additional criteria, and
possibly the advice of MAF, to determine if either an IEE or EIA is required or in no assessment is
necessary (EIA Decree Article 6) (UNDP 2014).
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Additional “social categories” exist with respect to the social studies and plans that an investment project
is required to conduct. For example a project with large-scale social impacts may be required to submit a
Social Impact Assessment, and Resettlement Plan and/or Ethnic Minority Development Plan,
Resettlement Plan and/or Land Acquisition and Compensation Report to DESIA for approval.
MONRE leads the study and identification of policies, strategies, regulations, methods and measures for
environmental protection. The environmental management organizations consist of:
• MONRE
• Provincial or Capital DONRE
• District or municipality office of natural resources and environment
• Village unit of natural resources and environment
These organisations are also the environmental inspection agencies that work with other agencies such
as the National Assembly, State Inspection and Anti-Corruption Authority, State Audit Authority, DoF and
DoFI.
INDIVIDUAL OWNED PLANTATIONS
Once land has been allocated for use as a plantation, individuals may establish their trees without further
approvals. Plantations should be inspected by District forestry officials after three years, to ensure that
they conform to standards set in the relevant regulations.
Environmental and social mitigation measures for small scale plantations (<20ha) fall outside the ESIA
process, and requirements are included in the relevant legal texts and departmental guidelines, as
summarised in Appendix 6. However, smallholder plantations may require that a technical and socio-
economic assessment is made where plantation are greater than 5 ha or where several plantations less
than 5ha are to be established on adjoining land, regardless of whether this land is owned by one or
many different individuals. Regulation 0196/AF 2000 sets out in very broad terms the measures that are
required in this assessment. Instruction No 1643/DOF 2010 on the development of a feasibility study on
industrial trees and NTFPs plantation investment contains more comprehensive guidelines. However, this
is only applicable to concessions granted under Article 74 of the Forestry law, not to plantation on land
allocated to individuals.
Table 6: EISA requirements for Plantation Projects
Land Type Plantation size Forestry Assessment
required
Environmental
assessment required
Allocated to Individuals <0.16 ha (scattered
planting)
Nil Nil
Allocated to Individuals 0.16-3ha Nil, unless plantings are
grouped with a combined
area >5ha
Nil
Allocated to Individuals 3-5 ha Nil, unless plantings are
grouped with a combined
area >5ha
Nil
Allocated to Individuals < 5a (using bank loan) Technical assessment Nil
Allocated to Individuals 5-20ha Technical assessment Nil
State land concession 20-200ha Technical assessment
Feasibility Study
IIE
State land concession >200 ha Technical assessment
Feasibility
EIA
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PLANTATION REGISTRATION
After a period of three years plantations should be registered with the Department of Forestry, however,
in the case of smallholder plantations this regulation is not widely complied with despite exemptions from
land tax and other fees and charges. Plantation land-use rights, and plantation registration, have come to
be viewed as a means of de facto land ownership and markets for plantation and plantation land have
emerged. Compliance with plantation registration requirements remains low due to prohibitive costs,
lengthy and technical administrative procedures, unclear regulations and lack of enforcement (Smith et al.
2016). There is a common perception that plantations only need to be registered when trees are to be
harvested.
Plantation registration has, more recently, become the necessary evidence for demonstration of legal
source of origin for plantation timber; legally plantation timber cannot be sold unless it is registered.
Applications for plantation registration are often made at the time of sale or harvest, and the process may
either be completed by grower or timber traders.
ACIAR project FST/2010/012 has been investigating alternative approaches to plantation registration and
demonstrating the source of origin for plantation grown wood (Smith 2014; Smith 2016). This research
proposes an option that allows for local level institutions to authorise timber sales without the need for
smallholder to undergo the full plantation registration process.
TEMPORARY BAN ON SOME NEW PLANTATIONS
In 2012, a temporary ban (Decree 13/PM 2012) on the approval on some types of new mining and
plantation investment projects involving rubber and eucalyptus was put in place, and was reiterated in
2015 and 2016. This ban has made it difficult for plantation investors to access the land necessary to
sustain and build their enterprises.
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Figure 8: Land Allocation to Plantations
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Figure 9: Plantation Approval/Development Process
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11. MARKETS
Markets are a key driver for plantation development in Lao PDR, particularly the domestic processing of
products for export.
WOOD SUPPLY AND PRODUCTION
Precise statistics on wood production in Lao PDR are difficult to obtain, and there are discrepancies in
production, consumption and export data. There are no consolidated statistics on wood production from
Eucalyptus or Acacia plantations. Data on yields and harvesting are held by individual companies
(Smithies pers. comm).
With respect to teak, the statistics are not reliable. In 2006 it was estimated that over 7000 m3 of
plantation-grown teak was harvested in Luang Prabang Province and 20,000 m3 in 2010 (Savathvong
2010). Midgley et al. 2015, however, note that substantially higher volumes are reported by importing
countries than those recorded in official Lao trade statistics. In 2012, for example, combined imports to
China, Thailand and Vietnam were reported as 10,670m3 while exports from Lao were recorded as
3,655m3. Similar variations where found for 2013.
The absence of mapping, inventory, and appropriate growth and yield models for teak and other naturally
occurring species has meant that predicting volumes and long term supply has been difficult. Research
being undertaken by two other ACIAR projects14
is addressing this issue. For example, in Luang Prabang
province over 15,000 ha of teak plantation has been mapped and classified down to 0.35 ha parcels.
Combined with field based inventory and the application of growth and yield models, to be undertaken
during the next phase of that project, a better picture of the nature of that resource will be developed
(Boer and Seneanachack 2016).
DEMAND FOR WOOD
Plantation wood is consumed locally, processed domestically and exported. The volume of wood that is
consumed locally, by households and within villages, is not known.
The bulk of log and wood exports from Lao PDR are either unprocessed logs or basic sawn wood and
planks, with minor quantities further processed into components, strip parquet flooring, furniture and
various other secondary products.
TEAK
Midgley et al. (2012) found that Lao exports of timber derived from plantations were dominated by teak, a
large proportion of which was in the form of squared logs. The main markets are China, Thailand and
Vietnam, and India is emerging as a purchaser of Lao teak (Midgley et al. 2015). Keonakhone (2005)
estimated that about 95 % of the teak wood produced in Luang Prabang was exported and 5% used
locally, which includes teak residues produced in preparation of squared logs. Teak is used by domestic
wood processors and furniture makers, although volumes are low (ACIAR FST/2010/012 unpublished
data) and there is still a dependence on and preference for wood from natural forests.
Teak thinnings are sold as poles although this is not a formally recognised wood product in regulations.
14 ACIAR project FST/2010/012 Enhancing Key Elements of Value Chain for Plantation Grown wood in Lao PDR and project
FST/2012/041 on Teak-based Agroforestry Systems to Enhance and Diversify Smallholder Livelihoods in Luang Prabang Province.
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Photo 1: Teak logs (2.4m length) after extraction in Nam Bak District (credit K. Boer)
EUCALYPTUS AND ACACIA
A number of domestic mills have been established for the processing of Eucalyptus, however the market
is currently limited. One company (Burapha Agroforestry Co.) is producing construction poles for the
domestic market and customised furniture products for domestic and niche markets in Asia, North
America and Europe. Sticks trimmed from logs during processing are used for fences, screens and
ornamental material for luxury resorts in Asia. Another company is exporting high quality wood logs
through Vietnam for construction poles, chipping, pulp and MDF (Earth Systems 2016).
Veneer processing is being undertaken by a number of local processors to supply Thailand, Vietnam and
China. Thai companies have also purchased eucalyptus logs in Lao PDR.
The development of pulp mills has stalled due to challenges with land availability for plantation
establishment of an area necessary to make such projects economically viable. This is exacerbated by
Order No. 13/PMO 2012, which placed a temporary ban on new concessions.
In all cases Prime Minister’s Order No. 15/PMO 2016 has temporarily suspended the export of all planted
wood logs and unfinished products, although some exceptions have been negotiated.15
Households consume large volumes of wood in Lao PDR and there is potentially a significant volume of
wood that is produced locally from a range of sources including planted trees, and that is also consumed
locally, and hence is largely unregulated and unaccounted for. Some estimates are that household
consumption of wood for construction may be as high as 1 m3 per year, and wood consumption for other
uses such as fuel wood may be as much as 1m3 per person per year.
PROCESSING
The Government of Lao PDR has a policy to promote domestic wood-processing factories (WPF) by
linking the regulation of their operations to timber harvesting, quotas and plantation investment, and by
15 https://opendevelopmentmekong.net/veneers-can-be-exported-despite-unfinished-wood-product-ban-govt-spokesman/
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promoting only the export of processed wood. Many attempts have been made to both regulate and
develop the wood processing sector, and limit the export of round logs.
In 2006 MOIC took over the responsibility for regulating the wood processing industry from MAF and
issued a series of new regulations aimed at making the export of timber and wood-based products the
exclusive right of the central government. The transition in administration from MAF to MOIC was not
straightforward. Various efforts (e.g. Order No 17/PM, 2008) have been developed to improve
collaboration between MOIC and MAF across a range of areas concerning the operational standards and
management of wood processing, including sawmills and wood working factories and to develop
regulations with respect to operation of harvesting businesses, tree plantation groups, wood and wood
product merchants and wood product exporters.
The Law on Industrial Processing determines the principles, regulations and measures relating to the
establishment, operation and administration of industrial and handicrafts processing. In 2009 Decision
0719/MOIC 2009 was implemented to reform and modernize all levels of timber processing, including
small household sawmills and factories. It defines three levels of processing and classifies manufacturers
according to ISIC codes and specifies processing standards, including for environmental protection and
OH&S, as well as products standards. Within this Decree WPFs are classified into 3 types:
• Wood processing factories I (type I) include sawmill, semi-finish wood product factory, with codes 1610, 1621, 1622.1, 1701.1, as: sawn wood, square, re-sawn wood, rotary veneer, slice veneer, and pulp.
• Wood processing factories II (type II) include finished wood product factory, and furniture factory, with codes 1621, 1622.2, 1623, 1624, 1629, 1701.2, 1702, 1709, and 3100,as: wooden house, frames, door, window, stair, parquet, flooring, plywood, particle board, fibre-board, box, palette, paper, paper utensil, wooden furniture (tables, chairs, chests, beds), decorative wood, woodcrafts and carving products.
• Small size wood processing factories run by households (including small wooden furniture), with less than 10 employees, and less than 5 horse power, are classified in type II, and with codes 1629, 3100, as: tables, chairs, chests, beds, wood crafts and curving products, decorative items, photo frames.
For small sized (family/household) processing facilities the decision specifies the source and grade of
timber that can be used as being: timber from level I manufacturing (sawmills and semi processing
manufacturers) branches, roots, stumps and other waste woods. Specific prohibitions are provided,
including:
• the harvesting and input of illegal timbers (according to the rules and regulations of the forestry sector) as raw materials;
• the sawing or cutting of timbers for commercial uses, only allowing for the processing of timbers with a purpose of internal manufacturing.
• the use of its own raw material for any commercial purposes.
Small processing manufactures that meet conditions and standards of this Decision must apply for a
permit to operate. In September 201616
, over 1154 family processing and furniture plants were shut down
by the government for operating without a permit or for being located in or near forest conservation areas.
This will have implications for the production and supply of low quality household furniture that is
consumed locally.
With the close of these factories there are an estimated 445 registered wood processing and timber
manufacturing plants remaining in Lao PDR.
16 Vientiane Times 2
nd September 2016 “More than a thousand furniture plants ordered to shut down”.
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CERTIFICATION, LEGALITY AND OTHER STANDARDS
Forest policy in Lao PDR is increasingly influenced by the requirements of consumer markets and the
increasingly strong calls that are being made globally and regionally for sustainability and legality in
forests, forest industries and related trade. The response of Lao PDR’s trading partners is particularly
important. Approaches to certification verification and governance in forestry in Southeast Asia are
described in detail by the World Bank (2012). In Lao PDR there are two main approaches: voluntary
certification and legality assurance.
CERTIFICATION
Certification programs are voluntary. They are based on the premise that consumers demand and will pay
for timber that is sourced from sustainably managed forests, including plantations. The two most common
forms of certification are
• Forest management – ensuring forest operations are managed sustainably; and
• Chain of custody – tracking certified material from forest to final product
Certification programs apply a set of standards based on criteria. Once a forestry operation has received
certification, they are bound by the standards of the certifying organisation.
The two most prominent certification organisations are the Forest Stewardship Council (FSC) and the
Program for the Endorsement of Forest Certification (PEFC) an umbrella organisation endorsing domestic
forest certification systems across the globe. China, Australia and Indonesia, for example, have each
developed their own national standard under PEFC. Within these certification programs there is a
requirement for chain of custody to enable products to be tracked from harvest to purchase by a
consumer. Chain of custody certification is the mechanism used to ensure the traceability of wood
material from a certified forest to any point along on the supply chain. It is required to substantiate any
claim that wood and wood products are obtained from a certified forest.
From the Lao PDR context Flanagan and Laity (2015) describe and review the various forest certification
and verification schemes in detail. They note that programs to establish management systems based on
certification programs have been operating in Lao PDR since the late 1990s for a range of forest types
and products including timber from State-owned natural forest and plantations as well as community
grown wood, rattan and bamboo. Table 7 (based on Flanagan and Laity 2015) provides an overview of
certification and verification systems which have operated in Lao PDR.
In 2012 Lao PDR had about 2% (132,162 ha) the of production forests FSC certified of which more than
99% was in natural forest, issued to state or village groups, and less than 1% in forest plantations, issued
to private groups. By July 2016 one plantation company, Burapha Agroforestry Co., was the only entity in
Lao PDR with current certification.
Certification Issues and Challenges
A common characteristic across certification initiatives is the requirement for flexible approaches if
sustainable forest management outcomes are to be achieved. It is also critical that unrealistic economic
expectations are not promoted, because they can potentially undermine the benefits such systems
provide (Flanagan and Laity 2015). The failure for market benefits to materialise following certification is
one reason that programs fail. Other factors constrain the development of sustainable enterprise based
on smallholder grown wood (Ling 2014). The integration of teak into farmer livelihoods wherein timber
production may not be primary driver for planting trees (Newby et al. 2014; Smith et al. 2016) can limit the
ability for regular consignment s of wood that meet market quality to be compiled. Farmers decide when
to harvest trees on the basis of need, and supply is therefore unpredictable.
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The complexity and increased costs associated with meeting and maintaining certification standards, in
additional to already high transaction costs for plantation timber, are a deterrent to participation by
smallholders. Even donor funded programs, such as the LPTP, which are aimed at assisting smallholders
through the certification process, have found it difficult to certify a large enough area to supply wood
volumes at a level that meets market demand. This has flow on impacts on efforts to establish grower
groups and farmer enterprises around certified timber resources (Ling 2014). For example, in 2016 LPTP
opted to cease its certification program due to low volumes and the absence of a price premium for the
certified wood (Masias Bröcker pers. comm.). Farmers were unwilling to commit to membership of farmer
grower groups, which were being trailed as a means to facilitate market access; other cheaper and easier
avenues for wood sales were available, such as to Chinese traders (Ling 2014, Smith et al. 2016)
For timber processors who have adopted Chain of Custody systems, this limited supply of certified wood
also makes it difficult to maintain the level of processing of certified products that is needed to meet
consumer demands. Furthermore, because no premium is being achieved for their certified products (or
the returns do not exceed the costs) (Flanagan and Laity 2015) benefits cannot be passed back to the
growers. Companies have indicated that the strength of markets that do not require certification, but
which are price competitive, are an attractive option (Flanagan and Laity 2015); and evidence suggests
that the price paid to growers for teak logs by Chinese traders is certainly competitive with domestic
markets (Antilla 2016). In some cases traders do not require smallholders to demonstrate legal
compliance or they are able to fast-track or circumvent regulatory procedures (Smith et al. 2016,
Schneider 2014) and regulatory costs are minimised as a result.
For larger plantations issues have emerged that are impacting the ability for certification standards to be
achieved and maintained. Oji Plantations, for example cited “untenable conflict within the Lao People’s
Democratic Republic Laws and working to the Forest Stewardship Council (FSC)’s principles”17
as a
reason for not renewing its FSC certification in 2015. The critical issue was strongly related to the actions
of the company as regards several principles of the FSC, but with specific reference to FSC Principle 10
criterion 10.9. FSC Criterion 10.9 states that “Plantations established in areas converted from natural
forest after November 1994 normally shall not qualify for certification. Certification may be allowed in
circumstances where sufficient evidence is submitted to the certification body that the manager/owner is
not responsible directly or indirectly of such conversion”. Within Lao PDR this issue arises because, while
land that can be allocated for plantation should be classified as degraded or bare forestland, in reality
such areas may support secondary or degraded natural forest. This means that in the process of
plantation establishment natural forest may be cleared. Other issues related to the level of consultation
with affected communities and whether community agreement had been obtained with respect to the land
agreement. This task can be challenging where responsibility for providing land for plantation is
decentralised and where local people have limited opportunity to participate in land allocation processes
for investment purposes.
Furthermore, the level of support for certification is not well established in Lao PDR. Many officials in the
government, at both the provincial and central levels, reportedly do not support certification. Alternative
strategies under consideration include the WWF-GFTN and Conservancy (TNC) Responsible Asia Forest
and Trade (RAFT) initiatives, which offer market access for legal and certified wood.
17 http://www.lpfl.la/index.php/en/2014-01-14-08-36-59/256-fsc
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Table 7: Forest Certification and Verification initiatives in Lao PDR
Entity Type Structure Extent Stakeholders History
Lao PDR
Government.
FSC
Natural Production
forests FSC
certified
Central
government
group with
15 members
3 provinces, 5
districts for
natural wood
and rattan
DoF,
SUFORD,
WWF
Established in
1990s.
FSC certification in
2012
Ceased in 2015
FLEGT Focal point for
establishment of
VPA
Steering
committee
Lao PDR
Government
Forestry Sector
MAF, DoF,
EU, GIZ,
LNCCI
Focal point
established in 2009
Negotiations
ongoing
LPTP Project to support
smallholders
management and
marketing
including FSC
certification
Provincial
Forestry
Section
group entity
with farmer
group
10 villages and
three districts in
Luang Prabang.
Around 1000ha
between FSC
and pipeline
Lao PDR
Provincial
Forestry
Section, TFT,
JICA, ACIAR
and
smallholders
Established in
2008
FSC certified group
entity in 2010.
Certification
ceased in 2016
Burapha
Agroforestry
Co.
Agroforestry
development and
furniture factory.
Private
business
Vientiane
plantations and
country-wide
wood
purchasing
Company and
smallholders.
Established in
1991,
FSC certified in
2010 (CoC) and
2012 (FM).
Oji Lao
Plantation
Forest Co
Industrial
plantation
Joint
venture
Target to
establish 50,000
Ha (around 50%
established)
GoL and Oji
Lao
Plantation
Holding
Commenced in
1999,
FSC certified in
2013.
Certification
terminated in 2015
LEGALITY VERIFICATION
Legality verification requires that participants demonstrate that they comply with the relevant laws of the
producer country, as described in a framework set by the program and require a level of traceability of
legal timber at all points in the supply chain.
Some voluntary certification bodies have introduced legality standards as a second (lower) tier of
certification below sustainability.
Consumer countries such as Australia, The United States and The European Union (EU) have enacted
domestic legislation to reduce the risk of the importation of illegal timber. Of these the EU Forest Law
Enforcement, Governance and Trade (FLEGT) program is the most prominent in Lao PDR. The program
includes financial and technical support and advice, as well as measures to promote the legal timber
trade. Voluntary Partnership Agreements (VPAs) established between the EU and timber-producing
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countries are a central component of the scheme which requires the development of Timber Legality
Assurance System which has five core components:
The legality definition
Supply chain control
Verification of compliance
FLEGT licensing
Independent audit.
Lao PDR has entered negotiations with the EU on a VPA and a TLAS is under development. Timber from
land to be converted to plantations, plantations and plantation grown wood are all included within the
scope of the FLEGT-VPA. Special consideration is being given to smallholder plantations. Once verified
as legal, countries can give FLEGT licences to timber products destined for the EU market.
Issues with Legality Verification
While the EU FLEGT process is still ongoing, issues have been identified in response to processes
undertaken elsewhere. One issue is that the processes of developing the TLAS and legality definition
may embed regulations that are excessively complex or difficult and costly to comply with. For
smallholders in particular this risks alienating from the markets which are supposed to provide a price
and/or perversely pushing them towards informal markets with lower compliance standards, but
potentially competitive prices, as described above. There is a need for laws and regulations to be
reviewed on the basis of first principals and where necessary reformed, before they are included within
legality definitions.
Second, the effectiveness of legality programs is highly dependent on local law enforcement, which may
be under resourced or for whom monitoring plantation timber trade may not be a high priority, when
compared with the risk of illegal logging from natural forests or wildlife trafficking. While funding and
capacity building for domestic law enforcement is a component of EU-FELGT programs the demands on
imported wood from both international markets and end users have also created a need to expand
legality monitoring systems beyond the national borders. This can be viewed as an imposition on national
sovereignty or as complementary to law enforcement, lending legitimacy and credibility to the forest
management system, thus reassuring consumer countries (World Bank 2012).
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12. RISKS
Plantations face many risks. Smallholders are often viewed as vulnerable because they bear a
disproportionately high share of the risks associated with tree plantations (Midgley 2006). However, a
similar position could be taken with respect to all growers in the plantation value chain. Technical,
environmental, market, livelihood and policy/regulatory risks are all present.
MARKET RISKS
• Fluctuations in price
• Changes in wood quality, specifications and standards
• Changes in consumer demands (such as design needs)
• Market competition
• Introduction of consumer country certification or legality measures (also a regulatory risk)
POLICY AND REGULATORY RISKS
• Changes in policy with respect to land availability (e.g. No.13/PMO 2012 banning some new concessions; the new Land Policy)
• Changes in regulation restricting market access (e.g. No 15/PMO 2016 banning round log exports)
• Introduction of new regulations that add to costs of production (e.g. the introduction of EISA regulations increasing establishment cost, or phytosanitary requirements required for export)
• Introduction of new regulations to meet the requirements of importing and consumer countries
• Delays or failure in land registration and titling process
TECHNICAL AND ENVIRONMENTAL RISK
• Impact of disease or pests
• Impacts of natural disasters such as drought, floods, snow/frost or fire
• Climate change
• Lack of skills or expertise, e.g. appropriate silviculture
LIVELIHOOD RISK
• Changes in socio-economic condition resulting in unplanned harvesting or plantation sale (smallholders)
Loss of plantations due to compulsory acquisition for National development projects.
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13. CONCLUDING REMARKS AND RECOMMENDATIONS
CONCLUDING REMARKS
Lao PDR has a complex planning process designed to progress its national socio-economic development
strategies. The making of strategies, planning and policy formulation in Lao PDR has remained linked to
development assistance and with it to the motivations and agendas of donor countries, whether these are
economic, social, humanitarian, environmental or political. Efforts to simultaneously join the global
community but retain national identity have resulted in a hybrid approach to policy making - centralised
decentralisation - and this has implications for the formulation and implementation of future development
goals and policies.
There is no shortage of high-level statements on priority issues, and many sectoral strategies and
implementation plans have been developed with international donor support. Broad policy statements
satisfy the expectations of partners but appear to be at the expense of approaches specific to the needs
of Lao PDR. Many of these strategies are underpinned by target-driven indicators of success, which may
send a clear signal of commitment, but which may not be particularly useful in understanding policy
effectiveness or in pointing to areas that need reform.
Policies for plantation forestry have transitioned in national strategies from being a poverty reduction tool
and a means to help stop land and forest degradation, to become a mechanism for attracting foreign
investment, developing a national industry and increasing forest cover. One very simple target –
establishing 500,000 ha of plantations has become a key indicator of success, but in reality this provides
little indication of whether policies for plantation development have been effective in achieving their
broader objectives. This review suggests that not all policy objectives have been achieved; fundamental
tensions exist between central policies and local realities. Describing and mapping out the relationships
between plantation production systems and policy objectives helps to understand the effectiveness of
those policies and as well as the factors that have constrained them. It will also assist in the identification
of options for targeted and more detailed research for policy and institutional change for plantation
development.
Overtime the process of policy making and implementation has successfully promoted plantations but has
also created a complex and diverse set of supply and demand arrangements for plantation grown wood.
On the supply side a heterogeneous typology of plantation systems is evident in which many actors may
participate in the production of plantation grown wood. The resource is diverse in terms of species, age-
class, condition, ownership arrangements and availability. On the demand side, timber flows along
several value chains – local, domestic and export based. The domestic industry is immature and unable
to compete with international markets.
The policy environment and regulations for plantations have evolved from those designed for systems of
timber production from natural forests. As the protection of the natural environment has become an
increasingly important policy in Lao PDR, the regulations to manage and control timber flow have
tightened. As a consequence the plantation wood value chains are heavily regulated and in some areas
governance and administrative requirements are complicated and have created bottlenecks.
Investment promotion policies have encouraged investment in industrial scale plantations but land
policies have constrained access to the necessary land resource base. In response multiple pathways
have been utilised to gain access to land.
Land policy and land allocation programs have also created a complex set of investment perspectives
amongst smallholders who have opted to integrate tree plantations into their livelihood strategies. For
some these strategies are not motivated by timber production objectives, but rather by maintaining tenure
41 | P a g e
security and the protection of land use rights. This has implications for a range of issues including
plantation management practices which influence wood quality, harvesting regimes which impact wood
availability and regulatory compliance. As a result the wood processing sector remains challenged by an
irregular and unpredictable supply of wood that may not meet input specifications, output standards or
market based requirements for legality.
The policy and regulatory environment has not evolved in line with the development of these diverse
plantation arrangements. There is a need to better understand what these arrangements are and how
policies have affect or been affected by them so that new policies and an enabling environment can be
created. This needs to balance between government, grower, industry and environmental needs.
RECOMMENDATIONS
Based on this review a number of preliminary recommendations can be made as a basis for further
analysis and development of more detailed policy options.
That the Government of Lao PDR:
1. Continue its current review of tree plantation policy to provide a simpler and more transparent policy
framework for the establishment, management and production and use of plantation grown wood.
2. Clearly indicate an overall vision for the tree plantation sector, spelling out the multiple objectives for
plantations, the ways in which these objectives can be achieved and how the benefits and costs of
different types of plantations will be distributed.
3. Clearly separate tree plantation policy and regulations from those governing management, harvest
and use of wood from natural forests.
4. Simplify and clearly indicate the agencies and levels of government responsible for different aspects
of plantation development and use of plantation wood.
5. Develop mechanisms to clearly communicate these policy arrangements and responsibilities to all
levels of government and other industry and community stakeholders.
6. Build capacity within these agencies based on a new governance rationale aimed at facilitating
plantation growing and wood use rather than capturing revenues for government. This includes
investment in research and extension and advisory capacity to smallholder growers.
7. Invest in broader inventory of tree plantation resources and their capacity to contribute to potential
wood supply, including trees on farms, village plantations and different levels of private ownership
and undertake regular assessments of the usage and value added to plantation grown wood.
8. Consider potential financial mechanisms (such as levies on plantation area or timber production and
processing) to support cooperative research between the processing industry, and larger private and
smallholder growers.
9. Establish mechanisms for regular evaluation and review of tree plantation policies.
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14. APPENDICES
Appendix 1: National Socio-Economic Development Planning Process .................................................... 48 Appendix 2: Priority Policy and Programs as set out in the Forestry Strategy 2020 .................................. 49 Appendix 3: The Hierarchy of Laws ............................................................................................................ 50 Appendix 4: The Law Process for Making Law in Lao PDR ....................................................................... 52 Appendix 5: Legal Instruments related to the plantation value chain ......................................................... 53 Appendix 6: Environmental and Social protection measures for Smallholder/farmer plantations .............. 61 Appendix 7: International Agreements and Treaties Ratified by Lao PDR ................................................. 62
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Appendix 1: National Socio-Economic Development Planning Process
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Appendix 2: Priority Policy and Programs as set out in the Forestry Strategy 2020
• To formulate national land policy and introduce land use planning both at macro and field level.
• To enhance village based natural resource management for poverty eradication.
• To introduce reliable systems for harvest determination.
• To control unsustainable harvest and export of NTFPs and promote sustainable participatory management and processing of NTFPs.
• To improve performance of the wood industry including bringing processing capacity into closer accord with the sustainable timber supply and processing of more finished products.
• To promote tree planting and management by setting clear purposes with relevant target owners and markets, and investment schemes to strengthen wood supply base and farmers’ income base.
• To prevent encroachment, unauthorized activities and biodiversity degradation through solid law enforcement, capacity building and assisted participation of villagers in forest management.
• To determine target areas for forest closure of both permanent and temporary nature. Permanent closure is for forest areas of national security and forest on river banks or watershed. Temporary closure is for heavily degraded areas due to shifting cultivation for a long time, forest areas without sustainable management system and areas heavily logged beyond their sustainable supply capacity.
These will be implemented through:
• Completing and improving the forestry related legal framework, clearly defining different stakeholders’ responsibilities and providing sound criteria for, and transparency in, decision making.
• Improving sector efficiency and strengthening international competitiveness through greater market-orientation.
• Completing decentralization process or bottom-up planning and implementation system and capacity building, especially at local level.
• Maximising benefit generation through innovative mechanisms and equitable allocation.
• Mobilizing effective international cooperation
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Appendix 3: The Hierarchy of Laws
Text Authority Summary
Constitution18 National
Assembly
The Constitution clearly delineates the powers and duties of
the political regime, the socio-economic system and the
rights and duties of Lao citizens.
Law National
Assembly
A law is legislation that is developed by the authorized
authority, adopted by the National Assembly and
promulgated by the President of the Republic that defines
principles, regulations and measures governing social
relationships in many areas or in a specific area, and is
effective nationwide and is long lasting.
Resolutions of the
National
Assembly
National
Assembly
A Resolution of the National Assembly is a decision on a
specific matter brought into discussion at the National
Assembly session related to a social-economic
development plan, state budget plan, implementation of a
law and other matters under the mandate of the National
Assembly.
Resolution/Directi
ve of the Standing
Committee of the
National
Assembly
National
Assembly
Standing
Committee
Resolution on any matter brought into a meeting of the
Standing Committee of the National Assembly on the
implementation of a resolution of the National Assembly,
the inspection of the implementation of the Constitution,
laws including interpretation of the Constitution, and laws
and other matters under the rights and duties of the
Standing Committee of the National Assembly.
Presidential
Ordinance
President A President Ordinance is legislation that defines principles,
regulations and measures for governing social relationships
or amending selected articles of a law issued by the
President of the Republic in accordance with the proposal
of the Standing Committee of the National Assembly.
Decrees of the
Government
President A Government Decree is legislation of the Government
issued to:
1. Implement a resolution of the National Assembly,
resolution of the Standing Committee of the National
Assembly, social-economic development plan and a
strategic plan;
2. Govern social relationships in a certain area to meet the
needs for State management and social-economic
management where conditions to make a law is lacking;
3. Establish the organization and activities of a ministry and
a Government agency.
18 The Constitution of Lao PDR was adopted on 15 August 1991 and was amended for the first time on 6 May 2003.
This first modern Constitution of Lao PDR abolishes the former constitutional monarchy and establishes a unicameral National Assembly.
51 | P a g e
Text Authority Summary
The Government may also issue a decree to instruct the
implementation of a law by elaborating and providing
detailed explanations to certain articles of the law to make it
easier to understand and to ensure uniform implementation
of the law or in case that the law required that specific
regulations shall be developed.
Resolution of the
Government
Government A Resolution of the Government is a decision on certain
matters brought into consideration at the Government
meeting, for instance: National Social-Economic
Development Plan, State Budget Plan, and other matters
under the mandate of the Government
Orders (Decrees)
and Decision of
the Prime Minister
Decree,
Prime Minister as above for Decree of the Government
Orders, Decision
and Instructions
of the Minister or
Head of
Government
Authority
Heads of
Relevant State
Organizations
An Order is legislation issued by the head of the relevant Government agency to require individuals or organizations to implement a plan, laws, Presidential Decree and other legislation and other matters under their scope of rights and duties.
A Decision is legislation issued by the head of a relevant government authority to implement its rights and duties or to elaborate and implement higher government legislation.
An Instruction is legislation that is issued by the head of a government authority to implement the National Social-Economic Development Plan, the State Budget Plan, a law, other legislation, a plan or certain activities by providing a general understanding, methods, procedures and the use of equipment, timeframe for the implementation, coordination and others.
Orders, Decision
and Instructions
of the Provincial
or City Governor
Provincial or City
Governor
as above, as issued by the Governor of a Province or City
Orders, Decision
and Instructions
of the District or
Municipal Chief
District or
Municipal Chief
as above, as issued by the Head of a District or Municipality
Village Regulation Village Authorities A village regulation is a legislation that is issued by the
village authority to implement legislation of higher level or to
manage the security and public order under its jurisdiction.
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Appendix 4: The Law Process for Making Law in Lao PDR
-
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Appendix 5: Legal Instruments related to the plantation value chain
Legal Source Ministry Responsible Scale/Scope of Application
Plantation Establishment and Registration
Law No. 01/NA on Contract and Tort 2008 MOF Large-scale Plantations
Smallholder Plantations
Law No. 02/NA Investment Promotion 2009 MPI Large-scale Plantations
Law No. 04/NA on Land 2003 MONRE Large-scale Plantations
Smallholder Plantations
Law No. 29/NA on Environmental Protection 2012 MONRE Large-scale Plantations
Smallholder Plantations
Law No. 46/NA on Enterprise 2013 MOIC Large-scale Plantations
Smallholder Plantations
Law No 47/NA on Local Administration 2003 G Large-scale Plantations
Smallholder Plantations
Decree No. 003/PO on Service fees and Charges 2012 PO Large-scale Plantations
Smallholder Plantations
Order No. 13/PM Regarding suspension of consideration and approval for new
investment projects in connection to mineral ore exploration & survey, rubber and
eucalyptus Plantation in whole country 2013
MAF Large-scale Plantations
Decree No. 119/PM on the Implementation of the Investment Promotion law, 2011 MPI Large-scale Plantations
Decree No. 135/PM on State Land Lease or Concession 2009 MPI Large-scale Plantations
Decree No. 192/PM Decree on the Compensation and Resettlement of the
Development Project 2005
MONRE Large-scale Plantations
Decree No. 88/PM on the Implementation of the Land Law 2005 MONRE Large-scale Plantations
Smallholder Plantations
Decree No. 96/PM on Industrial Tree Plantations and Environmental Protection,
2003
MAF Large-scale Plantations
Smallholder Plantations
Statute No. 02/PM on Concession Rental 2009 MOF Large-scale Plantations
Order No. 17/PM on Strengthening the Forest Management, Protection and
Coordination of Forest Management and Forestry Business, 2008
PM Large-scale Plantations
Smallholder Plantations
Decision No. 32/PM On adoption Meeting Minute for National Forest Conference on
Forest management, Forest Inspection and Forest business on 25th-26th January
2012
MAF Large-scale Plantations
Smallholder Plantations
Decision No. 8056/MONRE on Endorsement and Promulgation of a List of MONRE Large-scale Plantations
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Legal Source Ministry Responsible Scale/Scope of Application
Investment Projects and Activities Requiring for Conducting Initial Environmental
Examination or Environmental Impact Assessment 2013
Directive No. 0564/NLMA on the adjudication of land occupation rights for the
issuing of land titles 2007
MONRE Large-scale Plantations
Directive No. 1849/MAF concerning the registration of tree planting parcels 1999 MAF Large-scale Plantations
Smallholder Plantations
Instruction No. 8029/MONRE on Initial Environmental Examination of the
Investment Projects and Activities 2013
MONRE Large-scale Plantations
Instruction No. 8030/MONRE on Environmental and Social Impact Assessment of
the Investment Projects and Activities
MONRE Large-scale Plantations
Instruction No. 115/MAF regarding the investment on tree planting as a source of
raw material for the wood processing factories, registration of tree plantation,
licensing for cutting and exporting of planted trees, 2003
MAF Large-scale Plantations
Smallholder Plantations
Notice No. 1374/MCAF regarding application for registering tree planting parcels
and grown timber certificate 2010
MAF Large-scale Plantations
Smallholder Plantations
Instruction No. 1643/DOF 2007 on development of a feasibility study of industrial
trees and NTFP investment
MAF Large-scale Plantations
Regulation No. 2432/STEA for Implementing Decree 192/PM on Compensation and
Resettlement of People Affected by Development Projects 2005
MOF Large-scale Plantations
Regulation No. 0196/MAF concerning the development and promotion of long-term
plantations 2000
MAF Large-scale Plantations
Smallholder Plantations
Agreement No. 0141/MAF on Terms of Reference for Provincial Forest Inspection
Office 2010
MAF Large-scale Plantations
Smallholder Plantations
Agreement No. 1984/MAF on The Terms of Reference Department of Forest
Inspection (DOFI) 2012
MAF Large-scale Plantations
Smallholder Plantations
Agreement No. 1987/MAF on Terms of Reference for District Forest Inspection
Office 2013
MAF Large-scale Plantations
Smallholder Plantations
Guideline No. 0105/MAF Concerning the Implementation of the Prime Minister’s
Order No. 17/PM, dated 22/09/2008, 2008
MAF Large-scale Plantations
Smallholder Plantations
Guideline No. 2156/MAF 2006 on Sustainable Production Forest Management
Planning
MAF Large-scale Plantations
Smallholder Plantations
Proposal No. 0133/MAF 2012 for the approval of tree plantation & forest
regeneration plan and the timber logging and NTFP harvesting plan for 2012 – 2013
MAF Large-scale Plantations
Smallholder Plantations
Concessions and Leases
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Legal Source Ministry Responsible Scale/Scope of Application
Law No. 04/NA on Land 2003 MONRE Large-scale Plantations
Smallholder Plantations
Decree No. 02/PO on Lease and Concession Rates of State Land 2009 PO Large-scale Plantations
Smallholder Plantations
Decree No. 192/PM on the Compensation and Resettlement of the Development
Project 2005
PMO Large-scale Plantations
Smallholder Plantations
Decree No. 88/PM on the Implementation of the Land Law 2005 MONRE Large-scale Plantations
Smallholder Plantations
Order No. 13/PM Regarding suspension of consideration and approval for new
investment projects in connection to mineral ore exploration & survey, rubber and
eucalyptus Plantation in whole country 2013
PMO Large-scale Plantations
Smallholder Plantations
Guidelines No. 20/PMONLMA on the implementation of decree on state-owned land
approval for lease or concession 2010
MONRE Large-scale Plantations
Smallholder Plantations
Guideline No. 0537/PM on the Rates of the State Land Lease and Concession 2009 PMO
Harvesting Haulage and Transport
Law No. 46/NA on Enterprise 2013 MOIC Large-scale Plantations
Smallholder Plantations
Law No. 24/2012 NA on Transportation, 2012 MPWT Large-scale Plantations
Smallholder Plantations
Law No. 02/NA on Land Traffic 2000 MPWT Large-scale Plantations
Smallholder Plantations
Decree No. 003/PO on Service fees and Charges 2012 PO Large-scale Plantations
Smallholder Plantations
Decree No. 96/PM on Industrial Tree Plantations and Environmental Protection,
2003
PMO Large-scale Plantations
Smallholder Plantations
Order No. 57/PM Managing the collection of revenue from the sale of timbers and
NTFPs 2014
PMO Large-scale Plantations
Smallholder Plantations
Order No. 17/PM on Strengthening the Forest Management, Protection and
Coordination of Forest Management and Forestry Business, 2008
PMO Large-scale Plantations
Smallholder Plantations
Decision No. 32/PM On adoption Meeting Minute for National Forest Conference on
Forest management, Forest Inspection and Forest business on 25th-26th January
2012
PMO Large-scale Plantations
Smallholder Plantations
Decision No. 0080/MAF on procedures for importation, management and utilisation
of chainsaw, 2012
MAF Large-scale Plantations
Smallholder Plantations
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Legal Source Ministry Responsible Scale/Scope of Application
Decision No. 0221/MOIC the Standard of Wood, Rattan and Bamboo Industrial
Processing Factories (Processing Manufacture), 2007
MOIC Large-scale Plantations
Smallholder Plantations
Decision No. 0116/MAF regarding the procedure for measuring log, tree stump, tree
burl and log quality grading 2007
MAF Large-scale Plantations
Smallholder Plantations
Directive No. 0509/MF for the calculation of taxes on timber and non-timber forest
products, 2009
MOF Large-scale Plantations
Smallholder Plantations
Instruction No. 3211/MOF on Royalty of timbers for 2014-2015 and 2015-2016,
2015
MOF Large-scale Plantations
Smallholder Plantations
Notification No. 0094/SA Guidance on The Implementation of Ministerial Guidance
on the Management of wood exportation for the purpose of revenue collection in
timely manner; 2013
MOF Large-scale Plantations
Smallholder Plantations
Notification No. 1179/SS on the cancellation of inspection station - checkpoints
2011
MOT Large-scale Plantations
Smallholder Plantations
Notification No. 1440/MOIC.DIMEX on Management of Wood Transport Vehicle,
Wood Extraction Machinery, and Wood Processing Machinery in Consistency with
the Laws and Regulations, 2008
MOIC Large-scale Plantations
Smallholder Plantations
Notification No. 1601 MOIC.DIMEX on the Management and movement of timber,
timber products and non-timber products in domestic and for exportation 2008
MOIC Large-scale Plantations
Smallholder Plantations
Notification No. 2215/MIC on the cancellation of the issuing Commodity Movement
Permit by the industry and commerce sector 2011
MOIC Large-scale Plantations
Smallholder Plantations
Instruction No. 1643/DOF 2007 on development of a feasibility study of industrial
trees and NTFP investment
MAF Large-scale Plantations
Regulations No. 0196/MAF 2000 concerning the development and promotion of
long-term plantations
MAF Large-scale Plantations
Smallholder Plantations
Agreement No. 0141/MAF on Terms of Reference for Provincial Forest Inspection
Office 2010
MAF Large-scale Plantations
Smallholder Plantations
Agreement No. 1984/MAF on The Terms of Reference Department of Forest
Inspection (DOFI) 2012
MAF Large-scale Plantations
Smallholder Plantations
Agreement No. 1987/MAF on Terms of Reference for District Forest Inspection
Office 2013
MAF Large-scale Plantations
Smallholder Plantations
Agreement No. 0019/MAF-2008 No. 2139/2008 MPWT, 14 February 2008 MAF
MPWT
Large-scale Plantations
Smallholder Plantations
Guideline No. 0105/MAF Concerning the Implementation of the Prime Minister’s
Order No. 17/PM, dated 22/09/2008, 2008
MAF Large-scale Plantations
Smallholder Plantations
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Legal Source Ministry Responsible Scale/Scope of Application
Guideline No. 2156/MAF 2006 on Sustainable Production Forest Management
Planning
MAF Large-scale Plantations
Smallholder Plantations
Guideline No. 2297/MOF on Bidding Regulations for Buying Timber and Other
Forest Resources from State Standing Timbers, Infrastructural Areas and
Production Forest Areas at Second Landings 2004
MOF Large-scale Plantations
Smallholder Plantations
Guideline No. 2157/DOF Guideline on Timber Harvesting in Production Forest,
2006
MAF Large-scale Plantations
Smallholder Plantations
Guideline No. 0962/MAF Concerning the management of timber log transport from
cutting area to Log Landing 2 2010
MAF Large-scale Plantations
Smallholder Plantations
Proposal No. 0133/MAF 2012 for the approval of tree plantation & forest
regeneration plan and the timber logging and NTFP harvesting plan for 2012 – 2013
MAF Large-scale Plantations
Smallholder Plantations
Timber Processing
Law No. 48/NA on Industrial Processing 2013 MOIC All wood processors
Law No. 05/NA on Tax 2011 MOF Large-scale Plantations
Smallholder Plantations
All wood processors
Law No 46/NA on Enterprise 2013 MOIC Large-scale Plantations
All wood processing
Law No. 02/NA on Investment Promotion 2009, MPI Large-scale Plantations
All wood processors
Decree No. 119/PM on the Implementation of the Investment Law 2011 MPI Large-scale Plantations
All wood processors
Order No. 17/PM on Strengthening the Forest Management, Protection and
Coordination of Forest Management and Forestry Business, 2008
Various Large-scale Plantations
Smallholder Plantations
All wood processing
Decision No. 32/PM on the adoption Meeting Minute for National Forest Conference
on Forest management, Forest Inspection and Forest business, 2012
Various Large-scale Plantations
Smallholder Plantations
Decision No. 2005/MOIC.DOIH on Timber Product Standards 2015 MOIC All wood processors
Decision No. 1301/MOIC on Timber Processing Management 2007 MOIC All wood processors
Decision No. 0719/MOIC on Timber Processing Manufacture Standards 2009 MOIC All wood processors
Decision No. 1140/MOIC concerning the Standard of Wood, Rattan and Bamboo
Processing Industry Factories 2007
MOI All wood processors
Decision No. 1415/MOIC on The Form and Size of Timber Products 2008 MOIC All wood processors
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Legal Source Ministry Responsible Scale/Scope of Application
Directive No. 0509/MOF for the calculation of taxes on timber and non-timber forest
products 2009
MOF Large-scale Plantations
Smallholder Plantations
All wood processors
Regulation No. 0261/MAF requiring timber processing factories to have an
operating permit and an agroforestry permit.
MAF All wood processors
Notification No. 0051/MOIC to implement the decision on the form and size of wood
products 2009
MOIC All wood processors
Notification No.1440/MOIC.DIMEX on the Management of wood transport vehicle,
wood extraction machinery, and wood processing machinery.
MOIC All wood processors
All harvesting contractors
Agreement No. 1984/MAF on The Terms of Reference Department of Forest
Inspection (DOFI) 2014
MAF Large-scale Plantations
Smallholder Plantations
All wood processors
All harvesting contractors
Guideline No. 0105/MAF Concerning the Implementation of the Prime Minister’s
Order No. 17/PM 2008, 2008
MAF Large-scale Plantations
Smallholder Plantations
All wood processors
All harvesting contractors
Timber Export
Law No. 46/NA on Enterprise 2013 MOIC All wood exporters
Law No. 04/NA on Customs 2011 MOF All wood exporters
Additional Order No. 10/PO on the prevention of harvesting and purchase-sale of
prohibited timbers
MAF, MOIC All wood exporters
Edict No. 25/PM on Duty Rates 2012 MOF All wood exporters
Order No. 10/PM On Log export Ban 2000 MAF, MOIC All wood exporters
Order No. 17/PM on Strengthening the Forest Management, Protection and
Coordination of Forest Management and Forestry Business, 2008
All Large-scale Plantations
Smallholder Plantations
All wood processors
All harvesting contractors
All wood exporters
Decree No. 114/GOL on Import and Export of Goods, 2011 MOF All wood exporters
All wood importers
Decree No. 228/PM on the Origin of Import and Export Goods; 2010 MOF All wood exporters
Decree No. 363/PM on the Notification and Enquiry of Trade Related Information
2010
MOF All wood exporters
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Legal Source Ministry Responsible Scale/Scope of Application
Notification No. 0403/CD of Exemption of Determination of Customs value of
exported wood products for basis of calculation of export royalties; 2009
MOF All wood exporters
Notification No. 1031/MOIC.DIMEX concerning the implementation of Decree
regarding the origin of imported and exported commodity 2010
MOIC All wood exporters
Notification No. 1791/MOIC.DIMEX on Import and Export Licence for Plantation
Timber, 2011
MOIC Large-scale Plantations
Smallholder Plantations
All wood processors
All harvesting contractors
All wood exporters
Notification No. 1904/MOIC.DIMEX on Procedure to issue import and export license
for Timber and timber products, 2011
MOIC Large-scale Plantations
Smallholder Plantations
All wood processors
All harvesting contractors
All wood exporters
Notification No. 2273/CD Determination of Customs value of exported wood
products as the basis of calculation of export royalties, 2009.
MOF All wood exporters
Notification No. 0051/MOIC.DIMEX Notification to Implement the decision
1415/MOIC.DIMEX on the form and size of wood products 2009
MOIC All wood exporters
All wood processors
Notice No. 159/GS on the Collection of extra charges on logs, processed timber
products and construction timbers to be exported through the custom office
GS All wood exporters
Notice No. 790/GO regarding timber export and royalties 2014-2015, 2015 GO All wood exporters
Notice No. 0032/MAF on the exportation of prohibited and special plantation timbers
and non‐prohibited plantation timbers
MAF All wood exporters
Notification No. 1415/MOIC.DIMEX on the Form and Size of wood products 2009 MOIC All wood processors
All wood exporters
Notification No. 0076/MOIC.DIMEX on goods subject to automatic and non-
automatic import or export licensing),
MOIC All wood exporters
Notification No. 0094/SA Guidance on The Implementation of Ministerial Guidance
on the Management of wood exportation for the purpose of revenue collection in
timely manner; 2013 -
MOF All wood exporters
Additional Notification No. 1135/MOIC.DIMEX Authorizing Provinces and Capital
City to be in charge of studying and deciding on the approval for exporting of wood
from plantations (Teak, Para Rubber, Eaglewood, Eucalyptus and Acacias) 2014
MOIC All wood exporters
Instruction No. 10503/CD for Detailed Customs Declaration by the ASYCUDA MOF All wood exporters
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Legal Source Ministry Responsible Scale/Scope of Application
system 2012
Instruction No. 1696/CD on the Application of ASEAN Harmonized Customs
Declaration Document (ACDD) 2010
MOF All wood exporters
Announcement No. 2857/ on the Amendment of Notification No.
1904/MOIC.DIMEX, 2011
MOIC All wood exporters
Decision No. 2387/MOIC.DIMEX on Authorizing the Lao National Chamber of
Commerce and Industry (LNCCI) to issue and administrate the certificate of origin
(CO) for goods/products under the preferential tariffs rates
MOIC All wood exporters
Decision No. 41/PM on the authorization for Provinces, the Capital to consider and
make decisions on exportation of planted timber in the form of logs and sawed
timber from Teak, Rubber, Agar wood, Eucalyptus, Acacia auriculiformis and Acacia
mangium 2014
MOIC Large-scale Plantations
Smallholder Plantations
All wood processing
All harvesting contractors
All wood exporters
Guidance No. 0491/MOF of the Ministry of Finance on the Implementation of the
Customs Law No. 05/NA 2005
MOF All wood exporters
Guidance No. 04170/CD for the review of Customs Declaration with reference to
01470
MOF All wood exporters
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Appendix 6: Environmental and Social protection measures for Smallholder/farmer plantations
Step Regulation Conditions
Land Allocation Land Law (21) 3/ha degraded or barren land per labour force per
family is allocated under the land use allocation program
Decree No 169/PM
1993(ChIV)
A forest management (land use) contract for tree
planting is required which specifies certain conditions.
Directive No 234/MAF 1995 Tree planting should be avoided on land appropriate for
farming, paddy, and grassland for animal husbandry.
Luang Prabang Manual on
implementation Decree No
186/PM 1994
Makes some general rules about the use of ‘hills’
Land with natural forest must be preserved.
50m preservation zone on river banks and roads - but
flat land can be used for rice or fruit trees and sloped
land may continue to be used fort tree plantations.
30m preservation zone on streams and footpaths.
10m preservation zone on water canals.
500m preservation zone around water reservoirs.
Site Preparation Decree No 186/PM 1994
(contract)
Slope: commercial value trees can be planted on slope
12-36 degrees.
(0-12 degrees for agriculture)
>36 degrees protected forest and ‘crops with
preservation)
Instruction No 0822/AF 1996 Slope: “agroforestry” can be undertaken on slope from
25-45%
Directive No 0234/MAF 1995 Soil: on flat land soil can be tilled before planting, on
slope land may not be tilled and existing trees should be
retained.
Spacing: the Directive species the tree spacing for
different species
Regulation No 0196/AF 2000 Defines ‘degraded forestland’ and ’bare forestland’
Regulation 196/MAF 2000 >5ha technical and socio-economic assessment and
plantation management plan is required
<5 ha no assessment required unless multiple adjoining
areas totalling > 5a are being planted
Penalties Inappropriate site clearing, site preparation or
use of chemicals or non-compliance with environmental
protection measures is subject to educational measures.
Planting Regulation No 0196/AF 2000 Defines planting configurations.
Specifies Agroforestry should be used in areas where
there is land or rice shortage or steep slopes.
Imported seeds must have phytosanitary certificates.
Harvesting and
Haulage
Regulation 196/MAF 2000 Logging and transport must be in accordance with
plantation management plan
Logging permit is required
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Appendix 7: International Agreements and Treaties Ratified by Lao PDR
Treaty or Agreement Relevance
Mekong River Commission Agreement on the
Cooperation for the Sustainable Development of
the Basin ratified in 1995
Sustainable development, utilization, management
and conservation of the water and related
resources of the Mekong River Basin
United Nations Convention to Combat
Desertification in Those Countries Experiencing
Serious Drought and/or Desertification,
Particularly in Africa, ratified in 1995
Land and soil productivity in arid, semi-arid and dry
sub-humid areas
ASEAN Agreement on the Conservation of
Nature and Natural Resources, ratified in 1985
Ramsar Convention on Wetlands of International
Importance Especially as Waterfowl Habitat,
ratified in 2010
Conservation and wise use of wetlands.
Controls for development and around Ramsar
wetlands
United Nations Convention on Biological
Diversity, ratified in 1996
Conservation of biological diversity, the sustainable
use of its components and the fair and equitable
sharing of the benefits arising out of the utilization
of genetic resources
World Heritage Convention Concerning the
Protection of the World Cultural and Natural
Heritage, ratified in 1987
Protection and management of world heritage sites
Washington Convention on International Trade in
Endangered Species of Wild Fauna and Flora
(CITES), ratified in 2004
Trade in endangered plant and animal species
The United Nations Framework Convention on
Climate Change (UNFCCC), ratified in 1995
Adaptation
Mitigation
Land Use, Land Use change and Forestry
Reduced Emissions from Deforestation and
Degradation
Kyoto Protocol to the United Nations Framework
Convention on Climate Change, ratified in 2003
Greenhouse Gas Emissions reductions
International Plant Protection Convention, ratified
in 1995
Plant health, protect cultivated and wild plants by
preventing the introduction and spread of pests.
Plant Protection Agreement for the Asian and
Pacific Region, 1956
Phytosanitary measures
Membership of the World Trade Organisation,
2013
Sanitary and phytosanitary (SPS) measures
The transport of hazardous waste.
Cartagena Protocol on Biosafety to the
Convention on Biological Diversity, 2000
Safe handling, transport and use of living modified
organisms (LMOs) resulting from modern
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Treaty or Agreement Relevance
biotechnology.
Minimise effects on biological diversity and risks to
human health
Vienna Convention for the Protection of the
Ozone Layer, year of accession 1988.
Use and destruction of ozone depleting substances
Basel Convention on the Control of Trans-
boundary Movements of the Hazardous Wastes
and Their Disposal, ratified in 2010
Environmentally sound waste management
Limit/control transboundary movement of
hazardous waste
Stockholm Convention on Persistent Organic
Pollutants. Stockholm, ratified in 2006
Prohibit and/or eliminate the production and use, as
well as the import and export, of the intentionally
produced Persistent Organic Pollutants
Rotterdam Convention on Prior Informed Consent
Procedure for Certain Hazardous Chemicals and
Pesticides in International Trade (PIC), 1998
Environmentally sound use of certain hazardous
chemicals
Trade of certain hazardous chemicals
Safe use of certain hazardous chemicals
Appropriate labelling of certain hazardous
chemicals
Globally Harmonized System of Classification
and Labelling of Chemicals
Classification and labelling of hazardous chemicals
Safe use, transport and disposal of hazardous
chemicals
International Labor Organisations conventions Women and young persons working at night
Forced or compulsory labour
Minimum wage
Child labour
Fair remuneration
Discrimination
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Tree Plantations in Viet Nam: A Policy Framework
PROJECT WORKING PAPER 2
Authors: Hilary Smith, Keith Barney, Neil Byron, Dai Nghia Tran, Rodney Keenan, Vu Tan Phuong and Thu Ba Huynh
17th January 2016
ACIAR Project FST/2014/047: Improving policies for forest plantations to balance smallholder,
industry and environmental needs
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ABOUT THE PROJECT
The Australian Centre for International Agricultural Research (ACIAR), together with the Governments of Lao PDR and Viet Nam SR, is undertaking a project on “Improving policies for forest plantations to
balance smallholder, industry and environmental needs”. The aim of this project is to provide policy options that achieve national goals for forest plantation industry development in Lao PDR and Viet Nam SR (Viet Nam or Vietnam) through improved linkages between commercial investment and smallholder production.
The project has three objectives:
1. To develop policy and institutional options for plantation development; 2. To understand the positive and negative social, economic and environmental impacts
associated with different approaches to tree plantation development; and 3. To create a network for policy learning that builds capacity in plantation sector policy
analysis, development and implementation.
These objectives require research to evaluate current policies, policy options, and their likely impacts on policy goals and to provide the evidence for policy recommendations.
This policy framework provides a descriptive overview of the policy environment for plantations in Viet Nam. The document describes the current situation for plantations and the plantation wood sector and it will be used to form the basis of policy analysis by identifying key issues, gaps and leverage points to focus research, and to identify options for improving policies for plantations. It addresses the question:
How well do current policy arrangements for tree plantation development in Lao PDR and Viet Nam support national development goals for smallholder involvement and what are the challenges and gaps in policy to meet these goals?
Photo 1: Restoration Planting (H. Smith 2011)
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DISCLAIMER
This report was prepared as a research output from Project FST/2014/047, “Improving policies for forest plantations to balance smallholder, industry and environmental needs in Lao PDR and Viet Nam” funded by the Australian Centre for International Agricultural Research (ACIAR).The Project’s aim is improve policies for forest plantations, to balance smallholder, industry and environmental needs. The contents and views represent the views of the authors and do not necessarily represent the views of the Government of Viet Nam SR, the Australian Government or ACIAR.
The statements and opinions contained in the report are given in good faith but, in the preparation of this report, the authors have relied, in part, on information supplied from other sources, or from documents and interviews held in Vietnamese and translated into English. The report has been prepared with care and diligence. However, except for those responsibilities which by law cannot be excluded, no responsibility arising in any way whatsoever for errors or omissions (including responsibility to any person for its negligence), is assumed by the authors or contributors for the preparation of this report.
Limitations upon use: This report is for the use of the party to whom it is addressed. No responsibility is accepted to any third party who may use or rely on the whole or any part of the content.
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CONTENTS
About the project ..................................................................................................................................... 1 Disclaimer................................................................................................................................................ 2 Contents .................................................................................................................................................. 1 List of Figures .......................................................................................................................................... 3 List of Tables ........................................................................................................................................... 3 1. Executive Summary ......................................................................................................................... 1 2. Synopsis Of Plantations In Viet Nam to 2015 .................................................................................. 2
What is a Plantation? ........................................................................................................................... 2 Plantation area and species ................................................................................................................ 3
Acacia species ................................................................................................................................. 4 Eucalyptus species .......................................................................................................................... 4 Other species ................................................................................................................................... 4
Geographic Distribution of Plantations ................................................................................................ 5 Plantation ownership ........................................................................................................................... 6
3. Plantation policy setting ................................................................................................................. 11 Strategies, Policies and Plans ........................................................................................................... 11
National Socio-Economic Development Plans .............................................................................. 11 Vietnam 2035: Toward Prosperity, Creativity, Equity, and Democracy ......................................... 12 Forestry Development Strategy 2006-2020 ................................................................................... 13 Significant Reforestation and Plantation POlicies ......................................................................... 14 Greening the Hills Program 327 .................................................................................................... 15 Five Million Hectares Reforestation Program ................................................................................ 15 Forestry Research Strategy ........................................................................................................... 17 Land Policy .................................................................................................................................... 17
Strategies, Plans and Policies that impact or influence plantation policy ......................................... 18 Comprehensive Poverty Reduction and Growth Strategy ............................................................. 18 National Strategy for Environmental Protection ............................................................................. 20 Biodiversity Conservation Action Plan ........................................................................................... 20 Strategy on Climate change .......................................................................................................... 20 The National Green Growth Strategy ............................................................................................ 21 Rural Development Strategy .......................................................................................................... 21 Policies and mechanisms for forest protection and development linked with poverty reduction for ethnic minorities ............................................................................................................................. 22 Industrial Development Strategy .................................................................................................... 22 National Strategy on Exports and Imports ..................................................................................... 22
4. Policy Drivers ................................................................................................................................. 24 Domestic Policy drivers ..................................................................................................................... 24 International drivers ........................................................................................................................... 24
5. The Legal Framework for Forest Plantations ................................................................................ 27 6. Governance ................................................................................................................................... 35
Government Agencies ....................................................................................................................... 35 Ministry of Agriculture and Rural Development ............................................................................. 35 Ministry of Natural Resources and Environment ........................................................................... 37 Ministry of Industry and Trade ....................................................................................................... 38 Ministry of Finance ......................................................................................................................... 38 Ministry of Planning and Investment .............................................................................................. 38 Ministry of Public Works and Transport ......................................................................................... 39 Ministry of Justice .......................................................................................................................... 39 Local Administration ....................................................................................................................... 39
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Enforcement agencies and roles ....................................................................................................... 39 Forest Protection Department ........................................................................................................ 39 Ministry of Public Security .............................................................................................................. 39 General Police ............................................................................................................................... 40 Customs, Ministry of Finance ........................................................................................................ 40 The Supreme People’s Procuracy ................................................................................................. 40
Private Sector .................................................................................................................................... 40 Industry Associations ..................................................................................................................... 40
7. Stakeholders/actors and interests/positions .................................................................................. 42 8. timber production and Markets ...................................................................................................... 43
Wood Supply ..................................................................................................................................... 43 Domestic wood supply ................................................................................................................... 43 Wood imports ................................................................................................................................. 43
Wood Processing, Consumption and Exports ................................................................................... 44 Furniture manufacturing and building material .............................................................................. 45 Wood chip and wood-based panels ............................................................................................... 45
Certification, legality and other market standards ............................................................................. 46 Certification .................................................................................................................................... 47 Legality Verification ........................................................................................................................ 50
9. Enabling environment .................................................................................................................... 55 Land Tenure and Plantation Ownership ............................................................................................ 55
State Forest Enterprises (or Companies) ...................................................................................... 57 Forest Management Boards .......................................................................................................... 58 Commune People Committees ...................................................................................................... 58 Community and mass organizations .............................................................................................. 58 Individuals and households ........................................................................................................... 59
Plantation contribution to livelihoods ................................................................................................. 59 Plantation Development Process ...................................................................................................... 60
General provisions ......................................................................................................................... 60 Plantation Registration ................................................................................................................... 60 Environmental and Social Impact Protection Measures ................................................................ 61
Incentives, disincentives and finance ................................................................................................ 63 Technical support, Capacity Building and assistance ....................................................................... 64 Risks .................................................................................................................................................. 65
Market risks .................................................................................................................................... 65 Policy and Regulatory risks ........................................................................................................... 65 Technical and Environmental Risk ................................................................................................ 65 Livelihood Risk ............................................................................................................................... 65
10. Concluding remarks and recommendations ............................................................................. 66 Concluding remarks ........................................................................................................................... 66 Recommendations ............................................................................................................................. 67
References ............................................................................................................................................ 68 Appendices ........................................................................................................................................... 73
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LIST OF FIGURES
Figure 1: FAO definitions of forest types ................................................................................................. 2 Figure 2: Forest Distribution 2010 ........................................................................................................... 6 Figure 3: Policy and forest cover time line ............................................................................................ 10 Figure 4: Integration of CPRGS with National socio-economic development plans ............................. 19 Figure 5: Domestic Policy Drivers ......................................................................................................... 24 Figure 6: Policy discourses and forces ................................................................................................. 26 Figure 7: Volume of wood product imports by supplier country ............................................................ 44 Figure 8: Value of Wood based Product Exports .................................................................................. 46
LIST OF TABLES
Table 1: Total area and percent of plantation species in Viet Nam in 2015 4 Table 2: Area of plantation by species and region in 2012 5 Table 3: Area of plantation by ownership in 2015 7 Table 4: Major legal sources relevant to Plantations 28 Table 5: Wood demand projection 2015 -2030 43 Table 6: Wood production and export projection 2015 -2030 45 Table 7: FSC Certificates in Viet Nam, 2016 48 Table 8: Significant policy statements influencing forest land management in Vietnam 55 Table 9: Scope of land use rights for forestland 56
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1. EXECUTIVE SUMMARY
Viet Nam has reached the status of middle income country and has a highly ambitious vision to become an upper-middle income country by 2035. This vision is based on balancing economic prosperity with environmental sustainability, promoting equity and social inclusion and enhancing the capacity and accountability of the state. It aims for economic modernization with a competitive private sector firmly in the lead.1 To realise this vision Viet Nam is progressing many policy initiatives and has recognised several challenges for the plantation forest sector.
Preliminary recommendations that can be made on the basis of this review are that the Government of Viet Nam should:
1. Continue its current review of forest development and protection policies. 2. Clearly indicate an overall vision for the tree plantation sector, spelling out the multiple objectives
for plantations, the ways in which these objectives can be achieved and how the benefits and costs of different types of plantations will be distributed.
3. Clarify related and supporting policies, such as land tenure policies and establish effective coordination among line ministries responsible for those policies;
4. Review current policies to identify and eliminate gaps and contradictions, and provide detailed guidelines for effective application and implementation at the local level.
5. Clearly differentiate tree plantation policy and regulations from those governing management, harvest and use of wood from natural forests, particularly imported wood.
6. Build on current investment in research and extension and advisory capacity to smallholder growers.
7. Invest in broader inventory of all tree plantation resources (exotic and indigenous species) and their capacity to contribute to wood supply including for emerging markets,
8. Develop a system for improved statistics on timber production, processing facilities and timber exports.
9. Undertake research to better understand the nature and extent of the contribution of informal (scattered) tree plantings, particularly of indigenous species, to domestic wood supply needs.
10. Ensure policy responses to consumer market standards, such as for certification and legality, are commensurate with the risks associated with the plantation production system and take into account the ability of smallholders to meet these standards. Such standards should not have adverse impacts on policy goals for poverty alleviation.
11. Carefully assess the design and impacts of policies aimed at reducing woodchip exports. Poorly designed policies could have considerable financial consequences for smallholder plantation growers.
12. Consider potential financial mechanisms to support cooperative research that improves communication and linkages between the processing industry, and larger private and smallholder growers.
13. Establish mechanisms for regular monitoring, evaluation and review of tree plantation policies. 14. Prioritise ongoing investment in the process of policy making, including research required to
support evidence based policy making.
1https://openknowledge.worldbank.org/bitstream/handle/10986/23724/VN2035English.pdf
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2. SYNOPSIS OF PLANTATIONS IN VIET NAM TO 2015
There has been a concerted program of reforestation and plantation development in Viet Nam with firm policies and measures successfully promoting plantation establishment. Plantation development began in the 1980s and in 2015 the total forest plantation area was around 3.8 million ha.
WHAT IS A PLANTATION?
There are various definitions of plantation that are applied in policy and in literature. The terminology remains somewhat ambiguous, and confusion leads to misunderstandings and to suboptimal policies (Batra and Piraud 2015).
Currently, the international definition of forests adopted by the Food and Agriculture Organisation (FAO) on the advice of its member states identify “planted forests” as part of the spectrum of forest
types - it covers a range of ecosystems from semi-natural forests where trees were planted with subsequent light management, to strictly man-made tree plantations with short rotations (Batra and Piraud 2015). Under this definition, “tree plantations” are a subset of planted forests, corresponding to
the “Productive Plantation” category of “Planted Forests” (Figure 1).
Figure 1: FAO definitions of forest types
(Reproduced from Carle and Holmgren (2008))
Under the Law on Forest Protection and Development, forests in Viet Nam are officially categorized based on the function or use of the forests. There are three categories:
1. special use forest, mainly protected areas such as national parks and nature conservation areas designed for biodiversity conservation;
2. protection forest, mainly for protection of water sources, soils and cosatl protection; and
3. production forest, including both natural forests and forest plantations, mainly used for timber production
Plantations are a subset of production forests, and to be legally recognised as a plantation specific criteria2 must be met:
a) Being an ecosystem of which the major component is perennial timber trees, bamboos and palms, of a height of at least 5 meters, capable of providing timber and non-timber forest products, and bringing about other direct and indirect values such as biodiversity
2 Circular No. 34/2009 / TT-BNN dated 10 June 2009 of MARD
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conservation, environmental protection and landscape values. New forest plantations of timber trees will be identified as forests if they reach the average height of over 1.5 meters for slow-growing trees (for example, pine trees and some indigenous trees) and over 3 meters for fast-growing trees (such as acacia wattle and eucalyptus) with a density of at least 1,000 trees per hectare.
b) Having a canopy cover of at least 10% for trees which constitute its major component.
c) Having forest plots of at least 0.5 hectare each, or forest tree strips of at least 20 meters in width and be composed of at least 3 tree lines.
Consolidated forest trees on areas of less than 0.5 hectare and forest strips of less than 20 meters in width are called ‘scattered trees’.
Forest plantations are forests formed through planting, including:
a) Forest plantations on land without forests;
b) Forest plantations on lands after exploitation of existing forest plantations:
c) Forests naturally regenerated after exploitation of forest plantations.
Based on growth rates, forest plantations are also classified according to age. Depending on each tree species, the time period prescribed for each age level may vary.
Tree plantations are established in a variety of planting patterns and silvicultural arrangements, including:
• Mono-culture plantations of single wood producing species in large or small woodlots.
• Mixed species plantation with more than one wood producing species planted together.
• Mixed species agroforestry systems of multiple wood producing and non-wood producing trees/plants established in a single area, often resulting in a complex multi-layered structure.
• Scattered/boundary plantings and trees in home gardens where one or more species of wood-producing trees are planted in low densities to demarcate property boundaries, protect land (e.g. paddy boundaries, wind rows) or established for non-timber products (e.g. fruits) with wood and end by-product.
PLANTATION AREA AND SPECIES
The area of plantation forests in Viet Nam is large and expanding; in 2015 the estimated area of plantation was 3.8 million ha3 (Table 1 below, source Dong and Phuong 2016). On average, the plantation area in Viet Nam increases by approximately 150,000 to 200,000 hectares per year (Tran and To 2013).
Vietnam’s plantation forests are dominantly made up of:
• acacia species • eucalyptus species • a mixture of acacia and eucalyptus species • a mixture of acacia and other species, or • a mixture of eucalyptus and other species. • other species such as indigenous trees, • Casuarina and • rubber.
3 Decision No 3158/QD-BNN-TCLN dated 27 July 2016 on announcing the forest status in 2015
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Table 1: Total area and percent of plantation species in Viet Nam in 2015
Species Area (ha) Percent Products
Acacia spp. 1,500,000 39% Chip, pulp, veneer, small saw-log
Rubber 900,000 23% Latex, small saw-log
Pinus spp. 250,000 7% Resin, small saw-log, protection forest
Eucalyptus spp. 210,000 5% Chip, pulp, veneer, small saw-log
Bamboo 80,000 2% Pulp, handicraft, construction
Other native trees 950,000 24% NTFPs, solid-log, protection forest
TOTAL: 3,890,000 100%
Commercial plantations comprise mainly fast-growing Acacia and Eucalyptus species, and the logs from these plantations are largely sold for woodchip and pulp. Most small plantations use a rotation length of around 5-7 years, with the majority of small-diameter logs used to produce chip-wood. Larger State Forest Enterprise (SFEs) may be managed for longer rotations, with the majority of large saw logs aged 10-12 years and accounting for about 25% domestic, plantation saw logs (Pistorius et al. 2016).The productivity of these plantations varies both between and within regions, and from private to industrial management regimes.
ACACIA SPECIES
Acacia, planted in monocultures or established in mixed production systems, is the dominant commercial plantation species in Viet Nam. It is typically established in short rotation systems and the primary product is wood chips.
There is a plethora of grey literature (e.g. Project and consultants’ reports) containing extremely
diverse and contradictory estimates of the current extent and performance of the acacia plantations and associated industries in Viet Nam (Byron 2016). Redman et al. (2013) estimate that approximately 1.03 million ha of the plantation forests in Viet Nam are pure acacia plantations, making up 43% of the total. Most new plantations are Acacia. A significant area of scattered acacia trees also exists, with estimates in the order of 690,000 ha (Midgley et al. 2016)
EUCALYPTUS SPECIES
Eucalyptus species have been important for plantations in Viet Nam where they are grown largely to produce pulpwood and poles for construction. It has been estimated that up to 1997, 300,000 – 400,000 ha of eucalypt plantations were established in Viet Nam, with scattered trees, planted around farms, homesteads, roads and villages contributing the equivalent of an additional 700, 000 – 800,000 ha (Tran Xuan Thiep 1995 in Midgley et al. 1996). The most commonly used species in the past was E. camaldulensis and hybrids and more recently E. Urophylla and hybrids have been introduced.
In 2001 the total area of Eucalyptus plantations in Vietnam was 348 000 ha and by 2014 the area of pure eucalyptus plantations was estimated to be approximately 200,000 ha (Harwood and Nambiar 2014). A substantial scattered tree resource also remains (Midgley et al. 2016).
OTHER SPECIES
Although around 24% of the planted area is indigenous species, little information is available about this resource, its contribution to farmer livelihoods or value to the wood processing sector. Many indigenous species are being planted in ad hoc mixed-species plantations which can offer some significant advantages, if the species concerned are complementary. However random assortments are considered unlikely to provide advantages and are more likely to reduce productivity or even fail4.
4http://aciar.gov.au/project/fst/2000/003
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GEOGRAPHIC DISTRIBUTION OF PLANTATIONS
Plantations are geographically dispersed throughout Viet Nam (Table 2 and Figure 2 - source Pham 2012; Byron 2016).
Table 2: Area of plantation by species and region in 2012
Ecological Forestry Regions
Forest plantation area by region (ha) Total area
(ha) Acacia plantation
Acacia mixed
plantation Eucalyptus Plantation
Eucalypt mixed
Plantation Indigenous Plantation
Northwest 11,960.7 38,622.8 4,675.4 - 67,424.6 122,683.5
Northeast 336,069.3 13,213.2 32,756.0 - 251,651.9 633,690.3
Red river delta 379.0 3,057.0 - - 33.0 3,469.0
North Central 235,391.3 11,657.9 20,629.3 - 172,591.3 440,269.8
South Central 214,419.0 13,965.0 46,119.0 1,757.0 53,615.9 329,875.8
Central Highlands 53,154.1 8,879.2 8,393.0 - 96,881.5 167,307.8
Southeast 26.0 516.3 - 508.4 75.4 1,126.2
Southwest 203.4 - 23,583.2 - 472,604.2 496,390.8
Total area (ha) 851,602.8 89,911.4 136,155.8 2,265.4 1,114,877.7 2,194,813.2
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Figure 2: Forest Distribution 2010
PLANTATION OWNERSHIP
Understanding the arrangements under which plantations are owned and managed is important for the design and implementation of policy measures intended to promote plantation development and for effective plantation wood value chains.
Plantations are owned and managed by various user groups in Viet Nam. Table 45 shows the total planted forest area allocated to different owners according to government records, noting that not all land allocated may be have been planted or is currently productive.
Castella et al. (2009, Table 3) describe a typology of ownership and investment arrangements for rubber plantations, which is useful to explore other plantation regimes that occur in Viet Nam.
5 Decision No. 3158/QD-BNN-TCLN dated on July 27, 2016 of MARD on publishing forest data for 2015 (up to date 31/12/2015).
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Table 3: Typology of Plantation regimes
Regime Land Labour Capital Market Technology Smallholder (5+0) with own capital ● ● ● ● ● Smallholder (5+0) with government officials
● ● ● ● ●
Contract Farming 4+1 smallholders (credit)
● ● ● ●
Contract Farming 3+2 ● ● ● Contract Farming 2+3 ● ● ● Contract Farming 1+4 ● ● ● ● ● Concession Farming Note: ● = farmer inputs; company inputs
Plantations in Viet Nam are owned by a variety of entities (Table 4) however as a consequence of land allocation, leasing and contracting opportunities, household livelihood factors and business strategies the plantation estate is doinated by two plantation production systems: smallholder-based production and Government-led production. The smallholder-based production systems may be fully independent with all inputs provided by the smallholder (5+0) or supported by inputs from the government or development partners (4+1). The government-based plantations systems may included contracted labour from local farmers (1+4) or include no farmer inputs (0+5).
Table 4: Area of plantation by ownership in 2015
Owner Area (ha) %
Forest Management Board 538,992 13.87 State enterprises 448,332 11.54 Other economic organizations 133,237 3.43 Military forces 55,193 1.42 Households 1,747,781 44.97 Communities 48,069 1.24 Other organizations 81,900 2.11 Commune People Committee 832,834 21.43 Total 3,886,338 100.00
Other factors that may impact the nature and effectiveness of policy measures include:
• Species
• Products
• Rotation Length
• Labour Arrangement
• Investment perspective of owner
• Investment timeframe
• Intent/Driver
• Livelihood perspective
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Sikor identifies three “ideal types of household” to illustrate the range of practices associated with
investment in and financing of plantations by smallholders resulting in different livelihood perspectives:
• ‘Survival-focussed households’ concentrate on meeting their immediate needs, primarily food and basic consumer items, and possibly saving a small surplus as a buffer against unexpected expenses.
• ‘Surplus oriented households’ are more likely to integrate plantations into the household economy, each year, seeking to maximise surplus from all their activities combined.
• ‘Investment-oriented households’ make decisions about plantations independently of other livelihood decisions.
Understanding this differentiation is important because it impacts the effectiveness of policy measures designed to influence the behaviour of plantation owners particularly those that are aimed at increasing length of plantation rotations, altering the types of products and the timing and magnitude of harvesting events. It may also influence how they comply with regulations (Smith et al. 2016, Smith 2016).
How these fators interact with the types of plantation is summarised further in Table 5.
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Table 5: Plantation Management practices of major plantation species
Species Ownership Model Products Rotation Length
Labour Arrangement
Driver Investment perspective of owner
Livelihood Perspective
Investment timeframe
Eucalyptus (Eucalyptus
camadulensis)
SFC
0+5 1+4
Small sawlog Woodchip/pulplog Poles Round log Energy
<12 years Contracted
Wood supply Profit
Standalone Investment Short
Eucalyptus (Eucalyptus
camadulensis)
Farmer 5+0 4+1
Woodchip/pulplog Poles Round log Energy
4-7 years Self-employed Cash Income
Integrated Surplus
Short
Acacia (Acacia Mangium) Hybrids
SFC
0+5 1+4
Small sawlog Woodchip Poles Energy (charcoal/firewood)
<12 years Contracted
Wood supply Profit
Standalone Investment Short
Acacia (Acacia Mangium) Hybrids
Farmer
5+0 4+1
Woodchip Poles Energy (charcoal/firewood)
<10 years Self-employed Land security Cash Income Environemnt protection
Integrated Surplus
Short
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Figure 3: Policy and forest cover time line6
6 Sources: Dong and Phuong 2016, Ngo 2015
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3. PLANTATION POLICY SETTING
STRATEGIES, POLICIES AND PLANS
In 1986, the Government of Viet Nam launched the "Doi Moi" or all-round renovation process. In subsequent policies priority was given to economic reform aimed at creating a multi-sector, market economy regulated by the Government, at the same time consolidating the legal environment and renovating Party and State structures. The strategy to adopt an open market policy initiated a wave of reforms such as decentralized state management, a market oriented monetary system, broader foreign economic relations, long-term land use rights for farm households and a new forest policy (Sam and Trung 2001).
NATIONAL SOCIO-ECONOMIC DEVELOPMENT PLANS
Viet Nam’s forest policy is determined largely by National Socio-Economic Development Strategies which are made on a ten-year planning cycle and supported by five-year plans. These provide the overarching framework for sectoral initiatives, which also include strategies, plans and annual programs and budgets. The planning process is set out in various Decrees and Ordinances and is summarised in Appendix 1 and Appendix 2.
In 1991 Viet Nam adopted a national Socio-Economic Strategy to the Year 20007. That plan was made at a time when the country’s economy was undergoing significant change, following the collapse of the socialist regimes of the Soviet Union and Eastern Europe, ongoing economic sanctions from the US, regional financial-economic crises and consecutive natural disasters.
The subsequent ten-year Strategy 2001-20108 set specific economic and social targets with the overarching objective to become a modern, industrialised country by 2020. The strategy maintained a focus on independence and autonomy with a socialist-oriented development policy, but with increased integration into the international economy. It also aimed to develop a multi-sector economy with many forms of ownership, through in part, the completion of a legal framework and the dismantling of policy and administrative structure with a view to maximising all resources, providing impetus for the development of production and business in all economic sectors. The legal framework was viewed as necessary for the efficient functioning of an open and dynamic market.
The specific strategies adopted for agriculture and forestry were:
• to protect and develop forest resources, increasing forest cover to 43%; • to complete the stable and long-term assignment of forest and land, geared towards social
mobilisation for forestry development and adoption of policies ensuring the forest-based livelihood of forest workers;
• to combine forestry with agriculture and enact policies benefiting sedentary cultivation and settlement to help stabilise and improve the life of mountain inhabitants;
• to prevent forest burning and destruction; and • to speed up commercial reforestation in order to provide raw materials for the pulp and wood
processing industries and for export; and to augment the value of forest products. Following review of that strategy at the 11th Party Congress in 2012, the current ten year Sustainable Development Strategy 2011-2020 was developed. The general objective of this strategy is that sustainable and effective growth must occur together with social progress and equality, national resources and environment protection, socio-political stability, firm protection of independent unified sovereignty and territorial integrity of the country. Its specific economic, social and environmental objectives are:
7 The Seventh Vietnam Party Congress endorsed the 1991-2000 Strategy for Socio-Economic Stabilisation and Development. 8 The Ninth Vietnam Party Congress endorsed the 2001-2010 Strategy to continue promoting industrialization and modernization, developing fast and sustainably.
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• to ensure macro-economic stability and to firmly maintain food security, energy security and financial security;
• to transform a growth model into harmonious and expansive development including through green growth, low-carbon economic development and more economic and effective use of resources;
• to develop a democratic, disciplined, harmonious, equal and civilized society with a progressive culture deeply imbued with national identity, prosperous, progressive and happy families, ensuring people’s comprehensive development in all physical, spiritual, intellectual aspects, having creativeness capacity, a sense of citizenship, and a sense of law observance;
• to make education and training, science and technology the major driving forces for development;
• to firmly maintain socio-political stability, protect independence, sovereignty, unity and territorial integrity;
• to mitigate negative impacts of economic activities on the environment;
• to reasonably exploit and effectively use natural resources, especially non-renewable resources and prevent, control and repair environmental pollution and degradation, improve the quality of the environment, protect and develop forests and conserve bio-diversity; and
• to reduce the harmful effects of natural disasters and to actively and effectively respond to climate change, especially sea level rise.
With respect to resources and the environment, the plan includes specific objectives to:
• Prevent degradation and ensure the effective and sustainable use of land resources.
• Protect and ensure the sustainable use of water resources.
• Ensure the proper exploitation and economical and sustainable use of minerals.
• Protect marine, coastal and island environments and the development of marine resources.
• Protect and develop forests.
• Reduce air pollution.
• Effectively manage solid and toxic waste.
• Conserve and develop biodiversity.
• Reduce the impacts of climate change and prevent natural disasters.
VIETNAM 2035: TOWARD PROSPERITY, CREATIVITY, EQUITY, AND DEMOCRACY
In February 2016, the Office of the Government, Ministry of Planning and Investment and the World Bank Group jointly launched a report titled "Vietnam 2035: Towards Prosperity, Innovation, Equity, and Democracy”. This report lays out development strategies that are relevant to Viet Nam as a lower middle-income country in the global context, and aims to transform Viet Nam into a high-income country or upper middle-income country by 2035. The three main approaches discussed in the report are: economic prosperity with environmental sustainability; equity and social inclusion; and a capable and accountable state.
Some elements of the report are particularly relevant to the forest sector. The vision emphasises that restructuring and equitizing State Owned Enterprises (SOEs) alone is not sufficient and should be accompanied by a stable, well-regulated, and inclusive financial sector, transparent and functioning land markets and rewards for participation in global value chains. The plan encourages learning and innovation and calls for internalization of environmental costs and building climate resilience. To achieve this, strong policies and institutions for smart investment are viewed as essential.
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FORESTRY DEVELOPMENT STRATEGY 2006-2020
The Forestry Development Strategy 2006-20209 (FDS) was made in 2007 and is the primary sectoral strategy for forestry, including forest plantations.
The overarching objectives of the strategy are:
• to establish sustainable forest protection, development and use of 16.24 million ha of land and forest for the forestry sector;
• to increase forest cover to 42-43% by 2010 and to 47% by 2020; • to ensure participation of various economic sectors and social organizations in forest
development; • ecological environment protection; • to conserve biodiversity and supply environmental services; and • to contribute to poverty alleviation, improve livelihood of mountainous rural people and to
maintain national security.
The economic objectives of the strategy are:
• that the forestry growth rate shall reach 4-5% per annum, and contribute 2-3% to national GDP by 2020;
• to establish, protect, develop and sustainably use the three forest categories, being: 8.4 million ha of production forest, 5.68 million ha of protection forest and 2.16 million ha of special use forest;
• that harvested timber volumes will be 20-24 million m3/year; • forest products will have an export value of US$7.8 billion; and • the value of forest environmental services will be US$2 billion by 2020.
The social objectives are:
• to create 2 million new jobs; • to contribute to poverty alleviation; and • to complete forest allocation through leases to households, individuals, communities and
organizations before 2010.
The environment objective is to achieve forest cover of 42-43% in 2010 and 47% by 2020.
These objectives are to be implemented through three development programs:
1. The sustainable forest management and development program.
2. The forest protection, biodiversity conservation and environmental services development program.
3. The forest products processing and trade program.
And two supporting programs:
1. Research, education, training, and forestry extension program.
2. Renovation of the forestry sector institutions, policies, planning and monitoring program.
Further information on these is provided in Appendix 3.
Forest Protection and Development Plan 2011-2020
The current ten year Forest Protection and Development Plan 2011-202010 has the following objectives:
9 Decision No. 18/2007/QD-TTg 10 Decision No. 57/Q-TTg dated 9th January 2012
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• To manage the existing forest areas well and to use forest resources and land available and planned for forestry, in an effective and sustainable manner.
• To increase forest cover to 42 - 43% by 2015 and 44 - 45% by 2020 respectively (with a change in timing from the FDS noted above), increase the productivity, quality and values of forests, and restructure the sector towards increasing added value as well as meeting demands for timber and forest products for domestic consumption and export.
• To generate more jobs, improve incomes for forest-dependent residents, contribute to hunger elimination and poverty reduction, while ensuring security and national defence.
It sets a forest development target for the afforestation of 2.6 million ha, including 250,000 ha for new protection and special use forests, 1 million ha for new production areas and 1.35 million ha for post harvesting replanting. In addition, 500 million scattered trees should be planted.
The plan identifies a need to review and finalize forest protection contracting policies for organizations, households, individuals, villages, and communities in the areas aligned with the current plans, and aimed to complete forest allocation in 2015 (a target that has not been met).
Under the plan, markets should be strengthened through trade promotion, and timber legality must be ensured through reforms. Competition in all economic sectors should be encouraged, harmonising benefits to producers and consumers and creating market drivers. Domestic forestry production should be promoted.
SIGNIFICANT REFORESTATION AND PLANTATION POLICIES
Forest rehabilitation in Viet Nam has been occurring since French colonial times. The Vietnamese government intensified these efforts in the mid-1980s and during the 1990s in response to ongoing and accelerating forest cover loss. The causes of this forest degradation and deforestation are somewhat debated but include inter alia (de Jong et al. 2006):
• Land conversion for farm land including by independent swidden farmers and estate crop production driven by population growth, including lowland migration into the uplands association with crop booms such as coffee (see e.g. Hardy 2003) .
• Devastation by war from 1945-1954 and 1961-1975. During these wars Viet Nam lost nearly 2 million ha of forest.
• Forest fire.
• Over-harvesting for timber by State Forest Enterprises and illegal logging by individuals and other entities.
• Harvesting of fuelwood.
• Lack of capacity within forest management organisations.
• Poor governance.
• An inadequate legal framework and enforcement capacity.
Since 1998, the country has developed ambitious plans to complete a forest rehabilitation program that will bring back the forest cover to 1943 levels (Sam et al. 2004).
World Food Program
The World Food Program (WFP) commenced in Viet Nam min 1975, and invested a total of US$ 500 million in the country. Forestry, irrigation and primary health care were the three major project areas supported. The forestry program under the WFP started in 1975 and was completed in 2000. During this period, six forestry projects were implemented to supply food to rural communities, provide equipment and materials for 450,000 ha of forest plantation, construction of forest roads, organize fire
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protection teams, and improve the forest extension services. The projects focused on the development of demonstration plots and agroforestry production on steep slopes.
To support the forestry projects, the Government allocated forest land to farmers, and the projects supported household investment in farmers’ own land. At that time, no farmers held any land and at best they had conditional use rights that were later formalised with the “Red Book” that gave them a
form of transferable title (described further below). By 1995 the WFP was the principal source of international funding for environmental projects in Viet Nam with ten projects of a total investment of USD$143 million (de Jong et al. 2006). The project has been credited (Sam et al. 2004) with good results including large areas being planted to trees, jobs creation, improved livelihoods, capacity building in forest plantation and agroforestry techniques, better gender equity in forestry and training of local staff in the organization and management of forestry projects. Others hold that the WFP paid insufficient attention to technical aspects, which led to inappropriate species selction under different site conditions, resulting in failure on a large scale (de Jong et al. 2006).
GREENING THE HILLS PROGRAM 327
‘Program 327’ was established in 1993 on the basis of Decision No. 327 of the Chairman of the Minister Council (Prime Minister) on the policies and objectives in the utilization of barren land and hills, alluvial coastal areas and water surface areas. This program was implemented nationwide across several sectors including forestry, agriculture, aquaculture, fixed cultivation and resettlement. In the forestry sector, Program 327 focused on re-greening barren land and hills, including protection of existing forest areas, natural regeneration and forest plantations. The program was reformed over time:
• In 1994 the program was amended to focus on forest protection in critical areas, and areas where slash and burn cultivation persisted, mostly in the Northern and Central Highlands. Activities for the re-greening of barren land and hills were mainly implemented in the mountainous and midland regions.
• After 1995 the program focused only on protection forest and special use forest in areas where local farmers practiced slash and burn cultivation. As a result, the program emphasized activities such as promoting permanent cultivation and settlements, and on greening barren land and hills in mountainous and midland areas.
• From 1996 to 1998 the scope of this program was again narrowed to forest protection and establishing new plantations in special use forest lands, protection of forest through natural regeneration, and forest plantations.
FIVE MILLION HECTARES REFORESTATION PROGRAM
The Five Million Hectares Reforestation Program (5MHRP), which was based on Prime Minister’s
Decision No. 661/QD – TT in 1998, ran from 1998-2010 and was a national target program in the forestry sector aimed increasing countrywide forest cover to 43%. The 5MHRP objectives included:
a) building a forest resource base for the forest processing industry;
b) creating jobs and income;
c) contributing to poverty reduction and livelihoods, security, and defence;
d) decentralizing forest management to local authorities, especially the commune level;
e) reducing shifting cultivation;
f) mobilizing overseas development assistance (ODA) for forest development; and
g) supporting the application of advanced technologies in forest seedling production, timber plantation forestry, and forest product processing.
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The 5MHRP delivered support from the central government to the provinces for both the establishment of new plantations and the protection of existing forests. The provinces subcontracted with SFEs and Forest Protection Management Boards (FPMBs) to issue forest planting and protection contracts to households. The program included provision of subsidized loans for plantations. From 1998 to 2005 over 2.4 million hectares of forests were provided with protection contracts; about 0.8 million hectares of forests were reportedly regenerated; and 1.5 million hectares of protection, special-use forests or plantations were planted. Planned targets were achieved for forest protection objectives while targets for regeneration and new plantations were much below originally set targets (World Bank 2010a). In response, the National Assembly revised the 5MHRP targets, but the overall target of achieving 43 percent forest cover by 2010 was retained.
A major part of the 5MHRP activities concentrated on international cooperation in forestry. Some 21 donors committed with the Ministry of Agriculture and Rural Development (MARD) to support the planting of the five million ha of forests. In recent years, 45 projects from UNDP, FAO programs, the Governments of Sweden, Germany, Japan, Holland, Finland and non-government organizations such as WWF, CARE, and OXFAM were being implemented. Loans from the World Bank, Asian Development Bank, and Japan Bank for International Development Cooperation are being assigned to projects under the 5MHRP program (Sam et al. 2004).
The 5MHRP faced challenges including lack of funding to meet ambitious targets (despite donor support), high annual interest rates on loans to farmers (despite preferential rates), inadequate land use planning and land allocation, inappropriate tree species selection, poor access to forest, and a lack of awareness among local people about the benefits to be derived from participation in the forest management program (Houng et al. 2014).
Production Forest Development Policy
In 2007, the Government issued a new Production Forest Development Policy (2007-2015)11 in order to encourage investment in forest plantations and production forestry and to bolster efforts to reach the plantation development targets set in the 5MHRP. This policy resulted from a number of critical internal evaluations of the 5MHRP and represented a shift in the government’s focus away from subsidies for protection and special-use forests toward investments and subsidies for production forestry. The specific objectives of the policy were to encourage the development of 2 million hectares of plantations — at a rate of 250,000 hectares each year until 2015 — and, in so doing, to contribute to livelihoods and employment and the supply of raw materials for the country’s fast-growing wood-processing industry.
The policy targeted specific geographical areas, including the central highlands and remote mountainous areas in the northwest and centre, and offered preferential terms and cost norms for ethnic minority and poor communities and households. It made provisions to subsidise various aspects of plantation forestry, including seed and tree-nursery development, the building of forest roads, and the cost of transport from the wood-processing factories established in the northwest region.
The policy included several changes to previous national programs, specifically it:
• focused on smallholder production forestry, and emphasised the need for land allocation as a precondition,
• promoted further decentralization of implementation down to district, commune and village levels,
• addressed the urgent need for improvement of the quality and quantity of forest planting material (germplasm) in decentralized nurseries, training of forestry staff and extension, as well as monitoring and control systems.
11 Decision NO. 147/2007/QD-TTG, 2007,
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FORESTRY RESEARCH STRATEGY
The main objectives of the Viet Nam Forestry Research Strategy towards 202012 are to contribute to and orient forestry sector development, effectively implement the forest development strategy and master plan of agriculture research in Viet Nam towards 2020 and meet the requirement of industrialization and modernization in agriculture and rural areas in Viet Nam to the year 2020. The strategy provides context with respect to social demands, trends in development, research trends, opportunities and challenges of the forestry sector in Vietnam. It sets specific objectives and strategies to improve and strengthen research and resources, providing solutions for how to apply the strategies and ways that forestry research will be enforced to improve and enhance the forests of Viet Nam.
Six areas are prioritized for research and development:
i) Planning, monitoring and assessment of forest resources;
ii) Forestry policy and institutions;
iii) Sustainable forest management;
iv) Forest environment and biodiversity;
v) Silviculture and technical measures (natural forests, plantations and non-timber forest products; and
vi) Forest industry, wood preservation and processing of forest products.
LAND POLICY
Land policy relates to the institutional arrangements through which the Government of Viet Nam defines those individuals and groups that have access to rights in land and the circumstances that apply to gaining and retaining that access. The overall goal is to ensure that land in Viet Nam is used efficiently and equitably so as to achieve the Government’s objectives of rapid economic growth,
poverty reduction, food security, international competitiveness, social harmony, and environmental sustainability (Ho and McPherson 2010).
In accordance with the Constitution, all land in Viet Nam belongs to the population as a whole. The State administers the land on their behalf, and citizens and organizations rely upon land-use rights to gain access to land, but do not own land. The hierarchy of authorities at the central, provincial, district and communal levels administer Viet Nam’s land policies. The Ministry of Natural Resources and
Environment is the primary central-level administrative body for land, and People’s Committees at all
levels (provincial, city, district, commune, ward and township) implement land policy, which is made at the central level. The current distribution of powers and responsibilities affecting forests and land use is described in detail by Trung et al. (2015).
The current distribution of land in Viet Nam stems from policies that extend back to the 1950’s when
communist reforms imposed agricultural collectivization in the north, while in the south policies provided ownership rights to former tenant farmers and led to approximately three-quarters of tenant households receiving rights to roughly 44% of the farm area. These reforms were largely lost when the Communists took power in 1975 and in the late 1970s almost 97% of rural households in the north belonged to collectivized farms. Although Communist leadership attempted to collectivize the south, approximately one quarter of the population joined cooperatives (Marsh and MacAuly 2006).
When the Government implemented the series of measures in the late 1980s associated with the Doi
Moi reform process this included the allocation of land-use rights to farmers. The de-collectivization of agriculture was formalized in 1988 and the introduction of the Law on Land represented a dramatic
12Decision No. 78/2008/QĐ-BNN of Ministry of Agriculture and Rural Development dated on 1 July 2008 on approving forestry research strategy towards 2020;
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policy shift. By 2009, the state had allocated 72% of Viet Nam’s total land area and almost all of its
agricultural land to land users (Kirk and Tran 2009; World Bank 2010a; Marsh and MacAulay 2006, USAID 2013). By leasing land to individual farmers, the Government created the conditions that boosted agricultural output and exports, and raised rural income and wealth. It also provided a foundation for rapid urbanization, industrialization and economic modernization (Ho and McPherson 2010).
Forest and land allocation
The policy for forest land allocation was introduced in 1993 following revisions to the 1987 Land Law which actively devolved land and forest use rights to state forest companies, business entities, communities, households and individuals. Degree 02/CP 1994 clarified how forest land could be allocated for use on a sustainable basis. The broad policy objectives were to reduce deforestation (by reducing swidden), and to improve the livelihoods of people, including ethnic minority groups. However it was not until after 1999, following Decision 187,13 that the program was implemented on a large scale. This Decision directed State Forest Enterprises (SFEs) to transfer forest lands back to districts for reallocation to households, focussing on barren land for the establishment of plantations. Decree 16314 enabled individuals and households to be issued a land use certificate (Red Book) for the land allocated to them, valid for 30 years for agriculture and 50 years for plantations. More recently policy changes have enabled the allocation of special use forest (if less than 1000 ha), and natural protection forest as well.
While it was anticipated that all land would be allocated by 2010, at the end of 2007 only 62 percent (or about 8 million ha) of the total forest land area had been allocated due in part to slow implementation of the SFE reform process and limited financial and human resources within provincial agencies responsible for forest land allocation program.
Other factors that have been described as affecting the allocation of forest and forest land (see e.g., So and Thoan 1999, Clement and Amezaga 2009), include:
• low productivity of allocated (barren) forest land; • low competitiveness of timber compared to agricultural crops; • lack of integration of local people into markets for forest products; • infeasible benefit sharing policies; • poorly defined and explained forest land management policies; • reticence amongst upland farmers to switch from swidden to permanent tree production; • formalisation of land use rights and land arrangements through “Red Books”, replacing
(preferred and understood) informal/customary practices; • discrepancies and inconsistencies in policy implementation at the provincial level; and • low efficiency of provincial forestry extension services in supporting forest land allocation
processes.
STRATEGIES, PLANS AND POLICIES THAT IMPACT OR INFLUENCE PLANTATION
POLICY
A number of broader and other sectoral strategies impact on or are influenced by those that are specific to the forest plantation sector.
COMPREHENSIVE POVERTY REDUCTION AND GROWTH STRATEGY
The Comprehensive Poverty Reduction and Growth Strategy (CPRGS15) is an action program that translates the Government’s Ten-Year Socio-economic Development Strategy, Five-Year Socio-
13Decision No. 187/1999/QD-TTg on the renovation of SFE organisations structure and management mechanism 14Decree No. 163/1999/ND-CP on assigning and leasing of forestry land to organizations, households and individuals for stable and long-term use for forestry purposes. 15 Decision No. 825/QD-TTg 2002
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economic Development Plan as well as other sectoral development plans into concrete measures with well-defined road maps for implementation (Figure 4). The CPRGS recognises that despite relatively rapid economic change, poverty remains a pressing issue for the country.
The CPRGS includes major policies and measures for various sectors with respect to poverty reduction and growth. For agriculture and rural development these are to:
• ensure food security; • diversify agricultural production; • attach importance to market research and ensure timely provision of information; • increase investments in agriculture; • link the production of high value crops to developing storage and processing facilities; • promote research and efficient use of natural resources; • expand agricultural, forestry, fishery activities and extension activities in a manner that is
suitable to production conditions in different areas in a way that is responsive to the demand of poor people;
• develop fisheries and diversify aquaculture; • develop a disaster prevention strategy to minimize losses; and • stabilize livelihoods and production in disaster-prone areas.
The strategy recognises the importance of land and land availability as a limiting factor in poverty alleviation and includes an objective to implement land use planning and grant land use rights in order to increase the efficiency of land use.
Figure 4: Integration of CPRGS with National socio-economic development plans
For forestry, the objectives are aimed at development into a profitable sector that creates jobs and raises incomes for people in mountainous areas. There is a recognised need to provide adequate incentives to people who plant forests and to promote the role of the community in the protection and natural regeneration of forests. The CPRGS includes the continuation of the implementation of the 5MHRP and acceleration of the process of the allocation of land and forest, especially in important, environmentally sensitive areas. Mechanisms include the review and revision of policies on investment in forest development including adjusting cost norms and unit prices in forest protection, providing interest free or low interest loans for afforestation, adequate investment in infrastructure in forest areas (e.g. roads to transport materials, storage facilities, etc.), the development of the forest
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processing industry to increase the value received from forestry and the creation of forestry-related income generating opportunities.
NATIONAL STRATEGY FOR ENVIRONMENTAL PROTECTION
Following the National Plan of Environment and Sustainable Development 1991- 2000, the Prime Minister of Viet Nam approved a National Strategy for Environmental Protection (NSEP) until the Year 2010 and Vision toward 202016. The National Strategy on Environment Protection to 2020, with Visions to 2030 was subsequently approved17 in 2012. With respect to forests, the strategy identifies the need for solutions for the effective and sustainable use of land resource, to reduce the losses of agricultural lands due to conversion, degradation, impoverishment, and desertification, and to increase forest cover and improve forest quality by:
• continuing afforestation and forest protection while securing a sustainable forestry sector, and to closely manage the renting of forest land, especially protection and watershed forests;
• surveying and evaluating remnant natural forests, taking effective measures to protect and prevent illegal exploitation, encroachment or deterioration of primitive forests and improving natural forests’ resistance to impacts of climate change;
• localizing the protection of natural forests, especially mangroves, forests for special use, protection forests, and watershed forests, and at the same time preventing deforestation and illegal exploitation, and promoting activities which help to prevent forest fires and improve capability of responding to forest fires.
BIODIVERSITY CONSERVATION ACTION PLAN
In 1995, the first Biodiversity Action Plan (BAP1995) was issued after Viet Nam became a member of the Convention on Biological Diversity in 1994. BAP1995 became the guideline for biodiversity conservation in Viet Nam during the period 1995-2005. In 2005, the Ministry of Natural Resources and Environment (MONRE) made the “Biodiversity Action Plan to 2010 with Vision to 2020”
(BAP2007) which was revised in 2011 to become the National Biodiversity Strategy to 2020, Vision to 2030. This strategy includes programs for Payments for Ecosystem Services (PES) including for reforestation projects and introduces the concept of economic valuation of ecosystems for comprehensive assessment of trade-offs between conservation and development (MONRE 2011). The strategy identifies the need for better consideration of biodiversity in reforestation projects and the need to incorporate greater species diversity into planting programs, particularly local species.
STRATEGY ON CLIMATE CHANGE
The Government of Viet Nam ratified the UNFCCC in 1994 and the Kyoto Protocol in 2003, and developed a Strategy on Climate Change in 2011.18 Within this strategy Task 4 relates to the protection and sustainable development of forests, increasing carbon sequestration and biodiversity conservation by accelerating the progress of afforestation and reforestation projects and encouraging the business sector to invest in economic forestation. It aims, by 2020, to establish, manage, protect, sustainably develop and use 16.24 million ha of forest, increase forest coverage to 45%, manage 8.134 million ha of production fores, 5.842 million ha hectares of protection forest and 2.271 million ha of special-use forest.
In response MARD developed an Action Plan on Climate Change for the agriculture and rural development sector in the period 2011-2015 with a vision to 2050. The aim is that by 2030 Viet Nam will reduce its greenhouse gas (GHG) emissions by 8% compared to the business-as-usual level. Emission intensity per unit of GDP will be reduced by 20% compared to the 2010 levels and forest cover will increase to 45%. Specifically, the country is committed to:
• implementing sustainable forest management;
16Decision 256/2003/QD-TTg, 2003 17Decision 1216/QĐ-TTg 2012 18Decision No: 2139/QĐ-TTgOn approval of the National Climate Change Strategy
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• improving the quality of poor natural forests; • implementing afforestation and reforestation measures, focusing on large timber plantations; • preventing forest deforestation and degradation; • developing and improving policies to promote sustainable forest management; and • developing mechanisms and policies to attract private sector investment for sustainable forest
management, afforestation, reforestation, biodiversity conservation and livelihood development.
The national REDD+ action plan19 has also been approved to implement a number of activities to reduce emissions from deforestation and forest degradation. Recently emission reduction targets were established for different sectors such as transportation, energy, agriculture, land use, land use change and forestry. The emission reduction target by 2020 for land use, land use change and forestry is 20% compared to that of 200520.
THE NATIONAL GREEN GROWTH STRATEGY
The National Green Growth Strategy (NGGS) aims to achieve a low-carbon economy and enrich natural capital. It advocates the development of Natural Capital Accounting (NCA) tools and identifies forestry as a sector that would benefit from the implementation of future NCA activities.21 Green growth is seen as a means to increase investment in conservation, develop and use natural capital efficiently, reduce greenhouse gas emissions, and improve environmental quality –all of which are aimed at achieving sustainable economic growth. The NGGS envisages the development of new legislation and financial and economic policies that incorporate green growth principles. The Ministry of Planning and Investment (MPI) is charged with the implementation of the NGGS and is defining an NGGS action plan as well as a green growth master plan. One of its policy priorities is to develop a monitoring and evaluation framework for measuring progress towards green growth.
The NGGS targets a reduction in Greenhouse Gas (GHG) emissions by 8-10% compared to 2010 for the period 2011–2020 and annual emission reductions of 1.5-2% for 2020–2030. It aims to encourage development of economic sectors that have the potential to efficiently use natural resources to produce high added value. For forestry, the prioritiesof the NGGS are a reduction of GHG through the sustainable management of forests and biodiversity, and an increase in forest cover thus improving carbon sequestration values of forests and ensuring the supply of timber for production and consumption.
RURAL DEVELOPMENT STRATEGY
The main policy document for rural development is Resolution 26 on “Agriculture, Farmer and Rural
Area” – Tam Nong, 2008. The document states that the development of agriculture and rural areas and improvement in the living conditions of farmers should be based on a market economy with socialist orientation. The resolution lays out both general and specific objectives to be attained by 2020 (Rudengren et al. 2012).
Based on that resolution and policy, a national target programme was developed -the New Rural Development (NDP), led by MARD. The National Target Programme for New Rural Development (NTP-NRD) 2010-2020 is built on the following principles:
• Development based on 19 rural development criteria22; • Promotion of community ownership; • The State playing an instructive and supportive role; and • Inheriting from and integration with other NTP programmes and projects.
19 PM. 2012. Decision No. 779/QD-TTg dated on 27 June 2012 20 PM. 2012. Decision No. 1775/QG-TTg dated on 21 November 2012 21 Prime-Minister Decision 1393/QD-TTg of 25 September 2012 22 Details of the 19 rural development criteria were updated in the Decision No 1980/QĐ-TTg of the Prime Minister dated on the 17/10/2016.
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POLICIES AND MECHANISMS FOR FOREST PROTECTION AND DEVELOPMENT LINKED WITH POVERTY
REDUCTION FOR ETHNIC MINORITIES
In 2015 the Government issued Decree No. 75/2015/ND-CP of 2015, on policies and mechanisms for forest protection and development, linked with rapid and sustainable poverty reduction for ethnic minorities (2015-2020) poor ethnic minority and Kinh households that are stably residing in disadvantaged communes in ethnic minority and mountainous areas. Under this decree those ethnic minorities will annually receive VND 400,000 per hectare for up to 30 ha of forest assigned to them forest. Those involved in forestation will receive a support of up to VND 1.6 million per hectare per year in the first three years and VND 600,000 for the subsequent three years. The support is to be decided by chairpersons of provincial-level People’s Committees based on their local practical
conditions.
Poor households that plant production forests and develop non-timber forest products will receive one-off support of between VND 5 million and 10 million per hectare to purchase saplings, fertilizers and partially make up for their labour costs. Those households facing food scarcity during the initial period of afforestation will receive additional support equivalent to 15 kg of rice per person per month for up to seven years. In addition, the Bank for Social Policies and the Bank of Agriculture and Rural Development will offer these households a loan of VND 15 million per hectare without requiring collateral, at an annual interest rate of 1.2 percent for up to 20 years, to support planting of production forests and non-timber forest product development.
INDUSTRIAL DEVELOPMENT STRATEGY
The Industrial Development Strategy to 2025, with a Vision toward 203523 aims to:
• effectively mobilise all resources from domestic economic sectors and external resources to develop and restructure the industrial sector;
• focus on training a skilled, disciplined and innovative workforce for the sector; and • prioritize the development and transfer of technologies in the industrial sub-sectors that have
competitive advantages, with modern and advanced technologies, including, amongst others, agricultural, forestry and fishery product processing and new and renewable energy.
For forestry the aim is to increase the processing ratio of key timber products and to apply international standards to production including the establishment of trademarks.
The strategy has an emphasis on improving the position of Viet Nam’s processing sector within global
product value chains.
NATIONAL STRATEGY ON EXPORTS AND IMPORTS
The Strategy on Exports and Imports for 2011-2020, with a Vision to 203024 aims to:
• develop production for meeting export and domestic demands by making use of the economy’s comparative advantages, improving efficiency and export-import competitiveness, and shifting the economic structure towards industrialization, modernization, job creation and trade balance;
• build and consolidate strategic partnerships for sustainable market development; to harmonize the country’s short and long-term interests as well as economic and political-diplomatic interests; and to be active, independent and self-reliant in international economic integration;
• diversify export-import markets; to actively take part in the global production network and chain of value; to place importance on building and developing commodities of high added value and good trademark in domestic and foreign markets.
23Decision No. 879/QD-TTg 2014, http://www.chinhphu.vn/portal/page/portal/English/strategies/strategiesdetails?categoryId=30&articleId=10054959 24Decision 2471/QĐ-TTg 2011, http://www.chinhphu.vn/portal/page/portal/English/strategies/strategiesdetails?categoryId=30&articleId=10051303
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For agro-forestry and aquaculture production, which are viewed as having a long-term competitive advantage and capacity but low added value, the specific aims are to improve output, quality and value-added and shift the structure of exports toward well-processed products and those exploiting scientific and technological advances.
Photo 2: Acacia Nursery (H. Smith, 2011)
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4. POLICY DRIVERS
DOMESTIC POLICY DRIVERS
Viet Nam’s economic growth and poverty alleviation policies and goals recognise the forestry sector as one of the highest priorities for development and wealth creation. The supporting forestry policies, described above, seek to remedy historic deforestation, increase overall forest cover and protect natural forests, promote forest land tenure reform and land allocation, reform state forest enterprises, and improve forest-based livelihoods and employment opportunities (Figure 5).
Improved connectivity between participants in the timber value chains, market efficiency, product quality and standards are emerging policy drivers. To a certain extent these are a response to external/international drivers but they also reflect an increasing awareness of the consequences of past domestic policies.
Figure 5: Domestic Policy Drivers
INTERNATIONAL DRIVERS
Increasing exposure to and a desire to penetrate global markets as well as participation in international programs have influenced forest policy in Viet Nam. United Nations Conventions and treaties, many of which Viet Nam is a signatory to and some of which have also been ratified (refer Appendix 6)25, international processes, such as United Nations Forum on Forests (UNFF), International Tropical Timber Agreement (ITTA) and Montreal Process, and political summit recommendations, such as the Group of Eight Largest Economies (G8), Asia-Pacific Economic Cooperation (APEC) and Association of Southeast Asian Nations (ASEAN), provide a strong political message.
Those funding the forestry sector, including multilateral and bilateral donors, development banks and international commercial banks, have principles, policies, safeguards, guidelines and procedures to which their clients countries increasingly must conform if they want to retain access to funding or markets. Additionally, non-governmental organizations (NGOs), forest and forest industries investors, wholesalers, retailers, buyers and governments, particularly in industrialized countries of Europe,
25e.g. United Nations Framework Convention on Climate Change (UNFCCC), United Nations Convention to Combat Desertification (UNCCD), Convention on Biological Diversity (CBD), Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) and Convention on Wetlands of International Importance (RAMSAR)),
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North America, Oceania and Japan, are increasingly demanding proof of legality and sustainability through verification and sustainability certification (World Bank 2012).
Surrounding these are discourses on forestry and forest management and it is possible to extract key narratives that have influenced forest and plantation policy in Viet Nam. These concepts contribute to pressure on policies and influence their implementation and effectiveness. Some narratives provide the driving forces for change while others may create resistance to change (Figure 6). Some examples are:
• Plantations are seen an alternative, preferential production system to slash-and-burn/swidden
agriculture, which in turn is viewed as a cause of poverty, particularly in the uplands (Castella
et al. 2006).
• Swidden causes land and soil degradation (Sam 1994) and plantation can help address this.
• Plantations produce wood, which provides a source of income to the rural poor (Putzel et al. 2012).
• Plantations together with land use rights encourage permanent settlement or resettlement.
• Land policies allow for the categorisation and zoning of land, which can then be allocated for use (Clement and Amegaza 2009).
• Land allocation provides land security and privatisation enables the development of formal and informal land markets, but may be ineffective or resisted due to pre-existing land use arrangements (Sikor 2006).
• Land allocation results in livelihood improvement for the poor, although the extent and nature of improvement may be inequitable (Sandewall et al. 2010).
• Land tenure security encourages investment and more efficient use of resources.
• Industrial plantations have resulted in land grabbing and elite capture (Sikor 2012).
• Allocation of land to plantations operated by others can have negative impacts on indigenous people through the loss of use rights or access to land and forest.
• Conversion of land to plantations may have negative environmental impacts depending on the previous vegetation and its condition.
• Plantation grown wood can be substituted for timber harvested from natural forests. This helps to address unsustainable harvesting and reduces illegal logging (McElwee 2004).
• Legally sourced wood is more acceptable to export markets (Nguyen and Tran 2011).
• Certified wood may attract a price premium (see https://ic.fsc.org/en/news/id/66, but see Hoang et al. 205; Laity et al. 2015).
• Legality verification and certification will help build the timber industry by diversifying timber products and increase revenue through placement in sensitive markets (http://www.euflegt.efi.int/laos).
• Plantations increase forest cover (de Jong et al. 2006).
• Plantations are not forest (see https://www.rainforest-rescue.org/petitions/772/plantations-are-not-forests).
• Plantation produce low value products, e.g. wood chips.
• Plantation can produce high value products (e.g. Redman et al. 2013).
• Plantations contribute to climate change mitigation and adaptation (UN-REDD 2013).
• Plantations have helped achieve MDGs and will help achieve SDGs.
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Figure 6: Policy discourses and forces
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5. THE LEGAL FRAMEWORK FOR FOREST PLANTATIONS
The first Constitution of Viet Nam was made in 1992 and was revised in 2013 by National Assembly, with the new Constitution approved on 1 January 2014. This new Constitution was made with the aim of changing the basic organizational models of local government, promoting decentralization and autonomy. In addition, it sought to enhance the effectiveness and efficiency of the state management structure at the different levels of government and to create favourable conditions for the smooth operation of production activities and the integration of Viet Nam into the world’s economy. Viet Nam’s
legal system is currently under revision to bring it into line with the Constitution’s objectives and contents (Trung et al. 2015).
With respect to the forest sector the Central Communist Party decisions and resolutions provide the broad policy framework. The National Assembly translates these into laws while line ministries issue the subsequent decrees, decisions, and implementation guidelines for implementation (
Appendix 4). In practice, the drafting of legal instruments is controlled by the relevant Ministry in charge of the relevant area. Legal instruments issued by central authorities will be applicable nationwide while legal instruments issued by local authorities will be applicable within the specific localities only.
Usually, the legal framework covering a specific area of law includes:
• a Law issued by the National Assembly setting out the general principles of such area;
• one or more Decrees issued by the Government, which further clarify and implement the Law issued by the National Assembly; and
• one or more Circulars issued by the relevant Ministries in charge of the area in question, which provide more detailed implementation of the Decrees issued by the Government.
The Constitution, the Land Law and Forest Protection and Development Law are key legal instruments promoting the development of forest plantations and production of wood in the country. Since these laws were made in 2003 and 2004 a significant body of supporting regulations has been created. With respect to the Forest Protection and Development Law, this is described in a 2013 review undertaken by the Viet Nam Administration of Forestry through the Forest Sector Support partnership (VNFOREST 2013). More recently the Prime Minister issued a Decision No. 3826 to provide policy incentives to support forestry development. With this policy the Government commits to provide support to forestry development, including commercial plantations and forest certification.
In general, government policies and regulations have provided a solid foundation for the development of the forest and wood industry in Viet Nam. The frequency of government reforms, however, has made compliance challenging. Many of the regulations, particularly those promoting forest plantations, have not been fully implemented and is sometimes inconsistently applied. The legal framework in forestry and related sectors is complex and sometimes confusing.
A summary of the principle legal instruments relevant to plantation is provided in Table 6 and further detail is provided in Appendix 5.
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Table 6: Major legal sources relevant to Plantations
Legal Source Purpose Matter relevant to Plantations
The Constitution 2013 (revised) November 28, 2013 by the Thirteenth National Assembly, January 1, 2014.
Establishes the rule of law in Viet Nam.
Land is owned by the people and managed by the state on their behalf.
Law No on Land 45/2013/QH13 dated on November 29, 2013 of the National Assembly.
Governs the powers and responsibilities of the State as representative of the ownership of land by the entire people for uniform administration of land and the regime for administration and use of land; and the rights and obligations of land users.
Provides the regulatory basis for land allocation and the granting of land use rights by the state to individuals, households, entities and organisations.
Includes some incentive measures for land development.
National Assembly's Resolution No 134/2016/QH13, dated on the 09/04/2016.
Provides direction for adjusting land use planning to 2020 and developing land use planning in the period 2016-2020.
Confirms the planned areas of the three different forest types and sets a 2020 target of 16.24 M ha forestland of which
• 9.27 Mha is production forests;
• 4.62 Mha is protection forests, and
• 2.35 Mha is special use forests.
Law on Forest Protection and Development No.29/2004/QH11 dated on December 14, 2004 of the National Assembly.
Provides for the management, protection, development and use of forests and forest owners’ rights and obligations.
Defines and provides for ownership rights over planted production forests, including the registration of those rights.
Provides for incentives, exemption, valuation and compensation of and for plantations.
Provides the means for accessing forest ownership and use rights - such as to the State, by allocation or lease.
Law No.55/2014/QH13 on Environment Protection dated on June 23, 2014 of the National Assembly.
Provides for activities of environmental protection; policies, measures and resources for environmental protection; rights and obligations of organizations, households and individuals in environmental protection.
Establishes the requirements for environmental impact assessment.
Law on Enterprise No.68/2014/QH13 dated on November 26, 2014 of the National Assembly.
Recognises the private sector as a key sector of the economy.
Together with Government’s Decision 46 in 2001 on management of import-export commodities, provides opportunities for wood processing.
Law on Investment No. 67/2014/QH13 dated on November 26, 2014 of the National Assembly.
Applies to investors, other organizations and individuals (hereinafter referred to as entities) involved in business investment.
Provides incentives and support for investment.
Decree No. 118/2014/NĐ/CP dated on December 17, 2014 of
On arranging and reforming organisation, management
Restructuring of State Forest
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Legal Source Purpose Matter relevant to Plantations
the Government on arranging, reforming, developing and improving the effectiveness of agro-forestry companies (2014).
mechanism and policies on agro-forestry companies.
Enterprises and Forest Companies,
Decree No. 210/2013/ND-CP Dated on December 19, 2013 of the Government on incentive policies for enterprises investing in agriculture and rural areas.
Provides a number of incentives and additional investment supports of the State for enterprises which invest in agriculture and rural areas.
Support for investment in processing timber from planted forests which is particular for North-western provinces and provinces with poor districts under Resolution 30a/2008/NQ-CPdated December 27, 2008 of the Government,
Decree No. 135/ND-CP/2005, dated on November 8, 2005 of the Government on Contractual Assignment of Agricultural Land, Production Forest and land with water surface for agriculture in State run Aquaculture in State Run Agricultural Farms and Forestry Farms.
Provides for contractual assignment of agricultural land, production forest land and land with water surface for aquaculture in State-run agricultural or forestry farms, companies and factories.
Establishes the contracting arrangement between Forest Companies and other over land, including for plantations.
Decree No. 23/2006/ND-CP dated on March 3, 2006 of the Government on the Implementation on the Law on Forest Protection and Forest Development (2006).
Implements the Law on Forest Protection and Development.
Allows for the renting and leasing of land to individuals and organizations.
Sets limits to the area of land that can be used for plantations.
Decision No. 134/2004/QD-TTg dated on July 20, 2004 by the Prime Minister on a number of policies to provide support in terms of production land, residential land, dwelling houses and daily-life water to poor ethnic minority households meeting with difficulties.
Supports production land, residential land, dwelling houses and daily-life water to poor ethnic minority households meeting with difficulties
Allows for withdrawal of land (including forest plantations) being owned by state agriculture and forestry enterprises in order to allocate to ethnic minorities,
Decision No. 186/2006/QD-TTg dated on August 14, 2006 of the Prime Minister Regulation on Forest Management (2006).
Provides for the organization of management, protection, development and use of special-use forests, protection forests and production forests, including land areas with or without forests, which have been assigned, leased or planned by the State for forestry.
For the protection forest, production forest, no more than 40% of non-forested land area or mangroves land or no more than 30% of non-forested area in other areas can be used for agriculture and fishery production.
(note conflict with Decree No 23/2006/ND-CP),
Decision No. 38/2016/QD-TTg dated on September 16, 2016 of the Prime Minister on Promulgating a number of policies on forest protection and development, and support for investment in infrastructure construction and assignment of
Promulgating a number of policies on forest protection and development, and support for investment in infrastructure construction and assignment of public-utility tasks to agricultural and forestry companies,
Provides support policies for planted forest growers,
Supports for typical plantation timber processing in the poorer provinces,
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Legal Source Purpose Matter relevant to Plantations
public-utility tasks to agricultural and forestry companies.
Decision No: 686/QĐ-TTg on the Government programme to carry out Resolution 30-NQ/TW of the Ministry of Politics dated 12th March, 2014 on the arrangement, renovation, development and improvement of operation’s effectiveness of agro-forestry companies.
To reform agro-forestry companies (SFCs).
To strictly manage land and forest resources and enhance the effectiveness of land use
To maintain and set up centralized-goods production zones and develop a chain of material-processing which will help to create an ideal environment for the establishment and implementation of joint production models between agro-forestry companies, HHs and other economic elements in localities.
Review and equitisation of Forest companies.
Dissolve small sale and poorly performing companies.
Provides for re-allocation of land to households.
Decision No: 83/QD-BNN-TCLN dated on January 12, 2016 of MARD on Approving the Scheme of implementation of sustainable forest management and forest certification period 2016-2020.
Approves the scheme for implementation of sustainable forest management (hereinafter referred as SFM) and forest certification.
Sets a target by 2020 of at least 500,000 ha of production forests certified for sustainable forest management, of which 350,000 ha is natural forests and 150,000 ha is plantations.
Vietnam Forest certification scheme is developed and operating;
Building capacity of stakeholders to implement sustainable forest management and forest certification in Viet Nam.
Decision No. 1565/QD-BNN-TCLN dated on August 7, 2013 of MARD on approving the Scheme of Forestry Sector Restructuring.
Management and sustainable use of forest resources and conservation of biodiversity and the forest ecosystem services, promote forest certification in Viet Nam to meet the requirements of the domestic and international markets, contributing to improving value added in forestry sector.
Replanting three forest types. Up to 2020, forestland area increases to 16-16.5 Mha, of that 8.1 Mha is production forests; 5.8 Mha is protection forests and 2.2 Mha is special use forests.
Enhancing value added for forestry sector by improving values across the value chain.
Decision 899 /QĐ-TTg 2013 dated on June 10, 2013 of the Prime Minister on approving the Agriculture restructuring Proposal towards higher added value and sustainable development.
Maintaining growth, increasing efficiency, productivity, product quality and high added values to better meet the market demands, preferences of domestic consumers and expanding export Increase income, food security, protecting the environment, better management and uses of natural resources, increase forest cover to 42-43% by 2015 and 45% in 2020
Forest sector development in order to increase economic value, capacity and effectiveness environmental protection, biodiversity protection and response to climate change.
By 2020: 25% income of forest sector coming from PFES, 25% from silviculture and 50% from wood processing.
Develop economic forest plantation to become a key economic
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Legal Source Purpose Matter relevant to Plantations
subsector that creating jobs, improving income and livelihood of forest owners, improve economic values of plantation forests.
Decision No. 799/QD-TTg dated on June 27, 2012 of the Prime Minister on Approval of the National Action Program on Reduction of Greenhouse Gas Emissions through Efforts to Reduce Deforestation and Forest Degradation, Sustainable Management of Forest Resources, and Conservation and Enhancement of Forest Carbon Stocks" 2011 – 2020.
Reducing greenhouse-gas emissions through efforts to mitigate deforestation and forest degradation, increased greenhouse-gas sequestration by forests, sustainable management of forest resources, biodiversity conservation, and contribution to the successful implementation the national strategy on climate change and poverty reduction, and striving towards sustainable development.
Development and operation of pilot mechanisms, policies, organizational systems and technical capacity at the national level to ensure effective management, coordination and operation of REDD+ related projects.
Accomplishment of mechanisms, policies, organizational structures and technical capacity to ensure the proper management, coordination and effective operation of projects and activities under the National REDD+ Action Program.
Decision 124 /QĐ-TTg 2012 dated on February 2, 2012 of the Prime Minister on approving holistic planning for development of agriculture sector to 2020 and vision to 2030.
Building the agriculture sector to the comprehensive development toward modern, sustainability, producing larger scale commodities based on the comparative advantage, applying advance tech, to increase productivity, quality, effectiveness, competitiveness, meeting demands of the markets domestically and internationally.
Sets 2020 targets for: forest cover (44-45%), forest categories (8.132 million ha of production forests), regeneration and plantation establishment (610,000 ha plantation), restructuring the wood processing industry to balance between capacity and raw material supply and processing of sawn wood (6 million m3/year), chip wood (320,000 m3/year) and MDF (220, 000 m3/year) with export value of 7 billion USD.
Resolution No. 73/NQ-CP of the Political Bureau on sustainable development of forestry dated on 26 August 2016.
This aims to improve forest productivity, quality and economic benefit return and contribute to mitigation of natural harzards and environmental protection.
Is one of 21 government target programs for a period of 2016 – 2020.
Decision No 57/QĐ-TTg 2012 dated on January 9, 2012 of the Prime Minister on approving the forest protection and development plan during 2011-2020.
Properly protect existing forest areas; to effectively and sustainably use forest resources and planned forestry land; raise the forest coverage to 42-43% by 2015 and 44-45% by 2020;
Raising quality of natural forests and yield of plantation forests by 25% in 2020 compared to 2011.
Raising quality of natural forests and yields of planted production forests by 10% in 2015 against 2011.
Incentive policy for processing and consumption of planted timber;
Decision No. 18/2007/QD-TTg dated on February 5, 2007 of the Prime Minister on approving Vietnam forestry development strategy in the period 2006-2020.
To plant, manage, protect, develop and use in a sustainable manner 16.24 million ha of land planned for forestry (including 8.4 million ha of production forests, 5.68 million ha of protection forests and 2.16 million ha of special-use forests) and to
Provides orientation, measures and implementation arrangement of the strategy.
Indicates key programs: the programs on sustainable forest development, biodiversity conservation, PES, research,
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Legal Source Purpose Matter relevant to Plantations
increase the forestland to 42-43% by 2010 and 47% by 2020
education-training and forestry extension; renewal of institutions, policies, planning and supervision in the forestry service.
Decision No 66/2011/QĐ-TTg dated December 9, 2011 of the Prime Minister amending and supplementing a number of articles of Decision No. 147/2007/QD-TTg dated on September 10, 2007 of the Prime Minister on a number of policies for development of production forests during 2007-2015.
Regulates the investment support for afforestation, forestry extension, road building, forestry product transportation.
Investment support for:
• forestation and forest extension;
• planting and management of breeding forests and nurseries;
• building high-quality seedling centres;
• forestry roads;
• transportation of processed products in the north western region.
Decision No 100/2007/QĐ-TTg dated on July 6, 2007 of the Prime Minister on amending and supplementing a number of articles of Decision No. 661/QD-TTg of 29 July 1998, on the targets, tasks, policies and organization of implementation of the project on planting 5 million hectares of forests.
To amend and supplement a number of articles of the Prime Minister's Decision No. 661/QD-TTg of July 29, 1998, on the targets, tasks policies and organization of implementation of the project on planting 5 million hectares of forests.
Encourage investment in tending and conversion of small diameter forests into large diameter forests so as to supply the processing of domestic-use manufacturing and fine-art for export, and other processing needs.
Decision 146/2005/QD-TTg dated on June 15, 2005 of the Prime Minister withdrawing land and forest from state-owned agro-forestry enterprise to reallocate to local residents and communities.
Withdrawing land and forest from state-owned agro-forestry enterprise to reallocate to local residents and communities.
Withdrawal of land (including forest plantations) being owned by state agriculture and forestry enterprises in order to allocate to ethnic minorities
Decision 150/2005/QD-TTg of the Prime Minister on the approval of the planning in changing production patterns of agriculture, forestry and aquaculture to 2010 and vision to 2020 Dated 20/06/2005.
Building agriculture sector (including aquaculture and forestry) with strong commodities, diversity and sustainable based on the advance tech. high quality, meet the market demand domestically and internationally, improve the effectiveness of land uses, labour and capital investment, fast increase in income and livelihood of farmers.
Changing production patterns towards creating jobs,
Changing production patterns towards market demand, higher competitiveness, apply advance tech. higher yield, quality and increase processing, creating large scale raw material supply regions
Changing towards sustainable production and protecting the environment.
Decision 146/2005/QD-TTg of the Prime Minister on the policy of recalling the land from agricultural and forestry enterprises to allocate to the poor, ethnic households.
To support production land and livelihood development for the poor ethnic households in the mountainous areas.
Recall plantation forestland and nurseries and reallocate those to poor ethnic households for livelihood development.
Decision No 178/2001/ QD-TTg Regulates the benefits and Clarifies the rights and
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Legal Source Purpose Matter relevant to Plantations
dated on November 12, 2001 of the Prime Minister on the benefits and obligations of households and individuals when they are allocated leased or contracted with forests and forestry land.
obligations of households and individuals who are allocated, leased forests and forest land for protection, regeneration and afforestation by the State.
responsibilities of the persons who are allocated, leased or contracted with forests for protection and development of forests.
Sets the principles for determining the benefits and obligations of households and individuals who are allocated, leased with forests and forest land by the State.
Decree No. 02/CP, dated on January 15, 1994 of the Government on allocation of forest land to organizations, households and individuals for stable using long-term for forestry purposes.
Through this Decree the State allocated forestry land to organizations, households, individuals for stable, long-term use. This regulation includes: Land with natural forests, land under afforestation; un-forested land is planned afforestation, protection of vegetation.
Sets the duration of forest land allocation for stable, long-term use for forestry purposes to other organizations, households and individuals at 50 years.
Circular No 38/2007/TT-BNN dated on April 25, 2007 of MARD on regarding forest allocation and forest lease.
Guiding the steps and administrative procedure on forest allocation, forest for rent for organizations, households, individuals and communities.
Confirms which forest types can be allocated to households and communities.
Clarifies uncertainties and contradictions about forest and forest land allocation to households and communities as regulated in Article 135 of Land Law 2003.
Circular No. 128/2008/ TT-BNN, Circular No. 10/2009 / TT-BNN and Circular No. 26/VBHN- BNNPTNT dated on May 6, 2014 of MARD on guidance for rubber plantation on forestland.
Layout the conditions, procedures for planting rubbers on forestland that have been planned for production forests.
Conditions for planting rubbers on planned production forestland: soil profile, slope, ecological regions, forest categories, locations, monitoring and forest volume measurement before converting to rubber plantation.
Circular No. 34/2009 / TT-BNN dated on June 10, 2009 of MARD.
Regulated the criteria and classification of forests.
Sets the criteria for determining a planation as:
• new plantations forest, requiring a density of 1,000 trees/ha,
• if planting forest in bands requires 600 plants/ha,
• in sandy areas - 1,100 trees/ha,
Requiring a survival rate of 85%, But will not recognized as forest (because the density of less than 1,000 trees).
Joint Circular No. 07/2011/TTLT-BNNPTNT-BTNMT dated on January 29, 2011 of MARD and MONRE on guiding forest allocation and
Guiding forest allocation and lease in association with forestland allocation and lease.
Guides cooperation between Ministry of Natural Resource and Environment and Ministry of Agriculture and Rural Development in allocation and leasing forest and
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Legal Source Purpose Matter relevant to Plantations
lease in association with forestland allocation and lease.
forestland.
Circular No. 42/2012/TTBNNPTNT dated on August 21, 2012 of MARD.
On documents required for legal forest products and examination of forest product origin.
Plantation wood legality.
Circular No. 24/2013/TT-BNNPTNT, dated on June 6, 2013 of MARD on requirement for replacement of forest plantation when changing forest land use purposes.
To ensure the stakeholders involving in changing forestland use purposes to plant replacement forests.
PPC will carry the check and approve the areas of forestland proposed to for change in land use and areas of replacement forest plantation and implementation plan of forest plantation.
The Official Notification of the Prime Minister No 191/TB-VPCP, dated on the 22/07/2016 on the solutions for sustainable rehabilitation of Central Highland forest in response to climate change in the period 2016-2020.
By 2020, increase the forest cover in Central highlands to 59%.
Provides support for sustainable forest development, balancing the government budget in order to provide financial support for sustainable forest rehabilitation in Central Highlands provinces, to prioritize forest development projects in Central Highlands provinces in the high priority list for getting loan, financial support.
Prohibits the conversion of 2.25 million ha of natural forest in Central Highlands to other land use purposes.
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6. GOVERNANCE
In Viet Nam, the Government is the executive organ of the National Assembly, and the supreme state administrative agency. There are four main levels of Government administration: National/Central, Provincial/Provincial Peoples' committee, District/District peoples’ Committee, Commune.
GOVERNMENT AGENCIES
Responsibility for the plantation sector is spread across several Ministries and line agencies which regulate all aspects, from land allocation to wood exports.
• The Ministry of Agriculture and Rural Development • The Ministry of Natural Resources and Environment • The Ministry of Industry and Trade • The Ministry of Justice • The Ministry of Finance • The Ministry of Planning and Investment • The Ministry of Transport
MINISTRY OF AGRICULTURE AND RURAL DEVELOPMENT
The Ministry of Agriculture and Rural Development (MARD) is a governmental agency performing state management functions in the fields of agriculture, forestry, fisheries, irrigation and water services and rural development. MARD performs its tasks and is granted is authorities based on Decree No.178/2007/ND-CP dated 3rd, December, 2007.
With respect to forestry its functions include to:
• perform governance responsibilities for the implementation of regulations issued by the Government and the Prime Minister on forestation, forest resource development, valuable, rare and endangered plants and animals protection and preservation; forest management regulations;
• announce and govern, inspect, evaluate and make comprehensive reports on the implementation of strategies, master plans, forestry protection and development plans;
• appraise master plans developed by provinces or cities on forestry protection and development;
• guide, govern, inspect and identify boundaries and undertake forest inventories and monitoring of forests
• regulate criteria for forestry classification • guide integrated production of agriculture, forestry, fishery, socio – economic cost norms and
measure of forestry development; issue lists of valuable, rare and endangered forestry plants and animals that can be exploited and used; issue lists of major forestry plants; list of seedlings that could be produced and traded, lists of forestry plants prohibited export; issue national standards on seed classification; storage, research, reproduction, import and export.
• issue, monitor and inspect the implementation of regulations and process for nurturing and improving forestry and forestry product exploitation;
• perform governance responsibilities for forestry rangers • take the leading role in anti–desertification national action program; and • perform governance responsibilities for fire forestry and other disaster forecast, for deploying
preventive and restore measure, prevent deforestation, mitigate fire forest consequences.
In terms of processing, preserving, transporting, trading forestry products the role of MARD is to:
• govern, guide the implementation of processing development master plans, programs and strategies associated with relevant commodity production and markets
• issue national technical standards for food safety, environmental hygiene in cultivation, breeding, aquaculture, harvesting, processing, preservation, transportation to markets;
• issue national technical standards, technical process and announce list of additives and
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chemicals can be used in ingredients and for food preservation; and • guide transportation, export and import of products.
MARD is the focal point for the coordination and cooperation with other ministries, branches and People’s Committees of the provinces and municipalities under the central government for the implementation of Forest Development Strategy (FDS), for and incorporating FDS issues into the national Socio-Economic Development Plans and into the plans of ministries, branches and at the local level. The policies and programs of MARD are implemented through the Department of Agriculture and Rural Development (DARD) at the Provincial, District and Commune level.
The Viet Nam Administration of Forestry
The Viet Nam Administration of Forestry (VNFOREST) takes overall responsibility for the management and development of forests in Viet Nam. VNFOREST is divided into four key departments: Forest Protection (focusing on law enforcement), Forest Utilization (forest production), Forest Development, and Nature Conservation (forest conservation).
Department of Processing and Trade for Agro-forestry-Fisheries Products and Salt Production
The Department of Processing and Trade for Agro-forestry-Fisheries Products and Salt Production performs MARDs functions with respect to the development of master plans, programs and strategies associated with commoditiy production and markets and the development policies for some trade sectors and craft villages. It isses national technical standards for, amongst other sectors, harvesting, processing, preservation, transportation for agro-forestry, fishery and salt products until they enter the market.The Department is also responsible for guiding the transportation, export and import of agro-forestry, fishery and salt products.
Provincial Department of Agriculture and Rural Development
Provincial Departments of Agriculture and Rural Development (DARD) manage forests in the provinces. Each DARD is subject to its respective Provincial Peoples’ Committee (PPC) with regard to their budgets for operations and personnel. DARD conducts forest management through its Departments of Forest Development and Forest Protection. At the district level, forests are managed by the division of agriculture belonging to the District People’s Committee (DPC). Each district’s
department of forest protection helps the division to manage the forests within the district. At the commune level, there are government employees in charge of agriculture and forestry issues. This is supported by field level forest protection agents from the district’s forest protection department (Nguyen and Tran 2011).
Institute of Policy and Strategy for Agriculture and Rural Development
The Institute of Policy and Strategy for Agriculture and Rural Development (IPSARD) is a ‘Think Tank”
for MARD27. Its functions are to:
• Undertake research into the scientific basis for, and assessing impacts of, policies, strategies, plans, and programs in agriculture and rural development sector.
• Provide multi-dimensioned and multi-media information to support decision-making processes in management, production, trade and investment relating to agriculture and rural development.
• Implement cooperation activities in research, technology transfer, training, consultation and model development with domestic and foreign institutions and individuals.
Viet Nam Academy of Forest Sciences
The Viet Nam Academy of Forest Sciences (VAFS28) is a special scientific organization under the Ministry of MARD. Its functions are in implementing scientific research, technology transfer, post-
27 Decision 9WQD-TTg on 09/09/2006 to establish Institute of Policy and Strategy for Agriculture and Rural Development.
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graduate training, international cooperation, advisory services and business regarding forest research, development and extension in Viet Nam. VAFS leads research in forestry sciencs including silviculture, forest ecology, tree breeding, and improvement, forest engineering, forest soils and sustainable forest management.
Forest Inventory and Planning Institute (FIPI);
Forest Inventory and Planning Institute (FIPI) under the former General Department of Forestry was established on 26 January, 1961.29In 197130the Forest Inventory and Planning Department was renamed as Forest Inventory and Planning Institute (FIPI) belonging to Ministry of Forestry (now MARD). FIPI is responsible for inventory, monitoring and assessment of forest rsources and forest planning.
Vietnam Forestry University (VFU)
Vietnam Forestry University (VFU) was founded in 196431upon the separation of the Faculty of Silviculture and Forestry Mechanization Unit from Hanoi Agriculture and Forestry University. VFU is administered by MARD but managed by the Ministry of Education and Training in terms of educational and professional quality. VFU plays a role in training undergraduate and postgraduate personnel in the areas of forestry and rural development, and in undertaking research and technology transfer in forestry and rural development.
MINISTRY OF NATURAL RESOURCES AND ENVIRONMENT
The Ministry of Natural Resources and Environment (MONRE) is responsible for
• implementing the planning of land use at the national level; • devising the 5-year plans of land use (2016-2020) in accordance with the provisions of the
Land Law; • monitoring the implementation of planning by provinces and cities, as well as assisting them
in examining the establishment, approval and implementation of planning of land use at district level;
• reviewing and making adjustments to the planning of provincial-level; and • developing and implementing programs on education about legislation on land, to raise
awareness of policies and laws among agencies, organizations, households, individuals and resident communities; with special attention paid to ethnic minorities.
MONRE together with MARD provide guidance to local levels to review land use planning, allocation and leasing of forest land in line with objectives and tasks of the FDS and develop a proposal to establish the linkages between forest and land inventories, which are carried out every 5-years.
Viet Nam Environment Administration
Within MONRE the Viet Nam Environment Administration (VEA) has departments for Environmental Appraisal and Impact Assessments, Controlling of Environmental Protection Activities and Biodiversity Conservation as well as a Centre for Environmental Monitoring.
The Department for Environmental Appraisal and Impact Assessments32 is responsible for environmental protection planning, strategic environmental assessment, environmental impact assessment, integrated environmental assessment and transboundary environmental impact assessment.
The Department of Controlling of Environmental Protection Activities33is responsible for supervision and inspection, the sanctioning of administrative violations in the area of environmental protection,
28 Decision No. 2099/QĐ-TTg on the structure and operation of the Vietnamese Academy of Forest 2012 29 Decision No. 140/CP,1961 30 Decision N. 73/CP, 1971 31 Decision N0 127/CP, 1964 32 Decision No.1517/QD-TCMT, 2014 33 Decision No.1502/QD-TCMT, 2014
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settling disputes and complaints, examining and confirming the completion of environmental protection works and measures, and controlling environmental protection activities in the operation stages of production.
The Department of Biodiversity Conservation34 is responsible for biodiversity and conservation planning and biodiversity law enforcement. It is responsible for the Biodiversity Conservation Corridor project.
The General Department of Land Administration
The General Department of Land Administration (GDLA) was established in early 1994 by the Viet Nam Government by merging and reorganizing two state bodies, the General Department of Land Management and the National Department of Surveying and Mapping. The Functions of GDLA include the preparation of land legislation and land policies and their submission for consideration and approval, the implementation of the cadastral system including the land register, cadastral mapping, cadastral documentation, land tenure certificate issuance and land record systems. It is also responsible for land surveys and inventory for land classification, land assessment and land valuation. The GDLA maintains land statistics and current land use mapping.
The Department of Natural Resources and Environment (DONRE) at the provincial level is responsible for land allocation and the issuance of land use certificates.
MINISTRY OF INDUSTRY AND TRADE
The Ministry of Industry and Trade (MOIT) regulates35a range of sectors including processing industries, import and export, cross-border trade, external market expansion, market surveillance, trade promotion, and international economic-trade integration.
MOIT has responsibilities with respect to the issuing of permits relating to timber trade and sets the strategy for wood processing.
MINISTRY OF FINANCE
The Ministry of Finance has the function of implementing the State management in finance (including: State budget, tax, fees and other revenues of the State budget, national reserve, State financial funds, financial investment, corporate finance and financial services), customs, accounting, independent auditing, insurance, prices, securities and holding the ownership rights to the State’s
investment capital in enterprises according to regulations of the Law.
Within the Ministry of Finance the General Department of Customs is the agency tasked with determining and collecting the duties on goods exported from Viet Nam, including for wood products.
MINISTRY OF PLANNING AND INVESTMENT
The Ministry of Planning and Investment36 (MPI) regulates the functions of state planning and provides general advice on strategies. MPI compiles the plans for national socio- economic development as well as developing mechanisms and policies for general economic management and in some specific fields. It is responsible for policies on domestic investment, foreign investment into Viet Nam, and Viet Nam’s investments abroad
The Department of Agricultural Economics37within MPI develops the investment policy for the forestry and agriculture sector. While specific policy related to sectoral governance and technology belongs to the line ministry MPI is responsible for budget development. MPI and the Ministry of Finance, together with MARD, balance and allocate funds to implement the FDS.
34 Decision No.1501/QD-TCMT, 2014 35 Decree No. 95/2012/NDD-CP, 2012 36 Decree No. 178/2007/ND-CP, 2007 37 Decision No. 496/QD-BKH, 2009
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MINISTRY OF PUBLIC WORKS AND TRANSPORT
The functions, tasks and authority of Ministry of Transport38 include the management of roads, rail, inland waterways, sea and air transport and policies, regulations and standards in the transportation sector. It is responsible for management of transport infrastructure, transport vehicles, driver training of, transport services management, traffic safety, environmental protection, international cooperation and science and technology in the field of transport
MINISTRY OF JUSTICE
The Ministry of Justice (MOJ) has the primary role in the preparation of legislation for Viet Nam. It is responsible for the development and implementation of laws and regulations, post-review of legal normative documents, control of administrative procedures, legal dissemination and education, state management on the execution of civil and administrative judgments, judicial- administrative activities, judicial affairs support, state compensation in administrative management and execution of judgments, management of the implementation of laws and regulations on the handling of administrative violations and public services provision in the areas under the Ministry’s state
management.
The ministry of Justice is responsible for Viet Nam’s legal reform processes and has in place a
Judicial Reform Strategy to 2020.
The Vietnamese judicial system comprises: organizations for mediation and conciliation; people’s
courts, organized at three levels (Supreme; Provincial and District), military courts and organizations for economic arbitration.
LOCAL ADMINISTRATION
Viet Nam is divided into 58 provinces and three municipalities (Hanoi, Haiphong, and Ho Chi Minh City) all administered by the national government. Districts, towns, and villages are governed by locally elected people's councils and council candidates are screened by the Party. Council members' responsibilities include upholding the constitution and laws and overseeing local armed forces units. The councils in turn elect and oversee executive organs, called people's committees, to provide day-to-day administration. The entire system functions in a unitary fashion, with local organs of authority directly accountable to those at higher levels.
ENFORCEMENT AGENCIES AND ROLES
A number of entities are responsible for the enforcement of forestry and related laws in Viet Nam. These include:
• The Forest Protection Department within VNFOREST in MARD • The Ministry of Public Security; • The Department of Customs, and • The Supreme People’s Procuracy.
FOREST PROTECTION DEPARTMENT
The Forest Protection Department is the lead agency in Viet Nam concerned forest law compliance and trade in timber. The Department has approximately 10,000 rangers that are responsible for patrolling, monitoring and initiating investigations related to forestry offences (UNODC 2013).
MINISTRY OF PUBLIC SECURITY
Environmental Police
Since 2006, the Ministry of Public Security has a special Department for Prevention of Environmental Crime (commonly called Environmental Police) comprising 100 staff. The Department of 38 Decree No. 107/2012 / ND-CP, 2012
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Environmental Police is responsible for the enforcement of national policies aiming at preventing violations of the Laws on Forest Protection and Development, Environmental Protection, and Biodiversity. The powers given to the Environmental Police are restricted to the monitoring of the compliance with the laws and the undertaking of initial investigations for forestry crimes (UNODC 2013).
GENERAL POLICE
The General Department of Police (Inspectorate Police) is responsible for investigating serious crimes as stipulated in the relevant articles of the Penal Code. Cases are referred to the Police generally from the Forest Protection Department, Environmental Police and Customs, who are responsible for the initiation of the case (UNODC 2013).
In additional Within the General Department of Police two specific units related to anti-smuggling and economic crime.
CUSTOMS, MINISTRY OF FINANCE
The Customs Department is responsible for checking documentation associated with the import and export of timber and wood products. The Customs department also has a specific unit dedicated to anti-smuggling operations, with a focus, in the context of forestry, on the prevention of the movement of banned timber and wildlife. The Custom Department employs a risk assessment technique, using intelligence to determine which shipments may be linked to criminal activities. Investigations on wood products are based on the Law on Customs Services and indirectly on the 2005 Law on Environmental Protection.
THE SUPREME PEOPLE’S PROCURACY
The Supreme People’s Procuracy plays a significant role both in carrying out investigations and prosecutions related to violations under the Criminal Procedure Code. Prosecutors have a clear leadership and advisory role during investigation, including:
• Supervising the institution (UNODC 2013)of criminal cases, the supervision of investigative activities and the compilation of cases files by investigative bodies;
• To set the overall requirements for the investigation; • To summon and interrogate the accused and to take witness statements; and • To supervise arrests, custody and temporary detention.
Under the Criminal Procedure Code the prosecutor my cancel the decisions of other bodies, including the police and Forest Protection Department, if they believe the case to be unfounded. Equally, should they believe that a decision not to mount a criminal case is incorrect the Supreme People’s
Procuracy can order the charging of a suspect or an investigation as required.
PRIVATE SECTOR
INDUSTRY ASSOCIATIONS
The Wood and Forest Products Association of Vietnam (Vietforest); is a non-profit and non-governmental organization established in 2000. It represents Vietnamese enterprises, scientists and technical managers that belong to all economic sectors operating in forest establishment, harvesting, processing, consumption, trade and import, export of forest products.
Ho Chi Minh Handicraft and Wood industry Association (HAWA) was established in 1991 and has been recognized by the People’s Committee of Ho Chi Minh City. The association is a volunteer
organization consisting of enterprises from different sectors that are operating in the field of handicrafts and wood industry. Enterprises accepting the regulations of the association and voluntarily joining can all become official members of the association.
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Forest Products Association of Binh Dinh (FPA Binhdinh) was established under Decision No. 3413/QD-UBND dated 24/09/1999 of the People's Committee of Binh Dinh province. It has 85 members operating in the production of wood processing, supply of raw materials and equipment for wood processing. The association includes a diversity of business types and sizes, with the combined goal of establishing and promoting the "Binh Dinh Furniture" brand.
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7. STAKEHOLDERS/ACTORS AND INTERESTS/POSITIONS
The following stakeholders and actors are involved in the plantation and plantation wood value chain in Viet Nam.
• Farmers and households- who plant and grow trees for the purpose of timber production and other uses and benefits, on land allocated to them.
• Plantation growing companies and other large enterprises - Vietnamese or international companies that seek to establish plantations and produce timber.
• State owned enterprises - establish and manage plantations, word processing (e.g. VINAFOR).
• Communities–directly affected by plantations and plantation business that may gain or lose land use rights, land access, or who may gain opportunities for plantation related employment.
• Army – as a land/forest owner • People’s committees– with a role land and forest allocation. • Collectives/cooperatives/associations – that unite forest owners, formed by smallholders
to facilitate wood sales, price negotiation, improved market, share technical knowledge etc. (e.g. Vietnam Forests Owners’ Association, Forestry cooperatives).
• Harvesting contractors- business enterprises that undertake timber harvesting through contracts with farmers, grower groups, timber merchants or plantation companies.
• Wood Traders/merchants/brokers - Linking with buyer, procurement of trees, harvest, transport, ensuring the supply chain operating smoothly.
• Transporters and logistics companies -enterprises, which may operate independently or under contract with timber merchants.
• Primary Processors –e.g. wood-chip processors wood volume, resource availability, quality. • Secondary Processors–pulp and paper processors. • Furniture Manufacturers – creating demand for wood and setting prices through
competition, setting wood quality standards, impacting wood supply and volume; affected by taxes, trade measures and consumer standards such as for legality
• Exporters–impacted by taxes, duties, trade measures, product standards and quality, legality, phytosanitary rules.
• Industry Associations - Wood and Forest products Association of Vietnam (Vietforest); Ho Chi Minh Handicraft and Wood industry Association (HAWA).
• Non-Government Organisations– e.g.PanNature, Centre for Sustainable Rural Development.
• Civil Society- Individuals, families, communities, non-affiliated industry (e.g. household word processors) indigenous peoples, academics.
• International Development Partners - World Bank, FAO, ADB, ACIAR, GiZ, • Certification/Legality Bodies – FSC, PEFC • Certification Auditors– private companies • Importing (consumer) Countries/Companies -China, Thailand, EU, Australia, with an
interest in wood quality, standards, phytosanitary requirements and timber legality. • Wood Exporting (timber supplying) Countries – Lao PDR, Thailand and others that are
impacted by Viet Nam policies associated with, in particular, the standards set by consumer countries.
• Banks - Loans for plantations and plantations as collateral for loans. • Consumers and consumer countries– product availability, quality, standards and design. • Local management authorities (Commune, District, and Province) –Planning, promotion
of plantation development, monitoring and supervision, enforcement. • Government (e.g. MARD, VN Forests)–Policy making, developmental strategies,
implementation supervision, capacity improvement, investment and trade promotion.
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8. TIMBER PRODUCTION AND MARKETS
Markets are a key driver for plantation policy in Viet Nam, following the market-based focus in National socio-economic development plans and more specific objectives within the FDS for wood processing and trading. New policies are aimed at increased market access, improving product quality and standards, product diversification and meeting legality and sustainability requirements.
WOOD SUPPLY
Wood supply in Viet Nam originates from both domestic and imported sources. In 201239 the Government of Viet Nam projected wood demand to 2030 (Table 7) forecasting a slight decrease in imported wood, a limited increase in supply from domestic planted forests, and a significant increase in supply from domestic natural forests. While Viet Nam has a placed a ban on the logging of natural forests and thus domestic supply is theoretically limited to planted forests and trees, natural forests still appear to remain source of timber into the future.
Table 7: Wood demand projection 2015 -2030
Source 2015 (million m3)
2020 (million m3)
2030 (million m3)
Domestic wood 10.5 14.5 24.5 • Planted wood 6.0 7.5 8.5 • Wood from natural forests 1.5 3.5 12.0 • Scattered trees 1.5 2.0 2.0 • Rubber wood 2.0 2.0 2.0
Imported wood 10.2 9.1 8.2
DOMESTIC WOOD SUPPLY
Statistics on domestic wood production vary. In 2015 VAFS reported that timber production from domestic plantations increased from 6.05 million m3 in 2009 to 15 million m3 in 2013, and was predicted to reach 17.0 million m3 in 2015. According to the ITTO (2015) in 2014 the Vietnamese forest industry produced about 10.75 million m3 of logs, but To et al. (2015) reported the 2014 volume of plantation wood was 17-18 million m3. Dong and Phuong (2015) state that in 2015, 19 million m3 was harvested, mainly from plantations and scattered plantings (see also Midgley et al. 2016).
Currently, most plantation wood in Viet Nam is used for wood chip (pulp and paper feedstock) and construction materials (solid wood). A lesser proportion of plantation resource is being used for furniture making and other value-added products such as veneer and veneer based products (Redman et al. 2013).
WOOD IMPORTS
Viet Nam is a net importer of timber and Viet Nam’s wood processing sector is highly dependent on
imported materials from a large number of sources. In 2014, 1.4 million m3 of logs and 2.8 million m3
of sawn timber were imported into Viet Nam, worth US$ 2.24 Billion (General Department of Customs in Viet Nam in Ngo 2015). In 2015 this increased to 2 million m3 of sawn timber and 1.4 Million m3 of round timber (Dong and Phuong 2015).The General Department of Customs in Viet Nam estimated the value of timber imports in 2014 to be US$ 2.24 Billion.
Wood imports are sourced from a large number of countries (Figure 7; source Hewitt 2015).
39 Decision No. 2728/QĐ-BNN-CB, 31 October 2012, MARD
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Figure 7: Volume of wood product imports by supplier country
Regionally, Viet Nam has had a high dependence on wood imports from Lao PDR and Thailand. From Laos the majority of this wood has historically been from natural forests and while precise volumes are difficult to establish due to discrepancies in trade data between the two countries, the data compiled by Hewitt (2015) suggests in the order of 550,000 m3 round wood equivalent (RWE) was imported in 2013. Only a small proportion of wood imports from Laos are plantation grown; the dominant plantation species in that country being Eucalyptus and Teak. In 2012 Viet Nam imported a total of around 6,700m3 of teak, none which was produced in Laos (Midgley et al. 2015); and a limited volume of Eucalypt is being exported from Laos to Viet Nam for construction poles, chipping, pulp and MDF. A recent order made by the Government of Lao PDR40 banning the export of unfinished wood products, including from plantations, is impacting trade between Laos and Viet Nam (Earth Systems 2016).
As both Viet Nam and the countries that supply wood to it seek to meet consumer market standards for sustainability and legality the demand for domestically produced wood in Viet Nam is likely to increase. At present this resource limited in species diversity and products, and may be constrained by socio-economic factors that influence how smallholders choose to manage and harvest their plantations. Strong policy incentives that take into account smallholder needs as well and market demand are required if this transition is to be successful.
WOOD PROCESSING, CONSUMPTION AND EXPORTS
The wood processing sector has expanded rapidly to take advantage of global demand for wood products. In the six years after joining the World Trade Organization (WTO) in 2006, Viet Nam’s
timber processing and furniture exporting industry registered annual average growth 16%.
In 201241 the Government of Viet Nam projected wood production and exports to 2030 (Table 8). Most notable in this forecast is the complete stopping of wood chip exports by 2020. In 2014 6.97 million Bone Ddry Tonnes (BDT) wood chips (the equivalent42 of 12.89 million m3) valued at US$ 958
40Prime Minister’s Order 15/PMO banning the export of unfinished wood products. 41 Decision No. 2728/QĐ-BNN-CB, 31 October 2012, MARD 42 1 BDT=1.85m3 after Byron (2016)
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million were exported. In 2015 the reported export value of wood products from Viet Nam was US$ 7 billion (General Department of Custom, in Ngo 2015).
Wood production can be considered in two broad sectors: furniture manufacturing/building materials and wood-based panel and wood chip.
Table 8: Wood production and export projection 2015 -2030
Use 2015 (million m3)
2020 (million m3)
2030 (million m3)
Total 20.7 23.1 32.7 • Furniture manufacturing/buiding
material 10.05 17.1 24.6
• Wood-based panel and wood chip 10.65 6.0 8.1 Wood products for export 13.5 12.6 16.8 • Furniture manufacturing 7.5 12.6 16.8 • Wood chip 6.0 0 0
Wood products for local market 7.20 10.5 15.9 • Furniture manufacturing/building
material 2.55 4.5 7.8
• Wood-based panel and wood chip 4.65 6.0 8.1
FURNITURE MANUFACTURING AND BUILDING MATERIAL
Furniture is produced by around 4000 processing enterprises, mostly small and medium sized, and around 300 wood processing villages (To et al. 2013). The sector employs around 270,000 people.
Vietnam is one of the world's largest exporting countries of wooden furniture and parts, with exports valued at US$4.38 billion in 2013 (ITTO 2015). Export value of manufactured products grew to about US$7 billion in 2015. Products are exported to over 120 countries.
In 2015 domestic consumption of manufactured wood products was valued at US$1.3 billion and is expected to increase by 10% by the end of 2016.43
WOOD CHIP AND WOOD-BASED PANELS
In 2012 there were 112 wood chip processing factories in Viet Nam with a total design processing capacity of up to 8 million tons of dry wood chips per year (Tran and To 2013) with a further 18 factories planned. Tran and To predicted that if all 130 wood chip factories were operating at 100% of their design capacity, then the required input materials, which would be mainly provided from acacia and eucalyptus plantations, would increase to 18 million tons RWE but that given the then state of plantations, it was unlikely Viet Nam would be able to supply sufficient input material. By 2014 all 130 chipping mills were operational. In 2004 there were less than 30 reconstituted MDF factories, many of them producing particleboard (Barney 2005). Statistics on the current number of wood-based panel factories is difficult to source.
Of the wood processing enterprises, 95% of are privately-owned and the remaining 5% are state-owned enterprises. The relatively low cost labour force and a favourable environment for foreign investment are the main competitive advantages of the Vietnamese industry.
Timber supply to Viet Nam’s wood chip industry dominantly comes from commercial and small-scale plantations. Approximately 70% of Vietnamese wood chips are made from acacia, 27% from eucalyptus, and 3% from melaleuca.
43 http://vietnamnews.vn/economy/346510/wood-consumption-to-rise-by-10.html#rcqQKsOtYiOUx3zv.97
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Most wood chip factories, especially large-scale factories, are located near major sea ports and while these locations are convenient for exporting, the distance from timber plantations makes it difficult for large factories to source enough raw material. This has led to severe competition. The small-scale factories that are closer to timber plantations face less challenges in procuring supplies, but they report increased costs in loading, transporting, and unloading materials (Tran and To 2013).
The wood processing sector is now one of the key export sectors of Viet Nam (Figure 8, source Hewitt 2015). In 2015, revenue from exported wood based products was US$$6.8 billion (Dong and Phuong 2015). The key for wood chip and wood-based panels markets are China, Japan, South Korea, Singapore and Taiwan.
Figure 8: Value of Wood based Product Exports
Wood chip policies
The Government of Viet Nam is introducing policy measures44 to promote value added processing and reduce woodchip exports. Interventions include export taxes in wood chips (2% in 2016; with an increase to 5 – 10%), provision of long-term credit with low interest rates for longer rotation plantations (>10 years), improved seedling and plantation management technologies and infrastructure improvements. While wood chip export volumes will initially be maintained they will be gradually reduced in the future. However, given the importance of smallholder owned plantations as a source of timber for wood chips Tran and To (2013) caution the dynamics of introducing policies that are aimed at rapidly reducing demand for woodchips. They recommend that a comprehensive plan is needed to guide the development of the woodchip sector, taking into account the full value chain that focuses on more equal benefit-sharing and risk minimization among all actors across the value chain, from the establishment of timber plantations to export.
CERTIFICATION, LEGALITY AND OTHER MARKET STANDARDS
Forest policy in Viet Nam is heavily influenced by the requirements of consumer markets and the increasingly strong calls that are being made globally and regionally for sustainability and legality in
44 147/2007/QĐ‐TTg, 38/2016/QD-TTg, No. 5115/QĐ-BNN-TCLN, 01/12/2014, Circular 182/2015/TT-BTC
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forests, forest industries and related trade. The response of Viet Nam’s trading partners is particularly important. Approaches to certification, verification and governance in forestry in Southeast Asia are described in detail by the World Bank (2012) and in Viet Nam by Laity et al. (2015).
This section summarises the two main approaches: voluntary certification and legality assurance and describes their current application in Viet Nam.
CERTIFICATION
Certification programs are voluntary. They are based on the premise that consumers demand and will pay extra for timber that is sourced from sustainably managed forests, including plantations. The two most common forms of certification are
• Forest management – ensuring forest operations are managed sustainably; and • Chain of custody – tracking certified material from forest to final product.
Certification programs apply a set of standards based on criteria. Once a forestry operation has received certification, they are bound by the standards of the certifying organisation.
The two most prominent certification organisations are the Forest Stewardship Council (FSC) which applies its own standard, and the Program for the Endorsement of Forest Certification (PEFC) an umbrella organisation which endorses domestic forest certification standards; China, Australia and Indonesia, for example, have each developed their own national standard under PEFC.
There is a long history of standard development and in Viet Nam and although there have been many attempts for recognition of a national forest standard, this has not yet eventuated (Laity et al. 2015). However, both FSC and the national certification scheme have set ambitious targets. By 2020 the Government aims to45 (Trung and Kim 2015):
• have at least 500,000 hectares of production forests certified for SFM, of which 350,000 ha are natural forests and 150,000 ha are plantations.
• develop and have operating a Viet Nam forest certification scheme; and
• build the capacity of stakeholders to implement sustainable forest management and forest certification in Viet Nam.
As of November 2016, 204,617 ha were certified under FSC including 83,386 ha of natural forest and 121,231 ha of plantation (Phuong, Dong and Duc 2016, Table 9). Certification has been achieved through a number of largely externally funded pilot projects (summarised from Laity et al. 2015):
• a Japan International Cooperation Agency (JICA) funded project on inventory and planning on sustainable forest management at Kon Plong (Kon Tum) from 2000-2002, finishing in 2003. The second phase, from 2005, was focused on activities of agricultural and forestry improvement and development of modelling of community forest management.
• a WWF Indochina project providing support for improved of forest management within Ha Nung and So Pai State Forest Enterprises (Gia Lai) from 2003-2005.
• a TFT project on planning for forest certification and marketing, supporting forest management units such as Truong Son State Forest Enterprise (Long Dai, Quang Binh), Huong Son Forestry and Service Company (Ha Tinh). TFT in Viet Nam has also been providing technical support for sustainable forest management units including: Tram Lap, Dakroong and Lo Ku State Forest Enterprises (Gia Lai), Hao Quang Private Forestry Company (Dak Nong), Long Dai Forestry and Industrial Company (State, Quang Binh), Bao Yen Forestry Company.
• an IKEA/WWF and World Bank supported project for FSC Certification in Quang Tri Province.
45 Decision No: 83/QD-BNN-TCLN dated on January 12, 2016 of MARD on Approving the Scheme of implementation of sustainable forest management and forest certification period 2016-2020
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• The World Bank supported Forest Sector Development Project FSDP-WB3, which was implemented in four provinces: Binh Dinh, Quang Ngai, Thua Thien Hue and Quang Tri from 2005 to 2015.
• a PEFC Pilot project- The Hue University Project, supported by Finnish partners MTK (the Central Union of Farmers and Forest Owners Union), Ylä-Savo Forest Producers’ Association (YSFPA),
FFD (Finnish Agri-Agency for Food and Forest Development) and Savotta FMA.
Table 9: FSC Certificates in Viet Nam, 2016
Name of Forest Management Unit Certified area (ha
Year Certified
Certified forests area Natural
forest (ha) Plantation
(ha) QuyNhon Plantation Forest Company of Vietnam Ltd (QPFL)
9,762 2006 9,763
Forest certification for household groups in Quang Tri province
1,329 2010 1,329
Vietnam Paper Corporation (VINAPACO) 19,370 2010 19,370 DakTo plantation single member limited liability company
15,755 2011 15,702 53
Ben Hai Forest Company, Quang Tri Province 8,559 2011 8,559
Forest Sector Development Project 811 2012 811 Forest Products Export Joint-Stock Company of Quang Nam
1,590 2012 1,590
Vietnam Forest Corporation VINAFOR 35,269 2013 16,492 18,777 Binh Nam Company Limited 2,969 2013 2,969 Truong Son Forest Management Enterprise - Long Dai Forestry Industry Company Limited
31,483 2014 31,483
Dai Thanh Investment and Development Limited Company
17,552 2015 17,552
Trieu Hai Forestry 5,194 2015 5,194 Duong 9 Forestry One Member Ltd. Co. 4,868 2015 4,868
Thuy Son Joint Stock Company 1,048 2016 1,048 Tuyen Binh Forestry One Member Ltd. Co. 3,468 2016 3,468 Chiem Hoa Forestry One Member Limited Company
5,517 2016 5,517
Uong Bi Forestry Company One Member Ltd. 5,179 2016 5,179 Son Duong Forestry One Member Limited Company
2,481 2016 2,481
Bao Yen Forestry One Member Limited Forestry Company
3,682 2016 3,682
Ba Che Quang Ninh One Member Limited Company
2,446 2016 2,446
Yen The One Member Limitede Company 2,206 2016
Hai Vuong Private Company 2,631 2016 2,631
Huong Son State Forestry Company 19,709 2016 19,709
Yen The One Member Limited Forestry 2,206 2016 2,206
Total 204,617 83,386 121,231
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The current plan46 is for the development of a Viet Nam Forest Certification Scheme (VFCS) that is recognised and endorsed by international certification programs to promote forest certification that meets the requirements of national development and international markets and requirements. VFCS has four main objectives:
• to develop and operate VFCS to deliver requirements of forest certification; • to develop national standards, policies and toolkits for implementation of forest certification; • for quality control of forest certification implementation; and • to build capacity and awareness of stakeholders.
An initial structure of VFCS has been proposed and is undergoing the process to be approved by MARD.
In 2016 The Government of Viet Nam made a Decision47 to provide financial; support for businesses, communities and households of up to 70% of the cost of certification of plantations or natural forest areas equal to or greater than 100 ha.
Certification issues and challenges
An observed shortcoming of certification initiatives is the need for more flexible approaches, adaptable to local circumstances. It is also essential that unrealistic economic expectations are not promoted by standard bodies, because they can potentially undermine the benefits that such systems provide (Flanagan and Laity 2015). The failure for market benefits to materialise following certification is one reason that programs fail. Others include complex administrative procedures and early dependence on donor support which may not be sustainable (Hoang et al. 2015; To 2012).
The complexity and increased costs faced by smallholders in meeting and maintaining certification standards, in additional to already high transaction costs for plantation timber, are considered to be a significant deterrent to participation in certification programs (Laity et al. 2015). Donor funded programs aimed at assisting smallholders through the certification process, have found it difficult to certify a large enough area to supply wood volumes at a level that meets market demand. Similar barriers are less of an issue for state or large private enterprises.
For timber processors who have adopted Chain of Custody systems, complex supply chains based on wood from a number of sources, including timber from natural and plantation forests both within Viet Nam and imported from elsewhere, create administrative challenges in relation to certification. Vietnamese wood processors have imported timber from Laos and Cambodia that has been illegal and poorly documented for decades and there is a need to address the risk associated timber from such sources. However a similar risk profile may not apply to smallholder grown plantation wood.
The financial investment required for planning and forest certification is not generally incorporated into the budgets of forest management bodies. In most certified organizations, the funding for preparing plans and auditing costs are sponsored by external projects and wood processing enterprises. Dependence on external support is not sustainbale and in general, FMBs, SoFC and smallholders are not able to cover the costs associated with certification. Although policies exist to incentivize the use of financial support from the government budget for forest certification, detailed guidelines for accessing this support are not in place (Phuong, Dong and Duc 2016).
There is limited technical capacity among different forest owners in Viet Nam for development of plans, including FMBs, SoFC and smallholders. The technical capacity limitations are mainly for forest biodiversity survey and assessment, silvicultural measures for productivity improvement, environmental and socio-economic impact assessments and identification of high conservation areas
46 Decision No: 83 / QD-BNN-VNFOREST Approving the Scheme of implementation of sustainable forest management and forest certification period 2016-2020, 2016. 47 Decision No: 38/2016 / QD-TTg, 2016 on Protection Policy, Development and Investment Support Infrastructure, Public Affairs For Agriculture and Forestry Companies.
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as well as documentation and data management. Current guidelines on the development of plans are insufficient (Phuong, Dong and Duc 2016).
Broad policies, often focussed on protecting natural forests can have unintended consequences for plantations and create an unnecessary level of complexity for plantation growers. This is particularly the case for smallholder and household owned plantations where the degree of risk on an individual level is considered to be low (Laity et al. 2015), although on a landscape or regional scale the risk could be higher. A balance is required that considers the, often immediate, needs of participants in the timber value chains, and the longer-term broader benefits certification can provide.
Group certification has been promoted as a means to achieve this balance for smallholder growers, but faces problems associated with the persistent requirements for individuals to maintain the set standards. Group sustainability is challenged where market benefits are not realised or they are not appropriately transferred to group members (Hoang et al. 2015). The impacts of group certification are important because one of the primary prospective benefits of groups is lower costs to the members through economies of scale. This is relevant because costs for certification tend to be among the most commonly cited drawbacks of third-party certification schemes (Auer 2012).
More broadly, policies to protect or promote sustainable forest management can benefit from the opportunities that certification programs provide for increasing civil society48 participation in the policy making process. This also brings challenges, however, for policy makers in situations where the level or nature of civil society participation anticipated by certification organisations may not be common practice, is heavily regulated, or has emerged as a ‘local mode of advocacy’ as has been the case in
Viet Nam (Kepa 2015).
Certification schemes may also have benefits through a disciplining effect on Viet Nam’s forest
managers because they call for systematic planning, inventorying, tending, sustainable harvesting and other environmental provisions – concerns that have been lacking in the past management of Vietnam’s forests (Auer 2012).
LEGALITY VERIFICATION
Legality verification requires that participants demonstrate that they comply with the relevant laws of the producer country, as described in a framework set by the program, and require a level of traceability of legal timber at all points in the supply chain. Some voluntary certification bodies have introduced legality standards as a second (minimum) tier of certification below sustainability criteria.
Consumer countries such as Australia, The United States and The European Union (EU) have enacted domestic legislation to reduce the risk of the importation of illegal timber or wood products. Of these the EU Forest Law Enforcement, Governance and Trade (FLEGT) program is the most prominent in Viet Nam. The program includes financial and technical support and advice, as well as measures to promote the legal timber trade. Voluntary Partnership Agreements (VPAs) established between the EU and timber-producing countries are a central component of the scheme which requires the development of Timber Legality Assurance System, which has five core components:
• The legality definition
• Supply chain control
• Verification of compliance
• FLEGT licensing
• Independent audit.
48Civil society is not a consistently defined term (see e.g.Gemmill and Bamidele-Izu 2002, Meidinger 2003). It is used as an all-encompassing term for all actors who are neither government nor business sector members. Includes e.g. communities, indigenous peoples, advocacy groups, churches, academics and unions.
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In 2010, Viet Nam officially announced the start of formal negotiations for a bilateral FLEGT-VPA with MARD the agency responsible for undertaking negotiations for the Government of Viet Nam. To date, Viet Nam and the EU have conducted three negotiation rounds (Technical Working Group Meetings - TWG); and to support the negotiation process there have been numerous Joint Expert Meetings (JEMs), Video Conferences, and several Technical Working Sessions. A draft version of the Timber Legality Definition (LD) exists, and the preparation of the Timber Legality Assurance System (TLAS) is at an early stage, however there are difficulties in the harmonisation of the legal system within Viet Nam with the expectations of the EU (Laity et al. 2015).
Other FLEGT projects occurring in Viet Nam include: • Legal reform projects • Monitoring projects • Transparency projects • Information sharing projects • Domestic market projects
It was expected that the negotiation process would conclude with the VPA signed by December 2015, however this has been extended and is now planned for the end of 2016.
Issues with legality verification
Viet Nam’s wood processing sector is likely to remain highly dependent on imported materials from a large number of sources: currently, 80% of the industry’s raw materials are imported and demonstrating the legality of wood from other sources will be dependent upon systems applicable to those countries. In source countries where regulation is weak or enforcement poor this will be an ongoing challenge. In countries where these are strengthened, Viet Nam’s wood processing sector
may face reduced wood supply.49
The Government of Viet Nam and industry both have an interest in expanding to new markets in order to diversify its consumer base beyond the US, EU and Japan (e.g. to Russia, India, Middle East, central Asia). This is to protect from economic risks as well as to find markets for wood products that may not impose the more stringent requirements regarding legal or sustainable sourcing (To and Canby 2011).
There can be adverse impacts on vulnerable stakeholders. In 2013 and 2014 an investigation of the potential implications of Vietnam’s proposed VPA on vulnerable stakeholder groups and households was undertaken using a Livelihood Impacts Assessment (LIA) method (SRD 2015). The main objectives of the study were to assess the likely impacts of the VPA on vulnerable stakeholders, identify key social safeguard issues and responses, explore opportunities for enhancing livelihood outcomes and identify implementation risks and risk reduction and mitigation measures. It focussed on four vulnerable stakeholder groups: furniture manufacturing households, plantation timber processing households, forest-dependent ethnic minority households and forest growers without a Land Use Right Certificate (LURC).
The policy impacts analysis undertaken by the study revealed some likely adverse impacts associated with the implementation of the VPA:
For furniture manufacturing households:
• production costs are likley to increase due to a price increase of legal raw materials;
• productivity and household income will decline, although households with the capacity to adapt and with a stronger legal basis will benefit in the long term;
• households that are not legally compliant face the risk of closure; and
49 For example following Order No 15/PMO On Strengthening Strictness of Timber Harvest Management and Inspection, Timber Transport and Business in Lao PDR
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• increased powers of relevant authorities may lead to higher transaction costs, at least in the short-term.
Timber plantation processing households:
• may face a shortage of raw material as illegal timber is excluded from the market;
• will experience an increase in the price of legal wood, leading to higher costs of production and reduced household income;
• may lose access to institutional credit since their production facilities do not comply with new regulations;
• may face increased fees and tax payments;
• may face closure if they do not achieve legality, and laborers, especially women, face losing jobs; and
• will be impacted by the increased power of local authorities;
Forest- dependent ethnic minority households:
• will face increased demand for land for timber plantations which may cause them to sell their ancestral lands, and consequentially this may increase forest encroachment due to their ongoing need for farmland;
• may lose access to land previously used for non-timber forest products and timber where the expansion of timber plantations occurs on forest land previously available to them for these pruposes.
• may increasingly rely on off-farm employment; and
• may have their customary rights and institutions weakened through increased powers given to forest rangers, forest companies and forest owners.
For timber growers without LURCs:
• the sale price of legal timber will increase, but timber from non-LURC land will fall in price, reducing household incomes;
• transaction costs (including for bribes) could increase if a mechanism for legalising non-LURC timber is developed;
• employment opportunities may be lost as non-LURC househods discontinue tree growing, particularly affecting female laborers who provide most of the forest-based labor;
• there is a risk of losing land (weak land ownership);
• the increased power of authorities and strict enforcement of legal requirements would place them in an increasingly weak situation.
Land policy and clarification of legal land use rights, or loss of these remains a significant issue for timber legality in Viet Nam. Conflicts regarding land use and forest boundaries between local communities and FMBs and SoFCs are still quite common (Phuong, Dong and Duc 2016). Land encroachment by local people is often difficult to control. This situation is exacerbated by the rural poverty rate and the lack of alternative livelihoods for food security.Continued efforts to issue land use certificates clarifying land use rights are needed to facilitate any national efforts to define the legality of Viet Nam’s domestic timber supply, and to increase volume of timber harvest from plantation and natural forest in the long run (To and Canby 2011). Some exporters to the US and EU markets that use wood from plantation forests in Viet Nam may face risks associated with non-formalised land use rights, however, this risk can be minimised in the future if local authorities can verify the legality of timber harvested from plantation forests. The ease or difficulty in legal verification by local authorities
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depends on the scope of the timber legality definition of Viet Nam (Nguyen and Tran 2011). This is still under development.
Market regulations bring opportunities and risks for different industry actors. Certification and legality are likely to carry negative costs for some actors in the wood processing sector, while others will benefit. The majority of Viet Nam’s wood processing industry is privately-owned and is of small or medium size50, and half have some form of foreign investment. Requirements for legal timber for all of these processors are unclear but are likely to disproportionally affect SMEs, particularly small-scale wood processors. Larger companies with strong capital and resources may be able to capture the opportunity and derive more benefits from using legally certified timber and exporting to US, EU, and Japan markets. The SMEs with lower capital and capacity, and weak or absent mechanisms for assessing or controlling the legality of timber, are more at risk. These SMEs may be those most likely to opt for markets with less sensitive requirements.
Alternatively, SMEs may transition to being subcontractors for the larger enterprises, or disappear if they cannot meet market requirements (To and Canby 2011). This could disproportionately affect some Vietnamese provinces more than others, making it politically controversial. There are some policy options, for example, public policies could be targeted to support ‘at risk’ SME’s, or a more hands off approach may allow the private sector to be left to work out their responses to new sustainability and legality requirements.
Continued support for verified legality and certification systems can deliver sustainability benefits that enhance market access and long-term profitability. Maintaining these benefits requires further commitment and action from governments, industry and the third parties involved. Systems must be practical, cost-effective, and easy to implement. While sustainability and legality can be demonstrated through a number of different processes, care must be exercised where changing policy directions which create business uncertainty (Laity et al. 2015). The advocates of the various schemes (FSC, PEFC, FLEGT etc.) should also be mindful of the adverse impacts that competition between schemes for policy and market space may have on policy making.
With the application of appropriate policy measures the plantation resource has the potential to help address challenges faced by Viet Nam with respect to meeting the legality and sustainability requirements of markets. Plantation grown wood can be an alternative to wood sourced from natural forests (either in Viet Nam or imported from elsewhere). It can also add value along supply chains through the generation of additional employment opportunities associated with market focused domestic wood processing industries. These will emerge where there is a secure, predictable resource of known volume and quality. However achieving this may be challenged by the requirement for cash flow among the owners of Viet Nam’s smallholding plantation resources for both planned and unplanned livelihood purposes. The challenge for certification and legality verification approaches it to be sufficiently flexible to accommodate local requirements for poverty alleviation and livelihood improvements.
With a view to progressing sustainable forest management, certification and timber legality, through a VPA/TLAS Viet Nam recently reviewed status of these programs in the country several recommendations for intervention for FMBs, SFCs and smallholders have been made (Phuong, Dong and Duc 2016).
• Interventions for SFM for FMBs should focus on the development of options for forest co-management, improving the capacity, livelihoods and income of local communities, forest rehabilitation and enhancement. Co-management of forests should promote effective engagement of local communities and mobilize sources of finance for forest management. This can be achieved through the application of sustainable extraction of timber to supply subsistence needs for home use (housing, furniture etc); development of NTFPS in forest
50According to Government Decree 90/2001/ND-CP, 2001, SMEs in Viet Nam are defined as independent production and business establishments, registered as a business according to the current law, each with registered capital not exceeding VND 10 billion or annual labor not exceeding 300 people.
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areas for income generation; expansion of fruit trees and other cash crops on farms and home gardens; planting of scattered trees for subsistence use of timber and fuel wood; intensification techniques for agricultural crops and the development of eco-tourism.
• With regards to SFM interventions for SFCs, the focus should be on improved and sustainable productivity of plantation forests and natural forests, improvement of benefit and access to capital and markets and capacity building. Productivity of plantations can be improved through forest business planning, including land suitability assessment for tree species selection, application of suitable silvicultural measures, for example spacing, pruning, thinning techniques, fertilizer application, and use of certified germplasm. The value of plantations will be improved by promoting interventions across value chains, linkages between forest growers and wood industries and access to markets for certified products. Strengthening capacity for SoFCs is required to ensure effective development and implementation of SFM plans, value chain analysis and forest business planning.
• Interventions for smallholder on the sustainble management of plantations and natural forests include the promotion of the establishment of forestry cooperatives, improvement of plantation productivity, strengthening the process of forest land allocation and forest allocation, promotion of linkages with the wood processing industry, exploration and mobilization of funding sources for plantation development and awareness raising and capacity building.
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9. ENABLING ENVIRONMENT
LAND TENURE AND PLANTATION OWNERSHIP
Land tenure and land use rights, including for the establishment and ownership of plantations are set through the Land Policy and the Land Law. Between 1997 and 2007, the National Assembly passed laws on land use and a number of significant policy statements were made with respect to land and forest (Table 10, after Sandewall et al. 2010). Approved by the National Assembly in 2003, the Land Law51 reaffirms land as the property of the State that could be allocated for specified land uses to public or private entities, for periods of between 20 and 70 years with rights set out in Land Use Right Certificates (Red Books). The Land Law states that forest is attached to land in the allocation process, with forest regarded as connected property (To and Nghi 2014; To et. al. 2013).
Table 10: Significant policy statements influencing forest land management in Vietnam
Year, Statement Relevance 1981 Decree 100 Local authorities were given the right and obligation to contract the
management of collective land to others who could pay back in kind to the cooperative. The official start of the demise of producer cooperatives.
1986 Doi Moi The formal decision on the introduction of a ‘free market’ economy
1988 Resolution 10 Collective agricultural land allocated on a long-term lease, to individual households who pay the lease in cash. In effect the end of the period of collectivisation which started in the early 1960s.
1991 First National Forest Policy
Indicates a shift from state forest towards privatisation of some forest land. SFEs were also encouraged to lease out forest land to households.
1992 Decision 327/CT Concerns policies on the use of bare land and denuded hills. Although initially generally integrated rural development, eventually a strong re- and afforestation component.
1993 Land Law Allocation of agricultural and forest land to individual households through the provision of permanent land-use certificates was formalised.
1995 Decree 01/CP Formalised the leasing-out of SFE land to individual households
1998 Decree 661 1998–2010 The 5 Million Ha Reforestation Programme. A framework for reforestation of 5 million ha, of which 2 million ha by individual entities such as households and entrepreneurs, e.g. the private sector.
2003, Promulgation of Land Law, Order No 23
Defines the rights and obligations of land users, including regulations for mortgaging land and regulation of land prices.
2004, Promulgation of the Law on Forest Protection and Development
Recognition of communities, e.g. upland communities, as legal operators and owners of forest and forest land; specifies the rights of the owners and operators to sell, inherit, the produce and the forest land.
2007, Decree No 18/2007/ QD.TTg Promulgation, Vietnam Forest Development Strategy 2006–2020
Emphasises the move from State to social and private forestry; forestry based upon market mechanisms
51Land Law 2003, Decision 13/3003/QH11, November 26, 2003, National Assembly
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The Land Law helped to clarify the framework for forestry land tenure and created for the first time the opportunity to allocate forestry land to communities as well as to individual households, public management boards, and other state entities.
Table 11: Scope of land use rights for forestland
Use Rights Special Use Forests
Protection Forests
Natural Production Forests
Planted Production Forests
Timber Harvesting
Not allowed Limited Allowed Allowed
Land Use Right Certificate
Contract is made with individuals or households
Contract is made with individuals or households
LURC is issued with limited rights
LURC is issued with full rights
Term of use right varies under contract
varies under contract
20-50 years 50 years
Transfer Limited Limited Limited Yes Exchange Limited Limited Limited Limited Lease No No No Yes Bequeath No No No Yes Mortgage No No No Yes Inherit Limited Limited Limited Yes Investment No No Limited Yes
Broadly, the following four major forest tenure arrangements were recognised (Tan 2006):
• Private property, which is the most common forest management arrangement in Viet Nam. It includes forest management by individual households and by State and joint venture enterprises. Under this arrangement, forest is allocated for long-term management (50 years). Most forest owners under this arrangement are entitled to a land-use certificate.
• State property, through which forests are managed by people’s committees at different levels, army units and forest management boards. Under this arrangement, forest is allocated to a State body for an unspecified period. Where the forest falls into the special-use or protection category, its owners are entitled to receive State budget for its management.
• Common property, through which forest is managed by collectives that are legally recognized by the State. Forest under this arrangement is allocated to a group of individuals, each of whom has similar rights and responsibilities. Owner groups are also entitled to land-use title for the area of forest they are allocated. At present, only a small area of forest is under the common property arrangement, but the potential for the future is promising.
• Forest contracting, whereby a management arrangement is formed when an owner of forest (under State property) signs a contract with an organization, household, group of households or village to protect the forest. Under this arrangement, rights of ownership of the forest under contract remain with the contractor, and the contractee has only the rights specified in the contract. The contractee is entitled to cash remuneration for protecting the contracted forest area. Contracts are usually for one year and renewable based on the satisfactory performance of the contractee.
While forests and forestland can be allocated to private entities for long term tenure agreement, but the tenure regimes vary greatly across the type of forests (Phuong 2016). The Forest Protection and Development Law recognises eight categories of forest ownership, with varying responsibilities and rights for forest management:
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• Households and individuals • Commune People’s Committees (CPC) • Economic entities • State-owned organizations • Other types of organizations • Joint-venture companies • Foreign companies • Communities
In 2014 12.1 million ha of forestry land had been allocated to the 8 groups, including 4.5 million ha (37.5%) to households and individual of which about 70% is production forest land and the remainder (about 30%) protection forest land. Forest companies have been allocated 2.2 million ha of forest land, making up 19% of total forest land nationwide. Approximately 81% of the land allocated to forest companies is production forest land. The scope of rights of Forest Land is summarised in Table 11 (after To and Nghi 2014).
STATE FOREST ENTERPRISES (OR COMPANIES)
State Forest Enterprises (SFE’s) are semi-autonomous state-owned entities that were initially created to be responsible for the management of all production forestland in Viet Nam. SFEs were established in the 1960s to manage Viet Nam’s forests and to supply the industry with raw material. The SFEs often imported their own workers from other provinces, while the local population used the forest land for other needs (Sandewall et al. 2010). In 1997, SFEs still controlled 6.8 million ha of land, including protection and production forests, barren land, and agriculture land. In the early 2000’s the
Government made a decision to52 reform SFEs and Forest Management Boards. Resolution 28/NQ-TW by Viet Nam’s Political Bureau in 2003 and Decree 200 by Viet Nam’s Government in 2004
regulated the shift of SFE towards Forest Companies (FCs). As a result, 256 SFEs were transformed into 148 FCs, 3 joint-stock companies, and 91 forest management boards (FMBs); 14 ineffective SFE were dissolved entirely. Ten of the 148 FCs remained under central management, while the 138 SFEs were managed by their respective Provincial People’s Committees (To and Nhgi 2014). By 2006, the area under SFE control and management had been reduced substantially. Since 2007, some SFE have been renamed State Forest Companies. In the past the government assigned SFCs with responsibility for carrying out forest protection and development programmes such as the 327 and 661 Programmes. In accordance with such programmes, SFCs plant and protect forest through a budget allocated for programme activities.
The Provincial Departments of Agriculture and Rural Development are responsible for a majority of the State Forest Companies. About 10 percent are administered centrally under MARD. Their main business activities include timber harvesting from natural and plantation forests, the operation of sawmills, non-wood forest product processing, and seedling production.
Today Some SFCs conduct contract-based allocation of parts of their land holdings to local people to enable participation in forest protection and new plantation development programs. Under Decree 01 dated 1 January 1995, the Government provided regulations on forest land allocation based on contracts to state enterprises for agricultural, forestry, or aquaculture development purposes. Specifically SFC’s and protection/special-use FMBs could be allocated land for forestry purposes by the State. These entities then allocate forest land (including protection, special use, and production forest land/bare land slated for forest planting) to land recipients such as households, labourers, civil servants working for them, local residents, and households and organizations from other regions seeking to develop production forest. The Decree specified the responsibilities and benefits for each party and an allocation period for production forests based on the tree rotation period (To and Nghi
5228/NQ-TW by Viet Nam’s Political Bureau in 2003
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2014). Subsequently Decree 135 of 2005 indicated that SFE were allowed to allocate natural forest, plantations and production forest land to land recipients, including households seeking to receive land, with priority given to poor ethnic minority groups in mountainous areas. The forest land contract could be varied with a maximum period of 50 years. SFC’s could share the role in forest development
with land recipients, with benefits divided between the two parties. The contract-based allocation is overseen by various regulations and it is always the state that is the ultimate representative of land owners.
A criticism of contract-based allocation is that it is thought to encourage excessive land clearance for the collection of land rental fees. If SFCs are unable to manage their allocated land effectively, they typically choose to lease out the land to others as a quick source of revenue. On-going inequality in land access has also led to conflicts between SFCs and local people, the scale of which is difficult to realistically gauge (To et al. 2013).
The review of SFCs is ongoing with a view to convert them into more commercially oriented businesses through a process known as equitization. The review recognises that problems persist including excessive debt, dysfunctional business arrangements, unclear land rights, poor forestry practices, high overheads and unnecessarily large numbers of employees. The Government of Viet Nam has struggled unsuccessfully for three decades to put SFCs on a productive, profitable and sustainable track. Reform efforts have been frustrated by a burdensome regulatory framework, high costs of compliance, a poor appreciation for private-sector forestry and lack of responsiveness by the companies themselves (World Bank 2016b). In addition a lack of reliable and complete information about SFEs makes evidence-based reform difficult.
SFCs continue to have an important stake in forest plantation development and control around 25-30 percent of all production forest plantations. These plantations are generally considered to be more productive and comprise larger plots than plantations owned by smallholder households. Some SFCs have established joint ventures with private foreign companies, such as VIJACHIP, a joint venture between Nissho Iwai Company and Vietnamese Government (World Bank 2010). VIJACHIP has multiple sub-companies and plantation holdings in VN.
State Forest Companies may manage land directly or enter into contracts with local people under a variety of arrangements involving land, labour inputs and timber volume commitments after harvest (see for example To et al. 2013).While the SFCs may control up to 30% of Viet Nam’s production forest area, much of the forest land is leased out to farmers and entrepreneurs (Sandewall et al. 2010).
FOREST MANAGEMENT BOARDS
Forest Management Boards (FMBs) primarily manage protected forest areas belonging to the state. Of the total area managed by FMBs (538,992 ha) about 88% are natural forest, and the remaining 12% are plantation forests. FMBs receive central government budget allocations, and in many cases, contract local people to implement protection and conservation activities (To and Canby 2011).
COMMUNE PEOPLE COMMITTEES
Commune People Committees (CPC) manage around 833,000 ha, most of which are natural forests. Owing to the lacking of staff and capacity, CPCs are often unable to effectively manage these areas. Despite governmental efforts to allocate these areas to other forest user groups, delays have been caused by lack of budget for allocation processes, weak collaboration between MARD (responsible for managing the forest resources) and MONRE (responsible for managing the land) (To and Canby 2011).
COMMUNITY AND MASS ORGANIZATIONS
Community and mass organizations such as farmer unions, women and youth groups, manage approximately 130,000 ha of forest.
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INDIVIDUALS AND HOUSEHOLDS
Individuals and household own and managed around 1,747,781 ha of plantation. From a policy perspective forest land allocation to households and individuals is considered to be a mechanism that will improve civil access to land and long-term land use rights are considered to be an incentive for investment in forest protection and development, resulting in improved livelihoods and an ability to move beyond swidden cultivation.
In accordance with the Land Law up to 30 ha forest land many be allocated for production (Land Law 2003, Article 70.3). Land Use Rights are provided. Individuals and households are encouraged to establish farm businesses, including through forestry; plantations may be established by individuals, household or businesses on land allocated to them. Family households and individuals using land for farm businesses may convert the land use in accordance with a business or production plan approved by the people's committee of the district, town or provincial city.
Under the Law on Forest Protection and Development 2004, ownership rights over planted production forests provides the forest owners with rights to possess, use and dispose of trees, animals and property associated with planted forests, based on investment by the forest owner during the term of the allocation or lease.
Production forest can be recovered by the State in circumstances in which forest owners fail, for a period of 12 consecutive months, to use the land for development purposes, in accordance with land use plans, because a lease term has expired or as a result of violation of the law. Forests may also be compulsorily acquired by the State, in which case compensation is payable. This can take the form of assignment or lease of other forest areas for the same use; assignment of land for the planting of new forests or compensation in kind or cash.
Land leases
The allocation of forestland areas greater 30 ha is by way of lease. Under the Land Law 2003 (Article 35) The Government of Viet Nam may lease state land for forest production to individuals, households, economic organisations and foreign companies. Lease may be by way of an annual or one-off rental. Land that is leased for forest production should be bare. The authority for allocating land by lease is vested in the Provincial People’s Committee, District People’s Committee or
Commune People’s Committee depending on the intended use53.
Under the Law on Forest Protection and Development the State can lease planted production forests to overseas Vietnamese, foreign organizations and individuals with the lump-sum rent payment for the whole lease term or with the annual rent payment, for execution of forestry investment projects according to the provisions of investment legislation.
The Law on Foreign Investment encourages foreign companies to invest in agriculture production with special priorities, including land lease.
PLANTATION CONTRIBUTION TO LIVELIHOODS
The expansion of farm-based forestry in Viet Nam is a result of the combined effect of supportive policies, markets, economic development, improved infra-structure and communication, tenure reforms and changing conditions for agriculture (Sandewall et al. 2010). Studies make various estimates of the contribution that household plantations make to the scale of the resource. Nambiar et
al. 2014 suggest 46% of plantations are owned by individuals and households while others report as much as 70%. In 2013, of the total plantation area managed by households, only 51% was considered to be productive (To and Nghi 2014).
How trees and plantations are incorporated into household livelihood systems may be locally specific and influenced by a range of factors including general access to land, access to land for agriculture, 53Decree No 23/2006/ND-CP of March 2006 on the Implementation of the Law on Forest Protection and Development
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quality of land for plantations, household size and available labour, income, access to wood market/remoteness, access to markets for other crops, capital, access to finance and credit, off-farm labour opportunities and other factors (Sikor 2011; Sandewall et al. 2010). The tree and plantation components of livelihood systems consequently vary in scale and complexity from as little as 0.1 ha or scattered trees to complex multi-species agroforestry and stand-alone woodlots; 80%, have areas smaller than 5 ha and most are less than 1 ha in size. These factors may influence the overall production perspective of the households as being survival-focussed, investment-oriented or surplus-oriented, with the former focussed on meeting their immediate needs, primarily food and basic consumer items, and possibly saving a small surplus as a buffer against unexpected expenses latter more likely not to integrate plantations into the household economy, each year seeking to generate surplus from all their activities. Investment-oriented households make decisions about plantations independently of other livelihood decisions (Sikor 2011). This differentiation is important because it impacts the effectiveness of policy measures designed to influence the behaviour of plantation owners particularly those that are aimed at increasing length of plantation rotations and altering the types of products.
PLANTATION DEVELOPMENT PROCESS
The process for plantation approval and development follows a number of pathways depending on the scale of the plantation project, the nature of the investment and the land allocation process. These processes are described in the Forest Protection and Development Law, and environmental and social impact mitigation measures are described in the Law on Environment Protection and relevant regulations.
GENERAL PROVISIONS
In all cases owners of planted production forests must develop plans to manage, plant and protect forests accordance with the forest protection and development plan of each region and the forest management regulations.
In cases where forest owners invest their own money in planting, tending, managing and protecting forests, they are entitled to decide on the harvesting of their planted forests. Products harvested in this way may be freely circulated in the market. If planted forest trees are special or rare timber species, their exploitation must comply with the Government’s regulations.
In cases where forests are planted with the State budget and capital, forest owners must compile harvesting dossiers and submit these to the relevant agencies for approval.
Forests must be replanted immediately after exploitation or natural regrowth measures must be applied in the harvesting process.
PLANTATION REGISTRATION
Forest owners may register forest use rights and ownership rights over planted production forests54.
The initial process of registration of forest use rights must be conducted simultaneously with the land use right registration process according to the provisions of the Land Law and regulations and the Forest Protection and Development Law. The registration of ownership rights over planted production forests must also comply with provisions on property registration.
54Law on Forest Protection and Development, Article 31.
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ENVIRONMENTAL AND SOCIAL IMPACT PROTECTION MEASURES
The Law on Environmental Protection 2014 prohibits all activities that destroy or damage forests. It specifies requirements for strategic and project-level environmental assessment, including for both forestry projects and projects that could impact on forests.
Planning for Environmental Protection occurs at two levels - National and Provincial, undertaken respectively by MONRE and provincial People’s Committees. Planning is undertaken at a broad level, taking into account socio-economic development plans and objectives.
Strategic environmental assessments are made in the planning of socio-economic regions, key economic regions, corridors and belts, including planning and proposals for industrial and sectoral development at the national, local and provincial level that can significantly affect the environment.
For individual projects and environmental impact assessments (EIAs) or and Environmental Plan (EP) may be required. An EIA is required for:
a) Projects subject to decisions on investment intentions made by the National Assembly, Government and the Prime Minister;
b) Projects that use land parcels situated in wildlife sanctuaries, national parks, historical – cultural monuments, world heritage sites, biosphere reserves, scenic beauty areas that have been ranked;
c) Projects that can cause negative effects on the environment.
EIAs are the responsibility of the project owner and must be undertaken within the preparation phase of a project, and have a life of 24 months - that is, an EIA must be repeated if a project is not executed within a period of 24 months after the EIA has been approved.
EPs are required for “Investment projects that are not identified as objects that require the environmental impact assessment” (Article 29).
Specific measures have been introduced to minimize and mitigate the negative social, economic and environmental impacts associated with different tree plantation development approaches. These are articulated in Law, regulations and guidelines, including:
• The Law on Environmental Protection, 2014.
• The Law on Biodiversity 2008.
• The Law on Access to Information 2016 (to be in effect from July 1st 2018).
• The Law on Complaint 2011.
• The Law on Anti-Corruption (revised) 2012.
• Decree 18/2015/ND-CP dated 14 February 2015 of the Government on strategic environmental assessment, environmental impacts assessment, and environmental protection plan.
• Decree 19/2015/ND-CP dated 23 June 2014 of the Government guiding on (some articles) of LEP.
• Decree No. 29/2011/ND-CP dated 18/04/2011 on regulations on strategic environmental impact assessment and environment protection commitment.
• Decree 65/2010/ND-CP dated 10 June 2010 of the Government regulating and guiding on implementation of some articles of biodiversity law.
• Decree 21/2008/ND-CP Amending and supplementing a number of articles of the Government Decree 80-2006-ND-CP, 28 February 2008.
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• Decree 80/2006ND-CP Providing detailed regulations for implementation of Law on Environment Protection, 9 August 2006.
• Decision 1439/QD-BNN-TCLN dated 25 April 2016 of MARD promulgating regulations on FORMIS management and use.
• Decision 90/QD-TTg dated 12 January 2016 of Prime Minister approving the national network planning for natural resources and environment monitoring in the period 2015-2025, vision to 2030.
• Decision 166/QD-TTg dated 21 January 2014 of Prime Minister promulgating implementation plan for national environmental protection strategy by 2020 and a vision to 2030.
• Decision 81/2014/QD-TTg dated 31 December 2014 of Prime Minister on collaboration between ministries, sectors and (different level) people committees with (different level) farmer associations in receiving/listening citizens, solving farmers’ grievance/complaints
• Decision 1250/QD-TTg dated 31 July 2013 of Prime Minister approving national strategy on biodiversity to 2020 and a vision to 2030.
• Decree 160/2013/ND-CP dated 12 November 2013 of the Government regulating criteria for species determination and management of endangered, precious and rare species for protection purposes.
• Circular 25/2015/TT-BTNMT dated 29 May 2015 by Ministry of Natural Resource and Environment (guiding) on strategic environmental assessment, environmental impacts assessment, and environmental protection plan.
• Circular 05/2008/TT-BTNMT Guidance on SEA, EIA and CEPs 8 December 2008.
• Circular 08/2006/TT-BTNMT Guidance on SEA, EIA and CEPs, 8 September 2006.
With respect to forestry projects,55 EIAs are required for projects:
• with a forestation area of 1,000 ha or larger;
• involving exploitation of a forest area of 200 ha or larger, for planted forests,
• involving exploitation of a forest area of 50 ha or larger, for natural production forests, and
• involving exploitation of a forest area of 10 ha or larger, for natural protection forests
With respect to timber processing EIAs are required for projects:
• to build timber processing mills with an annual capacity of 3,000 m3 of timber or more
• to build chip plants with an annual capacity of 50,000 tons of products or more
• to build plywood plants with an annual capacity of 100,000 me or more
• to build plants of domestic, construction or industrial wood products with an annual capacity of 10,000 products or more
• to build pulp and paper plants with an annual capacity of 300 tons of products or more
• Projects to build paper plants with an annual capacity of 5,000 tons of products or more, for production of paper from pulp, and all plants with production of paper from waste
It is not explicitly stated whether smaller projects require an Environmental Plan.
55Government's Decree No. 29/2011/ND-CP of April 18, 2011, Appendix II, List of Projects subject to Environmental Impact assessment reporting
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MONRE is the lead agency with respect to environment rotection and the administration of EIAs. However, six other ministries share approval responsibilities with MONRE’s EIA Department and as a result inter-ministerial coordination can be a challenge. General departments under MARD (such as Fisheries and Forest Protection) are responsible to approve EIAs in relevant areas. Meanwhile, cross-cutting agricultural or irrigation EIAs are approved by MARD’s Department of Science, Technology and Environmental Management. The Ministry of Industry and Trade approves EIAs for projects under its responsibility, including hydropower and mining (World Bank 2014, in Wells-Dang et al. 2016).
In practice, the EIA system is highly decentralized (Clausen et al. 2011). In several decades of administrative devolution, the centre has ceded significant authority to provinces, so that the province is now the key level for EIA implementation. According to Decree 80 (2006), EIAs for small projects can be approved at the provincial level, making up 75% of total EIAs in the country. Provincial departments (of Natural Resources and Environment, Planning and Investment, etc.) report primarily to the Provincial People’s Committee, and only secondarily to national ministries, meaning the
ministries have limited leverage (Wells-Dang et al. 2016). Provinces compete with each other to attract investment and Provincial leaders who want to improve their economic development performance frequently allow project owners to delay in submitting an EIA report which allows the project owners to receive approval for investment first and conduct an EIA later.
At present many environmental regulations are reportedly unrealistic, of poor quality and cannot be implemented properly. They are also contradictory (Wells-Dang et al. 2016). Lack of clarity, perceptions of illegitimacy where rules are seen as unreasonable, regulatory complexities and inconsistencies, high real and hidden transaction costs all increase risk and uncertainty for projects, which may exacerbate non-compliance.
INCENTIVES, DISINCENTIVES AND FINANCE
The Government of Viet Nam has promoted plantation wood industries and tree planting through the following programs and policies:
• Land fee exemptions– By the end of 2003 the National Assembly promulgated a policy expempting and reducing land use taxes for farmers engaging in forest rehabilitation. Households that established forest plantations and owned an allocated areaof less than 30 ha were exempt from land use tax. Other economic organisations that managed forest plantation were entitled to a 50% reduction. This policy, which remained in place until 2010, was indended to encourage participation in the 5MHRP. Some land fee exemption remain in place. For example there is an exemption of land rental fees for tree planting (Land law 2013; Decree 46/2014/NĐ-CP; Decree 210/2013/ND-CP) which applies to individuals, households, organisations and cooperatives, however economic organisation are no longer exempt.
• Value added tax (VAT) incentives: e.g. Ministry of Finance (MOF) Circular 113 on exemptions to value added tax (VAT) for imported wood to be used for export.
• Export tax incentives: e.g. Decision 109/2008/QĐ- BTC on export tax exemptions for products made from plantation timber, and from imported wood.
• Export tax imposts - such as the proposed tax on wood chips. • Fee flexibility – e.g. allowing leases to be paid lump-sum or annually. • Direct Grants- Payments were made o to farmers or entities for planting tree or protecting
forest in association with the 5MHRP. At the beginning of the program farmers received amounts averaging VND 2.5 million/ha and this increased to VND 4 million/ha in 2004. House3holds and individuals who invested their own means in establishing plantation of rare and valuable species with a long rotation (30 years) were leigible to receive grants56 of VND 2 million per ha (de Jong et al. 2006).
• Subsidies - for example, under Decision 37 in 2004, the government provided for subsidies relating to costs associated with transport of products produced by companies located in the Northwest region. Under Decision No: 38/2016 / QD-TTg, 2016 financial support is provided
56 Decision 210/QD-TTg,
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across a range of forest activities. • Compensation - Forests may be compulsorily acquired by the State, in which case
compensation is payable. This can take the form of assignment or lease of other forest areas for the same use; assignment of land for the planting of new forests or compensation in kind or cash.
• Finance and lending - Tree gowers have been provided with several opportunities for preferential laosna credit associated with rforestation programs, for example::
o Decree 106 in 2004 and Decree 20 in 2005 enabled conditions for households participating in the government’s forest plantation program to gain access to government credit. Organisation and individual that enaged in production forest plantation and regeneration could access preferential credit with an annual interest rate of 5.4% per year.
o Decision 147 in 2007 and 131 in 2009 provided accessibility to government loans for the establishment of plantation forests and other production activities.
o Under decree 55/2015 ND-CP Tree growers can access a loan without security assets, with concessional interest and terms.57
o The Bank of Social Policy (BSP) typically grants households loans of VND 10–15 million for 3 years.
o Vietnam Bank for Agriculture and Rural Development (state-owned but operates largely independent from influence by People’s Committees) offer loans to famers typically for three years, requiring Land Use Certificates as collateral.
However in reality many organisations and individuals could not benefit from this opportunity (Dong and Phuong 2016, de Jong et al. 2006).
• Donor assisted activities - for example: o The Forest Sector Development Project offers plantation loans to households under a
loan agreement between the Vietnamese government and the World Bank signed in April 2005. The project objective was to establish production oriented plantations on a 66 000 ha by 2010 by providing loans to for up to 75% of total investment costs for terms of up to 15 years.
o Forestry Sector Development Project funded by the World Bank assists in measuring forest land and issuing Redbooks for households. The households then use their red books to ask for a loan from a revolving fund of the project which is managed by Vietnam Bank for Social Policies. The project also provides technical supports to forest growers.
o Reforestation projects funded by KfW support household tree plantations through grants in kind and cash. They provide free tree seedlings and fertiliser to households. They also set up savings accounts at BSP for participating households to compensate for their labour inputs.
TECHNICAL SUPPORT, CAPACITY BUILDING AND ASSISTANCE
The Forest Sector Development Plan 2011-2020 prioritises a number of research, technology and extension programs including:
a) formulating and finalizing procedures, technical standards on forest fire prevention and fighting, forest harvesting and utilization, intensive afforestation in identified areas.
b) strengthening research in, and transfer of, science and technology with special attention paid to select new high-yield, high quality varieties. Research the application of appropriate advanced technology and use and further development of, traditional knowledge to improve the effectiveness of resource utility, value of outputs and quality of forest environmental services.
57 Decree 55/2015/ND-CP on credit policies for agricultural and rural development; Decree 75/2015/ND-CP
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c) The use of harvesting and processing equipment and appropriate advanced technology, linking research with production and diversification of products in order to increase their value-added and reduce environmental pollution.
d) reinforcing the forestry extension system at the grassroots level, particularly in the communes with large areas of forest and forest land in remote locations.
The program on research, education, training and forestry extension focuses on capacity building for university students and government staff in the areas of sustainable forest management and forest processing. Research focuses on some key fields including bio-technology, high-yielding plantations, agroforestry and improvement of processing technologies for the wood industry.
Extension services are provided particularly to local households with regard to forest protection, production and management skills.
RISKS
There are risks associated with plantations of all scales. Smallholders are often viewed as particularly vulnerable because they bear a disproportionately high share of the risks associated with tree plantations (Midgley 2006). However, a similar position could be taken with respect to all growers in the plantation value chain. Technical, environmental, market, livelihood and policy/regulatory risks are all present.
MARKET RISKS
• Fluctuations in price
• Changes in wood quality, specifications and standards
• Changes in consumer demands (such as design needs)
• Market competition
• Introduction of consumer country certification or legality measures (also a regulatory risk)
POLICY AND REGULATORY RISKS
• Changes in policy with respect to land allocation
• Changes in regulation restricting market access (e.g. Wood chip taxes)
• Introduction of new regulations that add to costs of production (e.g. the introduction of EISA regulations increasing establishment cost, or phytosanitary requirements required for export)
• Introduction of new regulations to meet the requirements of importing and consumer countries
TECHNICAL AND ENVIRONMENTAL RISK
• Impact of disease or pests
• Impacts of natural disasters such as floods, typhoons or fire
• Climate change
• Lack of skills or expertise, e.g. appropriate silviculture, meeting certification needs
• Lack of species diversity
LIVELIHOOD RISK
• Changes in socio-economic condition resulting in unplanned harvesting or plantation sale (smallholders)
• Loss of plantations due to compulsory acquisition for National development projects
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10. CONCLUDING REMARKS AND RECOMMENDATIONS
CONCLUDING REMARKS
In Viet Nam policies have generally been effective in meeting broad socio-economic development objectives for forests and plantations including:
• preventing further loss of natural forests,
• increasing national forest cover,
• improving the incomes of farmers,
• providing a substantial export income from woodchips,
• developing a furniture manufacturing industry.
However, some of these policies have had broader consequences.
Reductions in the harvesting of domestic native forests have increased dependency on wood imports. This means that Viet Nam’s domestic policies for preventing further loss of its own forest cover,
coupled with aspirations for a strong and growing wood industry may be contributing to deforestation elsewhere (Meyfroidt and Lambin 2009).
Forestry has contributed to economic development but less to reducing poverty. For many households having forest land has improved, while the poorest groups have not benefitted from the reforms and the economic growth (Thulstrup 2014). Poverty among ethnic minority groups in upland areas is still very high and for many households without forest land, access to forests they previously used for subsistence needs, has decreased (Sandewall et al. 2010, Sunderlin and Huynh 2005).
Plantations are considered to contribute to targets for increasing forest cover. However, the dominantly short rotation plantations suppling volatile markets (e.g. wood chips) are vulnerable to land use pressures, particularly from agricultural commodities. Forest cover may not be permanent.
The woodchip industry is a high volume low value supply chain. Policies to promote a transition to long-rotation higher value products will be challenged by how plantations are integrated into livelihood systems and decision making processes of farmer. Perception of risk may inhibit policy effectiveness.
Taxes, such as woodchip export taxes, intended to change markets and encourage a shift to solid wood products and furniture production may be impacted by a shortage of domestically produced sawlogs. While this may increase the price, it remains unclear whether the benefits that should flow to farmers will encourage them to alter their production practices. There is a need to improve governance systems and reduce transaction costs along the value chain. A rapid shift away from short rotation production may have adverse consequences for risk-averse farmers. Policies intended to encourage farmer to extend their rotation lengths, such as low interest loans may be constrained by caution due past experiences.
The current varieties of plantation grown wood are limited and may not be suitable for sawlog production or meet some market requirements, particularly where these are replacing timber sourced from natural forests in Viet Nam or imported from elsewhere.
The low species diversity, which is advantageous for products such as woodchips, may be susceptible to pests, diseases, fire and climate change.
Demographic changes such as urban in-migration are reducing labour availability and increasing costs in rural areas. This impacts both SFC plantation systems which depend on large numbers of workers and on smallholder systems as people are attracted to alternative employment options. For famer based plantations, this may result in an increase in the area of plantations under absentee ownership or other models not yet considered in policies.
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RECOMMENDATIONS
Based on this review a number of preliminary recommendations can be made a basis for further analysis and development of more detailed policy options. That the Government of Viet Nam:
1. Continue its current review of forest development and protection policies. 2. Clearly indicate an overall vision for the tree plantation sector, spelling out the multiple objectives
for plantations, the ways in which these objectives can be achieved and how the benefits and costs of different types of plantations will be distributed.
3. Clarify related and supporting policies, such as land tenure policies and establish effective coordination among line ministries responsible for those policies;
4. Review current policies to identify and eliminate gaps and contradictions, and provide detailed guidelines for effective application and implementation at the local level.
5. Clearly differentiate tree plantation policy and regulations from those governing management, harvest and use of wood from natural forests, particularly imported wood.
6. Build on current investment in research and extension and advisory capacity to smallholder growers.
7. Invest in broader inventory of all tree plantation resources (exotic and indigenous species) and their capacity to contribute to wood supply including for emerging markets,
8. Develop a system for improved statistics on timber production, processing facilities and timber exports.
9. Undertake research to better understand the nature and extent of the contribution of informal (scattered) tree plantings, particularly of indigenous species, to domestic wood supply needs.
10. Ensure policy responses to consumer market standards, such as for certification and legality, are commensurate with the risks associated with the plantation production system and take into account the ability of smallholders to meet these standards. Such standards should not have adverse impacts on policy goals for poverty alleviation.
11. Carefully assess the design and impacts of policies aimed at reducing woodchip exports. Poorly designed policies could have considerable financial consequences for smallholder plantation growers.
12. Consider potential financial mechanisms to support cooperative research that improves communication and linkages between the processing industry, and larger private and smallholder growers.
13. Establish mechanisms for regular monitoring, evaluation and review of tree plantation policies. 14. Prioritise ongoing investment in the process of policy making, including research required to
support evidence based policy making.
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APPENDICES
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Appendix 1: Process for developing policy framework according to the Law on development of policy framework 2015.
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Appendix 2: Planning framework (from subsector plans, action plan, restructuring plan) development at ministry level (MARD)
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Appendix 3: Forestry Programs of the National Forest Development Strategy 2006-2020
Program Targets
Sustainable Forest Management and Development
a) Establish the national permanent forest estate for three forest types, mapping and boundary demarcation in field, manage sustainably and effectively all stable production forest areas, including 3.63 million ha of natural forests and 4.15 million ha of plantation forests (including industrial raw material plantations, NTFP and other plantation forests).
b) All forests and forest lands are to be allocated, or leased, to forest management entities before 2010.
c) Establish and implement plans of forest management and capacity building for forest owners, such as: forestry companies, cooperatives, communities, and foreign fund investment enterprises, etc.
d) Stabilize wood production from natural forests, plantation forests and scattered planted trees with timber production targets of 9.7 million m3/ year by 2010 and 20 – 24 million m3/ year by 2020 (including 10 million m3 large timber) and develop NTFPs to meet major demands for domestic consumption and export.
e) Provide small timber for pulp processing: 3.4 million m3/year by 2010, and 8.3 million m3/year by 2020.
f) Improve the productivity and quality of plantation forests, with an average annual increment of 15 m3/ha based on the implementation of forest tree seed strategy during period 2006-2020.
g) Enrich 0.5 million ha of poor degraded forests contributing to increase the quality of natural forests.
h) Afforest 1.0 million ha of new forests by the year 2010 (of which, 0.75 million ha of production forest and 0.25 million ha of special-use forest) and 1.5 million ha for the next phase, and harvested forest will be replanted after logging operations at the rate of 0.3 million ha/year.
i) Annually plant 200 million scattered trees, equivalent to 100,000 ha of plantation forests, to serve local demands of wood and fuelwood for home consumption.
j) Undertake forest inventory periodically; consolidate and update database of forest resources and related socio-economic aspects.
k) 100% of production enterprises will develop, implement, monitor and evaluate the forest management proposals (plans).
l) At least 30% of production forest areas are to be issued with certification on sustainable forest management by 2020.
m) Invest in equipment to modernize forest management work.
Forest Protection,BiodiversityConservation andEnvironmental ServicesDevelopment
a) Allocation of 1.5 million hectare of special use forests and protection forests and issuance of protection contracts by 2010
b) Reduction of forest law violations by 80 percent and infrastructure investments for forest protection and control
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Program Targets
c) Demarcation of 5.68 million hectare protection forest and 2.16 million hectare of special use forests and allocation to permanent owners
d) Piloting of community-based forest management models
e) Establishment of a Forest Protection and Development Fund by 2007
Forest ProductsProcessing and Trade
a) Reorganize the wood and NTFP processing industries in order to match the production capability with the sustainable raw material supply sources.
b) Strengthen the production capacity of forest product processing industry to meet the basic demands for domestic consumption and for export, which are:
o Total capacity of sawn timber: 6 million m3/year o Particle board: 320,000 m3 of products/year o MDF board: 220,000 m3 of products/year o Value of exported wood products: 7.0 billion
USD (3.5 million m3 of products) Research, Education and Forestry Extension
a) Research in key areas, such as bio-technology, processing of non-timber forestproducts, plantation forestry, agro-forestry, rehabilitation of degraded naturalforests, environmental services.
b) Improving forestry training institutions and curricula and provision of training tostudents, technical staff and forest owners
c) Improve the quality of the forest extension system, including delivery of extensionservices through the private sector
Renovating the forest sector institutions, policy, planning and monitoring
a) Develop and update the policy, legal and forestry institutional systems, to be more decentralized to local levels and to develop the forestry sector sustainably, according to the market orientation and socialization of forestry activities.
b) Develop mechanisms and policies to create momentum to encourage the participation of various economic entities in forest protection and development, and to stimulate development of the forestry economy among domestic and international economic entities.
c) Reorganize and improve the effectiveness of the state management system in forestry aiming at unified forest management, protection, utilization and development functions; clarify the functions and tasks of forestry organizations at all levels and diversify the modalities of forestry services.
d) Reorganize some forestry companies to be operated according to the market mechanism in remote forestry areas facing many difficulties where there is lack of investments from non-state economic entities; moving
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Program Targets
towards equitization of inefficient forestry production and forest product processing enterprises.
e) Develop, implement and scale-up modalities related to management and protection of community forests.
f) Establish the state forest extension system at different levels and provide supporting mechanisms for voluntary extension organizations in communes and villages having forests.
g) g) Establish specialized units in monitoring and evaluation, to be linked with consolidation of the sectoral planning system at all levels
Appendix 4: The Hierarchy of Laws
Authority Text National Assembly Constitution, Laws, Resolutions
Standing Committee of National Assembly Ordinance and Resolution
President Order and Decision
The Government Decrees
Prime Minister Decisions
The Supreme Court Resolutions
The Chief Judge of the Supreme Court Circulars
The Procurator General Circulars
Ministries or Ministerial Entities Circulars
The general State Auditor Decisions
Local People’s Committees Decisions and Directives
Local Peoples’ Councils Resolutions
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Appendix 5: Legal Instruments related to the plantation value chain
(sources: Ministry of Justice Legal documents database, http://vbpl.vn/TW/Pages/vbpqen.aspx, Viet Nam REDD: http://Viet Nam-redd.org/, Viet Nam Law http://Viet Namlawmagazine.vn/gazette.html#vnlpositionyl, WWF 2012,)
Number Description Date FOREST MANAGEMENT, PROTECTION AND DEVELOPMENT
Law 29/2004/QH11 Law 29/2004/QH11 on Forest Protection and Development 14/12/2004
Effect 01/04/2005
52/2005/QH11 Law 52/2005/QH11 on Environmental Protection 12/12/2005 Effect 01/07/2006
20/2008/QH12 Law 20/2008/QH12 on Biodiversity 28/11/2008 Effect 01/07/2009
45/2009/QH12 Law 45/2009/QH12 on Royalties 04/12/2009 Effect 01/07/2010
Resolution 57/NQ-CP Resolution 57/NQ-CP on administrative procedure simplification under the management of MARD. 15/12/2010
Effect 15/12/2010
18/2001/QH13 Resolution 18/2001/QH13 approving the execution of Resolution 08/1997/Qh10 and Resolution 73/2006/QH11 on 5 million hectares Reforestation Project
25/11/2011 Effect 25/11/2011
Decree 09/2006/NĐ-CP Decree 09/2006/NĐ-CP on forest fire prevention and control 16/01/2006
Effect 13/02/2006
23/2006/ND-CP Decree 23/2006/ND-CP on the implementation of the Law on forest protection and development 03/03/2006 Effect 25/03/2006
119/2006/ND-CP Decree 119/2006/ND-CP on organization and operation of the forest protection service 16/10/2006 Effect 15/11/2006
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48/2007/ND-CP Decree 48/2007/ND-CP on the principles and methods of determining prices of forests of different types 28/03/2007 Effect 04/05/2007
01/2008/ND-CP Decree 01/2008/ND-CP defining the functions, tasks, powers and organizational structure of the Ministry of Agriculture and Rural Development
03/01/2008 Effect 26/01/2008
50/2010/ND-CP Decree 50/2010/ND-CP detailing and guiding a number of articles of the Law on Royalties 14/05/2010 Effect 01/07/2010
117/2010/ND-CP Decree 117/2010/ND-CP on organization and management of the special-use forest system 24/12/2010 Effect 01/03/2011
157/2013/NĐ-CP Decree 157/2013/NĐ-CP promulgating settlements on administrative violations of forest management, forest protection and development, and forest products management
11/11/2013 Effect 25/12/2013
Decision of The Prime Minister 661/1998/QD-TTg Decision 661/1998/QD-TTg on Objectives, Tasks, Policies and Organization for the Establishment of Five
Million Hectares of New Forest 29/7/1998 Effect 13/8/1998
186/2006/QD-TTg Decision 186/2006/QD-TTg promulgating the Regulation on forest management 14/08/2006 Effect 07/09/2006
18/2007/QD-TTg Decision 18/2007/QD-TTg dated approving Viet Nam’s forestry development strategy in the 2006-2020 period 05/02/2007 Effect 03/03/2007
147/2007/QD-TTg Decision 147/2007/QD-TTg on a number of policies for development of production forests in the 2007-2015 period
10/09/2007 Effect 07/10/2007
39/2009/QĐ-TTg Decision 39/2009/QD-TTg dated promulgating the regulation of cooperation between forest ranger and civil defence force on forest protection mission
09/03/2009 Effect 09/03/2009
73/2010/QĐ-TTg Decision 73/2010/QD-TTg promulgating the regulation of management of investment in construction of silviculture work
16/11/2010 Effect 01/01/2011
34/2011/QD-TTg Decision 34/2011/QD-TTg amending and supplementing a number of articles of the Regulation on forest management promulgated together with the Prime Minister’s Decision No. 186/2006/QD-TTG of August 14, 2006
24/06/2011 Effect 19/08/2011
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1216/QĐ-TTg Decision 1216/QĐ-TTg approving the Strategy on national environmental protection towards 2020, with a vision towards 2030
22/07/2011 Effect 22/07/2011
66/2011/QD-TTg Decision 66/2011/QD-TTg amending and supplementing a number of articles of Decision No. 147/2007/QD-TTg of September 10, 2007, on a number of policies for development of production forests during 2007-
09/12/2011 Effect 01/02/2012
57/QĐ-TTg Decision No. 57/QD-TTg approving the forest protection and development plan during 2011-2020 09/01/2012 Effect 09/01/2012
07/2012/QD-TTg Decision 07/2012/QD-TTg promulgating some regulations on intensified enforcement of forest protection. 08/02/2012 Effect 30/03/2012
126/QD-TTg Decision 126/QD-TTg promulgating the piloting benefit sharing mechanism of management, protection and development for special- use forests
02/02/2012 Effect 02/02/2012
24/2012/QĐ-TTg Decision 24/QĐ-TTg on the policy of special used forest development and investment for the period 2011-2020 01/06/2012 Effect 20/07/2012
Decision of the Minister of Agriculture and Rural Development (MARD) 3031/1997/QĐ-BNNPTNT
Decision 3031/1997/QD- BNNPTNT of MARD promulgating the regulation of defining the forest boundaries and setting up landmarks amongst three forest types
20/11/1997 Effect 05/12/1997
516/QĐ-BNN-KHCN
Decision 516/QĐ-BNN-KHCN promulgating technical procedure on planning operation design 18/02/2002 Effect 18/02/2002
78/2002/QĐ-BNN-KL
Decision 78/2002/QĐ-BNN-KL promulgating technical procedure on forest and forestland monitoring of forest ranger
28/08/2002 Effect 13/09/2002
06/2005/QĐ-BNN Decision 06/QĐ-BNN to issue acceptance of plantation, zoning for rehabilitation, plantation tending, forest protection, zoning for reforestation
24/01/2005 Effect 27/02/2005
61/2005/QĐ-BNN Decision 61/2005/QĐ-BNN promulgating the regulation on norms of protection forest classification 12/10/2005 Effect 06/11/2005
62/2005/QD-BNN Decision 62/2005/QD-BNN promulgating the regulation on norms of special- use forest classification 12/10/2005 Effect 06/11/2005
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106/2006/QĐ-BNN Decision 106/2006/QĐ-BNN to issue Guidelines on forest management for local communities 27/11/2006 Effect 26/12/2006
434/QĐ-QLR Decision 434 /QĐ-QLR promulgating Guidelines on development of forest protection and development at commune level and community-based land & forest land allocation issued by the FPD.
11/04/2007 Effect 11/04/2007
550/QĐ-QLR Decision 550/QĐ-QLR issuing the “Guidelines on developing Agreements on forest protection and development for local communities” issued by the Director of FPD.
08/05/2007 Effect 08/05/2007
3551/QĐ-BNN-HTQT
Decision 3551/QĐ-BNN-HTQT approving Operational Manual on implementation of community development Component of KfW7 project
31/12/2010 Effect 31/12/2010
1119/QĐ-BNN-KHCN
Decision 1119/QĐ-BNN-KHCN approving temporary cost norms applying for forestry extension programs and projects
02/06/2011 Effect 02/06/2011
1253/QĐ-BNN-TCCB
Decision 1253/QĐ-BNN-TCCB amending and supplementing regulations on management and implementation of FSDP.
13/06/2011 Effect 13/06/2011
1588/QĐ-BNN-TCCB
Decision 1588/QĐ-BNN-TCCB establishing the Steering Committee of the Viet Nam Conservation Fund under the FSDP
14/07/2011 Effect 14/07/2011
1828/QĐ-BNN-TCLN
Decision 1828/QĐ-BNN-TCLN declaring the status of national forest in 2010 issued by the Minister of MARD 11/08/2011 Effect 11/08/2011
2164/QĐ-BNN-HTQT
Decision 2164/QĐ-BNN-HTQT approving the investment plan of project “Recover Viet Nam’s coastal mangrove protection forests” (phase I)
20/09/2011 Effect 20/09/2011
500/QĐ-BNN-TCLN Decision 500/QĐ-BNN-TCLN assigning tasks on implementation of forest development and protection in 2012. 13/03/2012 Effect 13/03/2012
900/QĐ-BNN-TCCB Decision 900/QĐ-BNN- establishing the PMU “Reinforcement of community forestry in Viet Nam”. 24/04/2012 Effect 24/04/2012
957/QĐ-BNN-KHCN
Decision 957/QĐ-BNN-KHCN on the extension of the project “Optimal management of silviculture and acacia plantation’s yield for high quality plank timber”
02/05/2012 Effect 24/04/2012
52/QĐ- Decision 52/ QĐ-BCĐBV&PTR dated 14th May, 2012 to issue operational regulations of National Steering 14/05/2012
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BCĐBV&PTR Committee on forest protection and development for the period 2011-2020. Effect 14/05/2012
161/QĐ-BNN-TCLN Decision 161/QĐ-BNN-TCLN to assign tasks to implement the plan on forest protection and development in 2013
24/01/2013 Effect 24/01/2013
1182/QĐ-BNN-HTQT
Decision 1182/QĐ-BNN-HTQT of MARD to revise and extend the FSDP. 02/06/2011 Effect 02/06/2011
Directive of the Government 02/CT-TTg Directive 02/CT-TTg to take directions on reforestation replacing areas which have been used for other
purposes. 24/01/2014 Effect 24/01/2014
Circular 34/2009/TT-BNNPTNT
Circular 34/2009/TT-BNNPTNT on Criteria for forest identification and classification 10/6/2009 Effect 25/7/2009
51/2012/TT-BNNPTNT
Circular 51/2012/TT-BNNPTNT guiding on forest protection and development stipulated in Decision 57/QĐ-TTg dated 9th January, 2012 of the Prime Minister
19/10/2012 Effect 05/12/2012
10/2013/BNNPTNT-BKHĐT
Joint Circular 10/2013/BNNPTNT-BKHĐT between the MARD and MPI provides guidelines on management and use of State fund to implement forest protection and development for the period 2011-2020 according to Decision 57/QĐ-TTg dated 09/01/2012
01/02/2013 Effect 20/03/2013
20/2013/TTLT-BNNPTNT-BTC
Joint Circular 20/2013/TTLT-BNNPTNT-BTC between the MARD and MoF to amend and supplement some articles of Joint Circular 61/2007/TTLT-BNN- BTC dated 22nd June, 2007 guiding on management and use of State budget for forest rangers at all levels; payments for organizations, individuals taking part in prevention of illegal forest destruction, forest fire prevention and control
27/03/2013 Effect 15/05/2013
23/2013/TT-BNNPTNT
Circular 23/2013/TT-BNNPTNT of the MARD to improve extremely poor natural forests which are production forests
04/05/2013 Effect 01/07/2013
24/2013/TT-BNNPTNT
Circular 24/2013/TT-BNNPTNT MARD regulating on alternative options of reforestation when objectives of forest use are changed
06/05/2013 Effect 01/07/2013
80/2013/TTLT-BTC-BNN
Joint Circular 80/2013/TTLT-BTC-BNN between the MoF and MARD guiding on management and use of state budget for forest protection and development
14/6/2013 Effect 20/07/2013
LAND USE PLANNING
13/2003/QH11 Law on Land 13/2003/QH11 10/12/2003
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Effect 01/07/2004
17/2011/QH13 Resolution 17/2011/QH13 on the land use planning up to 2020 and national five-year (2011-2015) land use plan 22/11/2011 Effect 22/11/2011
181/2004/NĐ-CP Decree 181/2004/ND-CP on the implementation of the Land 29/10/2004 Effect 16/11/2004
198/2004/NĐ-CP Decree 198/2004/NĐ-CP to collect land use fees 03/12/2004 Effect 24/12/2004
178/2001/QĐ-TTg Decision 178/2001/QĐ-TTg on rights and responsibilities of HHs, individuals allocated and employed with forest and forestry land
12/11/2001 Effect 27/11/2001
04/2005/QĐ-BTNMT
Decision No. 04/2005/QD-BTNMT promulgating the establishing procedure and adjustment of land use planning and land use plan issued
30/06/2005 Effect 04/10/2005
150/2005/QĐ-TTg Decision 150/2005/QĐ-TTg approving the restructure plan on agriculture, forestry and fishery productions by 2012 and vision up to 2020
20/06/2005 Effect 12/07/2005
1174/QĐ-TTg Decision 1174/QĐ-TTg approving pilot plan for forest allocation, forest protection contract for HHs and communities in ethnic minority groups in Central Highlands
07/11/2005 Effect 07/11/2005
16/2006/QĐ-BTNMT
Decision 16/2006/QĐ-BTNMT promulgating unit price for development and amendment of land use plan nationally and provincially.
09/10/2006 Effect 06/11/2006
23/2007/QĐ-BTNMT
Decision 23/2007/QĐ-BTNMT to promulgate maps’ signs for land use status and land use planning issued by the Minister of MONRE.
17/12/2007 Effect 13/01/2008
112/2008/QĐ-BNN Decision 112/2008/QĐ-BNN of MARD promulgating the economic- technical norm on forest allocation, forest lease and certificate issue for tenure in forestry purpose associate with development of forest management dossier.
19/11/2008 Effect 18/12/2008
800/QĐ-TTg Decision 800/QD-TTg of the Prime Minister approving the national target program on building a new countryside during 2010-2020
04/06/2010 Effect 04/06/2010
102/2006/TT-BNN Circular 102/2006/TT-BNN guiding on Decree 135/2005/NĐ-CP regulating the allocation and contract of agricultural land, production forest land and aquaculture land in stated-owned agricultural and forestry
13/11/2006 Effect
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enterprises. 10/12/2006 01/2005/TT-BTNMT Circular 01/2005/TT-BTNMT provides guidance on Circular 181/2004/NĐ-CP to implement Land Law issued by
MONRE 13/04/2005 Effect 06/05/2005
TIMBER AND NON TIMBER LOGGING
152/1999/QĐ-BNN-KL
Decision 152/199/QĐ-BNN-KL of MARD promulgating regulations on the use of fund for prevention of forest destruction and illegal transport and trading of forest products.
05/11/1999 Effect 20/11/1999
04/2004/QĐ-BNN-KL
Decision 04/2004/QĐ-BNN-KL of MARD promulgating the regulation on timber and non-timber logging 02/02/2004 Effect 17/02/2004
59/2005/QĐ-BNN Decision 59/2005/QĐ-BNN of MARD promulgating the regulation on inspection and control of forest products. 10/10/2005 Effect 06/11/2005
44/2006/QĐ-BNN Decision 44/2006/QĐ-BNN of MARD promulgating regulations on management and use of forest ranger’s hammers
01/06/2006 Effect 01/07/2006
107/2007/QĐ-BNN Decision 107/2007/QĐ-BNN of MARD providing amendments, supplements on regulations for management and use of forest ranger’s hammers attached with Decision 44/2006/QĐ-BNN dated 1st June, 2006 of the Minister of MARD
31/12/2007 Effect 25/01/2008
19/2004/CT-TTg Directive 19/2004/CT-TTg of the Prime Minister on some solutions for development of timber processing and timber products exporting
01/06/2004 Effect 30/06/2004
08/2006/CT-TTg Directive 08/2006/CT-TTg to reinforce urgent measures to prevent forest destruction and illegal exploitation 08/03/2006 Effect 08/03/2006
87/2009/TT-BNNPTNT
Circular 87/2009/TT-BNNPTNT dated 31st December , 2009 of MARD guiding on design, exploitation and selection of timber
31/12/2009 Effect 14/02/2010
35/2011/TT-BNNPTNT
Circular 35/2011/TT-BNNPTNT on exploiting, taking full advantage of timber and NTFPs 20/05/2011 Effect 04/07/2011
70/2011/TT-BNNPTNT
Circular 70/2011/TT-BNNPTNT of MARD amendments and supplements to Circular 35/2011/TT-BNNPTNT dated 20th May, 2011 guiding on exploiting, taking full advantage of timber and NTFPs
24/10/2011 Effect 08/12/2011
STATE FOREST ENTERPRISES
28-NQ/TW Resolution 28-NQ/TW of Politburo on the continuing of rearrangement, innovation, and development for 16/06/2003
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agriculture and forest enterprises. Effect 16/06/2003
200/2004/NĐ-CP Resolution 200/2004/ND-CP of Viet Nam Government on rearrangement, innovation of forest enterprises. 03/12/2004 Effect 04/01/2005
135/2005/NĐ-CP Decree 135/2005/NĐ-CP of the Government regulating the allocation and contract of agricultural land, production forest land and aquaculture land in stated-owned agricultural and forestry enterprises
08/11/2005 Effect 03/12/2005
142/2006/QĐ-TTg Decision 142/2006/QD-TTg approving the scheme on reorganization and renewal of state-run agricultural and forestry farms under the Ministry of Agriculture and Rural Development
19/06/2006 Effect 13/07/2006
477/QĐ/BNN-TCCB Decision 477/QĐ/BNN-TCCB of the MARD on the establishment of the Central Steering Committee on arrangement, reform and development of state-owned agricultural and forestry enterprises
07/03/2005 Effect 07/03/2005
POLICIES FOR ETHNIC MINORITY GROUPS
539/NQ-UBTVQH13
Resolution 539/NQ-UBTVQH13 of the Standing Committee of the National Assembly on the results of implementation of policies, laws on residential land, production land for ethnic minority groups
30/10/2012 Effect 30/10/2012
352/QĐ-TTg Decision 352/QĐ-TTg of the Prime Minister issuing the implementation plan for Resolution 539/nq-ubtvqh13 dated 30th October, 2012 of the Standing Committee of the National Assembly on the results of implementation of policies, laws on residential land, production land for ethnic minority groups
23/02/2013 Effect 23/02/2013
ENVIRONMENTAL IMPACT ASSESSMENT
80/2006/NĐ-CP Decree 80/2006/NĐ-CP guidance on Law on environment protection 09/08/2006 Effect 03/09/2006
21/2008/NĐ-CP Decree 21/2008/NĐ- revising Decree 80/2006/NĐ-CP on guidance of Law on environment protection 28/02/2008 Effect 21/03/2008
113/2010/NĐ-CP Decree 113/2010/NĐ-CP specifying on damages to environment 03/12/2010 Effect 18/01/2011
29/2011/NĐ-CP Decree 29/2011/NĐ-CP of the Government on strategic environment evaluation, environmental impact assessment, environmental protection commitment
18/04/2011 Effect 05/06/2011
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Appendix 6: International Agreements and Treaties Ratified by Lao PDR
Treaty or Agreement Relevance
Mekong River Commission Agreement on the Cooperation for the Sustainable Development of the Basin ratified in 1995
Sustainable development, utilization, management and conservation of the water and related resources of the Mekong River Basin
United Nations Convention to Combat Desertification in Those Countries Experiencing Serious Drought and/or Desertification, Particularly in Africa, ratified in 1995
Land and soil productivity in arid, semi-arid and dry sub-humid areas
ASEAN Agreement on the Conservation of Nature and Natural Resources, ratified in 1985
Ramsar Convention on Wetlands of International Importance Especially as Waterfowl Habitat, ratified in 2010
Conservation and wise use of wetlands.
Controls for development and around Ramsar wetlands
United Nations Convention on Biological Diversity, ratified in 1994
Conservation of biological diversity, the sustainable use of its components and the fair and equitable sharing of the benefits arising out of the utilization of genetic resources
World Heritage Convention Concerning the Protection of the World Cultural and Natural Heritage, ratified in 1987
Protection and management of world heritage sites
Washington Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), joined in 1994
Trade in endangered plant and animal species
The United Nations Framework Convention on Climate Change (UNFCCC), ratified in 1995
Adaptation
Mitigation
Land Use, Land Use change and Forestry
Reduced Emissions from Deforestation and Degradation
Kyoto Protocol to the United Nations Framework Convention on Climate Change, ratified in 2005
Greenhouse Gas Emissions reductions
International Plant Protection Convention, ratified in 1995
Plant health, protect cultivated and wild plants by preventing the introduction and spread of pests.
Plant Protection Agreement for the Asian and Pacific Region, 1956
Phytosanitary measures
Membership of the World Trade Organisation, 2007
Sanitary and phytosanitary (SPS) measures
The transport of hazardous waste.
Cartagena Protocol on Biosafety to the Convention on Biological Diversity, 2000
Safe handling, transport and use of living modified organisms (LMOs), resulting from modern biotechnology.
Minimise effects on biological diversity and risks to human health
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Treaty or Agreement Relevance
Vienna Convention for the Protection of the Ozone Layer, year of accession 1994.
Use and destruction of ozone depleting substances
Basel Convention on the Control of Trans-boundary Movements of the Hazardous Wastes and Their Disposal, ratified in 1995
Environmentally sound waste management
Limit/control transboundary movement of hazardous waste
Stockholm Convention on Persistent Organic Pollutants. Stockholm, ratified in 2002
Prohibit and/or eliminate the production and use, as well as the import and export, of the intentionally produced Persistent Organic Pollutants
Rotterdam Convention on Prior Informed Consent Procedure for Certain Hazardous Chemicals and Pesticides in International Trade (PIC), 2007
Environmentally sound use of certain hazardous chemicals
Trade of certain hazardous chemicals
Safe use of certain hazardous chemicals
Appropriate labelling of certain hazardous chemicals
Globally Harmonized System of Classification and Labelling of Chemicals
Classification and labelling of hazardous chemicals
Safe use, transport and disposal of hazardous chemicals
International Labour Organisations conventions Women and young person’s working at night
Forced or compulsory labour
Minimum wage
Child labour
Fair remuneration
Discrimination
DRAFT FOR DISCUSSION Overseas
Initial Lao PDR Plantation Policy Assessment No. 1: The role of plantations to increase forest cover, foster sustainable for-est management and economic development in Lao PDR
March 2017 Rodney Keenan, Neil Byron, Peter Kanowski, Somvang Phimmavong, Hilary Smith, Vongvilay Vonghamsao
The situation
Lao PDR has 6 to 8 million hectares of degraded forest land that could potentially be used for a mix of production and conservation purposes. The Lao 2020 Forest Sector Strategy aims to increase forest cover on degraded land to enhance rural livelihoods and safeguard environmental values such as water resources. In part, this goal was to be achieved through planting 500,000 ha of high-value or fast-growing trees by smallholders and corporate investors. The Strategy envisaged commercial tree plantation by farmers, villagers and investment by companies to provide export and domestic products.
Planting of trees by smallholders has been relatively limited, with over 15,000 ha of teak in Luang Prubang Province and possibly 40,000 ha across the country. Concessions allocated to industrial companies for plantation develop-ment have resulted in 74,000 ha of plantations for timber production, well below their collective target of 133,000 ha. Companies have had difficulties accessing land and local people often do not support plantation development. There is a moratorium on concessions that is limiting new planting.
This paper describes potential recommendations from project research to inform the development of the next Forest Sector Strategy.
The key question we address is: what policies can best support the Lao Government’s de-sire to increase forest cover and to use forest land to meet sustainable economic develop-ment, environmental goals, economic benefits to local people?
Key points
1. Simplify regulations and approval processes
Regulations surrounding plantations were originally developed from those that provide control over the harvest and sale of timber from natural forests. These arrangements are inconsistently applied and largely unenforced or, where they are enforced, do not facilitate plantation development. Improved regulations would provide less-prescriptive defi-nitions of tree plantations and plantation timber, simple approval requirements to harvest and transport wood, and a simple, locally-administered permit and licencing system with a standardised fee structure.
2. Develop markets for plantation timber
Markets could be a key driver of industry investment, but currently are very poorly developed. A diversified market is the most robust option for plantation growers. Current markets for plantation timber are limited and relationships along the value chain are weak to non0existent. Markets could be fostered by facilitating local small-scale enterprises specializing in niche products such as from plantation teak and by attracting foreign investment in larger processing facilities, building linkages to export markets in Thailand, Vietnam or China.
3. Develop national standards for environmental sustainability of plantations
Environmental impacts of plantations are a key concern for government, for local people and for many international markets. National laws require environmental and social impact assessment for plantation projects over a certain size but these requirements are often not enforced or monitored. A simple, well-designed and implemented code of prac-tice for plantations, based on international examples tailored for local circumstances, would address potential prob-lems and enhance environmental outcomes. This code could form the basis for national standards for forest certifica-tion required in some international markets.
DRAFT FOR DISCUSSION
4. Landscape level planning with inclusive community consultation
Allocating land to plantation ‘concessions’ has been problematic for companies, local governments and communities. Well-designed, inclusive, larger-scale planning activities would provide for input from all interested parties to deter-mine those places in the landscape that are most appropriate to locate timber plantations and other production or conservation activities. This would minimise future conflict and uncertainty for investors. This planning can support co-investment from different sources, in landscape restoration that integrates production, conservation and environmen-tal service payment programs such as REDD+.
5. Improve communication between governments, local people and industry
Poor communication between different levels of government, industry and local people results in uncertainty about goals for plantation development, lack of coordination and conflict that all impede planning and investment. Communi-cation can be improved by establishing a national forum, using social media, local meetings and providing a well-main-tained, web-based repository of plantation information and regulations.
The case for each reform is made separately and summarised below. But this is an inte-grated package of reform measures. Change is required urgently in all five areas, simul-taneously. If only one or two of these reforms were made, the overall result would still be negligible.
Introduction
Forest plantations in Lao PDR are potentially important contributions to national goals to increase forest cover, reduce rural poverty, develop sustainable industries and improve environmental values.
Current policies and strategies for forest plantations are not meeting these objectives. The future vision for planted forests is not defined. Unclear regulations, lack of markets, absence of national environmental stand-ards and poor planning and communications have been identified in our research as key barriers to plantation development.
The objective of this paper is to provide advice on policy options to address these barriers. The advice is based on initial results of research under a collaborative project being undertaken by researchers in Lao PDR, Vi-etnam and Australia.
1. More effective regulations
Concern about complex and unclear regulations was a common theme in interviews with policy makers, pro-vincial and district government staff, the industry and farmers. Regulations surrounding plantations were originally developed from those designed to provide control over the harvest and sale of timber from natural forests and provide revenue to provincial and district agencies. These arrangements may be unknown, are inconsistently applied and largely unenforced and where they are enforced, do not support plantation devel-opment.
Complex and costly regulations also limit plantation development in other countries. Where these have been removed, for example in Vietnam, establishment of new plantations has expanded rapidly.
Improved regulations would:
1. provide clear definitions of tree plantations and plantation timber;
2. reduce the approval requirements to register plantations and harvest and transport plantation-grown wood;
3. establish a simple, locally-administered permit and licencing system that is intended to facilitate plantation development,with a standardized fee structure that is transparently allocated to different
DRAFT FOR DISCUSSION
levels of government. not provide income for local and provincial government or salaries for local officials; and
4. indicate clear government agency responsibility for approvals and monitoring of large and small-scale plantation development activity and timber transport and processing.
Implementing these recommendations will potentially increase the area under timber plantations, particu-larly by smaller landholders, and increase their contribution to local households and regional economies, IF the other reforms are made simultaneously. It would also facilitate larger-scale investment in appropriate locations.
2. Developing markets for plantation timber
Markets for timber are normally THE key driver of investment in plantations, in most countries. Current mar-kets for plantation timber in Lao PDR are limited and relationships along the value chain are extremely weak.
A diversified market operating at a variety of scales (local, national, international) is the most robust option for plantation growers.
Markets could be fostered by:
1. attracting and supporting foreign investment in larger processing facilities, through tax credits, pro-vision of infrastructure and support with approval processes;
2. building formal linkages to export markets in Thailand, Vietnam or China to ensure a focus on legal wood supply, fair prices for timber growers and ease of movement of wood across borders;
3. supporting investment in local level enterprises and smaller-scale processing to use plantation wood, particularly wood processors that currently use wood from natural forests, through concessional loans, technical assistance and infrastructure support; and
4. reinforcing 1-3 above by supporting communication and information flows along timber value chains, for example a market information service to communicate prices for different species and classes of wood.
More analysis is required on forest grower cooperatives who can negotiate prices and provide advice on tim-ber market requirements. These have worked in other countries but research indicates they have not been effective for small-scale teak growers in Lao PDR.
3. National environmental standards for plantations
Environmental impacts of plantations are a key concern for government, for local people and for many inter-national markets. Forest plantations have been the cause of adverse environmental impacts in many coun-tries, in situations where they replace natural forests, use poor mechanical site preparation and harvesting practices, impact on rivers and water quality, allow uncontrolled use of chemical pesticides or herbicides and show little respect for local community values.
These impacts can be eliminated or largely reduced through legislation and codes of practice. These are in operation in many parts of the world. Third party certification is also used in markets to guarantee buyers that timber is being produced sustainably. The two most common schemes globally are the Forest Steward-ship Council (FSC) and the Programme for Endorsement of Forest Certification (PEFC).
In Lao PDR, national laws require environmental and social impact assessment for plantation projects over a certain size but these requirements are often not enforced or monitored.
A simple, well-designed and implemented code of practice for plantations, based on international examples, would address potential problems and enhance environmental outcomes. This code could form the basis for national standards for forest certification required in some international markets.
4. Landscape level planning and co-investment
DRAFT FOR DISCUSSION
Allocating land to plantations ‘concessions’ has been problematic for companies, local governments and com-munities.
Internationally, well-designed, inclusive, larger-scale planning activities that provide for input from all inter-ested parties have been successful in resolving conflicts and uncertainty over land use. These can be used to determine the appropriate places in the landscape to locate timber plantations and other production or con-servation activities.
Landscape planning can support co-investment from different sources in landscape restoration that inte-grates production, conservation and environmental service payments such as REDD+. This could include dif-ferent types of forest restoration in designated production forests.
More inclusive landscape level planning would avoid future conflict and uncertainty for investors and for local communities.
5. Improving communication
Lack of communication between different levels of government, industry and local people results in uncer-tainty about goals for plantation development and poor coordination and conflict that impedes planning and investment.
Clear communication of policy and ongoing dialogue among stakeholders will help identify problems with plantation policy design and implementation, support coordination with other policies, provide for integra-tion of new sources of support and initiatives and build the capacity to learn by doing to adjust policy over time.
Communication can be improved by:
1. establishing a national forum that meets annually to discuss progress on plantation development
2. using social media and professional communication and advertising
3. holding regular local meetings of key stakeholders
4. providing a well-maintained, web-based repository of plantation information and regulations
Conclusions
Timber plantation development in Lao PDR is at a crossroads.
To use motoring metaphor the car is going nowhere at present. To get it moving, it is necessary to:
1. Take the brakes off (by removing impediments like excessive regulation)
2. step on the accelerator (grow and stimulate markets)
3. steer in right direction (Local planning and environmental codes)
4. get all the passengers on board and bystanders out of the way (communication)
These actions need to be done simultaneously AS A PACKAGE, otherwise the car won’t move in the right di-rection with everyone on board!
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By Alex Van De Meer Simo, Keith Barney and Thu-Ba Huynh
This paper explores the effects and contributions to local livelihoods from industrial tree plantations and discusses policy recommendations for the promotion of a sustainable commercial tree plantation sector in Lao PDR. It is based on analysis of the literature and preliminary results from household surveys and farmer interviews at case study sites in five provinces in Lao PDR.
Key Points:
1. There are different investment “models” in Laos for establishing tree plantations, including independent smallholders, contract arrangements, community land ‘leases’ and state land ‘concession’ investments. Joint venture, international and domestic investors are highly interested in securing more land for plantation development. However, issues around land allocation for tree plantations need to be addressed; these include protecting customary rights and access to land and resources, and equitable benefit sharing.
2. Household livelihood strategies are based upon an increasingly diverse portfolio of activities, but
still dependent to a significant degree on agricultural land and forest use. Non-commercial use of local land and forest resources is still very important in the case study villages. It is recommended that these diverse livelihood strategies need to be taken into account while designing options for commercial plantations.
3. Informal (untitled) access to community forest-lands and natural resources is highly valued by
the communities. In two case study sites assessed to date, cash and non-cash income (total income/household/year) from forest and fallow land were higher than those from forest plantations. Our detailed livelihood surveys confirm that forests, including rotational swidden fields, remain important sources of everyday livelihood for many Lao villagers. Therefore, tree planting should be organised within diverse landscape mosaics, and the importance of natural forests and swidden agroforestry systems should be recognised in land-use planning.
4. Three of the four plantation “models” investigated – i.e. plantations developed independently by
farmers,community land leasing arrangements and concessions - deliver significant farmer income streams. Considered over full rotations, income from plantation employment appears much less significant. Opportunities to generate more substantial income from employment in plantation concessions and community land leasing arrangements need to be further explored. While some farmers can grow trees successfully without state extension support (e.g. a case study village whre farmers grew yang bong), targeted training and extension services should be provided to better support out-grower schemes.
Lao PDR Forest Plantation Policy Background Paper Industrial Tree Plantations: Examining Their Effects and Contribution to Livelihoods. March 2017 (revised June 2017)
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5. The design of plantation models should include measures and mechanisms to promote effective engagement with local communities, specifically through more participatory land use planning. Our result suggest that plantations development options should allow farmers to retain a high degree of livelihood flexibility, and foster their learning and adaptability.
Introduction
Addressing poverty, improving the living standard of the population, and graduating from the list of Least Developed Countries (LDCs), are the highest priorities of the the Government of Lao PDR (GoL)1. The Lao Government, like many other governments of developing countries, sees in the modernization and intensification of agriculture the pathway to transform the livelihoods of rural people. The Ministry of Planning and Investment and the World Bank Group found: “…for Laos to achieve its annual economic growth objective of 7.5%, the non-exploitation of land is not an option for the government.”(World WorldBank, 2011). Such transformations are reflected in policies that segregate forests and agricultural spaces, aim to eradicate shifting cultivation and foster more intensive and commercial agricultural practices (Castella et al., 2013; Lestrelin, Castella, & Bourgoin, 2012), and eventually support some of the rural population to transition away from farming (Broegaard, Rasmussen, et al., 2017). Implicit in this approach is the view is that current and traditional land use practices are sub-optimally productive (Rigg, 2012). In parallel, international and domestic investors are keen to secure more land for tree plantation development (Korhonen, Zhang, & Toppinen, 2016). Sustainable, well-managed plantations, established within an integrated landscape model, can provide important socio-economic (Bissonnette & De Koninck, 2015; Cramb & McCarthy, 2016) and environmental benefits (Cossalter & Pye-Smith, 2003; Grossman, 2015); however, plantation expansion also changes existing land uses, resource access and property rights, potentially with adverse consequences (eg Andersson, Lawrence, Zavaleta, and Guariguata (2016); (Gerber, 2011)). The GoL views commercial plantation forestry as a key sector for promoting economic development in rural areas, particularly in upland and priority-poor districts where a significant proportion of the population resides (PDR, 2013). As an example, the Laos Forestry Strategy 2020 (FS2020) prioritises: “…tree planting and management by setting clear purposes with relevant target owners and markets, and investment schemes to strengthen wood supply base and farmers’ income…”. In rural Lao PDR, most property rights to forest-land are still held on an informal or untitled basis (Dwyer, 2015), and there is strong evidence for continued reliance upon informal access to forest-land resources for livelihood production and food security. Local resources provide important sources of household cash income (Foppes & Ketphanh, 2000; Russell et al., 2013), that serves as a ‘non-commodified subsistence guarantee’ (Akram-Lodhi and Kay, 2010: 273; Baird and Barney, 2017). Thus, there exists a tension in forestry and development policy— between the identification of suitable areas
1 In 2010, the United Nations Development Programme (UNDP) labelled Lao PDR as the sixth most successful country for improved human development in the past 40 years (Sims, 2017).
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for tree plantations, and protecting existing customary rights to land and the livelihood benefits derived from land. Other policy questions relate to the optimal spatial and silvicultural organisation of plantations (including agroforestry and alleycropping options), and benefit sharing arrangements between private investors and local communities that can maximise a fair distribution of economic benefits. This background paper provides a preliminary analysis of ACIAR-supported research examining the socio-economic outcomes of tree plantation models. The paper presents early empirical evidence that can inform policy deliberations on a sustainable commercial tree plantation sector in Lao PDR.
Research Design
In Lao PDR, there is a wide range of tree plantation “models” — from independent smallholders, contract farming arrangements, to community land leases and state land concession-style investments. Within these models, there are also different rotation periods, planting patterns, spacing designs, and silvicultural practices (Smith, 2016). A comparative analysis of the economic, social, and environmental implications of these different plantation models can contribute to identifying opportunities and policy reforms that would strike a better balance between key stakeholders, including smallholder households, local communities, private investors, and state institutions. To provide a broad understanding of the phenomenon of plantation development, our research identified seven community case study sites, each representing a different approach to forest plantation establishment (Figure 1 below). The research collected data from surveys of 175 randomly selected households and accompanying open-ended interviews, photo-elicitation and participant observation, conducted in seven villages in five provinces between February 2016 - February 2017. Data contributing to this paper was derived from from 100 HH surveys in four of the case study villages2. Villages were selected based upon the extent and depth of their engagement in the different tree planting models. The sites include: (1) a village where Burapha Agroforestry Co., Ltd (BUFARCO) manages more than 500 hectares of eucalypt on communal land following a 30 year-length ‘village partnership’ agreement. Here, farmers provide labour based on their household capacity and interest, and also have the option of intercropping rice in between rows of eucalyptus; (2) a village where farmers have independently developed an agroforestry system that combines yang bong trees on 7-year rotations with rice (year 1), and bananas (years 2-5); (3) a village where farmers have planted eucalypt under a ‘contract farming’ (2+3) model, in collaboration with Oji-Lao Plantation Forestry Ltd.; and (4) a village where Stora Enso Laos (SEL) manages just under 100 hectares of eucalypt under a 30-year lease agreement. In the latter case, labour opportunities are based on the company’s requirements, and local farmers are able to intercrop rice in between the alleys of eucalypt.
2 At this stage of the project, we have only been able to digitise completely the data collected in 4 villages. Future project reports are expected to include results from the other 3 sites.
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Figure 1: Different tree plantation models implemented in Laos based on land tenure and produce ownership. Red circles highlight the seven models included in this research. [SEL: Stora Enso Laos; BUFARCO: Burapha Agroforestry Co.,Ltd, OLPFL: Oji Lao Plantation Forestry Ltd.; Birla: Birla Lao Pulp and Plantations Ltd.]
Key Findings
Household livelihood strategies are highly diverse
Househould (HH) income sources in the case study villages are illustrated in Figure 2. It is evident that (HH) livelihood strategies are highly diverse, and based to a significant extent upon the use of agricultural land and forests. The total average annual HH income (cash and non-cash values) in the surveyed HH’s from four villages ranged between US $2,641 (SEL agroforestry site) to US $8,105 (yang bong agroforestry site)3. The non-cash economy (i.e. based upon consumption and exchange of products) is still important, accounting for beween 27% and 47% of the total HH income in the case study villages. These data indicate that a significant portion of the Lao rural economy remains encompassed within the so-called “subsistence sector”. Our results show as well that incomes from ‘forest and fallow lands’ – which combine timber, fuelwood, NTFPs, aquatic products from ponds (not rivers), and rice from swidden agriculture fields – play an important role in supporting the livelihood of farmers in all villages. If we account for both cash and non-cash benefits, forests and fallows’ annual contribution to the household economy in the case study villages ranges from US $771 to US $1,508. In two of the villages in 2015-16, forest and fallow lands were the first and second most important source of surveyed household income. Our results indicate
3 The latest World Bank Economic Monitor estimated GNI per capita reaching US $1,730 in 2015 (World WorldBank, 2016). Our figures suggest that assessments such as the World Bank’s – which are basd on staff estimates and projections based on data provided by the Lao Authorities - may have overlooked the important contribution that forests and fallows make to the livelihoods of smallholders, underestimating the importance of ‘environmental’ income in overall economic development.
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that what is often defined as ‘degraded’ or ‘unstocked’ forests does not represent the actual importance of these sorts of land for the livelihoods of farmers (see also Broegaard, Vongvisouk, & Mertz, 2017). The real value of forest and fallow land would be even higher if we included livestock which, in most households, are left to roam freely and with little supervision in fallow lands.
Figure 2: Household Income Sources for Case Study Communities, 2015-20164.
Moreover, despite expectations that livelihoods might become ‘divorced from farming and, therefore, from the land’ (Rigg, 2006, 2007), and with (overseas) remittances becoming incresingly important for understanding agrarian transformations in Laos (Barney, 2012), our results indicate that livelihoods in rural Lao PDR remain strongly linked to land-use and farming activities - e.g. local tree plantations, swidden and permanent agriculture, keeping, selling or trading livestock, etc (see also Martin & Lorenzen, 2016). At least 88% of the average household income in all villages came from land-use and farming activities (see table 1). Remittances from permanent migrants – e.g. former household members, relatives or friends -which were mainly from urban areas in Lao PDR, contributed between
4 Legend: Average household incomes – both cash and non-cash – from the identified tree plantations are represented in blue at the base of each column. Where applicable, cash income includes wage labour, and smallholder plantation product revenues ( i.e. wood, bark and intercropped products). Where applicable, non-cash income includes company-sponsored community development programmes – such as electrification and the construction of household water systems - and self-consumed intercropped products (i.e. rice, fuelwood, bananas). Note that in none of our calculations we include land lease or land concession fees that any of the companies included in this study may pay to district, provincial and national authorities. As we have noted, we do include payments to communities such as ‘village development funds’, which in all cases were made in kind.
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0% - in two villages – and up to a maximum of 6% of the household income – in one village. A second form of off-farm livelihood diversification, which we define as ‘other labour’, includes off-farm employment opportunities that household members hold in the secondary and tertiary sectors- e.g. work in construction, charcoal industry, transport, public services, local administration, plantation surveillance. This sort of off-farm employment represented between 3 and 11% of the average household income in the four case villages in 2015-16.
Table 1. Income shares in different activities in the four case study villages.
BUFARCO allley cropping agroforestry farmer partnership 1+1+3
Yang bong independent agroforestry
OLPFL contract farming (2+3)
SEL allley cropping agroforestry village agreement
Other labour 5.7% 2.9% 3.6% 11.5% Remittances from permanent migrants
3.6% 0.1% 6.5% 0.0%
Farming and other land use activities
90.6% 97.0% 90.0% 88.5%
Incomes from from tree plantations, agroforestry and land leasing are significant
It is apparent from Figure 2 above that the tree plantation models contributed to local livelihoods to varying degrees. As an example, commercial tree plantations were the largest source of income in the ‘BUFARCO’ case study village, where households derived US $3,343 on average over the previous 12 months from plantation-based sources (i.e. US $2,913 cash and US $430 from consumed alleycropped rice). The returns from this plantation model thus represented 49% of the total HH incomes (cash and non-cash together). In the yang bong agroforestry site, the plantation model studied constituted the second most important economic HH livelihood source (22% of total income). In this community, surveyed households obtained an average income of US $1,781, including US $1,689 from sales of yang bong bark and intercropped bananas, and US $92 from consumed intercrop rice and fuelwood collected from the agroforestry system. Conversely, between 2015-2016, the eucalyptus plantation model in the ‘contract farming’ and the ‘SEL agroforestry concession’ cases provided households with US $444 and $250 total income (cash and non-cash), which constituted only 6% and 10% of the total household incomes, respectively. We note that these plantation-derived incomes depend largely on how much land was allocated to plantation foresty activities in each village, and the proportion of households in each village that participated in plantation activities. Adoption rates ranged from 85% of the households the BUFARCO case study to 50% in the contract growing case. The poor performance of the contracting case is due, at least in part, to the failure of 28 of the 45 farmers (63% of those who planted trees) to sell their contracted trees, notwithstanding that the trees were planted more than 7 years ago (a full rotation cycle) and assurances – verbal and written – from the company that trees would be purchased. Our fieldwork established that the contracting party advised farmers it lacked a market for their trees and advised farmers to sell their trees through an intermediary middleman. At the time of writing, this middleman also had a total debt of over US $9500 with 21 households whose trees had been felled.
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As the surveys revealed, significant farmer income streams were derived from the BUFARCO company-farmer leasing model, revenues which local people have in turn invested in livelihood assets. such as construction of high value housing stock. In the SEL research site, household income streams from land leasing have been used for hiring tractors, for creating new areas of wet rice paddy that will be a productive HH asset into the future. While our results identify that different plantation models can provide important livelihood streams for rural households, they also challenge the idea that fallow forests represent ‘idle’ or ‘unproductive’ lands. In fact, the returns from forests and fallows were higher than the returns from tree plantations in a number of sites (see results from OLPFL SEL agroforestry sites in Figure 2). Consequently, the diversity of farmers’ existing livelihood strategies need to be understood and taken into account in designing options for commercial plantations that will benefit farmers as well as companies. Incomes from plantation labour might not be significant
The provision of employment in plantaion operations is often advanced as a benefit of plantation forestry development. Our analysis suggests that the issue of labour provision through tree plantations requires closer consideration, specially in the cases where the management of the plantations are a company’s responsibility – i.e. under the concession and community land-lease models. Based on information provided by SEL and BUFARCO, these companies estimate that 1 hectare of tree plantation can provide 112 and 162 person-days of labour, over a full rotation cycle (of 7 years?). Based on this information, we can estimate that a household supplying one unskilled plantation labourer, on a wage of 50,000 kip (US $6) per day, would earn between US $96 to US $138 per year per hectare, respectively, from wages for the complete plantation cycle. Even under such optimal conditions (unskilled labourers are typically not involved in tree harvesting with chainsaws in Laos), this would represent approximately 10% of cash income in the poorest village, and only a few percent in the others, and so it appears unlikely that plantation–based labour itself could represent a sustainable livelihood. More plantations in the future? As part of our surveys, we asked informants whether, given their accumulated experience with the plantation model in question, they would advocate for more commercial tree plantations in their communities. Responses varied: those in the BUFARCO case were open to more plantations, if the company paid higher land lease fees than at present and/or paid them according to the volume of timber produced in addition to the current payment system, which is based on the area cleared and planted. All surveyed informants in the SEL case study village agreed that there was no more community land available for plantations; they did not wish to release any more of the c. 500 ha of ‘degraded’ land under different stages of fallow to establish more tree plantations. In the ‘contract farming’ case, the general view was that the company should purchase the trees that they had planted and assure the purchase of their future timber production if they wanted farmers to continue to participate in tree growing. In the yang bong case, only those with 6 or more plots of yang bong – that is, households selling yang bong nearly every year – said they would consider establishing a new plantation plot. In this village, the majority of households favour leasing land to Vietnamese for banana plantations, or the construction of paddy land for irrigated rice.
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Conclusions
This paper found that household livelihood strategies are highly diverse, and largely based on agriculture and forests use from both household and collective land. While income streams from plantations, agroforestry and land leasing are significant in the case study villages, the non-cash economy remains important. The high dependency of the poorest case study village on ‘degraded’ land is reflected in their unwillingness to make further land available for plantations. Commercial plantations can spur local economic activity at the village level, and also provide a pathway of upgrading into more intensive and higher value agro-forest production. However, some of the conventional assumptions about the contributions of plantations appear not to hold; and the benefits to households depend on the design of plantation models, as well as the level of adoption. One of the case studies provided evidence for spontaneous adoption where market signals are strong; conversely, non-filfulment by the company of contractual commitments in another case was a disincentive for continued tree growing. Overall, the results illustrate the challenges of, as well as some opportunities for, promoting integrated, sustainable and economically productive livelihoods for farmers in Lao PDR.
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REFERENCES
Andersson, K., Lawrence, D., Zavaleta, J., & Guariguata, M. R. (2016). More trees, more poverty? The socioeconomic effects of tree plantations in Chile, 2001–2011. Environmental management, 57(1), 123-136.
Barney, K. (2012). Land, livelihoods, and remittances: A political ecology of youth out-migration across the Lao–Thai Mekong border. Critical Asian Studies, 44(1), 57-83.
Bissonnette, J.-F., & De Koninck, R. (2015). Large Plantations versus Smallholdings in Southeast Asia: Historical and Contemporary Trends. Paper presented at the Conference on Land Grabbing, Conflict and Agrarian-Environmental Transformations: Perspective from East and Southeast Asia.
Broegaard, R. B., Rasmussen, L. V., Dawson, N., Mertz, O., Vongvisouk, T., & Grogan, K. (2017). Wild food collection and nutrition under commercial agriculture expansion in agriculture-forest landscapes. Forest Policy and Economics.
Broegaard, R. B., Vongvisouk, T., & Mertz, O. (2017). Contradictory Land Use Plans and Policies in Laos: Tenure Security and the Threat of Exclusion. World Development, 89, 170-183.
Castella, J.-C., Lestrelin, G., Hett, C., Bourgoin, J., Fitriana, Y. R., Heinimann, A., & Pfund, J.-L. (2013). Effects of landscape segregation on livelihood vulnerability: Moving from extensive shifting cultivation to rotational agriculture and natural forests in northern Laos. Human Ecology, 41(1), 63-76.
Cossalter, C., & Pye-Smith, C. (2003). Fast-wood forestry: myths and realities (Vol. 1): CIFOR. Cramb, R., & McCarthy, J. F. (2016). The oil palm complex: Smallholders, agribusiness and the state in Indonesia
and Malaysia: NUS Press. Dwyer, M. (2015). Untitled but not Informal: Lao Tenure Politics in Formality’s Gray Spaces. Paper presented at
the Untitled but not Informal: Lao Tenure Politics in Formality’s Gray Spaces, Chiang Mai University, Thailand.
Foppes, J., & Ketphanh, S. (2000). Forest extraction or cultivation? Local solutions from Lao PDR. Paper presented at the workshop on the evolution and sustainability of" intermediate systems" of forest management, FOREASIA.
Gerber, J. F. (2011). Conflicts over industrial tree plantations in the South: Who, how and why? Global Environmental Change, 21(1), 165-176. doi:http://dx.doi.org/10.1016/j.gloenvcha.2010.09.005
Grossman, J. J. (2015). Eucalypts in agroforestry, reforestation, and smallholders’ conceptions of “nativeness”: a multiple case study of plantation owners in eastern Paraguay. Small-scale Forestry, 14(1), 39-57.
Korhonen, J., Zhang, Y., & Toppinen, A. (2016). Examining timberland ownership and control strategies in the global forest sector. Forest Policy and Economics, 70, 39-46.
Lestrelin, G., Castella, J.-C., & Bourgoin, J. (2012). Territorialising sustainable development: The politics of land-use planning in Laos. Journal of Contemporary Asia, 42(4), 581-602.
Martin, S. M., & Lorenzen, K. (2016). Livelihood diversification in rural Laos. World Development, 83, 231-243. PDR, G. o. L. (2013). Lao PDR – National Growth and Poverty Eradication Strategy (NGPES). Rigg, J. (2006). Land, farming, livelihoods, and poverty: rethinking the links in the rural South. World
Development, 34(1), 180-202. Rigg, J. (2007). Moving lives: migration and livelihoods in the Lao PDR. Population, Space and Place, 13(3), 163-
178. Rigg, J. (2012). Living with Transition in Laos: Market Intergration in Southeast Asia: Routledge. Russell, A., Foppes, J., Ketphanh, S., Vongphasouvanh, S., Rafanoharana, S., Locatelli, B., . . . Nakondiege, N.
(2013). An Analysis of Ecosystem Services of Dry Dipterocarp Forests in Savannakhet Province, Lao PDR [Laotian].
Sims, K. (2017). Economic growth and development in Lao PDR: Who pays for progress? Human Rights Defender, 26(1), 20.
WorldBank. (2011). Investment and Access to Land and Natural Resources: Challenges in Promoting Sustainable Development A Think Piece (A basis for dialogue). Retrieved from http://documents.worldbank.org/curated/pt/home
WorldBank. (2016). Lao Economic Monitor. Challenges in promoting more inclusive growth and shared prosperity.
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Initial Lao PDR Plantation Policy Assessment No 4. Environmental impacts and benefits of different plantation development approaches
Himlal Baral, Rodney J Keenan, Yusuf Bahtimi, Somvang Phimmavong, Chittana Phompila
The situation Lao PDR has 6 to 8 million hectares of degraded forest land that could potentially be used for a mix of production and conservation purposes. The Lao 2020 Forest Sector Strategy aims to increase forest cover on degraded land to enhance rural livelihoods and safeguard environmental values such as water resources. In part, this goal was to be achieved through planting 500,000 ha of high-value or fast-growing trees by smallholders and corporate investors. The Strategy envisaged commercial tree plantation by farmers, villagers and investment by companies to provide export and domestic products. Planting of trees by smallholders has been relatively limited, with over 15,000 ha of teak in Luang Prabang Province and possibly 40,000 ha across the country. Concessions allocated to industrial companies for plantation development have resulted in 74,000 ha of plantations for timber production, well below their collective target of 133,000 ha. Companies have had difficulties accessing land and local people often do not support plantation development. There is a moratorium on concessions that is limiting new planting. Investment in plantations can come from different sources, smallholders investing land and labour or corporations investing capital and technology. Financial returns can come from employment and sale of wood that is either processed locally or exported. Local processing can provide wider economic benefits through employment and further capital investment and value adding. Lao PDR is considering future directions for timber plantation development, the types of plantations it wants to promote, for what purpose, and the implications of these plantations for values such as forest cover, household livelihoods, regional economy and environmental values. Key Environmental Issues related to planted forests Planted forests are frequently promoted as contributing multiple environmental benefits, such as biodiversity conservation, climate change mitigation, provision of clean water, reduced dry land salinity and generally reducing pressure on natural forest resources. In contrast, planted forests are viewed negatively by some, for example plantations have been labelled as ‘green deserts’, while others claim they should not be called forests at all. In Lao PDR, provision of water, biodiversity and climate regulations are key environmental issues related to industrial and smallholder tree plantations. Planted forests are often designed to protect or conserve natural forests with the aim of supporting biodiversity conservation and ecosystem services. In Sumatra, Indonesia, Acacia mangium has been planted to retain up to 26% of the area under natural forest. If
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appropriately designed and managed these areas can assist in the conservation of primates and other species. The conservation of a specified percentage of forest has become a mandatory requirement under forest certification. For example, the Forest Stewardship Council (FSC) requires at least 10 per cent of areas within planted forests to be allocated for conservation purposes. The role of planted forests in carbon sequestration and hence in mitigation of climate change has received major attention. Almost all forests have a natural ability to remove atmospheric carbon dioxide (CO2) through photosynthesis and to store it in biomass above and below ground. Healthy forests also build up carbon stocks on the forest floor in litter and dead wood and below ground as soil organic matter. For this reason, afforestation and reforestation have been recognized as important aspects of global action on climate change under the Kyoto Protocol and the recent Paris Agreement on Climate Change. In many cases, planted forests typically have positive water-related benefits such as lowering saline water tables and flood mitigation but many communities have become concerned that they will reduce the water available for other uses, such as irrigated agriculture and the environment. Adverse effects of planted forests on the hydrological yields of watersheds have been documented in drier regions. Tree plantations therefore have a range of potential benefits for, and impacts on, environmental values. On the positive side, plantations can increase tree cover, reduce soil erosion, improve water quality, remove CO2 from the atmosphere increase forest carbon stock, provide wildlife habitat, or reduce pressures for timber harvesting in intact natural forests. On the other hand, plantations can have negative environmental impacts through poorly implemented mechanical site preparation and soil erosion, inappropriate use of agro-chemicals like fertilisers, weedicides and pesticides, impacts on biodiversity and carbon stocks through conversion of native forests and impacts water yield when fast growing trees are planted at large scale across significant areas of catchments. Processing plants associated with plantations may also have environmental impacts that need to be considered. Purpose This paper describes current understanding of environmental benefits and impacts of different plantation development models. 1. Foreign investor driven, local processing focused 2. Foreign investor driven, export orientation 3. Smallholder driven, local processing focused 4. Smallholder driven, export orientation It provides a concise summary of different plantation developments models and associated environmental benefits and potential impacts. It provides a basis for discussion of future plantation development options in Lao PDR. Key findings 1. Foreign investor driven, local processing focused development Currently there are about five main foreign investors started establishing forest plantations for timber production in Lao PDR (Table 1). Most of the companies favor fast growing species,
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e.g. eucalyptus, acacia. These companies have generally focused on building a plantation estate to support a pulp mill in Lao PDR. Table 1: Foreign Company owned timber plantation in Lao PDR Company/Activity Investor origin Approved Area (ha) Burapha Agroforestry Co. Sweden 2,000 Birla Lao Pulp & Plantation Co India 50,000 Oji Lao Plantation Forest Co and Oji South Japan 74,974 Sun Paper China 9,235 Stora Enso Co. Finland/Sweden 2,000 TOTAL 115,732
Source: Smith et al., 2017 this project. Note that actual planted areas are well below the approved areas. Studies in Savanakhet and Salavan provinces suggests that large scale plantation establishment in degraded forest does not result in direct harm to biodiversity. However, plantations established in these degraded, lower biodiversity areas often highly valued as livelihoods source. Thus, any land-use change in degraded forest might drive the community to encroach higher biodiversity areas. Some compensations have been given to the community in the form of cash, infrastructure, and employment. Large-scale plantations might also cause environmental problems, e.g. agro-chemical use and waterway degradation. The type of processing facilities and markets will determine species and silviculture requirements. Local timber processing facilities currently include small sawmills or furniture production facilities (or a combination of the two). Proposed local processing options include dissolving pulp mills (or “bio-refineries”), veneer mills, larger solid wood mills and furniture production facilities. None of these larger scale mills have been developed because the companies involved have not be able to achieve sufficient plantation area. Policy options to mitigate impacts on environment (for discussion)
i. Cooperation with the local community is a key element in building sustainable forest plantation and reducing impacts on surrounding areas. Supporting collaboration between companies and local partners, particularly local communities can improve ecosystem services and benefits to locals. This needs to include assessment of environmental impacts experience by different parties and the gains and losses of environmental services from established plantation.
ii. Specific a certain proportion of forest area (perhaps 30%) to be conserved or re-established with natural forest within concessions or large estates.
iii. Encourage investors to consider integrating native species, or using multi-species
plantations to enhance ecosystem services. iv. Allocate responsibilities for government in managing environmental impact at the
level with the appropriate skills and understanding and capacity to engage with local communities.
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v. Assess management and operational activities for impacts on ecosystem services attributes. Develop codes of practice for plantation development and regulations, education and enforcement of requirements for chemical use are required to mitigate the impacts of plantation development on environmental values.
vi. Establish sound environmental regulations and monitoring and enforcement capacity
for processing facilities including sawmills, pulp mills or veneer plants. 2. Foreign investor driven, export orientation models The Lao PDR government also support foreign investment in tree crops for agriculture intensification and modernization. This export-oriented development model has been prominent for rubber plantation, triggered by Chinese and Vietnamese investors to fulfill the Chinese rubber market, but has also been the initial driver for some eucalyptus plantation investments – eg. Oji LFPL Ltd and Stora Enso. Plantations driven by foreign investors might be through direct investment from companies or contract farming where landowners are paid to grow trees. Larger plantations have generally been established by companies on state land through concessions. Contract farming is mostly found in the northern provinces due to provincial government policy, while land concessions have mostly developed in the southern provinces. Much of the land allocated for concessions is important for community livelihoods, mainly for different forms of agriculture or grazing. This land use change might cause ecosystem services reductions, e.g. agriculture function to plantation could challenge food security, or conversion of natural forest to plantation might reduce biodiversity. Export orientation may lead to a stronger focus on forest certification to ensure the sustainability of the plantation management and its products. However, for rubber most of the material is for markets in China and Vietnam where there is limited demand for certified products. Many timber markets in these countries have also not been interested in certification, although this is changing. Policy options to mitigate environmental impacts These options are similar to scenario 1, except that the impacts of processing plants do not need to be considered. 3. Smallholder driven, local processing focused Plantations driven by smallholders in Lao PDR include rubber, teak agarwood or yangbong. Independent smallholders account for 30 percent of rubber plantation. The independent smallholder has more flexibility and full-autonomy towards their plantation compared to farmer-company contract system. However, any production or market risks are borne by the farmer, which may create a threat to food security. Smallholder teak plantings bring the economic benefits to rural communities. Employment opportunities are important but form only a part of the package of benefits offered by plantation forestry. Furthermore, we can see examples of successful and profitable smallholder involvement in commercial rubber and eucalypt plantations in Northeast Thailand and southern China and this offer confidence that Lao smallholders can effectively engage with investors to
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contribute to flows of commercial wood for the smallholder growers to benefit considerably from this activity through sales of produce. Smallholder plantations can bring environmental benefits through increased tree cover, reduced soil erosion and increased landscape carbon stocks. Their scattered nature also means that they are unlikely to have extensive hydrological impacts. The limited land area available to farmers, as well as lack of finances to undertake mechanical site preparation or harvesting, or procure agro-chemicals means that plantations driven by smallholders are likely to have smaller negative impacts on the environment. The integration of these plantations into farming systems through agroforestry or other approaches is also likely to result in them having fewer indirect impacts on surrounding native forest areas. However, smallholders are less likely to have knowledge of, or adhere to, codes of practice for plantation production that limit harvesting of trees on steep slopes, or protect streams and river systems. They will not have the financial resources to put in good quality access roads for harvesting, which may lead to environmental degradation due to poorly designed or constructed roads. Policy options to reduce environmental impacts of smallholder tree growers:
i. Appropriate codes of practices designed to incorporate smallholder production systems.
ii. Establish inclusive landscape-level planning processes to identify where to support smallholder plantation production and arrangements that best support a mix of agricultural production, tree crops and conservation.
iii. Invest in education and awareness raising of the potential environmental impacts of tree growing and harvesting.
4. Smallholder driven, export orientation This type of development model is strongly related to contracts between farmers and rubber companies. These contracts amount to 24 percent from the total plantation area 281,772 hectares in 2014. The environmental impact of this type of model is similar with the independent smallholder model. Conclusions Rubber, Eucalyptus, Acacia, and teak are dominant tree species in Lao PDR’ plantation industry. The major driver of rubber plantation are Chinese and Vietnamese markets demand and Lao PDR government effort for agriculture sector intensification and modernization. Land tenure is the key element in sustaining the forest plantation in Lao PDR. Any mismanagement and lack of communication with community might increase encroachment in high biodiversity areas, directly or indirectly. New plantations through concessions to support pulp mills in Lao PDR can be designed for sustainable forest plantations and improve on outcomes experienced with rubber plantations. Various studies suggest that planted forests could offer array of ecosystem benefits including climate change mitigation, biodiversity conservation and reducing pressure on natural forest for supplying wood products. However, these benefits are relative to the land replaced by the planted forest. If a plantation replaces a natural primary forest, clearly some key ecosystem services including biodiversity, water and soil degradation will be significantly negatively
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impacted. Conversely, planted forests on degraded land offer numerous ecosystem benefits to the prior land use. Specific study based on the location of plantation, rotation length, management intensity, species needed to understand site specific outcomes or impacts of forest plantation.
Further reading
Baral, H., Keenan, R.J., Fox, J.C., Stork, N.E., Kasel, S., 2013. Spatial assessment of ecosystem goods and services in complex production landscapes: a case study from south-eastern Australia. Ecol. Complex 13, 35–45,
Baral, H., Guariguata, M., Keenan, R., 2016. A proposed framework to assessing ecosystem goods and services from planted forests. Ecosyst. Serv.,
Brockerhoff, Eckehard G., Herv?? Jactel, John A. Parrotta, and Silvio F B Ferraz. 2013. “Role of Eucalypt and Other Planted Forests in Biodiversity Conservation and the Provision of Biodiversity-Related Ecosystem Services.” Forest Ecology and Management 301: 43–50.
Bottcher, H, and Linder, M 2010. Managing forest plantations for carbon sequestration today and in the future. In: Bauhus, J. Van Der Meer, P.J., Kanninen, M. (eds.) Ecosystem goods and services from plantation forests. Earthscan Publications, London, UK, Washington, DC, USA, pp. 43–76.
D’Amato, D., Rekola, M., Wan, M., Cai, D., Toppinen, A. 2016. “Effects of Industrial Plantations on Ecosystem Services and Livelihoods: Perspectives of Rural Communities in China.” Manuscript 63. Elsevier Ltd: 266–78.
Ferraz, Silvio F B, Walter de Paula Lima, and Carolina Bozetti Rodrigues. 2013. “Managing Forest Plantation Landscapes for Water Conservation.” Forest Ecology and Management 301: 58–66.
IUCN (2008). Rapid Biodiversity Assessment for Stora Enso Plantations in Southern Lao PDR. 208 pp. Available at: http://cmsdata.iucn.org/downloads/stora_enso_final_oct_08_2.pdf
Smith, H. Keith Barney, Neil Byron, Alex Van Der Meer Simo, Somvang Phimmavong, Rodney Keenan, & Vongkhamsao, V. (2017). Tree Plantations in Lao PDR: Policy Framework and Review. This project.
Kenney-Lazar M, Wong G, Baral H, Russell AJ, in review. Greening rubber? The challenges of sustainability in Laos and Myanmar, Geoforum.
Liao, Chengzhang, Yiqi Luo, Changming Fang, and Bo Li. 2010. “Ecosystem Carbon Stock Influenced by Plantation Practice: Implications for Planting Forests as a Measure of Climate Change Mitigation.” PLoS ONE 5 (5).
Molina R. 2011. Camps, Children, Chemicals, Contractors & Credit: Field Observations of Labour Practices in Plantations & Other Social Developments in Savannakhet and
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Champassak. Pakse, Savannakhet: Global Association for People and the Environment, Japan International Volunteer Center.
National Land Management Authority, Chiang Mai University and Foundation for Ecological Recovery. 2009. Research evaluation of economic, social, and ecological implications of the programme for commercial tree plantations: Case study of rubber in the south of Laos PDR. Vientiane: NLMA, Chiang Mai University and TERRA.
Pirard R, Petit H, Baral H and Achdiawan R. 2016. Impacts of industrial timber plantations in Indonesia: An analysis of rural populations’ perceptions in Sumatra, Kalimantan and Java. Occasional Paper 149. Bogor, Indonesia: CIFOR.
Phimmavong, S., Ozarska, B., Midgley, S., & Keenan, R. (2009). Forest and plantation development in Laos: history, development and impact for rural communities. [Article]. International Forestry Review, 11(4), 501-513.
Schofield, N. J. 1992. “Tree Planting for Dryland Salinity Control in Australia.” Agroforestry Systems 20 (1–2): 1–23. doi:10.1007/BF00055303.
Scott, David F., and W. Lesch. 1997. “Streamflow Responses to Afforestation with Eucalyptus Grandis and Pinus Patula and to Felling in the Mokobulaan Experimental Catchments, South Africa.” Journal of Hydrology 199 (3–4): 360–77.
Silveira, Luis, and Jimena Alonso. 2009. “Runoff Modifications due to the Conversion of Natural Grasslands to Forests in a Large Basin in Uruguay.” Hydrological Processes 23 (2): 320–29.
van Dijk, Albert I J M, and Rodney J. Keenan. 2007. “Planted Forests and Water in Perspective.” Forest Ecology and Management 251 (1–2): 1–9.
Warman, Russell D. 2014. “Global Wood Production from Natural Forests Has Peaked.” Biodiversity and Conservation 23 (5): 1063–78.
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Initial Lao PDR Forest Plantation Policy Assessment No 3. Regional and national economic benefits of different plantation development approaches
Somvang Phimmavong, Rod Keenan, Neil Byron
The situation
Lao PDR has 6 to 8 million hectares of degraded forest land that could potentially be used for a mix of production and conservation purposes. The Lao 2020 Forest Sector Strategy aims to increase forest cover on degraded land to enhance rural livelihoods and safeguard environmental values such as water resources. In part, this goal was to be achieved through planting 500,000 ha of high-value or fast-growing trees by smallholders and corporate investors. The Strategy envisaged commercial tree plantation by farmers, villagers and investment by companies to provide export and domestic products. Planting of trees by smallholders has been relatively limited, with over 15,000 ha of teak in Luang Prubang Province and possibly 40,000 ha across the country. Concessions allocated to industrial companies for plantation development have resulted in 74,000 ha of plantations for timber production, well below their collective target of 133,000 ha. Companies have had difficulties accessing land and local people often do not support plantation development. There is a moratorium on concessions that is limiting new planting. Investment in plantations can come from different sources, smallholders investing land and labour or corporations investing capital and technology. Financial returns can come from employment and sale of wood that is either processed locally or exported. Local processing can provide wider economic benefits through employment and further capital investment and value adding. Lao PDR is considering future directions for timber plantation development, the types of plantations it wants to promote, for what purpose, and the implications of these plantations for values such as forest cover, household livelihoods, regional economy and environmental values. Purpose This paper describes current understanding from project research of the regional economic benefits from plantations of different plantation development models. The aim is to examine the full impact of forest plantation policy on the Lao economy and its development. The primary study used an innovative approach to economic analysis that linked macro and micro-economic models to investigate the welfare implications of expanding forest plantations in Lao PDR (Phimmavong, Ozarska et al. 2009; Phimmavong, Ferguson et al. 2010; Phimmavong 2012). Key findings • Timber production and processing in Lao PDR is currently a small contributor to the national
economy, 4 per cent of GDP in 2003. Assuming 500,000 ha of new plantations, real GDP increased slightly from 0.06 per cent in 2004 to 0.74 per cent in 2020, compared to the business-as-usual scenario. This limited increase is because interactions between the Forestry sector and the rest of the economy (except for the Wood industry sector) are relatively small and most forestry goods are currently exported as raw materials to neighbouring countries.
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• The Forestry and the Wood industry sector can assist the rural economy. The high indirect wage content of a forestry sector could play a key role in remote or underdeveloped area where unemployment or surplus labor occur.
• Foreign capital investment or smallholder plantations can either decrease or stimulate aggregate demand and have flow-on effects to other sectors such as manufacturing and services. This is because this policy will increase the relative prices of several sectors that have weak relationships with the Forestry sector. On the other hand, the expanding Forestry and Forestry related sectors would decrease the price of production, domestic sales, intermediate inputs, and exports.
• Capital investment in plantations can provide increases in household income through employment or other payments such as land rentals. However, this may increase income inequality depending on how the plantation program is designed.
• Despite a relatively higher growth in the production of various other industries, converting land from subsistence uses to plantations owned by foreign investors will result in some loss of local economic activity but this will not be reflected in national economic statistics
• Smallholder investment in plantations may take labour or land away from other crops or livestock production that contribute to the regional economy unless they currently are underemployed ( have spare labour without having to give up other activities).
• There is only a small increase in the growth of government revenue. This is because the total tax revenue collected from land rent, particularly from the Forestry sector, is extremely low, compared to regional and international land tax rates.
Examples of the economic impacts of plantation development in other countries At the global level, there is considerable evidence that plantation forestry can have direct and indirect positive impacts on the economy and household welfare. 1. In the Green Triangle region of South Australia, with 350,000 ha of forest plantations, timber
industries were estimated to employ about one-fourth of the workforce and produce almost one-third of gross regional product (Gerrand, Keenan et al. 2003). Investment in softwood plantations have been profitable over the longer term. After paying for the costs of plantation establishment (A$900 per ha), the gross revenue from timber sales at the end rotation is A$14,000 to $16,000 ha per ha an IRR of 6 per cent.
2. Liping County in Guizhou Province, China (Zhou, Yin et al. 2007), is undergoing a rapid smallholder plantation development under the reforestation of sloping agricultural land policy. Government subsidies for plantation establishment were required due to lower short-term income compared with annual crops. Investment in plantations by smallholder growers is profitable in the long run even without government financial incentives. Farmers own mature forests and planted Chinese fir, bamboo, mason pine and other non-timber species. With provision of 2250 kg/ha/year in food and US$36/ha/year in cash, the net economic return for all tree species is US$385 per ha, higher than grain crop production (US$326 per ha) or cash crops (US$288 per ha).
3. Economic analysis of a wood-chip project Western Australia indicated an income multiplier of 1.68 for the Forestry sector. That is, each $100 of additional forest sales generates additional regional income of $168. The multiplier for Sawmilling was 1.92. The employment multiplier or the number of indirect jobs created in other related sectors, for each job created directly in the sector being analysed was 0.41. That is, each $100 of sales by Forestry comprised a total wage content of $41. The project has substantial linkages with other economic sectors, especially the Transport sector.
4. Assessment of economy-wide impact in Northern Victoria using a regional input-output table showed that farm forestry would increase gross production output of the regional economy over 30 years by 6 per cent. Aggregate household income and total regional income would to rise by
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4 and 5 per cent respectively. Employment would increase by 4 per cent. The wood manufacturing sector would grow by over 400 per cent in production output, income, and employment.
5. In Scotland, the employment multiplier for timber processing industry was found to be 2.26 while income multipliers (type 2) for forestry planting and harvesting were 4.38 and 2.04 respectively. Most afforestation scenarios would contribute to the economy by increasing production, income, and employment.
Conclusions
Analysis of the Government of Laos’ forest policy to establish 500,000 ha of plantations for timber production, shows that plantation development policy is likely to have a small positive impact on the Lao economy by increasing the production of several economic sectors and by stimulating exports and household income. Obviously, the greatest impact is on the Forestry and Forest-related sectors. Under the assumptions in the analysis, land price will decrease significantly because of the increasing land supply. This will consequently lead to a rapid increase in the Forestry sector’s competitiveness, and bring about an expansion of this sector, partly at the expense of other sectors. Furthermore, higher production in Forestry and the Wood industry sectors will result in a significant increase in domestically produced commodities, intermediate consumption, and exports in these sectors. Despite prompting a relatively higher growth in the production of various other industries, some undesirable impacts are also likely on sectors that do not have strong interactions with the Forestry sector from the short to medium runs, e.g. the Crop, Livestock, Construction, and Non-metallic mineral products sectors. However, because of efficiency and accumulation effects, production of these sectors is projected to recover in the long run, and enjoy increases in their production in all sectors in longer terms. The results also indicate that the government tax revenue is likely to experience some growth. The effects of plantations on degraded land on subsistence values contributing to local livelihoods was not assessed. The analysis also shows that the expansion of plantations may increase income inequality. In order to maximize the benefits from this policy and minimise any adverse impacts, the Government of Laos will need to enforce forestry and other laws and implement supporting policies to ensure that plantation investments are consistent with international standards, guidelines and codes of practices relating to the creation of planted forests. Because most forestry goods are currently exported as raw materials, there is much scope for adding value by processing and improvement of product quality. There is an opportunity for Laos to develop vibrant and modern wood-based industries, funded by foreign investors. Thus, policies to encourage value-adding and foreign investment are especially important to increase the extent of positive policy outcomes beyond those that the model incorporates.
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REFERENCES
Gerrand, A., R. J. Keenan, et al. (2003). "Australian forest plantations: an overview of industry, environmental and community issues and benefits." Australian Forestry 66(1): 1-8.
Phimmavong, S. (2012). Forest Plantation Development, Poverty, and Inequality in Laos: A Dynamic CGE Microsimulation Analysis, University of Melbourne, Department of Forest and Ecosystem Science.
Phimmavong, S., I. Ferguson, et al. (2010). Economy-wide impact of forest plantation development in Laos using a dynamic general equilibrium approach. International Conference on Economic Modelling. Istanbul, EcoMod.
Phimmavong, S., B. Ozarska, et al. (2009). "Forest and plantation development in Laos: history, development and impact for rural communities." International Forestry Review 11(4): 501-513.
Zhou, S., Y. Yin, et al. (2007). "The costs and benefits of reforestation in Liping county, Guizhou province, China." Journal of Environmental Management 85(3): 722-735.
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Overseas Development In
Initial Vietnam Plantation Policy Assessment No. 1: Supporting Sustainable Forest Management in Smallholder Plantations
March 2017
Hilary Smith, Tran Nghia, Rodney Keenan and Peter Kanowski
Introduction
In Vietnam, the Law on Forest Protection and Development 2004 is under review and the new draft law will be based on principals of sustainable forestry development and sustainable forest management, which is defined as:
the process of forest management undertaken to achieve management objectives, ensuring production continuity that shall not reduce forest values and productivity in the future, nor cause negative consequences for the environment and society.
The draft law stresses that forest owners will be required to implement sustainable forest management (SFM)on their allo-cated land, which should certified by an approved organization. In 2016, Decision 83 1 was made to approve a scheme for the implementation of SFM and forest certification for natural forests and plantations. That Decision includes the implementa-tion of SFM through:
• The development of a national SFM standard on the basis of, and harmonized with, international SFM standards. The Vietnam Standard on SFM will follow the Programme for the Endorsement of Forest Certification (PEFC).
• The development and completion of technical guidelines for SFM including for monitoring and evaluation.
• The dissemination of SFM propaganda and training on SFM
• The review, planning and preparation of master plans and annual plans for the implementation of SFM on national and regional scales; and the implementation of pilot projects for larger scale application.
PEFC applies a ‘Sustainability Benchmark’ based on broad consensus of society and applies standards that promote envi-ronmentally sound, socially just, and economically viable management of forests globally, but when applied locally reflect the specific national context. In Vietnam households own approximately 45% of the area of planted forests and while each hold-ing is small (typically 1-3 ha) they make a significant contribution to domestic wood production as well as to household in-comes. National policies aim to further expand the area of land under planted forest and increase their wood supply contri-bution to domestic processing, with an increasing emphasis on sawn wood for furniture production. A Vietnam standard for SFM will therefore need to focus on understanding and supporting smallholders with consideration of the socio-economic aspects of plantation ownership and the regulatory measures, financial instruments and educational processes that can help achieve this.
Key Issues
1. securing land use rights to grow and harvest trees,
2. understanding, accessing and maintaining markets, particularly those with strict product standards,
3. plantation design and silvicultural practices that maintain site productivity, meet market needs and contribute to other landscape values such as biodiversity conservation and water quality,
4. access to quality planting materials and technical assistance to ensure adequate product quality and quantity,
5. measures to protect, manage, develop and sustainably use plantation forests that are appropriate to each type of forest.
1 Decision No: 83 / QD-BNN-VNFOREST Hanoi, 12 January 2016 Approving the Scheme of implementation of sustainable forest management and forest certification period 2016-2020
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6. measures to support smallholders during the period between planting and harvesting and that encourage re-planting,
7. external factors that will influence the sustainability of smallholder plantations including competing employment op-portunities and land uses.
The key question we address is: What is needed to achieve and support SFM in smallholder plantations?
Key Questions
1. What is Sustainable Forest Management?
Internationally SFM has been defined as “the stewardship and use of forests and forest lands in a way, and at a rate, that maintains their biodiversity, productivity, regeneration capacity, vitality and their potential to fulfill, now and in the future, relevant ecological, economic and social functions, at local, national, and global levels, and that does not cause damage to other ecosystems”.2 This the definition that has been adopted by the PEFC with which Vietnam’s approach to SFM will align.
The draft Law on Forest Protection and Development (Art 4) proposes the following definition for SFM:
the process of forest management undertaken to achieve management objectives, ensuring production conti-nuity that shall not reduce forest values and productivity in the future, nor cause negative consequences for the environment and society.
A new Vietnam Standard on SFM will be issued and approved by the Minister of MARD, and should be based on the local context, but its scope or content have not yet been determined.
What are the key elements of SFM in the Vietnam context?
2. What does SFM for smallholder plantations look like?
Currently, smallholder plantations are focused on short rotation Acacia and Eucalyptus systems for the production of wood chip or small diameter sawn or veneer wood. Policies to promote these types of plantation have been very effective and they are generally compatible with farmer’s needs. They appear to be sustainable under the current market conditions for these products, however there are some environmental concerns associated with the risk fire, typhoons, pests and diseases and lack of tree species diversity. In recent years there has been a shift towards pro-moting native, high value timber species.
The Government of Vietnam has new policies to promote the manufacturing of furniture for export markets and this requires the production of timber for sawn wood; currently large volumes of sawn wood are imported. In order for this wood to be sourced locally, a proportion of it will need to be grown in smallholder plantations under different silvicultural arrangements. There is a perceived need to introduce new practices for smallholder owned plantations to meet the needs of new markets and to achieve SFM under these conditions.
What does SFM for smallholders look like now? How should SFM for smallholder look in the future?
3. What are the current issues/conditions that are limiting the achievement of SFM in smallholder planta-tions?
Different types of households have different opportunities to participate in plantation production and adopt different plantation investment and management strategies. Access to land, finance, social connections, level of education and proximity to markets may all impact their ability to take-up or adjust to new policies and emerging markets. This will also affect their sustainability. Policies to support increased timber value and SFM will need to reflect these different household types; a range of financial mechanisms may be needed.
For example:
Type 1. “Poor households” focused on subsistence production with low access to land and finance may have lim-ited opportunity to invest in plantations. Those that do so use low quality seeds, little fertiliser and rely on their
2 Ministerial Conference on the Protection of Forests in Europe (FOREST EUROPE), and has since been adopted by the Food and Agriculture Organiza-tion
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own labour, resulting in reduced productivity and returns. Their ability to re-invest will be determined by their other livelihood needs. Access to finance may be constrained by the absence of collateral and their ability to pay-back loans due to lack of financial surplus. Rotations are likely to be very short (3-4 years) with limited capacity to be extended.
Type 2. “Better off farmers”, with more land, better social connections and who may have been able to develop diverse household economies thereby generating a surplus, may be more able and willing to invest in larger are-as of tree plantation. Surplus generated through integrated production allows for small loans to be accommo-dated, facilitating the use of better quality inputs. Rotations are still likely to be short (up to 5 years) however, the diversified household economy creates a more flexible and resilient system that could accommodate even-longer rotations.
Type 3: “Wealthy households” – have secure access to larger land areas, including through strategic land accu-mulation (often because they arrived early or were early adopters of tree growing), and have an investment strategy aimed at establishing significant areas of plantation for ongoing income generation. Such households may engage in off-farm employment and have the capacity to purchase good quality inputs and employ others to undertake plantation management. Good access to external finance facilitates investment and re-investment and allows for slightly longer rotations. Such plantations owners may be more able to accommodate longer planta-tion rotations if the final returns are significantly greater.
How can implementation of SFM principles accommodate different types of smallholder tree growing? What key policy changes are required for smallholders to achieve SFM?
Conclusions and next steps • Policies, including a Decree, guiding circulars and technical guides, aimed at changing plantation design (to incorpo-
rate water protection and conservation values) and management practices such as site preparation and harvesting techniques (to protect site quality and long-term productivity) will need to include new evidence-based codes of practice, education, financial incentives and enforcement to address any current preferences for potentially degrad-ing practices. Smallholder cooperatives may be appropriate for the dissemination of information and extension.
• Policies aimed at achieving SFM should not introduce institutional barriers, bureaucratic procedures or technologi-cal constraints that increase the transaction costs for smallholders.
• New measures for SFM in smallholder plantations will need to provide flexible conditions that encourage those households that already have plantations to reinvest in new plantations after harvesting.
• Some households may not be able to accommodate longer rotations into their production systems. Policies should be aimed at supporting these households to continue to invest in short rotation plantations and reduce the risk of market driven land use change.
• For other households, policies need to support a transition to new plantation models based on longer rotations and that produce the diversity of products demanded; and which can accommodate new environmental protection measures including through financial incentives.
Further reading Government of Vietnam Decision No: 83 / QD-BNN-VNFOREST Hanoi, 12 January 2016 Approving the Scheme of implemen-tation of sustainable forest management and forest certification period 2016-2020
Sikor, T. and J. A. Baggio (2014) Can Smallholders Engage in Tree Plantation? An Entitlement Analysis from Vietnam. World Development, 64:S101-S112
Phuong, V. T., Dong, T. L and L. T. Duc (2016) Policy Brief Sustainable Forest Management in Vietnam: Status, challenges and interventions (Draft version) UN-REDD.
Overseas Development Institute
Initial Vietnam Plantation Policy Assessment No. 2: Tree Plantations Policy Background Paper Smallholder plantations and certification March 2017
P Kanowski, P Vu Tan, R Keenan
Introduction
Smallholder tree plantations are important resources for domestic and international value chains, and for smallholder livelihoods, in many countries; many governments have policy objectives to increase their extent and value. This is the case for both Lao PDR and Vietnam. Both countries have goals of increasing the area of smallholder plantation, in the context of national goals to increase forest extent.
Smallholder tree plantations and value chains are well developed in Vietnam 1.7 M ha (44%) of the 3.9 M ha of tree plantations are owned by smallholders (excluding rubber), contributing to the c. 8 M m3 annual harvest volume, and to supply chains of both the export woodchip and furniture value chains.
Environmentally-aware markets, predominantly in the EU and North America, are important for furniture value chains. Since the mid-1990s, forest certification has become increasingly required in these markets. Forest certifica-tion emerged as a response to the loss and degradation of tropical natural forests. It is a mechanism for validating that wood and wood products are sourced from well-managed forests and that operations along the value chain meet environmental and social criteria. In the past decade, the EU and USA, amongst others, have also introduced regula-tions that prohibit the importation of illegally-harvested wood products. Forest certification offers a means to demon-strate the legality of wood products.
Forest certification adds costs that are high for small-scale producers. Certification proponents thought that consum-ers would pay a premium for certified products; however, this has seldom been the case. Against many criteria, small-scale tree growers should be favoured by certification, as they are by Fairtrade initiatives in other agricultural value chains such as coffee. However, in practice, smallholders are disadvantaged by the costs and compliance requirements for certification. For these reasons, the two forest certification schemes operating and competing globally – FSC and PEFC – have sought to develop initiatives, such as “group certification”, that aim to minimize the costs to smallholders. Most analyses suggest that these have been only partly successful. Some voices are calling for alternatives to certifi-cation that are better suited to smallholder enterprises and demonstrate responsible production.
Pilot-scale smallholder forest certification projects have been initiated with the FSC in both Lao PDR and Vietnam – with teak and eucalypts in Luang Prabang and Vientiane Provinces in Lao PDR; and with acacia in Quang Tri, Yen Bai, Thua Thien Hue and Quang Ngai in Vietnam. Generally, these pilot projects have not continued beyond their initial phase, because of both the relative costs and the organizational challenges associated with “groups” of smallholders. In 2015, the Government of Vietnam announced its commitment to develop a national forest certification scheme, in collaboration with PEFC. This scheme is planned be operational from 2018, and will apply to smallholders as well as other forest growers and managers.
Key Issue
The forest policy objectives of both Lao PDR and Vietnam, and the challenges faced by certification of smallholders in both countries, focus attention on what policy settings and mechanisms might best facilitate the goals of certification in Lao PDR and Vietnam
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Key Questions
1. Are there credible alternatives to forest certification for smallholder plantation growers?
Forest certification developed in the 1990s to address concerns about timber production from nat-ural forests. More recently, many international agricultural commodity corporations have commit-ted to simpler objectives such as ‘deforestation-free’ supply chain initiatives. Some professionals have argued that the objectives of certification – environmentally and socially responsible forest production and value chains – would be better met by other mechanisms, especially for smallhold-ers.
Are there internationally-credible mechanisms other than certification that smallholders could use to demonstrate environmentally- and socially responsible production and supply chains?
2. How can the Vietnam Forest Certification Scheme work best for smallholders?
The Government of Vietnam aims to increase the area of smallholder plantations grown on longer rotations for solid wood production. It also aims to increase the volume of certified forest products under the Vietnam Forest Certification Scheme (VFCS), to improve market access. Markets for solid wood products are more likely to require certification than those for woodchips. The Government of Vietnam has introduced measures to support these ob-jectives, including the development of the VFCS in collaboration with PEFC. The VFCS is expected to be operational from 2018; its implementation for smallholder tree growers is likely to face similar challenges to those that have emerged for smallholders elsewhere. Measures such as group certification could help reduce the costs associated with certifica-tion and improve both the linkage along the supply chain and forest management.
In what ways can Vietnam’s National Forest Certification Scheme be developed and implemented to work well for smallholder tree growers, consistent with national policy objectives?
Conclusions and next steps
• Certification of smallholder tree growing, or the development of credible alternatives, are important mech-anisms to support national policy objectives in Lao PDR and Vietnam, and to foster access to environmen-tally- and socially-sensitive international markets.
• There is a body of research and practice, both in Lao PDR and Vietnam and elsewhere, that informs the issue of certification and smallholders. What can be learnt from the early experience of group certification in Lao PDR and Vietnam to inform current initiatives, including implementation of VFCS?
• The Project will focus on assembling and assessing this evidence and experience over 2017.
Further reading Centre for Sustainable Rural Development. 2015. Livelihood Impact Assessment Of Vietnam’s Proposed Voluntary Partnership Agree-ment. The Vietnamese Non-Government Organization Network On Forest Law Enforcement, Governance And Trade (Vngo-Flegt).
Government of Vietnam, Ministry of Agriculture & Rural Development. 2016. Decision: Approving the Scheme of implementation of sustainable forest management and forest certification period 2016-2020. No: 83 / QD-BNN-VNFOREST
McDermott, C.L. 2012. Plantations and communities: Key controversies and trends in certification standards. FSC International. https://ic.fsc.org/en/our-impact/program-areas
Midgley, SJ, Stevens, PR, Flanagan, AC And Ha Thin, N. 2016. The Promise And Reality Of Private-Sector Adoption Of Forest Certifi-cation For Smallholders In Vietnam, Thailand And Lao PDR. Paper for PEFC [?]
Poynton, S. 2015. Beyond certification. DoShorts. www.dosustainability.com/shop/products_new.html
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Initial Vietnam Plantation Policy Assessment No. 3: Building Bridges: REDD+ and Tree Plantations
June 2017 Thu-Ba Huynh, Rodney Keenan and Sam Citroen. This background paper was prepared as a reference material for the March 2017 Policy Forum on Forest Plantations, within the framework of the ACIAR1 project “Improving policies for forest plantations to bal-ance smallholder, industry and environmental needs in Lao PDR and Vietnam”2. After the Forum, the paper was further revised, adopting the participants’ comments/feedback. This paper explores policy issues integrating forest plantations and REDD+ in Vietnam. Empirical data used for this paper is from 150 smallholders’ surveys and interviews in Quang Tri and Hue provinces.
Key points
REDD+ aims to reward performance for reducing greenhouse gas emissions from deforestation and degradation and increasing carbon stocks through expanding forest area and increasing forest carbon stocks. Planted forests on degraded land are an effective way of increasing forest carbon stocks. In Vietnam, 1.6 million hectares3 of plantations established4 and managed by smallholders can potentially increase forest carbon stocks. However, there are concerns in REDD+ policy circles about incorporating payments for plantations. These include: conversion of natural forests to plantations; the introduction of exotic species; the displacement of agricultural production by local people; and the potential increase in inequality in land distribution or income. The extent to which commercial plantations results in additional carbon sequestration also needs to be further explored and demonstrated.
There are opportunities for REDD+ payments (both in cash and in-kind) to support increased small-holder plantation areas or management to increase plantation carbon stocks, in particular to support for:
• Plantations in areas with degraded forest land where there is little current investment, for exam-ple, regions remote from markets or in poorer communities.
• Growing plantations on longer rotation to produce higher value wood products required by in-dustry. Extending the rotation (currently between 4-5 years) and growing larger trees would in-crease carbon stocks.
• Retention of plantations in stream reserves and on steep slopes and to underplant with native species to convert these areas to natural forests. This would increase carbon stock, improve water quality and increase landscape conservation values.
1 Australian Centre for International Agricultural Research 2 The project aims to develop policy options that achieve national goals for forest plantation industry development and is led by Vietnam Academy of Forest Sciences. 3 MARD, 2016 4 The plantations area established on barren land (not from converted from secondary forests)
There is a “business case” for REDD+ investment in forest plantations for poverty reduction. Significant economic and social benefits and overall wellbeing enhancement as results from forest plantations were observed. However, the definition of poverty within REDD+ needs to be broadened. As a first step, REDD+ activities are supporting group certification and extending plantation rotation lengths. These actions need to be tailored and designed carefully, taking into account the situation and needs of the poor, local power dynamics and ethnic differences.
REDD+ investments can support effective forest governance, transparency and monitoring of forestland and together with FLEGT leverages positive impacts from plantations. Tensions are rising between house-holds; commune authorities and state forest enterprises over land due to the lack of transparency around land titling and allocation. Currently, the distribution of land amongst households is relatively uneven, especially the poor. This risks exacerbating poverty and increasing inequality. FLEGT Voluntary Partner-ship Agreement provides a good opportunity for the timber-exporting country to improve its forest gov-ernance and regulation, reinforce law enforcement and promote sustainable forest management. REDD+ initiatives could contribute to ensuring transparency and effective communication, building trust with local communities in forest land use planning and allocation.
Providing for knowledge exchange within and beyond the community on plantations and markets is a key livelihood strategy. REDD+ activities can enhance social capital through networking and bridging and provide targeted and timely support on technical aspects, local leadership and equitable benefit shar-ing.
Context Viet Nam first embarked on sustainable forest management (SFM) in 1998. However, the progress has been slow [1]. As of November 2016, total certified plantation forest areas under FSC was 121,231 ha. Recently, SFM in Vietnam has recently gained new momentum. The country aims to have 350,000 ha of certified planation forests by 2020. Reduced emissions from deforestation and forest degradation (REDD+) is a global initiative to mitigate climate change through the application of conditional incentives for protection and enhancement of the carbon sequestration functions of forests; conservation, sustainable management of forests and en-hancement of forest carbon stocks. Vietnam was one of the first countries to introduce a National REDD+ Action Program (NRAP) in 2012. By June 2017, thirteen Provincial REDD+ Action Plans (PRAP) and 35 Site-based REDD+ Implementation Plans (SiRAP) had been developed and approved. In April 2017, the country approved a new REDD+ Program with a vision to 2030, including expansion and improvement of plantations quality. Planted forests on degraded land are an effective way of increasing forest carbon stocks. Enhanced community involvement in decision-making and providing opportunities via REDD+ programs will increase buy-in and commitment, which are key elements for a more stable, less risky environment for investors in plantations [2]. On the other hand, plantations in the right places and adopting landscape approach can help to mitigate climate change by sequestering carbon. In Vietnam, the 1.7 million hec-tares of plantations, established and managed by smallholders, has significantly increased forest carbon stocks. According to the New Generation Plantations, a number of their participants have had some success selling credits through voluntary carbon markets with active monitoring of carbon stocks in their plantations and conservation/restoration areas [2].
SFM and REDD+ can contribute to Vietnam’s sustainable development agenda and the Green Growth Strategy. The new NRAP aims to improve the quality of forest to increase the carbon accumulation and environmental forest services. To meet these objectives, eleven Policies and Measures (PaMs) were pro-posed, including four measures on enhanced forest production and large wood business models. At sub-national level, for example, Hue PRAP sets the goal for 2020 to have 7,700 ha of acacia with short-rotation model to be converted to long-rotation model and mixed species plantations. SFM in Vietnam has faced challenges, including: inadequate policy (i.e. circular 38) and institutional capacity; limited financial investment and incentives; low awareness; conflicts in land-use and bound-aries and the absence of alternative livelihood for local communities [3] . Although, REDD+ in Vietnam is relatively new, proponents have encountered similar issues in implementation. The recent workshop “Exchange of Experience on Sustainable Forest Management in the REDD+ Context in Vietnam” found that an integrated approach with effective engagement across sectors and with local communities is essen-tial to promote SFM in the context of REDD+. Currently, both FCPF and UN-REDD programs in Vietnam provide support to forest plantations in different ways. The Emission Reduction Program Document (ER-PD) and UN-REDD proposed to work with smallholders and large forest owners to implement eight specific activities, including enrichment planting to enhance carbon stocks, extending the rotation lengths of plantations and reforestation using long rotation systems and indigenous species in mixed plantations. Specifically, the UN-REDD pro-gram is providing support to sustainable forest management for both natural and planted forests, in-cluding Group Certification for plantation in Bac Kan and Ha Tinh provinces. Concerns over REDD+ support for forest plantations include conversion of natural forests to plantations; risks of overlooking national land use policies (i.e. land allocation) at sub-national level; risks of marginalizing ethnic mi-norities thus increasing inequality and major challenge/barriers to converting plantations to longer-rotation regimes. Data contributing to this paper was collected from 150 household surveys conducted in two villages in Quang Tri and four villages in Hue Provinces5 in 2016.
Key Findings Effects of Forest Plantations on Livelihood Improvement There are significant economic, social benefits and overall wellbeing improvements from forest planta-tions in the surveyed areas. Timber production and wage labour from plantations are the top two in-come sources for surveyed HHs. Timber accounts for about 25% of the total annual HH income. For landless and/or poor households, the portion of wage labour is much higher than the overall average, but it is an unstable and seasonal. Approximately 90% of HHs believe that they are better off now than 5 years ago, and 82% of respond-ents consider this is due to timber plantation. They report positive impacts on their livelihood and economic, environmental and psychological wellbeing. Immediate/short-term benefits on physical and social capital include new or renovated houses, payment for children’s education and ability to afford other daily necessities. Medium-term benefits include employment and financial security. Longer-term
5 Quang Tri Province: Ban Chua, Tan Quang villages, Cam Lo District; Hue Province: Hoa Cat, Phu Thien in Binh Dien
District and Phu Mau, Xuan Phu villages in Nam Dong District.
effects from plantations are a result of secure forestland ownership. This guarantees the family easy access to bank loans (both formal and informal) and secure future access to land for their children. Interestingly, respondents discussed many positive psychological effects from plantations. Hope (i.e. better future, for big weddings, better education for children and bigger houses) was frequently men-tioned as an inspiration for investing in plantations. Many respondents expressed their satisfaction with enhanced self-esteem/confidence and social status. This satisfaction extends beyond self-wellbeing to include positive influence on other community members. More than 70% of people interviewed asso-ciate knowledge exchange (within and beyond their communities) as a key livelihood improvement strategy. Forest Land Allocation On average, most households have approximately 3-4 hectare of forest land (Table 1). However, in terms of the distribution land amongst households, the majority of households have smaller land hold-ings of 2 hectares or less. There is a positive relationship between the size of household land holding and total annual average income. Approximately 26% of the HHs interviewed were dissatisfied with forest land allocation. People were concerned with inconsistent, complex and costly procedures for Red Books; lack of transparency; absence of grievance mechanisms; land (in) security and quality. In some cases, this lack of clarity and security has eroded people’s trust with projects and local authorities. De-spite the existing poverty definition by the GOV, classification of poor HHs for more forest land allo-cation can be “flexible”, manipulated and context-based.
Table 1: Household Income and Land Distribution 6
Total average ‘Poor’ households
N 36 7
Income generation
Average proportion of total household income derived from household tree plantations (%) 25.7% 4.2%
Average proportion of total household income derived employment in the smallholder forestry sector (%) 9.8% 50.2%
Land Total area of household land holdings under tree planta-tions (hectares) 3.6 0.0 Average proportion of total household land holdings man-aged as tree plantations (%) 83.0 20.8 Average proportion of total household land holdings un-der formal land title (Red Book land right certificate) (%) 48.4 33.3
Conclusions
In Vietnam, the 1.6 million hectares of plantations, established and managed by smallholders, has significantly increased forest carbon stocks. There are opportunities for REDD+ payments to support increased smallholder plantation areas or management to increase plantation carbon stocks and sup-port the governance, transparency and monitoring arrangements to support payments. To effectively address concerns/risks around REDD+ support to plantations, it is suggested that (i) opportunities for additional carbon sequestration from plantations needs to be explored and demonstrated; (ii) REDD+ support be tailored and designed carefully, taking into account local power dynamics and ethnic dif-ferences into account (iii) ensuring transparency, effective communication and building trust with local
6 Data in this table is derived from a total sample of 36 HHs, analysed by Sam Citroen for her MSc thesis. The data analysis for the entire 150 HHs is on-going and the initial analysis shows similar findings.
communities around land allocation/titling processes and (iv) targeted and timely support not only on the technical aspects, but also on local leadership and ensuring equitable benefit sharing.
Further reading 1. McNally, R.; Vu, T.P.; Nguyen, T.C.; Pham, X.P.; Nguyen, V.D. Issues And Options, Support
For The Revision Of Viet Nam’s National REDD+ Action Programme (NRAP) 2016-2020; 2016.
2. NGP. Plantations for People: Thinking at a landscape level New Generation Plantations 2015. 3. Vu, T.P.; Tran, L.D.; Le, T.D. Exchange of Experience on Sustainable Forest Management in
the REDD+ Context in Vietnam; UN-REDD Vietnam Program: Hanoi, Vietnam, 2016.
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Initial Vietnam Plantation Policy Assessment No. 4: Value chain partnership models and cooperatives
Tek Maraseni, Hoang Lien Son and Geoff Cockfield
Key points 1. Increasing wood supply for furniture production can potentially be achieved through
longer rotations. Financial returns are higher from longer rotations at interest rates <10% but smallholders prefer to manage on short rotation to provide more rapid income, to meet immediate household needs and due to concerns about risks such as typhoon. Policy options to support larger log production include development of demonstration sites and field days for forest growers, promotion of alternative management options through communication and extension activities, providing insurance products against typhoon damage and better integrating woodchip and furniture timber production.
2. Certification of sustainable forest management can potentially improve partnership arrangements between growers, timber processors and the market. Smallholders and sawmillers receive a 15-16% premium on certified products but smallholders bear most of the costs, making it less attractive.
3. Cooperatives of tree growers have been successful in improving returns to farmers in other countries. Support the development of grower cooperatives focused on tree growing and timber markets and building skills and knowledge of tree growing in agricultural cooperatives.
4. Timber traders are a vital part of the value chain. Smallholders do not have the necessary harvesting skills and equipment or the ongoing, direct relationships to deal effectively with processing companies. Processing companies prefer to build stable log supply arrangements with middlemen and not deal with hundreds of farmers. policies intended to eliminate middlemen and give greater returns to farmers could be counterproductive. The positive roles of traders in the supply chains should be acknowledged and support provided to improve their knowledge and skills, for example in harvesting and transport practices.
Purpose The Vietnam Government has goals of increasing the supply of suitable wood for furniture production and the certified forest area. This paper describes the results of recent studies and describes potential policies to increase timber supply for furniture production and support improved relationships along the value chain, given the large number of smallholder tree growers, small sawmills and the diversity of timber markets. This will inform discussions at the Plantation Policy Forum on 24 March, 2017 and provide a basis for more formal advice into policy. Background The Vietnam government has several policies to support the expansion of tree plantations to meet economic development, poverty alleviation and landscape restoration goals. As a result, the area of plantations has rapidly increased from 1.7 million hectares in 2006 to 3.6 million hectares— 26% of the forest area—in 2015. Approximately, 1.7 million hectares (47% of planted forests) are owned and managed by smallholders with an average area of 1.27 ha per
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household, contributing to the livelihoods of more than 1.4 million families. These smallholder tree growers have the potential to contribute to Viet Nam’s 2035 vision of becoming an upper-middle income country, balancing economic prosperity with environmental sustainability, promoting equity and social inclusion and enhancing the capacity and accountability of the state. This involves a goal of ‘economic modernization’ with a competitive private sector. Vietnam exported worth of wood products and wooden furniture products has been increasingly growing1 from US$1.9 billion in 2006 to US$7.178 billion in 2016, and is now the fourth biggest furniture exporting country in the world after China, Germany and Italy. It has been exporting furniture to more than 120 countries with major markets being the US, Japan, China, EU and Korea. If the current trend is continued, Vietnam has the potential to triple exports by 2025 and be a future destination for global investment. For this, Vietnamese enterprises have the challenge of looking for new markets and producing new products for export. In Vietnam, planted forests are major sources (>95%) of round wood. Annually, around 15-17 million m3 of round wood was produced from planted forests but 80% of this volume2 was used for producing woodchips mainly because of the production of short rotation, small sized and low quality woods. The domestic wood processing industry is highly dependent on imported raw materials. The Vietnam Government wants to encourage production of more sawn timber for local industry use rather than woodchips. To meet international market demands, it also wants to increase the area of certified forests to 30% by 2020. So far, the area of certified forests is insignificant. As of July 30, 2016 only about 86,193 ha of natural forest and 113,008 ha of planted forests have been certified. Following the increased plantation area, free trade agreements and favorable government policies, amongst other things, the number of registered timber processing and furniture exporting industries grew at an annual rate of 16% from 2006. Currently, there are more than 3000 timber processing companies with more than 97% of them either being of extremely small size or of small size. These processing companies provide employment and livelihood opportunities for thousands of people. The Government of Vietnam seeks to generate greater benefits to small holders, processing companies and the timber industry as a whole by building partnerships and value adding activities between them3. A firm’s ability to use markets and make profit is not a function of size but rather the interdependence of firms how they interact to meet market requirements and add value overall. Improving information flow and relationships among actors along the value chain can achieve these objectives. Key findings 3.1 Financial returns from short and longer rotations Increasing wood supply for furniture production can potentially be achieved through longer rotations. Analysis of financial returns from acacia plantations managed by the Ben Hai State Forestry Company (SFC), indicated rotation ages of 5, 6 and 10 years all produce positive
1 VNFOREST, 2017. 2 Decision No 774-QD/BNN-TCLN dated 18 April, 2014 of Ministry of Agriculture and Rural Development approved Action plan to improve productivity, quality and value of planted production forests period 2014 – 2020. 3 Decision 1565 / QD-BNN-VNFOREST dated 08 July, 2013 of the Ministry of Agriculture and Rural Development approved the "Proposed Restructuring Plan of forestry sector".
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returns. At low or intermediate interest rates return from the 10 year rotation plantations is about 4.24 times higher than that of 5 year rotation plantations, mainly because of the greater volume of higher value sawlogs and lower costs due to lower plantation density. However, smallholders prefer short rotations due to a high demand of woodchips, increased risk, or perception of risk, particularly of typhoons and increased risk of defects and borers in large size logs. Policy options to support increasing rotation age include development of demonstration sites and running field days for forest growers, promotion of alternative management options through communication and extension activities, providing insurance products against typhoon damage and better integrating woodchip and furniture timber production.
3.2 Financial returns for certified and non-certified forest products Certification of sustainable forest management can potentially improve partnership arrangements between growers, timber processors and the market. Acacia growers in Kinh Mon Village in the Quang Tri Province and a Sawmill and Furniture Industry (Doanh Nghiep Tu Nhan Hoa Nga – Hoa Nga Private Company) in Thua Thien Hue Province, are being supported by SNV and WWF to implement certification. Our analysis indicates that the farmers and the sawmill industry receive positive returns from certified and non-certified supply chains but the certified product returns are higher, with both the sawmiller and tree grower receiving a 15-16% premium. However, if the tree grower has to bear all costs of certification, then that certification may not be more profitable than growing non-certified wood. Certification also requires the grower to prepare forest management plans that can be costly. In recent years, the price difference between certified and non-certified wood is narrowing and this will further discourage farmers from attaining certification. Sawmills benefit more from certification and bear less costs. There is an argument that a portion of these benefits should be transferred to growers through improved value chain relationships. Cooperatives of tree growers have been successful in other countries (eg. Finland and Japan) in building the scale required for group certification, grower skills and capacity, and better linkages to markets and power in the market place. Agricultural grower cooperatives are operating in Vietnam but other studies have shown that the staff in these cooperatives have little knowledge of tree growing and limited understanding of, or connection with, timber markets. Policies to support greater adoption of certification include:
1. Support for wider adoption of sustainable forest management practices that meet certification requirements.
2. Collective or group certification. To justify investment in the cost of certification, more than 3,000 ha of plantations is required. This is difficult to realize due to the scattered nature of smallholder plantations.
3. Support the development of grower cooperatives focused on tree growing and timber markets and building skills and knowledge of tree growing in agricultural cooperatives.
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3.3 Building relationships along the supply chain
The role of middlemen. Multiple timber traders in each village provide a relatively competitive market for growers. These middlemen are seen by some as taking advantage of tree growers. They provide harvesting and marketing services and receive about 7% to 10% of the returns. Our interviews with several stakeholders (farmers, middlemen, government departments, processing companies, FSC Association) indicate that they are a vital part of the value chain. Farmers believe that they do not have the necessary harvesting skills and equipment or the ongoing, direct relationships to deal effectively with processing companies. Even SFCs, with good inventory technologies and harvesting equipment, prefer to use middlemen as they believe that middlemen have developed good relationships with processing companies that enable a higher price.
Processing companies prefer to build stable log supply arrangements with middlemen and do not want to deal with hundreds of farmers, as this would increase their transaction costs. They would also need to establish a separate harvesting unit, hire staff and buy equipment. Given the active market among traders is more efficient for them to outsource these costs. Therefore, they have developed practices to support middlemen (for example, providing some funds in advance). Middlemen themselves believe that they are well equipped and have very good knowledge and skills in predicting log volume and harvesting and transportation costs across a range of geographical areas. These findings suggest that policies intended to eliminate middlemen and provide greater returns to farmers could be counterproductive. Instead, their positive roles in the supply chains should be acknowledged and support provided to improve their knowledge and skills, for example in harvesting and transport practices. Improving communication and relationships Generally, linkages among the many value chain actors are weak with firms operating independently, opportunistically and, sometimes, as adversaries. Every firm seems to prefer to grow its own profit margins at the expense of others. Growers, especially woodchip growers, are not that interested in producing higher quality logs as they know they will sell whatever they produce and get a satisfactory price in a short period. Growers, primary processors and in some cases secondary processors, do not know the consumer preferences for wood quality and there is no strategic alignment among the firms towards consumer demands. There is no flow of information between processing companies and farmers. Information is generally controlled by exporters. These exporters should be encouraged to build relationships with primary processors and growers, informing them about consumer preferences types of species, log sizes and potential prices for different types of products. These ‘communication partnerships’ would be beneficial to all actors and secure a competitive advantage for the timber production sector as a whole.
Examples of value chain partnerships can be drawn from vegetable and horticulture industries:
• In Australia, Houston’s Farm was under pressure to reduce costs and remain competitive in salad markets. Results from consumer demand surveys inspired them to produce cut and bagged salad and develop close relationships with the salad growers. As a result of this innovation, they are now able to supply high quality fresh baby salad leaves at competitive
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prices. • 300,000 smallholders in Pakistan support one of the world’s largest mango export
industries. These were exported to Gulf countries with lower prices due to poor quality. With funding support from ACIAR, agricultural practices and market linkages have been greatly improved and they now meet compliance requirements for higher price markets in China and Korea, with increased volume and higher returns to all actors in the value chain.
• Smallholders in Kenya supply horticultural products to the UK but the quality was poor. By building closer relationships and exchanging information on quality requirements, all actors benefited, producers obtain market assurance and higher profits and processors and retailers are assured of quality produce.
Conclusions
In spite of the attractive returns from long rotation plantations, smallholders still prefer short rotation plantations. Providing low interest loans and hurricane insurance and limiting woodchip demand could increase plantation rotation age and log size and quality. Donor supported forest management certification has been useful in building an understanding of certification requirements and costs. However, if tree growers need to bear all costs of certification, then the certification is not profitable for them. Group certification could work but, because of the scattered nature of smallholders, it is hard to realise the required scale. Therefore, Provincial and National Level Associations and Programs could be an alternative approach for achieving certification and building supply chain relationships. Linking certification program with PES, REDD+ or other socio-economic development programs could support wider adoption of certification. The relationships among firms and information flow in the timber value chain are ineffective. Building partnerships among the chain actors, along with code of conduct, could generate greater benefits to them by creating conducive environment for collaborative, interdependent, trustworthy, and co-innovative value chains.
DRAFT July 2017
A comparison of financial returns for acacia growers and sawmill-furniture producers from certified and non-certified forest products
TEK NARAYAN MARASENI*, HOANG LIEN SON1, GEOFF COCKFIELD*, HUNG VU AND
TRAN DAI NGHIA2
* University of Southern Queensland (USQ), Toowoomba, Queensland, 4350, Australia
1 Vietnam Academy of Forest Science (VAFS, Vietnam 2 Institute of Policy and Strategy for Agriculture & Rural Development (IPSARD), Vietnam
Abstract From 1990 to 2015, about 129 million hectares of the World’s forest area (natural and planted) was lost even though the area of planted forest increased by more than 110 million hectares. Vietnam has one of the higher rates of increase in planted area with more than 80 percent of forest products used for woodchip production. The Vietnam Government has goals to increase both the certified forest area and the rotation age of plantations in order to boost the supply of suitable wood for furniture production. It is however not clear whether or not lengthening rotation age and increasing certification will necessarily benefit growers and processors. This study aims to compare financial returns from certified and non-certified: (1) 10-year rotation acacia plantations for growers; and (2) a furniture processing business (battens for chair and table) in the Quang Tri Province. The data were collected from farmers and sawmill owners and triangulated with, and supplemented by, formal and informal interviews with several other forest stakeholders in the Province. Financial data were discounted at 7 and 12 percent rates. Results show that, at current prices and costs, non-certified timber production is profitable for both farmers and sawmill owners but, if timber was certified, there could be an increase in profit for growers and especially for sawmill businesses. The higher the price difference between the certified and non-certified logs, the greater the incentive to farmers for certification but, in recent years, the price difference between these types of logs is narrowing and this may discourage farmers from attaining certification. Implications of the full cost of certification and required policies to promote certified forests are discussed. Keywords: acacia plantation; certified forest; Vietnam; grower; sawmill; furniture industry
1. Introduction Worldwide planted forests account for about 7 percent of the global forest area of 3,999 million hectares (Mha) (FAO, 2015). From 1990 to 2015, the planted forest area increased by more than 110 Mha but rates of increase varied across time. From 1990 to 2000, the average annual increment rate was 3.6 Mha, from 2000 to 2010 it was 5.2 Mha/year and from 2010 to 2015 it was 3.1 Mha/year (FAO, 2015). In Vietnam however, the annual plantation rate did not slow down even after 2010 (Trung and Kim, 2016). This may have been due to two key policies introduced in the 1990s—‘decollectivisation of agriculture’ and ‘distribution of forestlands to local households’, as well as accession to the World Trade Organization in 2006 (Meyfroidt and Lambin, 2008). Other factors could include the scarcity of forest products, increasing national and international demand for such products and agricultural intensification (Meyfroidt and Lambin, 2008; Truong et al., 2016). The agriculture intensification pathway proposition is that with land degradation, the most productive land is used for intensive agriculture and marginal or degraded agricultural land is reforested (Meyfroidt and Lambin, 2008). There are arguments as to whether the agricultural intensification pathway or the “policy related pathways” played the major role in reforestation in Vietnam (Castella et al., 2006; Truong et al., 2016). Analysing the historical data, Truong et al. (2016) concluded that the former played a major role. To ‘enable economic modernization with a competitive private sector firmly in the lead’ is one of the six key transformations of the Vietnam Government to achieve a ‘prosperous and creative Vietnam by 2035’ (Government of Vietnam and the World Bank Group, 2016). Therefore all government ministries, including the Ministry of Agriculture and Rural Development (MARD), are guided by these transformation targets so that the MARD—through its Forestry Sector Reform Proposal (2013)—aims to improve the quality, efficiency and competitiveness of the forestry sector. In order to realise this goal, the MARD is giving high priority to value-adding in the forestry sector, particularly through planted forests and the timber processing industry (Objective 2b) (MARD, 2013). Moreover, the MARD (2010) aims to increase the country’s forest state/cover to 45% by 2020 so that there will be about 8.4 Mha of productive forests, including 4.15 Mha of plantations. The intention is that tree plantations will assist in meeting economic development and poverty alleviation goals and will also reduce the pressure on natural forests and Vietnam’s reliance on imported timber (Pistorius et al. 2016). Planted forest area has been increasing rapidly, from about 1.7 Mha in 2006 to 3.6 Mha in 2014 (Trung and Kim, 2016). In 2014, Vietnam earned US$6.3 billion from the export of timber, timber products and non-timber forest products, with 13–15 Mm3 of wood produced from planted forests (MARD, 2015). Approximately 47% (1.7 M ha) of the planted forests are managed by smallholders, with an average size of 1.27 ha per household and contribute to the livelihoods of more than 1.4 million families. In addition, from 2006, the number of registered timber processing and furniture exporting industries grew at an annual rate of 16%. There are more than 3000 timber-processing companies in Vietnam, with 72% of those being of extremely small size (with financial capital less than 5 billion VND1 (US$223,714), with another 25% of firms of small size (with financial capital of 5–50 billion VND (US$223,714
1 US$1=22,350 VND (Vietnamese dollar)
to US$2,237,140). Despite the relatively small scale, these processing companies provide employment and livelihood opportunities for thousands of people. An insignificant amount of the harvested woods is however used for timber and furniture production, with more than 80 percent used for producing woodchips for export. The dominance of woodchip products is likely the result of: (1) the dominance in production of small-sized and low quality logs, resulting from the producer preference for short rotations; (2) the large volume of uncertified logs; (3) the simplicity and therefore relatively low cost of technology for chip production; (4) high demand for woodchips in overseas markets; and (5) relatively simple procedural requirements in import markets (MARD, 2015). To meet other needs, in 2015, Vietnam imported raw wood materials valued at $1.639 billion, mainly from Laos, Cambodia, US, China and Malaysia (MARD, 2016). With both shipping and raw wood costs increasing, wood processing companies are facing difficulties in competing with those in China and Malaysia (MARD, 2015). While, Vietnam has a population of more than 90 million, the value of their average furniture consumption over the last 5 years was only about $25 per head. However, with their economy booming, domestic demand for furniture is expected to increase, supplementing the demand for exports. Therefore, the Vietnam Government is developing policies such as land title reform and value chain development to promote smallholder plantations (Nambiar et al., 2015). Moreover, there is an intention to generate greater benefits to smallholders, processing companies and the timber industry as a whole by building partnerships and value adding activities between them, presuming that a firm’s ability to use markets and make profit is a function of how strongly all firms in a chain are interdependent and how competitive the chain is overall (Instate Pvt Ltd, 2000). The Vietnam Government wants to increase the: (1) rotation age of plantations and produce more furniture rather than woodchips. The target is to increase: the production of furniture from 4.5 million tons to 6.5 million tons by 2020, with woodchip exports to decrease from 6 million tons to 3 million tons by 2020 (MARD, 2015); and (2) area of certified production forests to 30% by 2020 (MARD, 2007). Currently, Vietnam is ranked as the fourth largest furniture exporter in the world after China, Germany and Italy. Many foreign companies are interested in conducting furniture manufacturing in Vietnam because of the availability of cheap labour and accessible transport systems (Hoang et al., 2015). Therefore, the popularity of Vietnam as a major furniture exporting country is growing rapidly, with more than 120 export destination countries (ITA, 2014), and major markets in the US (>US2 billion), Japan (US$866 million), China (US$791 million), EU (US$612 million) and Korea (US$448 million) (MARD, 2015). Forest certification is a market-based instrument, first established in 1993 under the brand of the Forest Stewardship Council (Hain and Ahas, 2007). It quickly became popular in developed countries and is attracting attention in developing countries as well. There are several reasons for Vietnamese interest in certification. First, there are reputational reasons and in particular, Vietnamese interests have been accused of destroying forests in Cambodia and Laos; second, some of its major customers such as EU and USA need proof of legality of sourced logs; and third, an increase in rotation length should produce wood that is more eligible for certification (Hoang et al., 2015a). So far though, the area of certified forests is insignificant. As of July 30, 2016 only about 86,193 ha of natural forest and 113,008 ha of planted forests have been certified (http://info.fsc.org/). Therefore, meeting the expected target is highly unlikely. Barriers to adoption could include costs of certification and the lack of reliable information about the financial returns of plantations with FSC (Forest Stewardship Council) certification.
A study by Hoang et al (2015b) compared the financial returns from certified and non-certified acacia plantations for growers in Quang Tri Province but there are a number of reasons for further research. They considered 7 year rotation plantations but, as noted, the Vietnam Government is pushing for rotations greater than 7 years. Second, their FSC fee/cost was nominal (US$60/ha) and they did not consider FSC fees for harvested products and FSC fees for harvested products has become common practice. Third, they used single prices for each of certified and uncertified products, whereas in recent years prices vary by the size of logs. Fourth, they used an official interest discount rate of 6% but the effective discount rate for farmers could be much higher than this due to their transaction costs for borrowing money. Finally, they do not consider a similar analysis for sawmill/furniture industry. This study takes account of those factors and aims to compare financial returns in Quang Tri Province from certified and non-certified: (1) 10-year rotation timber plantation for acacia growers; and (2) the production of outdoor furniture by processors.
2. Methods
Using the case of a 10-year rotation acacia plantation in Kinh Mon Village, with wood sold to a sawmill and furniture enterprise in the Quang Tri Province, this study compares the financial returns for these enterprises from producing and using both certified and non-certified forest products. These two enterprises are selected because the former produces certified wood and sells it to the latter. The case study is based on acacia, which is an increasingly popular species for plantations throughout Vietnam. In 1992, acacia accounted for 7.23% of plantations but, by 2016, it accounts for more than 40% (1.5 M ha) of total plantations (de Jong et al. 2006; Nambiar et al., 2015; Trung and Kim, 2016; Hardwood and Nambiar, 2016). Acacia is a popular species because: (1) it can be grown on shorter rotations than locally available plantation species such as teak and pines; (2) it can be used for both the production of high value furniture and woodchips. For example, about 70% of woodchips in Vietnam comes from acacia and only about 27% comes from eucalyptus (Forest Trend, 2013); (3) its mean annual increment—10-25 m3/ha/yr depending on the site quality, climatic factors and management inputs—for shorter rotations is relatively better than other plantation species (Nambiar et al., 2015); and (4) being a leguminous species, it has soil nitrogen and carbon enrichment ability. It can fix atmospheric nitrogen through its symbiotic bacteria and make this available to the soil and plant. Therefore, its leaf litter and root exudates have higher nitrogen concentration. Its ability to increase soil carbon is linked to retention of residues and capacity of soil carbon storage by its roots (Hardiyanto and Nambiar, 2014). Moreover, it has demonstrated the ability to increase production in second rotations compared to the first rotation, probably due to increased soil carbon and nitrogen (Hardiyanto and Nambiar 2014) 2.1 An overview of Quang Tri Province The Quang Tri province is located on the North Central Coast region and is characterized by steep slopes, sharp crests and narrow valleys covered mainly by a dense broadleaf evergreen forest. It is surrounded by the provinces of Quảng Bình, Thừa Thiên-Huế, Savannakhet (Laos) and the East Sea in the north, south, west and east, respectively. It is frequently affected by natural disasters, and is highly influenced by floods, storms, landslides, droughts, salinization, etc. The annual average temperature is 24°C, but temperatures can drop to as low as 7°C during the rainy season. The Agriculture-forestry sector contributes 22.7% of the total economy. This province covers 437,982 ha of land, of which 241,105 ha is forests. Of the total forest area,
108,114 ha is production forests, 74,097 ha is protected forests and 58,894 ha is special use forests. The area of planted forests has been growing rapidly during recent years. In 2014, the total area of plantations was 75,221 ha and about 399,000 m3 of timber was harvested from these planted forests. The majority of planted forests is acacia.
(FIGURE 1 HERE) 2.3 Data collection This research is part of a larger research project “Improving policies for forest plantations to balance smallholder, industry and environmental needs in Lao PDR and Vietnam”, funded by the Australian Centre for International Agricultural Research. Data for this project were collected in August 2016 and January 2017. Key informants, including representatives of producer organisations and processors, were interviewed to gain an understanding of the supply and value chains and to identify sources of information on production costs and returns. Records of costs and benefits for farmers were taken from the register of a cooperative that represented 15 farmers managing 82 ha. These data were transcribed to English for analysis. For the sawmill and processing operation, the processes and activities were observed, and timber recovery rates and costs of different resources/inputs and benefits from different products were documented. This information was further verified from the factory registers. These data were triangulated and supplemented by formal and informal interviews with several other forest stakeholders such as the Department of Industry and Trading, Department of Forest Protection, FSC Association, Forest Co-operatives, State Forest Company and middlemen. All costs and benefits were discounted at 7% and 12% rates as interest rates have ranged between these two figures in recent times. Sensitivity analyses were done for different prices and yields. Hoang et al. (2015a) argue that certification is not seen as a desirable option for a smallholders because of high transaction costs and additional paper work, (. In the study area however, WWF and SNV (Netherlands Development Organization) are organising farmers into a group and doing collective certifications for them (for details, see Hoang et al., 2015b). The donor is responsible for certification and recurrent costs and farmers are paying nominal fees (discussed later). In this study, financial returns for the farmer were estimated on the bases of current practices but we also discussed the implications of full certification costs to the farmers and current policy developments to address certification issues.
3. Results and discussions
3.1 Costs and incomes for farmers A description of different activities related to planting, protecting, harvesting and transporting forest products and related costs and income data are given in Table 1. In summary: (1) plantation density at the time of planting was assumed to be 1660 trees/ha and rotation age was 10 years. The density is typical in the region for long rotation plantations as growers want to avoid an early thinning cost. The 10 year rotation would likely meet the requirement of FSC certification. Thinning is conducted at five years of age, resulting in 13t of woodchips, sold at the local markets at the rate of US$44.7/t. From the harvest, 50 t of woodchips and 130m3/ha of different sizes of FSC certified logs were assumed to be produced and these were sold at prices relevant to each of the log sizes (Table 2).
[Table 1 and 2 here] The factory gate price of certified and non-certified logs and the certification cost for the farmer is given in Table 2. The price of certified and non-certified logs is size specific but, according to the sawmill owner, the average price difference between these two products was 280,000 VND/m3 (US$12.50/m3). As per the decision of the FSC Association and Farmers’ Co-operative, certification costs for the farmer are based on the relative market prices of certified and non-certified logs. At the time of the fieldwork, certification cost for a farmer was about 7% of the price difference between the certified and non-certified logs. In addition, a farmer also needs to pay an annual certification fee of US$1.30/ha. 3.2 Financial returns of FSC certified and non-certified forest products for farmer
The results show that the financial returns from FSC certified forest products are much higher than for non-certified forest products for the farmer, both at 7% and 12% interest rates (Table 3). Although the profit for the farmer was much lower with 12% interest rates than a 7% interest rate, there is still an apparent benefit to certification. Similar research in the Quang Tri Province by Hoang et al (2015b) reported that the Net Present Values (NPVs) for farmers from certified and non-certified acacia plantations was US$4,777/ha and US$3,401/ha, respectively. Our NPV figures for certified (US$4,866/ha) and non-certified (US$4,160/ha) acacia plantations are bit higher than these values. This is because they assumed a 7 year rotation period and a 6% discount rate and here we have used a 10 year rotation period and a 7% discount rate. Their FSC fee/cost is US$60/ha and they have not charged FSC fees for harvested products but, in our case, we have considered it and the total FSC fee/cost is US$114/ha. The difference in NPVs between certified and non-certified timber for them is much higher than our estimations. As noted, our price for certified and non-certified logs is based on size—price differences between these two products ranges from US$8.9/m3 for smaller sized logs and US$15.7/m3 for larger sized logs (Table 2)—and actual price received from the sawmill owner. On the other hand, Hoang et al. (2015b) used single prices for certified and uncertified products and the price difference between certified and non-certified logs for them is much higher (US$23.3/ha) than ours.
[Table 3 here]
3.3 Financial returns of FSC certified and non-certified forest products for sawmill and furniture industry The case study sawmill and furniture factory processes logs and produces battens (semi-processed materials for tables and chairs). This sawmill processed non-FSC certified logs before but, since 2015, has been processing FSC certified logs. As noted, the price of certified logs is size specific but, here, the average price is used. All the cost and income data and financial returns are given in Table 4. According to the sawmill owner, the difference in selling prices for factory products was 1 M VND/m3 (US$44.7/m3), about 6.5M VND/m3 (US$290.8/m3) for certified products and 5.5M VND/m3 (US$246.1/m3) for non-certified products.
[Table 4 here]
Recovery rate for the conversion of: (1) long logs (with bark) to small logs (without bark) is assumed to be about 92%; (2) small logs to small battens is 46% (from 92%); and (3) fresh battens to dried battens is 96% (from 46%). Therefore, the net recovery rate from logs to final products is 40.63%. In order to produce 1 m3 of final product, the sawmill needs to buy 2.4612 m3 of raw (with -bark) logs. From processing 2.4612 m3 of raw logs, about 777kg of fuelwood is recovered and used for dry kilning in the same enterprise. At a price of US$17.9/t for 777kg of fuelwood, this means a return of US$13.90. After processing, the battens go to the IKEA Furniture Company in Dong Nai Province for making tables and chairs and the final products are exported overseas. The total cost per m3of the certified final product is about US$255.2 (Table 4). Selling price of the final product for the sawmill at its factory gate (IKEA manages own transport) is about US$290.80/m3. Therefore, there is a net benefit of US$49.5 per m3of final product, including the income from fuelwood. All the costs for certified and non-certified products, except the cost of the raw uncertified logs, is US$12.50 less than certified raw logs. The selling price of uncertified battens is only about US$246/m3. Therefore, the net benefit of one m3 of uncertified product will be about US$36. 3.4 Comparing the returns for farmer and sawmill owner As the value of VND for the 10th year is not likely to be the same as that of the first year, all the costs and benefits for the farmer are discounted to the initial year and NPV is calculated accordingly. To make the sawmill owners’ returns comparable with farmer’s returns, the net benefit of the sawmill owner is also discounted to the farmer’s level (Table 5). The results show that: (1) the farmer’s NPV per unit of non-certified and certified final product is much higher than that of the sawmill owner; (2) although both farmers and sawmill owners are receiving net benefits from both types of businesses (with certified and non-certified products), the net benefit is higher from certified products for both actors; and (3) the benefit of doing business with certified products for the sawmill owner is more than 1.4 times higher than that of doing business with uncertified products whereas this value for the farmer is about 1.2 times higher.
[Table 5 here]
For the whole business, on average, the sawmill buys 15,652 m3 of logs per year or 156,520 m3 in 10 years. Most farmers are smallholders, with an average size of 1.27 ha per household and therefore may produce about 165 m3 of logs in 10 years. Therefore, as a whole, the sawmill enterprise would be better off in net gains than farmers’ plantation enterprises, even if they were considered in aggregate. 3.5 Sensitivity analysis for the farmer and sawmill owner The sensitivity analyses for the farmer and sawmill owner are given in Table 6a, 6b and 6c. For the farmer the results show how net present values (per ha and per m3of final product) change with changes in the price and yield of the product. With increasing demand for timber for the furniture industry, there may be an increase in the price of both certified and non-certified timber. On the other hand, due to exponential growth of planted forests, timber could be oversupplied to the market and thus the price of timber could decrease. Therefore, price variations of -20% to +20% is considered. Similarly, being a leguminous species, acacia has an ability to increase production in succeeding rotations (Hardiyanto and Nambiar, 2014) but,
due to climate change, the intensity of natural disasters (such as hurricanes and typhoons) could increase (Hoang et al (2015b), and so productivity could decrease in the long run. Therefore, the yield variation of -20% to +10% is considered. The results suggest that even if the price decreases by 30% or the yield decreases by 20%, farmers will still have positive NPVs and therefore plantation enterprises could still be a profitable business but whether it would still be competitive with competing land uses requires further research.
[Table 6 here] Similarly, for sawmill owners, there are two potentially sensitive variables, the buying price of raw logs and the selling price of products. Even if the buying price of raw logs for the sawmill industry increases by 20%, processors will still receive a positive return from both the certified and non-certified forest products businesses. Similarly, if the selling price of products (batten and firewood) decreases by 10% they are still profitable but if it is decreased by 20%, they won’t get positive returns. 3.6 Further discussions: Cost of certification and recent policy developments Forest certification has several benefits to management, marketing and compliance as it calls for logical planning, forest inventory, tending and cultural practices, sustainable harvesting, and several other environmental provisions (Auer 2012). Moreover, it can add to the value and promote the reputation of a country but, because of additional costs and management issues, certification may not seem a desirable option for a smallholder (Auer 2012; Hoang et al., 2015a). So far, our discussion was based on current practices in which farmers received financial support from WWF and SNV but the full cost of certification may be prohibitive and current policy developments also need to be considered. The 2012 Workshop on “Sustainable Management Certification: Opportunities and Challenges to Vietnam” in Ho Chi Minh City identified six issues of forests certification. Primary among them is the high cost of certification. The workshop noted that about US$40,000 is needed for an assessment of about 10,000 ha of plantation forests and another US$20,000 for an assessment two subsequent years after certification (Forest Trend, 2012). The cost could vary by the forest status, area and topographical conditions. For example, the actual assessment cost for: (1) 2,100 ha of plantation in the Phu Tho province was about US$70,000; and (2) 11,700 ha rubber plantation—of Vietnam Rubber Corporation— was about US$200,000 (Forest Trend, 2012). In addition to this cost, forest owners need to develop sustainable forest management plans for which they need to pay a large amount of money (Forest Trend, 2012). Therefore, certification is considered a burden for a smallholder. In addition: (1) farmers need to manage all paper work in order to maintain the certificate; (2) they are not allowed to sell trees in a traditional way in which farmer and middlemen discussed and agreed on selling price then the latter would be responsible for harvesting and transportation of logs. Selling certified plantation requires the grading of logs based on its diameter, labelling the FSC logo and keep record (Hoang et al., 2015b). These activities consume lot of time. Hoang et al. (2015), on the basis of the number of working days people have to spend for the FSC related work, estimated FSC certification cost at US$60/ha for a 7 year rotation. In our case, with 10 year rotation plantation, it could be more than US$85/ha. Group certification however could be a better option for reducing per hectare costs. As noted, in our study area, WWF and SNV are financing farmers for group certification (see Hoang et
al., 2015b). When the FSC certification started in 2010, they paid US$12,000 for the initial FSC audit fee and then every year they are paying an auditing fee of US$7,000 for a group of farmers (Hoang et al., 2015a). This is beyond the capacity of the individual farmer as their per capita annual income is about US$1,000 (Vietnam Statistics, 2011). However, if the number of farmers (and certified area) in a group increases, this could be feasible, as these costs do not necessarily increase for them (Auer, 2012). In order to capture the full cost of group certification, during our field interview in January 2017, the Director of Department of Forests Protection and the Chairman of FSC Association in Quang Tri Province mentioned that the collective forest area should be at least 3000ha. Similarly, a WWF staff member who is directly involved in the group forest certification project in Quang Tri Province reported the minimum area at 2,000 ha but the certified timber sale prices would need to increase by at least 12% from 2012 level (Forest Trend, 2012). Table 7 shows estimates of the minimum area assumption of 2000h and 3000ha (Table). Our estimates suggest that both areas are okay to cover the certification cost but the higher the collective forest area the greater would be the benefits. However, we should be mindful of several things: (1) this estimation has not considered the cost of management plans; (2) the price difference between the certified and non-certified forest products may not remain the same; (3) the perceived risks of having long rotation plantation is not considered, and there are considerable risks in this region (Hoang et al., 2015b); (4) all collective forest area may not be planted and harvested at the same time; and (5) all costs and incomes are non-discounted.
[Table 7 here] In 2014, in order to promote group certification, the Quang Tri Provincial Government supported the formation of the ‘FSC Association’ which is chaired by the Vice Director of Department of Department of Forests Protection (one of our interviewees).The aim of this Association is to bring many farmers together and increase their collective bargaining and negotiating power. They can also provide witness service [guaranty] for a grower for borrowing money from a bank. Currently, 564 smallholder farmers from six districts, with 1722 ha of certified forests, are involved in this Association. The Association collects funds from the FSC certified smallholders, currently equivalent to the 7% of price difference of certified and non-certified logs. By the end of 2016, they had collected US$4,027. The head of the FSC association mentioned that, although they have successfully increased the number of farmers and size of certified forests area (it was 345 households with 925 ha of forests in 2014) since its establishment in 2014, it is still not enough to cover the full costs. According to him, meeting the 3000 ha target is difficult for two main reasons: (1) farmers are not interested in long rotation plantations, which is a pre-requisite for FSC certification, mainly due to the high demand of woodchips and frequent occurrence of typhoons; and (2) being smallholders, the planted forests area is highly fragmented and scattered throughout the province. When comparing our results with Hoang et al. (2015a), we can say that the price of both certified and non-certified raw logs is increasing but the difference is narrowing down. For example, in 2010, the price difference between the certified and non-certified logs was 19% to 22%, depending on the size of the logs (Hoang et al., 2015a) but now our findings show that the difference has narrowed to 15-16%. If this trend continues, certification may not be attractive to the farmer as the difference in price between the two products plays a major role in their decisions. However, at the moment, sawmills would still be profitable if the price of
certified raw logs increased by 20% or the selling price of sawmill certified products decreased by 10%. In a separate discussion, it is widely recognised that, if the complex administrative procedures are not simplified and costs are not reduced, the current (non-collective) certification scheme is not sustainable (To 2012; Hoang et al. 2015). Even the WWF and SNV supported current collective certification scheme in the study area has found it difficult to attract enough smallholders and required certification area. Due to the additional burden and high perceived risk of long rotation plantations, some certified forest owners are exiting from the system (Hoang et al., 2015b). However, on the other hand, the sawmill is very happy with the business with FSC certified products as they believe that there are other benefits of certification: (1) it reduces the fire safety compliance provision as the system automatically covers this; and (2) as discussed above, the profits for the sawmill owner from certified products are much higher than for non-certified products. In order to address the issues with certification the Government developed the Vietnam Forest Certification Scheme (VFCS) Program—in line with the requirement of Programme for the Endorsement of Forest Certification schemes (PEFC). The Vietnam Academy of the Forest Science (VAFS), with 16 regional offices and 700 staff, has been appointed a key partner of the Program, (iReader, 2016).
4. Conclusions
Several policies—such as the decollectivisation of agriculture, distribution of forestlands to local households and joining the World Trade Organization—were developed to support expansion of tree plantations in Vietnam. As a result, the area of planted forests and the number of subsequent downstream timber processing industries have grown exponentially for Vietnam to be the sixth largest furniture exporting country in the world. Increasing the area of certification and certified forest products is part of a strategy to enhance the country’s international reputation and retain or expand markets. This study compared the financial returns for the farmer and the sawmill industry from producing and using certified and non-certified forest products. Currently, the SNV and WWF are organising farmers into a group and supporting them for their certification costs and the farmers themselves are bearing only a nominal certification fee. Under this provision and the scenarios presented here: (1) both the farmers and the sawmill industry would have positive returns from both types of businesses but having certified forest products would be more beneficial for both of them; and (2 the difference in per unit of final product returns between the certified and non-certified forest products for the sawmill owner is higher than that of the farmer. Moreover, given its higher amount of total output, the sawmill enterprise, combined with the greater marginal gain, particular benefits from certification. Therefore, certification is of interest to both actors but more so to the sawmill industry. If the farmer needs to bear all costs of certification, then it may not be profitable for them, at least if the price of their logs does not increase significantly and additional forest management and paper works requirements are not minimised. Moreover, in recent years, the price difference between the certified and non-certified logs is narrowing and this may further discourage farmers from forest certification.
By our estimates, sawmills would still be profitable even if the price of raw logs increases by 20% or the selling price of the product decreases by 10%. Therefore, if either mechanisms for aggregating for certification could be put in place or some benefits for sawmills could be transferred to the involved farmers, group certification may work. We note that significant aggregation may be required to achieve sufficient economies of scale, relative to current collective action. The Vietnam Government is addressing the issue of additional forest management and paper work but it may take time to get positive outcomes. In the meantime, donor support is providing some incentive for certification. References Auer, M.R., 2012. Group Forest Certification for Smallholders in Vietnam: An Early Test
and Future Prospects, Hum Ecol, DOI 10.1007/s10745-011-9451-6 Castella, J.C., Boissau, S., Hai, N.T., Novosad, P., 2006. The impact of forest land allocation
on land use in a mountainous province of Vietnam. Land Use Policy 23, 147–160. De Jong W, Sam DD, Hung TV. 2006. Forest rehabilitation in Vietnam: histories, realities
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Challenges for Future Development, 3p. Forest Trend, 2012. Forest Certification in Vietnam, Information Brief No 2, May 2012, 4p Gibbon A, Silman MR, Malhi Y, Fisher JB, Meir P, Zimmermann M, Dargie GC, Farfan
WR, Garcia KC. 2010. Ecosystem carbon storage across the grassland–forest transition in the high Andes of Manu National Park, Peru. Ecosystems 13: 1079–1111.
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Hain, H., Ahas, R., 2007. Can forest certification improve forest management? Case study of the FSC-certified Estonian state forest management centre. Internat Forestry Rev 9:759–770
Hoang, N., Toppinen, A., Lähtinen, K., 2015. Foreign subsidiary Development in the Context of a Global Recession: A Case of the Furniture Industry in Vietnam, International Forestry Review, 17 (4), 427-437
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Tree Plantations in Lao PDR: Environmental management and
protection measures
PROJECT WORKING PAPER 3
Authors: Hilary Smith and Ellie Carmichael
ACIAR Project ADP/2014/047: Improving policies for forest plantations to balance smallholder, industry and environmental needs
19 July 2017
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ABOUT THE PROJECT This project “Improving policies for forest plantations to balance smallholder, industry and environmental needs” is being supported by the Australian Centre for International Agricultural Research (ACIAR), together with the Governments of Lao PDR and Vietnam and is being undertaken by Australian universities and research partners in the two countries. The aim is to provide policy options that achieve national goals for forest plantation industry development in Lao PDR and Vietnam through improved linkages between commercial investment and smallholder production.
The project has three objectives:
1. To develop policy and institutional options for plantation development; 2. To understand the positive and negative social, economic and environmental impacts associated
with different approaches to tree plantation development; 3. To create a network for policy learning that builds capacity in plantation sector policy analysis,
development and implementation.
These objectives require research to evaluate current policies, policy options, and their likely impacts on policy goals. This research project will evaluate current policies and identify key issues for resolution in order for plantation development to meet the goals of national governments and local communities.
This paper to written to help meet the project objective to understand the positive and negative social, economic and environmental impacts associated with different tree plantation development approaches through a review and analysis of environmental management and protection measures for plantations (Objective 1.4).
DISCLAIMER This report was prepared as a research output from Project ADP/2014/047, “Improving policies for forest plantations to balance smallholder, industry and environmental needs in Lao PDR and Vietnam” funded by the Australian Centre for International Agricultural Research (ACIAR). The Project’s aim is to improve policies for forest plantations, to balance smallholder, industry and environmental needs. The contents and views represent the views of the authors and do not necessarily represent the views of the Government of Lao PDR, the Australian Government, or of ACIAR.
The statements and opinions contained in the report are given in good faith but, in the preparation of this report, the authors have relied, in part, on information supplied from other sources, or from documents and interviews held in Lao and translated into English. The report has been prepared with care and diligence, however, except for those responsibilities which by law cannot be excluded, no responsibility arising in any way whatsoever for errors or omissions (including responsibility to any person for its negligence), is assumed by the authors or contributors for the preparation of this report.
Limitations upon use: This report is for the use of the party to whom it is addressed. No responsibility is accepted to any third party who may use or rely on the whole or any part of the content.
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CONTENTS About the project ..................................................................................................................................... 1 Disclaimer................................................................................................................................................ 1 Contents .................................................................................................................................................. 1 List of Figures .......................................................................................................................................... 2 List of Tables ........................................................................................................................................... 2 1. Executive summary .......................................................................................................................... 1
Preliminary Findings and Recommendations ...................................................................................... 1 2. Context ............................................................................................................................................. 3
PlantationS in Lao PDR ....................................................................................................................... 3 3. Plantation Policy Setting .................................................................................................................. 4
National Socio-Economic Development Plans .................................................................................... 4 National Growth and Poverty Eradication Strategy (NGPES) ......................................................... 4
The Forestry Strategy 2020 ................................................................................................................. 5 National Environmental Strategy to 2020 and Environment Action Plan ........................................ 6 Strategy on Climate change ............................................................................................................ 6 Biodiversity Conservation Action Plan ............................................................................................. 6 Forest Landscape Restoration Strategy .......................................................................................... 6 Green Growth .................................................................................................................................. 7
Narratives for Environmental Management and Protection ................................................................ 7 Positive Narratives ........................................................................................................................... 7 Negative narratives .......................................................................................................................... 8
4. Governance ................................................................................................................................... 11 Government Agencies ....................................................................................................................... 11
Ministry of Agriculture and Forestry ............................................................................................... 11 Department of Forestry Inspection ................................................................................................ 11 Village Forestry Units ..................................................................................................................... 12 Department of Forest Resource Management .............................................................................. 12
Ministry of Natural Resources and Environment ............................................................................... 12 Department of Environmental and Social Impact Assessment ..................................................... 12
Ministry of Planning and Investment ................................................................................................. 12 Investment Promotion Department ................................................................................................ 12
LUang Prabang Teak Program ......................................................................................................... 12 Non-Government Organisations ........................................................................................................ 13
5. The Legal Framework for Environmental Measures ...................................................................... 14 Environmental and Social Impact Protection Measures .................................................................... 14
Plantation Development Approvals ................................................................................................ 15 Concessions and leases ................................................................................................................ 16 Smallholder and Household plantations ........................................................................................ 23
6. Non-regulatory Measures .............................................................................................................. 25 Certification ........................................................................................................................................ 25
Certification Issues and Challenges .............................................................................................. 25 Legality Assurance ............................................................................................................................ 27
Issues with Legality Assurance ...................................................................................................... 27 Other Mechanisms ............................................................................................................................ 27
Codes of Practice ........................................................................................................................... 27 7. Stakeholder Perceptions Of environment policies and protection measures ................................ 29
Policy ................................................................................................................................................. 29 Regulation ...................................................................................................................................... 31 Certification .................................................................................................................................... 32
Policy INterventions ........................................................................................................................... 33
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Land Use Rights and Technology to Encourage Tree Planting .................................................... 35 Supplying wood to industry ............................................................................................................ 36 Markets .......................................................................................................................................... 36 Environmental impacts................................................................................................................... 37 Certification .................................................................................................................................... 37
What needs to change? ..................................................................................................................... 37 8. Concluding remarks and recommendations .................................................................................. 39 References ............................................................................................................................................ 41
LIST OF FIGURES Figure 1: Area of plantations in Lao PDR in 2015 and targets to 2020 and 2030 .................................. 3 Figure 2: Smallholder in policy convergence ........................................................................................ 10 Figure 3: Land Allocation to Plantations ............................................................................................... 21 Figure 4: Plantation Approval/Development Process ........................................................................... 22 Figure 5: A conceptual space to place interventions depending on private and public net benefits (source: Pannell, 2016) ......................................................................................................................... 35
LIST OF TABLES Table 1: EISA requirements for Plantation Projects ............................................................................. 15 Table 2: Major legal sources relevant to Plantations ............................................................................ 18 Table 3: Environmental and Social protection measures for smallholder/farmer plantations ............... 23 Table 4: Stakeholders Interviewed ........................................................................................................ 29 Table 5: Government and industry perceptions of policies for smallholder timber plantations (after Carmichael 2017) .................................................................................................................................. 30 Table 6: Implementation issues for smallholder policy and regulations as perceived by industry and government respondents (after Carmichael 2017) ............................................................................... 31 Table 7: Types of policy mechanisms for seeking change in land management (based on Carmichael 2017, modified from Pannell, 2016) ...................................................................................................... 34
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1. EXECUTIVE SUMMARY In Lao PDR plantations and planted forests are viewed as a mechanism to help achieve a range of broad policy objectives including for the environment, through their capacity to support multiple ecosystem services, such as forest cover, biodiversity conservation, climate change mitigation and provision of clean water. In contrast, planted forests are also viewed negatively for their potential to have adverse impacts on the natural environment, such as through natural forest conversion and damage to soil and water quality.
The Government of Lao PDR has social, economic and environmental policy objectives for tree plantations that are derived from national socio-economic development goals. Achieving these objectives requires a well-designed and enabling policy environment. Minimising any negative impacts from plantations depends on a clear and enforced set of regulations and/or the application of other mechanisms to incentivise good practices.
This document provides a description of the policies and measures for environmental protection and management associated with tree plantations. It also explores a range of relevant stakeholders’ perceptions of the positive and negative social, economic and environmental impacts of plantations and how these are understood in the context of policy, regulations and forest certification. Recommendations for the development of policies and other measures for improved environmental outcomes in plantation development and management are made
PRELIMINARY FINDINGS AND RECOMMENDATIONS The primary objective for smallholder plantations is poverty reduction. However, smallholder plantations are also a policy mechanism used for achieving environmental policy objectives, such as to increase and protect forests cover, reduce land degradation, as a permanent form of land use that is preferable to shifting-cultivation which is thought to have negative environmental impacts and as a source of timber as an alternative to unsustainable or illegal logging of natural forests.
The contribution of smallholder plantations to achieving these broad policy objectives is viewed positively and their potential to contribute to a more extensive set of policy objectives, such as carbon sequestration and climate change mitigation, is increasingly recognised.
Smallholder plantations are not generally considered to have significant negative environmental impacts and as such few specific regulations have been developed or implemented in this area. However negative impacts do occur at the local level; fire and soil erosion are of concern to farmers.
While past programs to promote the planting of trees by farmers has been successful, these did not adequately address the need for mechanisms to ensure good plantation management and timber production, nor facilitate the harvesting and sale of wood. As a result, many plantations are not reaching their production potential. This is exacerbated by the fact that for many value of plantations to farmers is in land tenure security and as an investment strategy. Timber is sold sporadically and revenue from the sale of wood contributes only a small amount household incomes. This approach does not necessitate on-going management nor encourage replanting.
Smallholder owned plantations are vulnerable to changing land and commodity markets, driven by infrastructure development and global crop booms. In times of need farmers may opt to sell their plantations and land, or move from longer-term tree-based systems to short term agricultural crops which provide a more regular income stream.
Together these factors impact the sustainability of smallholder -based plantations systems. Where plantation sustainability cannot be achieved, policy objectives may also not be met, for example, forest cover gains may be lost.
The disaggregated nature of smallholder plantations and the diversity in ownership makes the development of a coordinated policy approach to promoting environmental benefits and minimising
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negative impacts more difficult; particularly where the benefits gained are public benefits within limited value to the individual farmer (such as climate change mitigation). Measures to address this, such as through markets for certified wood, have had limited success; the market has not demonstrated a willingness to pay. New mechanisms are therefore needed to balance the provision of public benefits through smallholder owned plantations.
Given the primary driver for smallholder plantations is livelihood improvement there is a need to provide incentives for smallholders to more effectively manage their plantations in order to improve production and in turn address any negative environment impacts. Measures are also needed to encourage farmers to harvest and re-establish their plantations.
Such measures could include:
• reducing or removing regulatory fees and costs associated with plantation harvesting and sales. Unnecessarily complex and costly regulations discourage farmers from harvesting and replanting teak. Basic services such as plantation registration and harvesting permissions can be simplified and delivered through local institutions, such as Village Forestry Units. The capacity of these institutions should be increased, so extension based on current research results and updated technical advice can improve farmers’ knowledge.
• providing information and extension with respect to plantation management and providing information and extension with respect to plantation establishment, in particular for reduced stocking rates and therefore reduced costs.
• Providing information and extension with respect to understory management and fire control. Develop and enforce fire prevention regulations.
• removing regulatory hurdles to the sale of small products derived from plantation thinning. This would improve plantation management practices and provide an intermediate income to farmers.
• providing free seeds/seedlings to farmer who re-establish plantations after harvesting to discourage conversion to other cropping systems.
• Where plantations are located on high quality agricultural land, develop mechanisms for encourage farmer to replant tree on other land (e.g. land use rights, tax exemptions).
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2. CONTEXT
PLANTATIONS IN LAO PDR Data from the Department of Forestry (DoF 2015) indicates the total area of planted forests in Lao PDR to be approximately 446,000 ha, comprising teak, eucalyptus and acacia, agarwood, rubber and other species. Of this, over 50% is rubber plantation. The Lao 2020 Forest Sector Strategy aims to increase forest cover through planting 500,000 ha of high-value or fast-growing trees by smallholders and corporate investors. The Lao Government has recently expanded this target to about 1.2 million hectares, or about 700,000 hectares of new plantations, by 2030 (Figure 1).
The main known sources of plantation grown wood are smallholder teak plantations (Tectona grandis; ‘mai sak’) and Eucalyptus and Acacia from largely investor owned/managed plantations. Other species grown in plantations such Agarwood (Aquilaria Crassna; ‘mai ketsana’), Benzoin (Styrax tonkinensis, ‘mai nyarn’) and Yang (Nothalphoebe umbellifiora, ‘mai bong’) are not typically grown for timber products, but rather are harvested for aromatic wood, resin or bark for processing into incense or oil. Pink Mampat (Cratoxylum formosum/ Cratexylon prunitfolium ‘mai tiew’) is grown under (typically) a coppice system for white charcoal, and other native species that have been planted include Pterocarpus macrocarpus, Afzeleia xylocarpa and Alstonia scholaris although the exact areas and production volumes are unknown. Several of these species are promoted for planting during National Arbor Day but precise records of the area of plantings and survival are no kept.
Rubber is established principally for latex, and there is currently no formal value chain for rubber-wood in Lao PDR, although anecdotally rubber wood logs are being exported to China from the north, in areas where plantations are being harvested due to low latex prices.
Figure 1: Area of plantations in Lao PDR in 2015 and targets to 2020 and 2030
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Tree plantations have been widely promoted in government policy and have been established in a variety of planting patterns and silvicultural arrangements including:
• Mono-culture plantation – single wood producing species
• Mixed species - more than one wood producing species planted together
• Intercropping - one or more wood producing species inter-planted with non-wood producing trees or plants (e.g. coffee, rice, cassava)
• Complex agroforestry - multiple wood producing and non-wood producing trees/plants established in an area, often resulting in a complex multi-layered structure
• Scattered/boundary plantings - one or more species of wood-producing trees planted in low densities to demarcate property boundaries or protect land (e.g. paddy boundaries, wind rows).
Both long and short rotation plantations are found in Lao PDR with the variation typically based on the species, the desired products and the investment goals and ownership of the plantation or plantation land. Investment in plantations has dominantly been through the establishment of smallholdings by famers or through corporate investment by domestic and foreign entities. While corporate investment has been aimed at the production of specific wood products, plantations established by households have been integrated into livelihood strategies for a variety of purposes (c.f. Newby et al 2014).
3. PLANTATION POLICY SETTING Policies that promote tree plantations in Lao PDR have their basis in national socio-economic development objectives. Through these, the role of plantations has transformed as the country has transitioned through a development process, influenced by increasing exposure of regional and global trends and opportunities. However, two dominant themes have persisted as development priorities to which plantations and planted forests are expected to contribute: forest cover and poverty reduction.
The following sections describe the relevant recent national strategies, plans, policies and processes that apply specifically with respect to environmental protection and management associated with planted forests in Lao PDR. The broader policy setting is described in Smith et al 2017.
NATIONAL SOCIO-ECONOMIC DEVELOPMENT PLANS The 8th NSEDP (2016-2020) was launched in April 2016 and sets the outcomes, outputs and targets for the country for five years including with respect to forests. Specific, relevant targets within the plan are:
For Outcome 1:
• Manage and use production forests and community forests effectively. • Continue surveys and allocate at least 600,000 ha to forestry. • Certify 30 % of total production forest area and restore production forest of 500,000 ha. • Promote cultivation of 500,000 ha of traditional plants and industrial crops. • Develop forest allocation and management plans at village level in 1,500 villages.
For Outcome 2:
• Reforestation area to reach forest cover of 70% by 2020. • Allocate areas for agricultural production based on soil and atmospheric conditions: Large flat areas
are suitable for irrigated agriculture development, rice farming, and industrial tree plantation.
For Outcome 3:
• Complete reforestation to achieve forest cover over 70 % by restoring natural forests on 1.5 million ha and planting trees on 35,000 ha of protected and conservation forests.
NATIONAL GROWTH AND POVERTY ERADICATION STRATEGY (NGPES) The National Growth and Poverty Eradication Strategy (NGPES), adopted in 2004, is a national development program aimed at enhancing growth and development and reducing poverty, particularly in the 47 poorest
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districts in the country. More broadly, it contributes to the overarching national development goal of progress towards graduation from LDC status by 2020 by strategically identifying the sectors that are most important for poverty reduction, and formulating national action plans for these sectors in response to poverty reduction priorities. The NGPES focuses on four main sectors:
1) Agriculture/forestry,
2) Education,
3) Health, and
4) Transport.
It identifies forest and biodiversity conservation as a main source of livelihood and income for rural households, the need to better manage river basins and watersheds to minimize flooding and other natural hazards, while also addressing the low government spending and budgeting for environmental management and conservation.
THE FORESTRY STRATEGY 2020 The Forestry Strategy 2020 (FS2020) is the primary sectoral strategy for forestry, including plantations. The main objectives of FS2020 are to define and agree on a set of policy and institutional arrangements, and to allocate relevant roles and responsibilities among the main stakeholders to achieve sector objectives and targets through implementation of the chosen strategies, policies and actions. The overarching objective of FS2020 is poverty eradication.
Environmental protection measures are embedded within several of the major objectives for forestry sector development, which include:
1) To control and correct actions which lead to the deterioration of forest resource quantity and quality and at the same time achieve livelihood improvements for poor farmers in rural areas and protect forest cover.
2) To develop and enforce laws and regulations related to forest.
3) To ensure sustainable management of Production Forests with the participation of local people and to promote commercial tree planting by individuals, groups, organizations, small and medium scale companies and foreign and national investors with government providing policies,
4) To contribute to conservation of forest ecosystems, habitat and all plant and animal species in danger of extinction.
5) To protect soil, watersheds and the environment and to secure the durability of important infrastructure by forest conservation.
6) To use revenue from forests in the most effective ways for development of the economy and other sectors according to government’s priority development plans, and to contribute to poverty eradication.
7) To ensure sustainable management of Non-Timber Forest Products (NTFPs) and their contribution to livelihood improvement of rural villagers
The major forest sector targets which must be achieved to contribute to poverty eradication, include several that specifically relate to environmental protection:
1) To improve the quality of the existing forest area by naturally regenerating unstocked forest areas, as an integral part of a rural livelihood support system encompassing stable water supplies and prevention of natural disasters.
2) To preserve the many species and unique habitats, which are, for different reasons, threatened both within the country and elsewhere.
3) To conserve the environment including protection of soil, conservation of watershed and climate.
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Forest Sector Development Plans
The current Five-year Agriculture and Forestry Development Plan (2016-2020)1 includes the following expected outputs which are relevant in the context of environmental measures:
• Manage, protect and develop forest under MAF’s responsibility to contribute to forest cover of 70%, through reforestation of degraded forest in production forest area of 650,000 hectares and planting of the trees over 100,000 hectares.
• Increase the area of forest certified to 20% of total forest production area.
NATIONAL ENVIRONMENTAL STRATEGY TO 2020 AND ENVIRONMENT ACTION PLAN The National Environment Strategy and Action Plan (NES-AP) aims to secure sustainable development and contribute to poverty eradication through sound environmental management and sustainable use of natural resources. The plan recognises that environment management should be implemented in a systematic and effective manner to ensure environmental protection and natural resource conservation, and should be balanced with economic and social development together with requirements for national defence and public security. This should be undertaken through the development of appropriate policies, legislation, institutional and capacity development, education and awareness, financial mechanisms and opportunities for international cooperation. The NES-AP includes seven focused programmes including, of particularly relevance to plantations, the promotion and enforcement of environmental and social impact assessments and environmental management of development projects.
STRATEGY ON CLIMATE CHANGE The Government of Lao PDR ratified the UNFCCC in 1995 and the Kyoto Protocol in 2003, and has developed a Strategy on Climate Change in 2010. A National Adaptation Plan of Action (NAPA) was released in May 2009 and contains 45 priority projects across four sectors: agriculture, forestry, water and water resources and health. Within the NAPA the program related to forestry includes the strengthening of villages through village forestry volunteers in forest planting, caring and management techniques as well as the use of village forests, raising public awareness on wildlife conservation, including a public awareness campaign to disseminate information on forest and wildlife regulations and laws, strengthening the implementation of these regulations and building research capacity on wildlife pests and diseases and outbreaks of animal diseases.
BIODIVERSITY CONSERVATION ACTION PLAN The National Biodiversity Strategy and Action Plan (NBSAP) outlines the issues, goals and actions needed to protect biodiversity resources and ensure their sustainable use. It contributes to implementation of the International Convention on Biological Diversity (CBD), which Lao PDR ratified in 1996. The goal of the NBSAP is to maintain biodiversity as a key to poverty reduction and to protection of the current asset base of the poor.
FOREST LANDSCAPE RESTORATION STRATEGY The Forest Landscape Restoration (FLR) approach, which is still in early stages of development in Lao PDR, is rapidly gaining attention as a way to restore both degraded forests as well as the surrounding degraded landscape. The perceived value of this approach is that it integrates forest restoration actions with overall landscape objectives, and it is undertaken with the full participation of the people who it is expected will have a role in the management of the restored areas over the longer term.
The Global Partnership on Forest and Landscape Restoration (GPFLR) was initiated in 2003 and responds directly to the Bonn Challenge to restore 150 million hectares of deforested and degraded land by 2020 and 350 million hectares by 2030. Several pledges have been made by governments, including Asia-Pacific Economic Cooperation leaders who have pledged to boost their forest area by 20 million ha by 2020. FAO and RECOFTC proposed the setting up of a facility to support the FLR mechanism in the region.
1 Based on a summary presentation translated from Lao. An English copy of the Plan was not available.
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FAO launched its ‘Forest and Landscape Restoration Mechanism’ in 2014 to support the implementation at the national level and in November 2016 Lao PDR initiated a project aimed at Promoting Forest Landscape Restoration in Laos.
GREEN GROWTH Green growth is widely understood to be sustainable, equitable economic growth achieved through investment in the pillars of a green economy which are listed by UNEP, OECD and other organizations to include:
• Natural Capital maintenance, enhancement and/or restoration • Sustainable infrastructure • Resource efficiency • Low carbon, clean technology • Enabling resilience and adaptive capacity across human, cultural, physical infrastructure and
economic systems • Developing social and human capital and supporting equitable development outcomes
In July 2011, the annual Greater Mekong Subregion (GMS) Environment Ministers Meeting announced that their regional vision of a “poverty free and ecologically rich GMS” will be achieved through the development of “a green, inclusive and balanced economy, and as a first step in this transition we aim to maintain and enhance ecosystems and the services they provide.” In December 2011, at the 4th GMS Summit, countries endorsed a new ten-year strategic framework that contains many core elements of a transition to a green economy. Most recently, during the GMS 2020 Conference on Balancing Economic Growth and Environmental Sustainability in 2012, policy-makers from all six countries, as well as development partners, gave explicit consideration to the issue of how best to bring about a balanced convergence between economic growth and environmental sustainability.2
Lao PDR has expressed interest and requested assistance in creating a green economy roadmap and policies. MONRE is working towards a “pollution control economy,” based on a pollution inventory. UNESCAP is supporting the government in its creation of a green growth roadmap, while UNDP and UNEP-FI have been assisting Lao to integrate green growth concepts into the national development plan. The Lao government has committed to keeping growth at 8 per cent to meet its targets of poverty reduction and exit the MDGs by 2020 – and has called on civil society to prepare for rapid changes.
NARRATIVES FOR ENVIRONMENTAL MANAGEMENT AND PROTECTION Within this policy setting there are strong narratives associated with the environmental benefits that can be provided through plantations and planted forests and the environmental impacts associated with plantation development.
POSITIVE NARRATIVES The dominant narratives associated with the positive environmental contributions of plantations include:
• increasing forest cover
o providing an alternative economic activity to shifting cultivation which is perceived to cause deforestation and degradation,
o protecting natural forests by providing an alternative source of timber
o providing a buffer to natural forests by from external impacts and encroachment such as though agricultural expansion,
• poverty reduction
o providing an alternative economic activity to shifting cultivation through permanent settlement and employment
2 http://www.greengrowthknowledge.org/country/lao-peoples-democratic-republic
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• landscape restoration
• protecting of soil and water including upland watersheds, hydro-dams and reducing flood risks (c.f. Lacombe et al 2016)
• contributing to climate change mitigation efforts,
• contribution to green growth, and
• enhancing visual amenity.
While some of these may be evidenced locally, by-and-large these benefits are public benefits and accrue at the national or international level.
NEGATIVE NARRATIVES In different contexts and geographic scales, plantations may also be perceived as having negative impacts on the environment. Generally, these include their lack of diversity and structure (‘green deserts’), risks to soil and water values and potentially adverse impacts on natural forests associated with increased pressure for land and increased access.
These perceptions are often on made based on generalisation about common characteristics of plantations such as “large” versus “small”, “industrial” versus “household”, “concession” versus “village”, “commercial” versus “livelihood”, “exotic” versus “native” and “short rotation” versus “long rotation”. While these descriptions may be overly simplistic they are not irrelevant because it is often in this context that policy measures are made and applied.
Negative environmental and social impacts are most commonly articulated in the context of large-scale, industrial, company-owned, profit-driven, short rotation, plantations of exotic species. They include, for example:
• land grabbing and displacement of local people resulting in the shifting of their land use activities into new areas
• directly clearing natural forest, including degraded forests, in preparation for plantation establishment
• soil erosion, soil compaction and land
• improper use of chemicals
• water interception, the alteration of stream flow
• lack of species and genetic diversity
• water pollution
In Lao PDR the plantation sector, as an industry group of companies, has recognised and responded to many real and perceived negative impacts associated with their activities, and acknowledges that there are some ongoing challenges (Earth Systems 2016), such as:
• The protection of natural forests which has been impacted due to significant competition for suitable land, the poor demarcation and lack of information about protected forests and conservation areas; ambiguity concerning the definition of degraded forest areas and legal provisions for the conversion of forestland to other land uses, and plantations operators’ capacity and ability to managed and protect remnant natural forest within their project areas.
• Rehabilitation versus conversion of degraded forests through which plantation companies undertake restoration activities within their project areas.
• Forest health and diversity including in association with planning to protect and enhance landscape functions and mitigate against risks associated with, for example, fire.
• Landscape management which takes into account government land zoning, village land and land use practices.
There are also negative impacts perceived to be associated with smaller, farmer-owned plantations of longer rotations and natural species, with criticisms including:
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• elite capture of prime-land resulting in the clearing of new areas for swidden by poorer farmers
• clearing natural forest for plantation establishment
• improper use of chemicals due to lack of knowledge
• soil erosion, gullying and root exposure associated with soil surface crusting and the tendency for farmers to intentionally keep the soil bare under trees by clearing and recurrent burning of the understorey
• increased run-off and changes in stream flow, compared to other production systems having important considerations with respect to the placement of plantations in the landscape.
Recurrent narratives may be used to support and perpetuate policy objectives and influence the introduction of policy mechanisms to influence change. If these mechanisms are designed in the absence of supporting evidence or without taking into account competing policy objectives, adverse and unforeseen consequences may be the result. A current example of this can be seen in smallholder teak plantations.
The Case of Smallholder Teak
In the late 1980’s, in response to concerns regarding rapid deforestation both globally and nationally, Lao PDR introduced policies to increase and protected forest cover3. The stated causes of deforestation included over-harvesting of timber, shifting cultivation undertaken by poor farmers in the uplands. Several international and national processes converged at a time when Lao PDR was adopting new approaches to economic development, including with respect to the allocation of land and the opening of markets. Simultaneously, internationally trained Lao public servants were returning with new ideas about forestry and forest management, significantly including approaches to social-forestry and plantations.
Broad policies for the allocation of land to individuals and the promotion of tree planting were intended to simultaneously increase forest cover, provide an alternative economic activity to shifting cultivation thereby reducing poverty and reducing deforestation, encourage permanent settlement4 and employment. Laws and Decrees began to be introduced including to allocate land for plantations,5 and including specific mechanisms intended to act as incentives to plant trees –land use rights and land and resource tax exemptions.
The effective promotion of plantations has created a network of thousands of smallholders who individually own and managed small areas of teak plantation, which when taken as a whole constitutes a significant resource. However, these smallholders have been placed at the convergence of diverse policy objectives with multiple, often contrasting objectives only some of which are intended to directly benefit smallholders. This has had some unintended and perverse outcomes also occurred by placing smallholder plantations at the nexus of competing policy objectives. Examples of these include:
• the tension between plantations as an economic resource for poverty reduction, requiring trees to be harvested and sold, and as a solution to forest cover decline, requiring trees to be maintained.
• linking permanent land use rights to plantation characteristics, creating a perception that tenure security is dependent upon tree stocking, resulting in sub-optimal plantation management practices and poor wood quality,
• viewing plantations as a solution to poverty reduction - expecting farmers to manage them to regularly harvest and supply timber to industry, thereby supporting economic development, but over-regulating the harvesting of timber to protect against illegal logging of natural teak.
Today, in Northern Laos there is a significant area of teak plantation, owned by thousands of smallholders who view their trees as an investment to be utilised largely as an economic safety net and as a means of
3 Refer to Ohlsson, and Inthirath (2001) for a detailed re 4 Permanent settlement of 60% of 1.5 million people currently engaged in shifting cultivation by year 2000 was an objective of the Tropical Forest Action Plan for Lao PDR in 1989 5 Decree No 186/PM 1994
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maintaining land use rights. The government is keen to mobilise this resource to supply domestic wood processing but does not have in place the policy mechanisms to achieve this.
However, it is erroneous to treat the teak plantations as a homogenous resource owned by smallholders with a common objective. New policy measures must recognise that past policy interventions have resulted in the emergence of a complex and dynamic agrarian environment in which teak plantations have become an asset under diverse ownership arrangements with multiple livelihood functions. Past incentives, such as land use rights and land tax exemptions, which were effective in promoting plantation development, may not be effective in encouraging smallholders to realise their asset in a way that also meets the needs of industry. Reforms need to consider whether existing measures are still valid. Policies may reinforce universalising tendencies and apply generalisations about the targets of interventions, and while some level of generalisation may be necessary, the human factor cannot be overlooked when designing regulations which are intended change human behaviour. When smallholder plantation owners are treated as a homogenous group with ubiquitous aspirations, and their plantations are viewed as a public asset to meet national policy objectives, further friction may occur (Smith, Ling and Boer in press).
Figure 2: Smallholder in policy convergence
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4. GOVERNANCE
GOVERNMENT6 AGENCIES Responsibility for the plantation sector sits several Ministries and line agencies which regulate all aspects from land allocation to wood exports. These are described in detail in Smith et al 2017. With respect to meeting environmental policy objectives and mitigating environmental impacts the key Ministries are the Ministry of Agriculture and Forestry and the Ministry of Natural Resources and Environment. The Ministry pf Planning and Investment also plays a role in approving larger scale plantation investment projects.
MINISTRY OF AGRICULTURE AND FORESTRY The structure and functions of Ministry of Agriculture and Forestry (MAF) are set out in Decree No. 262/PM (2012) on the organization and function of the Ministry of Agriculture and Forestry. According to its mandate, MAF is responsible for “ensuring food security; forest management, supplying raw materials for processing industries, sustainable, modern commodity production and the creation of permanent jobs for ethnic groups to reduce dependence on shifting cultivation and to eradicate poverty across the country”.
Department of Forestry
The Department of Forestry (DOF) is a central agency under MAF which provides advice to MAF in relation to the management, conservation, protection, development and use of forest resources within production forest areas, plantation forests and village forests, as well as for forestlands which are not yet classified. The main functions of DOF are to develop and implement strategies, programs and policies on forestry activities, undertake forest planning, zoning, surveys, monitoring, formulate forestry laws and other legal instruments related to forestry and to operationalise these through regulations, policy and technical instructions.
Within DOF the Plantation Investment Division, together with the Division of Technical Standards, is responsible for the development of regulations with respect to plantation investment and plantation management. It also collates and maintains plantations statistics.
Provincial Agriculture and Forestry Division
At the provincial level, the Provincial Agriculture and Forestry Offices (PAFOs) are responsible for implementing the functions of DOF as well as helping to perform sectoral activities at the provincial administrative level. This includes developing the provincial harvesting quota for submission to MAF, issuing harvesting licenses, developing harvesting contracts, supervising harvesting operations, preparing log source documentation, undertaking the scaling and grading of logs and creating the lists of logs at Landing 2, prior to transport and consolidating District level information for reporting to DOF.
District Agriculture and Forestry Office
Within each Province each District has a District Agriculture and Forestry Office (DAFO) reporting to the relevant PAFO. Their functions include the registration of plantations, providing advice on plantation management and planning, pre-harvest surveys, the approval and monitoring of harvesting operations and the preparation of log origin documentation by measuring and marking harvested logs from all areas (Production Forest Areas, Infrastructure projects, Plantations, and Village Forests). In the past both PAFOs and DAFOs have been responsible for finding “degraded land” for investors (and can be awarded with financial incentives to do so).
DEPARTMENT OF FORESTRY INSPECTION The Department of Forestry Inspection (DOFI), under MAF, is responsible for monitoring, investigation and enforcement activities under the Forestry Law No. 06/NA 2007 and the Wildlife and Aquatic Law No07/NA 2007.
6 “The Government” is defined under the Law on Government as the executive branch of the State, approved by and responsible to the National Assembly and the President of the State. Members of the Government are: the Prime Minister, Deputy Prime Minister, the Prime Ministers’ Office, Ministers, Deputy Ministers, Ministries and Ministry-equivalent organisations which may act as the secretariat to the government. And so formally one can distinguish between the ‘Government’ and the ‘Party’ even though the widespread use of the term pak –lat (the Party-state) highlights their near inseparability.
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DOFI is directly accountable to the secretary body to the Minister of Forestry, providing a direct line of reporting to the Ministerial level, thus measure of independence outside of DOF and other agencies. The responsibilities of DOFI are described further below.
VILLAGE FORESTRY UNITS The Forestry Law (Article 108) grants Village Forestry Units (VFUs) the right to take a leading role in monitoring and preventing adverse activities that may cause harmful effect to the forest, NTFPs, water resources in forests and the environment, such as illegal cutting of trees, forest burning and any actions that caused damage and destroy the forest on time. However, no formal terms of reference have been developed that allow VFUs to function as a component of DOFI and in the existing terms of reference for District Forest Inspection their role is limited to a liaison function.7
DEPARTMENT OF FOREST RESOURCE MANAGEMENT The Department of Forest Resource Management (DFRM) is responsible for conducting surveys and determining the areas and the measures on management, prevention, protection, development, restoration, and registration of forestry resources in protected and reserved forest areas. It also monitors and inspects the use of forests, forest exploitation, and collection of non-timber forest products and biodiversity.
MINISTRY OF NATURAL RESOURCES AND ENVIRONMENT The Ministry of Natural Resources and Environment (MONRE) was established in 2012 by merging the Water Resource and Environment Administration (WREA) with the National Land Management Authority (NLMA) and the Geology Department, as well as with two Divisions previously located within DOF: Protection Conservation and Forest Protection and Regeneration (now Department of Forest Resource Management).
Within MONRE there are ten Departments; including the Land Allocation and Development Department (LADD) which is responsible for the administration of land, land registration, surveys and the issuing of land titles, the Land Management Department (LMD) which is responsible for the participatory land use planning (PLUP) process during which it consults with stakeholders to propose and issue land use permits, land transfers, lands lease or land concession, and coordinates with related line agencies and local administration. MONRE is also responsible for the implementation of the Law on Environmental Protection No 29/NA 2012.
DEPARTMENT OF ENVIRONMENTAL AND SOCIAL IMPACT ASSESSMENT
The Department of Environmental and Social Impact Assessment reviews, confirms and approves the environmental and social impact assessments of investment projects, including for tree plantations, before concession agreements are signed. It monitors and inspects the implementation of environmental management plans, including the promotion of the participation of all stakeholders and people affected by investment projects.
MINISTRY OF PLANNING AND INVESTMENT The Ministry of Planning and Investment (MPI) regulates foreign and domestic investment in Lao PDR including plantation investment projects.
INVESTMENT PROMOTION DEPARTMENT
The Investment Promotion Department (IPD) administers the foreign investment system and reviews investment applications. IPD is the lead agency in the process of assessing applications for investment activities seeking access to land through leases or concessions, and it coordinates the participation all other relevant sectoral agencies in the decision-making process such as the issuing of the concession registration certificates.
LUANG PRABANG TEAK PROGRAM The Luang Prabang Teak Program (LPTP) was established in 2008 by The Forest Trust together with the Luang Prabang Provincial Forestry Section (PFS), the Department of Forestry (DOF) and Provincial as well as District Agriculture and Forestry Offices (TFT, 2015). The program aimed to provide smallholders with 7 c.f. Agreement No 1987/MAF on the Terms of Reference of District Forest Inspection Unit (DAFO), 2013
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knowledge on forest policy and environmental management in an attempt to achieve better economic returns from their plantations. Some of the activities undertaken to achieve this included (TFT, 2015):
• providing training on regulations and improved silvicultural practices • supplying plantation management equipment • developing Forest Management Plans • assisting in setting up farmer ‘grower groups’ to better manage their plantations • mapping plantation boundaries • providing free registration of plantations, and • training district and provincial government officials on plantation management and registration.
TFT also assisted in seeking FSC certification, resulting in 385 hectares of smallholder plantation receiving becoming certified.
While the program has provided smallholder farmers with a number of benefits and valuable skills in plantation management and harvesting, the absence of a strong market for certified wood resulted in lower than anticipated returns from FSC certification and in 2016, the FSC certification expired and TFT did not renew it.
NON-GOVERNMENT ORGANISATIONS Non-government organisations such as international not-for-profit organisations (e.g. The Forest Trust), overseas development assistance organisations (e.g. ACIAR, UNDP, World Bank, FAO, GIZ), industry sector groups (e.g. the Lao Wood Industry Association), corporate plantation owners (e.g. Burapha, Stora Enso, New Forests), individual farmers and grower groups influence the effectiveness of policies for plantation and the implementation of regulations for plantation, including with respect to the environment.
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5. THE LEGAL FRAMEWORK FOR ENVIRONMENTAL MEASURES There is an extensive and highly complex legislative and regulatory environment for forests, plantations and the timber value chain in Lao PDR which is described in detail elsewhere (Smith et al 2016; Smith and Alounsavath 2015; Smith 2014). This section focusses on those elements most relevant plantations in the context of environmental values - their enhancement or protection.
The Government of Lao PDR (GoL) enacted the Environmental Protection Law (Revised), No. 29/NA, in 2012 as the core framework law for environmental management, and incorporated the concept of an environmental impact assessment (EIA) as a key tool for the protection of environmental and social values. In October 2012, Environmental Impact Assessment Guidelines were developed to support the integration of the two objectives of ‘protection’ and ‘development’. These Guidelines provide a common framework for an Initial Environmental Examination (IEE) or for an Environmental and Social Impact Assessment (ESIA). They also guide project developers and their environmental consultants on the structure, content and scope of these reports, and ensure that reporting is consistent with legal requirements, good practices and professional standards.
In 2014 the United Nations Development Program (UNDP) and the GoL Department of Environmental and Social Impact Assessment (DESIA) in MoNRE, commissioned the development of an Environmental Impact Assessment Agriculture and Forestry Technical Guidance Note (TGN) to improve the effectiveness of environmental and social impact assessments of investment projects and as a safeguard for sustainable and climate-resilient development within Lao PDR.
The TGN was been developed to support the preparation, review and monitoring of both IEE and ESIA for agriculture and forestry plantation (AFP) investments. It provides information on key environmental and social values and potential impacts associated with AFP projects. It identifies key IEE and ESIA legal obligations, and integrates international best practice principles, which AFP project developers should follow when preparing, developing, implementing, monitoring, and reporting against approval requirements (as detailed under GoL laws, and an environmental compliance certificate and a pollution permit as specified under Article 43, and issued under authority specified under Article 79 of the Environmental Protection Law) as well as the range of impact avoidance, prevention and mitigation measures implemented to address identified impacts.
At the time of writing this report the official status of the TGN was unclear but it nevertheless provides useful contextual information with respect to environmental protection measures associated with large-scale concession-based plantations.
The major legal sources and their relevance to the environmental management of plantations are listed in Table 2.
ENVIRONMENTAL AND SOCIAL IMPACT PROTECTION MEASURES The 2012 Environmental Protection Law incorporates the concept of an environmental impact assessment (EIA) as a key tool for the protection of environmental and social values and provides “principles, regulations and measures related to environmental management, monitoring and protection”. Environmental Impact Assessment Guidelines have been developed to support the integration of the two objectives of ‘protection’ and ‘development’. These Guidelines provide a common framework for an Initial Environmental Examination (IEE) or for an Environmental and Social Impact Assessment (ESIA). They also guide project developers and their environmental consultants on the structure, content and scope of necessary reports, and ensure that reporting is consistent with legal requirements, good practices and professional standards (UNDP 2014). Environmental and social impact assessment and mitigation have been articulated in legal texts and guidelines.
While the Environmental Protection Law is focussed mainly on measures associated with what can be considered larger scale or industrial developments, they also apply to activities associated with household business activities and require (Article 23) households that undertake production, and cultivation (amongst other activities), that may impose negative impacts on the natural environment to have plans to address those issues. Households are required to make environmental protection commitments, develop plans and gain approval of these plans as stipulated in specific regulations. Which regulations apply is not articulated in the Law…?
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The roles, responsibilities, obligations and requirements are outlined under the Ministerial Agreement on Endorsement and Promulgation of a List of Investment Projects and Activities Required for Conducting Initial Environmental Examination or Environmental Impact Assessment, No. 8056/MONRE 2013; Ministerial Instruction on Initial Environmental Examination of the Investment Projects and Activities, No. 8029/MONRE 2013, and Ministerial Instruction on Environmental and Social Impact Assessment of the Investment Projects and Activities, No. 8030/MONRE 2013. While these guidelines are reasonably comprehensive current implementation is largely based on the level of knowledge of the consultant company that is engaged to undertake the assessment. Government employees who are responsible for the ESIAs have limited capacity in terms of their expertise, experience and knowledge. Some are from non-forestry or natural resource management backgrounds. In addition, the level of resourcing is inadequate.
PLANTATION DEVELOPMENT APPROVALS
The process for plantation approval and development follows a number of pathways depending on the scale of the plantation project, the nature of the investment and the land allocation process. These processes are summarised in Figure 4. These factors also determine the level of environmental and social impact assessment that is required as summarised in Table 1.
Table 1: EISA requirements for Plantation Projects
Land Type Allocated to Individuals <0.16 ha (scattered planting) Allocated to Individuals 0.16-3ha Allocated to Individuals 3-5 ha Allocated to Individuals < 5a (using bank loan) Allocated to Individuals 5-20ha State land concession 20-200ha
State land concession >200 ha
Specific measures have been introduced to minimize and mitigate the negative social, economic and environmental impacts associated with different tree plantation development approaches. These are articulated in Law, regulations and guidelines as well as within codes of practice and standards for sustainability certification and corporate social responsibility.
Environmental and social management and protection measures are implemented at the landscape level though national, provincial, district and village planning processes and at the project level. Landscape level measures tend to be aimed at restricting the types of activities that may be undertaken in areas with defined characteristics to limit impacts, protect remaining environmental qualities or values or restore past degradation. For example, limiting plantations to areas that are already degraded is intended to prevent further deforestation and simultaneously restore forest cover. In terms of social or economic impacts, landscape level measures may be intended to protect high quality agricultural land and ensure that strategies for enhancing agricultural production and food security are effective. Figure 3 summarises the process through which land is allocated to plantations.
The areas in which plantation can be developed are determined through the Law on Land (No. 04/NA 2003) which regulates the categorization of land and the allocation of access and use rights to land. The land allocation process for plantations is summarised in Figure 3. Land is categorised into eight types of which plantation can be established on only one – Forest land. Forest land can be allocated to individuals and households, or on State land or village land that is granted by concession or lease: In all cases plantations are to only be approved on Forest Land that is classified as ‘degraded’ or ‘barren’ and is located in rural or suburban areas. The process of demarcation of Forest land into these classifications has been inconsistent and has not been undertaken across the Forest Land estate.
However, land can be changed from one category to another category to allow alternative land uses if it is considered to be necessary and can be undertaken without having negative impacts on the natural or social
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environment; land category conversion must be with the prior approval of the concerned management authorities.
Generally, land areas for plantation projects should never include any of the following:
• Protection Forest • Conservation Forest • Local Production Forest • Watershed Areas • Forestlands with more than 20% of forest coverage • Areas with slope more than 35% for tree plantations • Military strategic areas • Historical or tourist sites • Other Government approved land concession project land.
The accommodation of land conversion options together with the incomplete identification of degraded and barren forest land has enabled the enabled the allocation and clearing of natural forest for plantation projects.
At the project level, environmental and social management and protection measures tend to be focused on local level impacts and are based on considerations about the type of activity, the scale and the magnitude of the risks involved (Figure 4).
CONCESSIONS AND LEASES State land concessions for industrial tree plantations, forest rejuvenation, reforestation and non-timber forest product collection can only be granted on land appropriately zoned as:
• Zone 1: mountains, plateaus, plains without economic infrastructure which encourages the investment.
• Zone 2: mountains, plateaus, plains with partial economic infrastructure which encourages the investment.
• Zone 3: mountains, plateaus, plains with good economic infrastructure which encourages the investment.
Except for in necessary cases concession land areas should not cover land which is:
• Land held on private land title; • Land that is under collective title; • Paddy land; • Agricultural land for growing rice (not including swidden) or annual crops by local farmers; and • Land on which people are residing or making a living, whether on a periodic or permanent basis.
In the event such land exists within a concession or state lease area, consultation must occur with the affected persons and compensation must be paid. In the case of paddy land, specific approval from MAF and the Land Management Department, MONRE must be obtained.
Where ever possible the use of Agricultural Land8 for concession based plantations should be avoided, unless is it is in excess to current and future agricultural requirements.
The processes through which applications and approvals for concessions and leases are to be made are articulated in many legal sources and administered through several agencies at different administrative levels. MAF, MONRE, Local Government and MPI all have responsibilities for approving plantation investment projects, allocating land, registering plantations and managing the timber arising from them, compounding the costs and time required for investments to commence, become productive and provide a return.
Concessions or leases are granted under agreements with National, Provincial, District and sometimes village authorities as detailed under the Law on Investment Promotion No. 02/NA 2009, the Forestry Law No. 06/NA 8 As defined under the Law on Land
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2007, and Land Law 04/NA 2003. The Presidential Decree No 135/PM on State Land Leases and Concessions 2009 establishes a set of general principles for the granting of leases or concessions of state lands, and Presidential Decree No. 02/NA provides a guide for range of land lease rates for concessions in the country. In line with the Prime Minister’s Decree No. 67/PM on the Organization and Function of the National Land Management Authority (2004) and Decree No. 135/PM on State Land Leases and Concessions 2009, approval for concessions of State land can be granted by the National Assembly, with agreement by the GoL, or at local level (Provincial Governors or Capital Mayor). A supervising committee, chaired by MPI has oversight of the concession or lease process (Smith and Alounsavath 2015).
Environmental and Social Impact Protection Measures for Forestry plantation projects
Forestry plantation projects are divided into two categories for environmental and social impact assessment and reporting purposes: Category I - Small scale investment projects with minor environmental and social impacts requiring an initial environmental evaluation (“IEE”); and Category II – Large-scale investment projects which are complicated or create significant environmental and social impacts requiring an environmental impact assessments (“EIA”). Industrial tree plantations of 20-200 ha are considered to be Category I projects while plantations >200 ha are considered to be Category II projects. Projects that are outside of the above listed categories will either be considered too small scale to require an IEE or EIA, or will be individually screened by MONRE based on additional criteria, and possibly the advice of MAF, to determine if either an IEE or EIA is required or in no assessment is necessary (EIA Decree Article 6) (UNDP 2014).
Additional “social categories” exist with respect to the social studies and plans that an investment project is required to conduct. For example, a project with large-scale social impacts may be required to submit a Social Impact Assessment, and Resettlement Plan and/or Ethnic Minority Development Plan, Resettlement Plan and/or Land Acquisition and Compensation Report to DESIA for approval.
MONRE leads the study and identification of policies, strategies, regulations, methods and measures for environmental protection. The environmental management organizations consist of:
• MONRE • Provincial or Capital DONRE • District or municipality office of natural resources and environment • Village unit of natural resources and environment
These organisations are also the environmental inspection agencies that work with other agencies such as the National Assembly, State Inspection and Anti-Corruption Authority, State Audit Authority, DoF and DoFI.
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Table 2: Major legal sources relevant to Plantations
Legal Source Purpose Matter relevant to Environmental Measures relevant to plantations
Scope of Application
Law No. 04/NA on Land 20039
Decree No. 88/PM on the Implementation of the Land Law 2005
To determine the regime on the management, protection and use of land.
All individual and organisations have an obligation to protect the land. Specifies that land use shall not have a negative impact on the natural or social environment.
Large-scale Plantations Smallholder Plantations
Law No 06/NA 2007 on Forestry10
Regulates the management and use of Forest Land (as defined under the Law on Land)
Allows for the use of Forest Land for plantations
Specifies the types of forest land that can be allocated for plantations
Sets the general requirements for the management of plantations.
Large-scale Plantations Smallholder Plantations
Law No. 29/NA on Environmental Protection 2012
Regulates for environmental protection, particularly with respect to mitigating and monitoring the anthropogenic impacts of development.
Establishes the requirement for Environmental Compliance Certificates for development.
Establishes the requirement for Environmental and Social Impact assessments.
Large-scale Plantations Medium-sized Plantations
Law No Water and Water Resources Law 02/96/NA 199611
Determines principles, rules, and measures for the exploitation, use and development of water and water resources.
To preserve water and water resources and to ensure sustainable volume and quality providing for (inter alia) forestry, while ensuring that no damage is caused to the environment.
The revised draft includes a requirement for water
Large-scale Plantations Smallholder Plantations
9 Currently under review 10 Currently under review 11 Currently under review
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Legal Source Purpose Matter relevant to Environmental Measures relevant to plantations
Scope of Application
resources permits for anything other than small-scale water use.
Decree No. 96/PM on Industrial Tree Plantations and Environmental Protection, 2003
To promote tree planting for commercial timber production and environmental protection
Promotes the use of plantations for environmental protection and restoration.
Large-scale Plantations Smallholder Plantations
Decree No 135/PM on State Leases and Concessions
Determines the principles, procedures, and measures regarding granting of state land for lease or concession with the aim to ensure the uniform management and use throughout the country, to boost the development of state land, to turn land into capital, to promote the investment for cash crop production and for services, and to build income for the state budget.
Specifies the need for a socio-economic and land suitability study and a report on the social and environmental impact assessments, including appropriate resolution measures.
Large-scale Plantations Medium-sized Plantations Concession-based plantations
Regulation No. 0196/MAF concerning the development and promotion of long-term plantations 2000
Promotes investment in tree plantations Establishes the requirements for a feasibility study, technical and economic analysis, management plans and plans of operations for some plantation types.
Makes reference to guidelines on some aspects of plantation management relevant to environmental protection.
Large-scale Plantations Smallholder Plantations
Instruction No. 1643/DOF 2007 on development of a feasibility study of industrial trees and NTFP investment
Ensuring the effective use of forest land, investment and reduce an impact to environment and social.
Establishes the requirement for conducting a social- economic survey, suitability of natural condition for soil, climate, sea level, rainfall, water resources, land use rights, local labours, forest and forest resources conditions, etc. Environment and social protection measures must be specified in the plan.
Large-scale Plantations
Instruction No. 8029/MONRE on Initial
Implements Law No. 29/NA on Sets the procedures of an Initial Environmental Large-scale Plantations
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Legal Source Purpose Matter relevant to Environmental Measures relevant to plantations
Scope of Application
Environmental Examination of the Investment Projects and Activities 2013
Environmental Protection 2012 Examination
Instruction No. 8030/MONRE on Environmental and Social Impact Assessment of the Investment Projects and Activities
Implements Law No. 29/NA on Environmental Protection 2012
Sets the procedures of an Environmental and Social Impact Assessment
Large-scale Plantations
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Figure 3: Land Allocation to Plantations
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Figure 4: Plantation Approval/Development Process
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SMALLHOLDER AND HOUSEHOLD PLANTATIONS Plantations may be established by individuals, household or businesses on land allocated to them through the Land and Forest Allocation Process. In accordance with the Land Law (Article 21) up to 3 ha of degraded or barren forestland many be allocated to each labour unit per household for timber plantation development or agroforestry (refer Smith 2014 for further details). Temporary Land Use Rights were provided for with plantation establishment which could be converted to permanent land-use rights, on application. More recently the issuing of TLUCs have been suspended and new participatory land use planning processes recognise a variety of documents to demonstrate existing land use rights (MAF and NLMA 2010).
The allocation of forestland areas greater than 3 ha for plantations must be by way of lease or concession.
Once land has been allocated for use as a plantation, individuals may establish their trees without further approvals. Plantations should be inspected by District forestry officials after three years, to ensure that they conform to standards set in the relevant regulations.
Environmental and social mitigation measures for small scale plantations (<20ha) fall outside the ESIA process, and requirements are included in the relevant legal texts and departmental guidelines. However, smallholder plantations may require that a technical and socio-economic assessment is made where plantation are greater than 5 ha or where several plantations less than 5ha are to be established on adjoining land, regardless of whether this land is owned by one or many different individuals. Regulation 0196/AF 2000 sets out in very broad terms the measures that are required in this assessment. Instruction No 1643/DOF 2010 on the development of a feasibility study on industrial trees and NTFPs plantation investment contains more comprehensive guidelines. However, this is only applicable to concessions granted under Article 74 of the Forestry law, not to plantation on land allocated to individuals.
Table 3: Environmental and Social protection measures for smallholder/farmer plantations
Step Regulation Conditions
Land Allocation Land Law (21) 3/ha degraded or barren land per labour force per family is allocated under the land use allocation program
Decree No 169/PM 1993 (ChIV)
A forest management (land use) contract for tree planting is required which specifies certain conditions.
Directive No 234/MAF 1995 Tree planting should be avoided on land appropriate for farming, paddy, and grassland for animal husbandry.
Luang Prabang Manual on implementation Decree No 186/PM 1994
Makes some general rules about the use of ‘hills’ Land with natural forest must be preserved. 50m preservation zone on river banks and roads - but flat land can be used for rice or fruit trees and sloped land may continue to be used fort tree plantations. 30m preservation zone on streams and footpaths. 10m preservation zone on water canals. 500m preservation zone around water reservoirs.
Site Preparation Decree No 186/PM 1994 (contract)
Slope: commercial value trees can be planted on slope 12-36 degrees. (0-12 degrees for agriculture) >36 degrees protected forest and ‘crops with preservation)
Instruction No 0822/AF 1996 Slope: “agroforestry” can be undertaken on slope from 25-45%
Directive No 0234/MAF 1995 Soil: on flat land soil can be tilled before planting, on slope land may not be tilled and existing trees should be retained. Spacing: the Directive species the tree spacing for different species
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Step Regulation Conditions
Regulation No 0196/AF 2000 Defines ‘degraded forestland’ and ’bare forestland’ Regulation 196/MAF 2000 >5ha technical and socio-economic assessment and
plantation management plan is required <5 ha no assessment required unless multiple adjoining areas totalling > 5a are being planted Penalties Inappropriate site clearing, site preparation or use of chemicals or non-compliance with environmental protection measures is subject to educational measures.
Planting Regulation No 0196/AF 2000 Defines planting configurations. Specifies Agroforestry should be used in areas where there is land or rice shortage or steep slopes. Imported seeds must have phytosanitary certificates.
Harvesting and Haulage
Regulation 196/MAF 2000 Logging and transport must be in accordance with plantation management plan Logging permit is required
Teak with retained understorey (H. Smith 2017)
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6. NON-REGULATORY MEASURES Forest policy in Lao PDR is increasingly influenced by the requirements of consumer markets and the strong calls that are being made globally and regionally for sustainability and legality in forests, forest industries and related trade. The response of Lao PDR’s trading partners is particularly important. Approaches to certification verification and governance in forestry in Southeast Asia are described in detail by the World Bank (2012). In Lao PDR, there are two main approaches: voluntary certification and legality assurance.
CERTIFICATION Certification programs are voluntary. They are based on the premise that consumers demand and will pay for timber that is sourced from sustainably managed forests, including plantations. The two most common forms of certification are
• Forest management – ensuring forest operations are managed sustainably; and • Chain of custody – tracking certified material from forest to final product
Certification programs apply a set of standards based on principles, criteria and indicators. Once a forestry operation has received certification, they are bound by the standards of the certifying organisation.
The two most prominent certification organisations are the Forest Stewardship Council (FSC) and the Program for the Endorsement of Forest Certification (PEFC) an umbrella organisation endorsing domestic forest certification systems across the globe. China, Australia and Indonesia, for example, have each developed their own national standard under PEFC. Within these certification programs there is a requirement for chain of custody to enable products to be tracked from harvest to purchase by a consumer. Chain of custody certification is the mechanism used to ensure the traceability of wood material from a certified forest to any point along on the supply chain. It is required to substantiate any claim that wood and wood products are obtained from a certified forest.
From the Lao PDR context, Flanagan and Laity (2015) describe and review the various forest certification and verification schemes in detail. They note that programs to establish management systems based on certification programs have been operating in Lao PDR since the late 1990s for a range of forest types and products including timber from State-owned natural forest and plantations as well as community grown wood, rattan and bamboo. In 2012 Lao PDR had about 2% (132,162 ha) the of production forests FSC certified of which more than 99% was natural forest, issued to state or village groups, and less than 1% in forest plantations, issued to private groups. By July 2016 one plantation company, Burapha Agroforestry Co., was the only entity in Lao PDR with current certification. The 8th NSEDP aims to achieve certification of 30 % of total production forest area.
CERTIFICATION ISSUES AND CHALLENGES The effectiveness of forest certification schemes for sustainable forest management is dependent both on the stringency of the standard applied and the practicality of its implementation. The FSC standard has a strong emphasis on protection of the environment, which has resulted in its principles and criteria heavily directed towards maintaining ecological functions and preservation of forests (Waardenburg, 2012). While the PEFC also incorporates environmental criteria (Schlyter, Stjemquist and Backstrand, 2009) it is viewed as more balanced across the spectrum of values to be managed.
However, there is limited empirical evidence from field-based studies that supports the claim that certification results in sustainable forest management (Blackman and Rivera, 2010; Clark and Kozar, 2011). There are few published studies on the impacts of certification schemes that meet the standard for formal impact evaluation (established by the Collaboration for Environmental Evidence and the Initiative for Impact Evaluation), and almost no rigorous case studies (Burivalova et al. 2016). Synthesised literature on the performance of forest certification schemes on environmental, as well as social and economic variables found that certification achieves environmental benefits but at a short-term cost to financial profits, and that certification schemes are not financially viable without external donors. Certification also resulted in associated benefits to the well-being of surrounding communities and to livelihood (Burivalova et al. 2016).
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Certification programs struggle with plantations because they have both negative and positive connotations. Plantations may be simultaneously viewed as part of as a strategy to complement conservation and the sustainable use of natural forests and as a cause of forest conversion, biodiversity loss and environmental damage. The FSC, for example states that plantations – especially large-scale, monoculture or intensively-managed operations – are often criticized for the negative environmental impacts of pesticide use, introduction of exotic species and biodiversity loss and that through bringing transparency into plantation management, FSC certification aims to bring substantial, measurable reductions in environmentally harmful practices (FSC 2015).
Standards may also be challenged by precisely defining plantations -may be narrow for example “a grouping of a single species of tree, all of the same age, planted by humans’12 or more broadly as “a forest area established by planting or sowing with using either alien or native species, often with one or few species, regular spacing and even ages, and which lacks most of the principal characteristics and key elements of natural forests.” (FSC 2015).
Further challenges arise when the scale, species, rotation length and approach to management are considered. For larger plantations issues have emerged that are impacting the ability for certification standards to be achieved and maintained. Oji Plantations, for example cited “untenable conflict within the Lao People’s Democratic Republic Laws and working to the Forest Stewardship Council (FSC)’s principles”13 as a reason for not renewing its FSC certification in 2015. The critical issue was strongly related to the actions of the company with regards to several principles of the FSC, but with specific reference to FSC Principle 10 criterion 10.9 which states that “Plantations established in areas converted from natural forest after November 1994 normally shall not qualify for certification. Certification may be allowed in circumstances where sufficient evidence is submitted to the certification body that the manager/owner is not responsible directly or indirectly of such conversion”. Within Lao PDR this issue arises because, while land that can be allocated for plantations should be classified as degraded or bare forestland, in reality such areas may support secondary or degraded natural forest. This means that in the process of plantation establishment natural forest may be cleared.
A common characteristic across certification initiatives is the requirement for flexible approaches if sustainable forest management outcomes are to be achieved. It is also critical that unrealistic economic expectations are not promoted, because they can potentially undermine the benefits such systems provide (Flanagan and Laity 2015). The failure for market benefits to materialise following certification is one reason that programs fail. Other factors constrain the development of sustainable enterprises based on smallholder grown wood (Ling 2014). The integration of teak into farmer livelihoods wherein timber production may not be primary driver for planting trees (Newby et al. 2014; Smith et al. 2016) can limit the ability for regular consignments of wood that meet market quality to be compiled; farmers decide when to harvest trees on the basis of need, and supply is therefore unpredictable.
The complexity and increased costs associated with meeting and maintaining certification standards, in additional to already high transaction costs for plantation timber, are a deterrent to participation by smallholders. Even donor funded programs, such as the LPTP, which are aimed at assisting smallholders through the certification process, have found it difficult to certify a large enough area to supply wood volumes at a level that meets market demand. This has flow on impacts on efforts to establish grower groups and farmer enterprises around certified timber resources (Ling 2014). For example, in 2016 LPTP opted to cease its certification program due to low volumes and the absence of a price premium for the certified wood (Masias Bröcker pers. comm.). Farmers were unwilling to commit to membership of farmer grower groups, which were being trailed as a means to facilitate market access; other cheaper and easier avenues for wood sales were available, such as to Chinese traders (Ling 2014, Smith et al. 2016)
For timber processors who have adopted Chain of Custody systems, this limited supply of certified wood also makes it difficult to maintain the level of processing of certified products that is needed to meet consumer demands. Furthermore, because no premium is being achieved for their certified products (or the returns do not exceed the costs) (Flanagan and Laity 2015) benefits cannot be passed back to the growers. Companies have
12 https://ic.fsc.org/en/news-updates/id/1351 13 http://www.lpfl.la/index.php/en/2014-01-14-08-36-59/256-fsc
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indicated that the strength of markets that do not require certification, but which are price competitive, are an attractive option (Flanagan and Laity 2015); and evidence suggests that the price paid to growers for teak logs by Chinese traders is certainly competitive with domestic markets (Antilla 2016).
Furthermore, the level of support for certification is not well established in Lao PDR. Many officials in the government, at both the provincial and central levels, reportedly do not support certification. Alternative strategies under consideration include the WWF-GFTN and Conservancy (TNC) Responsible Asia Forest and Trade (RAFT) initiatives, which offer market access for legal and certified wood.
LEGALITY ASSURANCE In 2003, the European Union (EU) first adopted its Action Plan on Forest Law Enforcement, Governance and Trade (FLEGT). EU-FLEGT promotes good governance in the forestry sector with the aim of reducing illegal logging and strengthening sustainable forestry. It is designed to prevent EU-bound imports of illegal timber and wood-based products. Voluntary Partnership Agreements (VPAs) established between the EU and timber-producing countries are a central component of the scheme. Lao PDR has entered negotiations with the EU on a VPA. The VPA is a legally binding bilateral trade agreement to improve governance and law enforcement in the forestry and timber sectors in Lao PDR and includes a Timber Legality Assurance System (TLAS), defining timber legality based on national laws and providing a mechanism to issue FLEGT licences to timber and timber products to verify their legal compliance. Through the formation of an expect technical working groups, and in consultation with stakeholders, Lao PDR has developed a draft TLAS for plantations.
ISSUES WITH LEGALITY ASSURANCE
While the EU FLEGT process is still ongoing, issues have been identified in response to processes undertaken elsewhere.
While in the process of making a TLAS and defining legality recommendations may be made for law reform, the process is necessarily linked to the laws in force in a country. In some cases, these may not be viewed as being of a sufficient quality or detail to mitigate what might be viewed as negative impacts. Furthermore, the processes of developing the TLAS and legality definition may embed regulations that are excessively complex or difficult and costly to comply with, in relation to the environment or other factors. This potentially alienates smallholders from the intended markets and/or perversely pushing them towards informal markets with lower compliance standards, but potentially competitive prices.
The effectiveness of legality programs is highly dependent on local law enforcement, which may be under resourced or for whom monitoring plantation timber trade may not be a high priority, when compared with the risk of illegal logging from natural forests or wildlife trafficking, as is the case in Lao PDR.
While funding and capacity building for domestic law enforcement is a component of EU-FLEGT the demands on imported wood from both international markets and end users have created a need to expand legality monitoring systems beyond the national borders. This can be viewed as an imposition on national sovereignty or as complementary to law enforcement, lending legitimacy and credibility to the forest management system, thus reassuring consumer countries (World Bank 2012).
OTHER MECHANISMS
CODES OF PRACTICE Codes of Practice (CoPs) mechanisms for ensuring observation of minimum environmental and social standards and may be voluntary or mandated as guidelines. They have their roots the in both legal systems and the commitment of individuals and organisations to conducting their business, and the business of their sector of the economy, on ethical and equitable, and publicly transparent and accountable basis. In some cases, they are used as a risk management tool, allowing activities perceived to be of lower risk to be managed through application of the code, self-assessment and reporting this reducing regulatory processes (re-tape) and compliance costs. Codes of Practice (CoP) are not typically intended to be a substitute for properly conducted Environmental and Social Impact Assessments (EIA/SIA); rather a CoP is one of a range of management tools that may be specified in the granting of a plantation concession or in an EIA as part of
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an environmental and social management and monitoring plan, or it can be a management tool implemented as part of a suite of corporate management policies and strategies (e.g. as part of CSR) (Foley 2009).
In 2009, in response to concerns about the impact of large scale plantations on loss of biodiversity, displacement and impoverishment of affected communities and poor governance a ban on the granting of new concession more than 100 ha in size was made14. Subsequently the Land Issues Working Group (LIWG), which is a working group of the International Non-government Organisations Forum in Lao PDR commenced an initiative on “Environmental and Social Codes of Practice for Industrial Tree Plantations” in response in an effort to minimize the environmental and social impacts of industrial tree plantations. The idea was that, a Code of Practices (CoP) would give investors and the government the guidelines needed to ensure they were having a minimal impact on the environment as well as respecting the rights of those involved or effected by tree plantations. It could also allow for some of the products from the plantations to be certified against the CoP to reach markets where certification demands premium prices. For the government of Lao PDR it would assist them to ensure that the assets of the nation, the environment and people, were being properly considered in plantation implementation (Foley 2009). A Draft Code of Practice for plantations in Lao PDR was never completed.
Subsequently the UNDP developed a Technical Guidance Notes (TGN) for Agriculture and Forestry Plantations based on the Environmental Protection Law (Revised), No. 29/NA 2012, as a framework for environmental management, and incorporates the concept of an environmental impact assessment (EIA) as a key tool for the protection of environmental and social values. The TGN was developed to support the preparation, review and monitoring of both IEE and ESIA for agriculture and forestry plantation investments. It provides information on key environmental and social values and potential impacts associated with AFP projects. It identifies key IEE and ESIA legal obligations, and integrates international best practice principles, which AFP project developers should follow when preparing, developing, implementing, monitoring, and reporting against approval requirements as well as the range of impact avoidance, prevention and mitigation measures implemented to address identified impacts (UNDP 2014).
The TGN aimed to help developers and their consultants prepare better quality IEE or ESIA; support the assessment review, approval and compliance processes; and ensure the best possible information is provided and approaches implemented. This approach was intended to reduce or eliminate negative impacts of plantations. The TGN has not been formally recognised by the Government no implemented.
14 This ban remains in force under Decree No 13/PM
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7. STAKEHOLDER PERCEPTIONS OF ENVIRONMENT POLICIES AND PROTECTION MEASURES
Interviews and discussion were held with stakeholders in a range of relevant sectors to explore perceptions about the environmental impacts of plantations and how these are understood in the context of policy, regulations and certification (Table 4).
POLICY Representatives from industry and government were asked about the most important policies relating to smallholder plantations (Table 5 after Carmichael 2017). Government respondents identified primarily the national policy objectives of increasing forest cover and reducing poverty (or improving livelihoods), and to a lesser extent sector-specific or relevant policies. In contrast, industry respondents identified land tenure; regulatory policies (selling and transport of timber); and meeting strategic targets. There was little confidence from industry respondents in the effectiveness of current policies due to inadequate implementation and poor policy design, in areas such as such community consultation; unclear application and definition (e.g., no definition of ‘smallholder’); and the application of regulations designed for native forests to smallholder plantation harvesting.
Table 4: Stakeholders Interviewed
Organisation Type Number. interviewed Roles
Government sector
National 7 National level administration of plantation policy and regulations.
Provincial 8 Provincial level administration of plantation policy and regulations.
District 3 District level administration of plantation policy and regulations.
Industry sector
Certification auditor 1 Certification auditing of certified plantations.
Certification body 1 Certification of forested areas.
International forestry companies
2 Influences policy and input into plantation law.
Market intelligence.
Contributes to research.
Environmental auditor 1 Private sector influence for environmental sustainability.
Conducts Environmental and Social Impact Assessments.
Environmental and Social aspects of policy development.
Academia / Consultant 2 Scholars on regulation, certification and policy with plantations.
Non-Government Organisation (NGOs)
Providing resources and support to smallholders to establish certified plantations.
International Development Entities
1 Financing projects and sourcing donor contribution to forestry sector. Also provides local training and education.
Smallholder farmers 31 Establishing, managing and harvesting smallholder teak plantations.
Total 58
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Three specific issues relevant to environmental policy objectives and smallholder plantations were identified. The first was that while smallholder plantations are expected to contribute to broad environmental policy objectives there are no specific environmental policy objectives aimed at smallholder plantations. The second, was that while environmental impacts are important this is not a focus of the government because they are perceived to be of relatively low risk and likely to be of low impact, and consequently their resources are not directed to this area. One government respondent explained that the main reason why there were no specific policies related to smallholders in respect to environmental impacts was that the primary goal for the government in relation to the role of plantations for smallholders is improving livelihoods. Industry respondent also noted that negative environmental impacts from smallholders were thought to be less of an issue than for large scale company owned plantations due to size. Thirdly, specific issues with respect to the issue of fire were identified; both in the context of fire impacting plantations and the use of fire by plantation owners. This was an important issue for smallholders but was not recognised as an issue for government.
Smallholders were asked why they chose to plant trees on their land and most respondents cited the role of plantations as an investment for the future (38%), for economic reasons (14%) and for personal use (14%) while only 9% identified policy measures as important.
Environmental benefits of smallholder plantations that were acknowledged by government respondents included increasing forest cover, restoration of degraded land, soil improvement, providing habitat, sequestering of carbon and (potentially, depending on species) nitrogen fixation. Two-thirds of industry respondents agreed that environmental objectives for smallholder plantations are important, and all believed that there are environmental benefits from smallholder plantations. When asked about negative or positive impacts from smallholder plantations that are not considered in policy, industry respondents mostly identified negative impacts associated with destruction of ecosystems, the use of chemicals and also social impacts such as food shortages associated with the use of agricultural land for trees plantations.
The majority of smallholders agreed that, if their plantations are managed properly, there are environmental benefits and when asked about the negative impacts from their plantations most said there were none; around one-third of referred to the negative impacts caused from fire.
The management and use of fire in general, and under teak plantations specifically, is an important objective for both government and smallholders, and while there is a clear policy to reduce fire in the landscape there is uncertainty about fire regulations. The use of fire within and surrounding plantations was a raised as a concern for many smallholders, with half stating they discontinued burning after receive training from LPTP and learning about the impacts it causes such as erosion and impact on their teak and other crops.
There were various opinions about why farmers burn including that is that the ash provides soil (fertilizer), fire controls weeds and minimises the weeding effort compared to manual weeding, and that they prefer the look of clean plantations. Smallholders’ main concern was that neighbouring farmers are still using fire in their plantations and on other land. Suggestions as to how to stop this practice were to provide more education to villagers and plantation owners about the negative impacts of fire, better enforcement by government, fines, and signs which indicate fines will be issued if fires are deliberately lit.
The opinion of government respondents about the rules of using and controlling fire within smallholder plantations varied, and can be summarised as lack of knowledge of the regulations and ineffective regulations.
Table 5: Government and industry perceptions of policies for smallholder timber plantations
Government Industry
Increase forest cover (47%) Land tenure rights (44%) Reduce poverty (31%) Taxes and fees (22%) Improve livelihood (15%) Policies for selling and transport wood (22%) Plantation registration (10%) Forest strategy (11%) Land law (5%) Forestry Law (5%)
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Lack of capacity to implement policy was raised as an issue by both industry and government (Table 6); lack of transparency within government was of particular concern to industry while government respondents identified lack of farmers’ technical knowledge as a barrier to policy effectiveness, and suggested a ‘one stop shop’ to improve administrative efficiency within government.
Table 6: Implementation issues for smallholder policy and regulations as perceived by industry and government respondents (after Carmichael 2017)
Issue Industry Government
Common perception
Limited capacity, such as budget and human resources constraints Lack of understanding and interpretation of law Weak enforcement Management of processes are across too many different government agencies Unclear responsibilities within agencies, due to lack of effective management and changing responsibilities within the two ministries - agriculture and forestry, and natural resource and environment
Different perceptions
Transparency Boundaries between plantation and forest are not clear
Overseas companies not following regulations Should have a one stop shop to reduce red tape
No willingness for government to make decision
Local farmers’ technical skills and awareness of the rules
Stronger leadership from Government
Approvals and fees should be clearly stated in the policies
Government respondents agreed that most of the policies should be reviewed and simplified for smallholders recognising that the rotation length of plantations is too long, delaying economic return to farmers when compared with other crops. Suggestions for improvements to the current policies included treating smallholder plantations in the same way as an agriculture crop; increasing central government control over plantation polices; increasing local level support for plantation policies and that policies should provide a greater focus on plantations for farmers.
REGULATION Two-thirds of industry respondents thought that the regulations for smallholder plantations were unclear and all agreed that there were major implementation and consistency issues and the need for simplification. Three government respondents also stated that the regulations should be simplified and inconsistencies removed.
However, around 70% of smallholders said it was easy for them to meet regulations. This may reflect their lack of awareness of the regulatory environment: around 45% referred to the Plantation Management Plan as a regulation, when it is actually a requirement of voluntary grower group membership and non-mandated for small plantations.
Two specific types of regulations were commonly identified fees and approvals, and plantation registration.
Numerous fees and regulatory costs apply to smallholder plantations including pre-harvest measurements, permission to harvest and transport, plantation registration and land use certificates (Smith 2014, Said 2015).
Industry commented that the fees for approvals were too high, especially for smallholders needing to obtain legal documents. Government respondents stated there are too many steps for smallholders to gain approval, and there are issues with bribery and informal payments for services.
Smallholders were asked about the costs and approvals associated with meeting plantation regulations and most responded that there were operational costs associated with meeting the requirements of being part of the grower group, such as for plantation establishment and management, which are not in themselves regulatory costs but hat were no other fees because they were a part of the LPTP grower group. The payment of fees by LPTP was also reported by Smith (2014) as reason that smallholder would comply with planation registration requirements.
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Government respondents also identified the importance of, and issues related, to plantation registration. For DOF, plantation registration is important because it viewed as a means for them to be able to report to high levels of government on the area of plantations, to monitor volume harvested and identify illegal timber.
The major issues raised by government about plantation registration were that:
• the terms of the land tax exemption are unclear: for example, the exemption period and the annual land tax value
• plantation registration is often not achieved, as farmers do not want to do it, and they hide or do not inform government of areas of plantation in order to avoid paying tax
• collecting data from local farmers is difficult, which means government does not have good data about how much plantation timber will be harvested in each period, and
• policies do not align between different departments and ministries, such as tax, industry and commerce and forestry departments.
Industry respondents reported that there were major inconsistencies in the application of plantation registration processes across the levels of government, such as applying the land tax exemption between Provinces.
Interviewees were asked about how smallholders would obtain information about plantation regulations. All government respondents believed that the government informs the village of the rules and most agreed that this approach is useful. Industry respondents identified a wider range of sources of information, including government, grower groups, word of mouth and civil society organisations. The majority of smallholders, however, stated that they received information on policy, regulations and certificated through LPTP and the grower group and only a few referred to the government in this context.
CERTIFICATION Three major issues emerged in relation to certification:
• the limited capacity of government to foster it,
• its limited value to smallholders,
• and the presence and influence of markets that did not require certification.
Opinions varied about the value of certification for sustainable forest management and the environment.
While government respondents said there was some support for certification, they also stated that government currently does not have the capacity to push or fund certification. One respondent explained that government is interested in obtaining certification for SFM, but is unsure which certification body would be most appropriate, and are looking for external donors to support this. Another stated that certification should not apply because smallholder plantations are considered to be a low risk to the environment and it is too costly to obtain certification.
Most industry respondents thought that certification was not beneficial to smallholders for two main reason firstly that certification was not developed or suited to smallholder operations, and secondly, because there is no strong market or premium price for smallholder certified wood. The main barriers suggested for smallholders seeking certification were cost, resources, capacity and lack of markets.
Industry and government respondents agreed that there are issues with the markets for wood from smallholder plantations. Four government respondents said that better market access is needed for smallholder and industry identified the small size of the certified wood market lack of support to smallholders for market access, and that certification is a marketing tool, as significant issues. The presence of a strong informal market for wood was also seen as important in influencing farmer’s decisions about wood sales.
Smallholders reported that they became certified for two main reasons: because they were members of a grower group and for market access. Smallholders were asked to identify the benefits from gaining certification and these were mostly associated with gaining improved timber price and market access, but also
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included indirect benefits such as the establishment of the grower group, receiving training and the land tax exemption. When asked to compare their experienced between selling certified wood and non-certified wood the responses ranged from there being no difference to receiving a better received a better price for certified wood although this was reported by less than 20% of smallholders with certified plantations. Training was viewed as an equally important benefit of certification.
In Luang Prabang Province, forest certification has been driven by LPTP, and two thirds of the smallholders interviewed for this research received FSC certification via this program in 2011. The current FSC certificate expired in 2016 and a decision has been made not to renew it due to the high cost of audits compared to the amount of timber produced and the income received from it (Bröcker 2017, pers. comm.). However, many of the practices and processes developed for the certification process are continuing to be implemented by farmers.
As a market-based mechanism, certification relies primarily on private sector actors; while governments may have a role in facilitating it, the sustainability of certification depends on the consumers’ willingness to pay along the value chain. However, Burivalova et al. (2016) report that certification schemes are generally not financially viable without external donors, as was found to be the case here. While the Lao PDR government supports certification in principle and in policy, it does not have the capacity or resources to foster it. In this context industry respondents identified the complementary roles of certification and regulation, with some merit seen in the more flexible approaches and greater responsiveness of certification to stakeholder interests when compared with regulation.
While smallholders listed a number of benefits from certification and several farmers had sold their certified timber at a premium price, overall, the markets for FSC-certified wood are lacking and in total only a small amount of certified wood has been sold (Brocker, 2015). Finding a regular market for certified timber is a major challenge for smallholder plantations. While LPTP and the grower groups were established because of the drive to obtain certification, there have been a number of other benefits. This includes smallholders gaining valuable knowledge on current regulations associated with plantations, receiving free plantation registration, improving their forestry management practices and better understanding on the market and the value of their timber. Smallholders confirmed that almost all the information received about policy, regulations and managing their plantations was through the LPTP and the grower group and it is doubtful that these benefits could have be achieved without some form external intervention. While in this case, certification did not provide better market access as intended, it did provide co-benefits that may persist in the absence of certification and the processes that underpin it. The role of grower groups as a proxy provider of extension services and to facilitate farmer networking may be more valuable going forward than certification.
POLICY INTERVENTIONS As part of this project Carmichael (2017) undertook research to investigate options for improving policy and regulations for smallholder tree plantations, with an emphasis on environmental impacts and benefits. Using the public -private benefits framework devised by Pannell15 she explored current perceptions of plantation policy and the best mechanisms for promoting environmental land use changes.
Pannell’s framework is based on the premise that many of the policy problems of environmental conservation or natural resource management require changes in land management on privately owned or managed lands. Programs use a range of mechanisms to encourage change, including education, awareness raising, technology transfer, research and development, regulation, subsidies and other economic instruments. In practice, the choice among these possible policy mechanisms is often not very sophisticated. Programs tend to rely primarily on a small number of mechanisms, sometimes as few as one (Pannell 2016). The choice of policy mechanisms should depend on the relative levels of private net benefits and public net benefits.
‘Private net benefits’ refer to benefits minus costs accruing to the private land manager as a result of the proposed changes in land management. In principle, private benefits are broader than financial benefits, and include the broad range of factors that influence the relative advantage of the new land use options (as
15 http://dpannell.fnas.uwa.edu.au/ppf.htm
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perceived by the landholders) such as riskiness, complexity, social considerations, personal attitude to the environment, and farming-systems impacts of the land-use practice (Kabii and Horwitz, 2006; Knowler and Bradshaw, 2006; Pannell et al., 2006). ‘Public net benefits’ means benefits minus costs accruing to everyone other than the private land manager. They exclude any costs borne by the environmental manager in the process of intervening to encourage the change in land management. It is assumed that all landholders would adopt a change in land management if it resulted in a positive private net benefit to them.
The public -private benefits framework identifies five policy mechanism categories (Table 7) which can assist in focussing the range of possible policy tools that could be considered, based on the relative public and private benefits of the policy outcomes.
Table 7: Types of policy mechanisms for seeking change in land management (based on Carmichael 2017, modified from Pannell, 2016)
Category
Positive incentives Negative incentives Extension Technology change
No action
The framework also identifies six conceptual spaces in which possible policy interventions and can fall, depending on the level of public and private net benefits (Figure 5, source: Pannell, 2016):
• Area A: public net benefits outweigh private net costs
• Area B: positive net benefits to both landholder and the public
• Area C: private net costs outweigh public net costs
• Area D: public net costs outweigh private net benefits
• Area E: negative net benefits to both landholder and the public
• Area F: private net benefits are negative and public net benefits are positive
What policy mechanism should be introduced, if any, to maximize the net benefit of intervening?
With respect to environmental management and protection measures associated with smallholder plantations there are several issues that must be considered with a view to designing new policy mechanisms:
• Smallholder plantations were in the past promoted as a policy mechanism to elicit the land use changes needed to deliver policy objectives predominantly associated with deforestation and land degradation and poverty. In this way plantations were and are expected to make a positive contribution to objectives that benefit the public generally and have little real or perceived private benefit to plantation owners. Plantation establishment and compliance is largely a private cost but the policy outcomes are public benefits.
Area F: private net benefits are negative and public net benefits are positive.
• Plantations were expected to have private benefits, primarily through income generation (Poverty reduction) to the plantation owner which, when taken overall, also help to meet public policy targets associated with national economic development and poverty reduction.
Area B: positive net benefits to both landholder and the public
• Plantations have, or may be perceived to have, negative environmental impacts, which may affect the benefit to the plantation owner (for example through decreased productivity) or which may affect public benefits, such as loss of biodiversity or reduced water quality and quantity. These may be addressed through regulation, certification or codes of practice, typically at private cost to plantation owner unless the beneficiary (public) is willing to pay.
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Area C: private net costs outweigh public net costs, or
Area E: negative net benefits to both landholder and the public
• Plantations are now also expected to play a greater role in providing wood to domestic industries, with a view to providing public benefits through economic development. This may also have private benefits through increased income to plantation owners, but in the absence of strong markets.
Area A: public net benefits outweigh private net costs
On this basis, the current policy environment for smallholder plantations appears to have more public than private net benefits and a high private net cost. Mechanisms have been introduced to encourage change or adoption in a number of areas.
Figure 5: A conceptual space to place interventions depending on private and public net benefits
LAND USE RIGHTS AND TECHNOLOGY TO ENCOURAGE TREE PLANTING The provision of land use rights, together with technology inputs such as seeds, for the establishment of Teak plantations resulted in rapid adoption in some areas. However, in its early stages this was largely unplanned, under regulated, resulted in land accumulation and, in some cases, in inappropriate land uses. Consequential efforts to address these issues were hindered by limited capacity and the momentum generated by the high private net benefit associated with the land use rights to be gained.
The requirement for plantation registration was introduced to help government regulate the growing area of plantations, to maintain some control over the flow of plantation timber to the market through wood quotas and monitor sustainability. Positive incentives were provided through land and resource tax exemptions for registered plantations, access to credit and eligibility for compensation in the case of government land acquisition for public use. Negative incentives were provided through a regulatory instrument that allowed only for timber from registered plantations to be harvested.
Neither the positive nor negative incentives were effective.
• Less than 1% of Teak plantations are registered. The cost of registration outweighs the benefits derived through tax exemptions (refer Smith, Ling and Boer in press, Smith 2014, Said 2015).
• Enforcement of the regulations is limited, risk of sanction is low.
• Few farmers have taken up the opportunity for credit and in many cases plantation registration certificates are not recognised by lending institutions as appropriate collateral.
• Until recently the risk of land reacquisition by government has been limited.
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• Informal markets operate into which plantation owners can sell wood without compliance with regulations
SUPPLYING WOOD TO INDUSTRY At the time plantations were first promoted, the forward-looking policy mechanisms that should encourage farmers to manage, harvest and replant their plantations were not developed. They were later adapted from those applied to native forests, with a high level of regulation associated with their value as a public asset as well as the risk of unsustainable and illegal logging. They are highly complex, require numerous approvals and the payment of many fees (Smith, Ling and Boer in press, Smith 2014) and these factors together act as a disincentive to farmers to harvest their plantations according to the rules.
Other factors also influence how and when farmers manage and harvest their plantations, and this in turn affects the supply of wood to industry.
• Many farmers planted trees for tenure security and as an investment.
• There is some uncertainty around land security if plantations are harvested to a stocking level below that prescribed in the regulations. While this may have some may benefit by maximising plantation retention by farmers it detrimentally impacts supply to industry. The detailed regulations that are overly prescriptive also constrain optimal plantation management resulting in lower overall productivity and wood quality. This reduces the value to industry and consequently income received by farmers.
• There no incentives to harvest plantations in a strategic manner in a way that benefits industry. Farmers harvest trees as needed.
• Farmers retain trees to secure land rather than grow wood. In some cases, this land may be productive agricultural land of value in, for example food production. In other cases, it may be strategically located with respect to development. Boer and Seneanachak (2016) found that around 65% of Teak Plantations in Luang Prabang Province are within 1 km of a River or major stream and more than 80% are within 1 km of a road.
While retention of trees in plantation is beneficial for public benefits associated with forest cover this counteracts objectives to develop the domestic wood processing sector and for economic development. One public benefit may be negatively impacted by another.
MARKETS The Lao wood processing sector developed on the supply of timber from natural forests, which was a main driver of deforestation. Numerous attempts have been made to regulate and control timber harvesting in natural forests and simultaneously develop the wood processing sector. Plantation grown wood has been indicated in policies as a current and future source of timber to domestic industry, but as described above, this has been limited.
The export of smallholder grown plantation wood has occurred primarily through sales of round and square logs to China with some products export to Thailand and Vietnam (Midgley et al 2015). This has occurred through formal and informal supply chains.
The domestic market is highly regulated and while there have been reforms in some areas (e.g. transport) new regulations and processes are being introduced in response to international, market-based concerns, over illegal timber (global public benefits). This is evidenced in the EU-FLEGT VPA process and the consequential strengthening of source of origin requirements, and the introduction of Prime Minister’s order No 15/PM in 2016. These requirements will place a higher burden on farmers to register their plantations and follow regulatory procedures to sell their wood to domestic wood enterprises (private net costs). Farmers will carry a cost of national policies aimed at delivering international public benefits. It remains to be seen if there will be a private benefit through increased price or market access.
The alternative for Teak farmers is the less regulated Chinese teak processing market, which expanding in Northern Laos in response to PMO 15 which bans the export of unfinished wood products, including from plantations. This largely informal market provides an avenue to farmers for competitive wood sales without the
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burden of paying for the public benefit of legality; it thus provides positive private net benefit and potentially negative public benefit through lost opportunity for economic development through the domestic processing sector. Depending on the nature of this market (sustainable or transient/opportunistic) it may encourage farmers to adopt different approaches to plantation management, harvesting and replanting resulting in plantation re-establishment (teak) or replacement (other tree species), or decline (non-tree crops).
ENVIRONMENTAL IMPACTS While smallholder plantations are expected to contribute to public environmental policies they are not viewed as having a high likelihood of causing significant negative environmental impacts. As a result, they are largely excluded from specific provisions within environmental protection regulations, as described above, (not withstanding that it is the responsibility of all Lao people to protect the environment16). There are few, if any, policy measures aimed at introducing or changing management practices to protect the environment.
Despite this, several environmental impacts have been identified, associated with the use of fire and the removal of plantation understoreys. Fire may be intentionally introduced to teak plantations by owners or may enter plantations from adjoining land. Farmers typically ‘clean’ the understory of their teak plantations either by manual weeding (when trees are young), slashing and/or burning. The use of fire is a common practice associated with slash-and-burn agriculture and the intentions are to reduce competition with trees, introduce nutrients to the soil and for aesthetics. However, the removal of the understorey and burning of vegetation results in soil erosion, gullying and root exposure (Lacomb 2015) which affects water quality and quantity. Fire scar may also affect wood quality.
Lao PDR has strong policies to reduce the occurrence of fire in the landscape, particularly associated with slash-and burn. A Law on Fire Prevention and Control exists17 and the Forestry Law Article 97(9) requires forest user to prevent fire. Information is provided to villages about controlling fires but there is limited enforcement for what continues to be a common practice.
Donor funded projects have undertaken research and provided demonstration of technology and practices associated with retaining plantation understory, for example the ACIAR Lao Australia Teak Agroforestry Project and farmer report that there are benefits to both their plantation and more broadly, for example through increases in biodiversity. There are private and public net benefits.
CERTIFICATION Certification generally provides a public net benefit and the beneficiary (consumer) pays through the anticipated price premium to the grower. Certification supported by external donor funding (in this case TFT/LPTP) provides both positive public and private net benefits, because farmer’s benefit through training and advice and improve their environmental practices. However, such approaches are not sustainable in the absence of strong markets. The absence of a market indicates that the beneficiary (consumer) is not willing to pay for the public benefit. While certification may provide positive co-benefits to smallholders the perpetuation of these will be determined by the demonstrated magnitude of their private net benefit; through certification farmers learnt to prune their trees and they will continue to do this if they can see a benefit to their plantations.
With respect to environmental objectives, certification that is not supported by a market or external donor funding would provide a positive public net benefit, but have a negative private net benefit to smallholders. The public net benefit would include improved management practices with reduced environmental impacts. The negative private net benefit to smallholders would be the compliance costs of certification without any gain (c.f. Maryudi et al. 2015).
WHAT NEEDS TO CHANGE? With respect to the environmental management and protection measures associated with plantations, what, if anything needs to change?
16 Law on Environment Protection No 29/NA 2012, Article 7 17 Although it could not be located during this study
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Positive incentives for establishing plantations, through land use rights allocation, was effective as a policy measure with respect to goals of contributing to forest cover but was inadequately supported by measures to supply timber to the domestic wood industry. If this is to change, there needs to be improved financial or regulatory instruments that are more accommodating of the economic drivers of farmer needs by balancing the private net benefits with the public policy objectives.
To increase wood supply to the domestic industry options include reducing the regulatory cost burden placed on smallholders to harvest their trees and to other actors in the domestic value chain, or increase the cost to foreign buyers.
Reducing regulatory cost to smallholders would also complement the FS2020 policy objective of reducing poverty. Farmers need to be encouraged to manage and harvest their plantations without diminishing the original private benefit provide through land security. Farmers also need to be encouraged to re-establish plantations, but in doing so the adverse outcomes associated with early land allocation policies need to be addressed to reduce the holding of high value agricultural land under trees. New approaches may be required to promote tree planting in more appropriate areas without net land asset loss to the farmers. Incentives such as payments for environmental services to farmers who replant after harvesting, in addition to technological support and extension may be appropriate.
Certification programs depend on consumer guilt or philanthropy to pay for the cost to the farmer of actions taken to provide public net benefits such as maintaining riparian buffer strips or not clearing native vegetation. The road to certification can improve plantation management which may result in improved economic and environmental benefits but regulations and or penalties may also be applied to inhibit this activity, and are also only effective if enforced and sanctions are a significant private net cost.
There are perceived environmental benefits when smallholder plantations are properly managed. There are also perceived negative impacts and uncertainty about the regulations of the use of fire within plantations. If there is to be an increase in environmental benefits associated with not burning there needs to be stronger enforcement or more extension on the regulations to the farmers to stop burning in the landscape.
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8. CONCLUDING REMARKS AND RECOMMENDATIONS Policies that promote smallholder plantations in Lao PDR seek to achieve a broad range of outcomes, many of which are focussed on public benefits including for the environment. For farmers plantations are promoted for poverty reduction. They contribution of smallholder plantations to achieving these broad policy objectives is viewed positively and they are not generally considered to have significant negative environmental impacts.
While past programs to promote the planting of trees by farmers have been successful there are some conflicts between the public policy objectives and those gained by individual farmers; in order to achieve the public policy objectives smallholder plantations are tightly regulated and this has adverse impacts on their ability to achieve their potential. Policies to promote plantations on farms did not adequately address the need for mechanisms to ensure good plantation management and timber production, nor facilitate the harvesting and sale of wood. Promotion policies incentivised plantations through land use rights and as a result for many farmers they value of their plantations ties land security and as an investment strategy. Timber is sold sporadically and revenue from the sale of wood contributes only a small amount household incomes. This approach does not necessitate on-going management nor encourage replanting. Ongoing concerns about illegal logging (for example of natural teak) are used to justify tight regulations for harvesting, and although these remain largely enforced, they act as a disincentive to wood sales.
Smallholder owned plantations are vulnerable to changing land and commodity markets, driven by infrastructure development and global crop booms. In times of need farmers may opt to sell their plantations and land, or move from longer-term tree-based systems to short term agricultural crops which provide a more regular income stream.
Together these factors impact the sustainability of smallholder -based plantations systems. Where plantation sustainability cannot be achieved, policy objectives may also not be met, for example, forest cover gains may be lost.
The disaggregated nature of smallholder plantations and the diversity in ownership makes the development of a coordinated policy approach to promoting environmental benefits and minimising negative impacts more difficult; particularly where the benefits gained are public benefits within limited value to the individual farmer (such as climate change mitigation).
Given the primary driver for smallholder plantations is livelihood improvement there is a need to provide incentives for smallholders to more effectively manage their plantations in order to improve production and in turn address any negative environment impacts. Measures are also needed to encourage farmers to harvest and re-establish their plantations. Market-based approaches which theoretically reward plantation owners for good practice and the delivery of public policy benefits, such as through markets for certified wood, have had limited success; factors work against the regular supply of wood from farmers and the market has not demonstrated a willingness to pay. New mechanisms are therefore needed to balance the provision of public benefits through smallholder owned plantations.
Options that reduce the public policy burden placed on farmers could include:
• reducing or removing regulatory fees and costs associated with plantation harvesting and sales. Unnecessarily complex and costly regulations discourage farmers from harvesting and replanting teak. Basic services such as plantation registration and harvesting permissions can be simplified and delivered through local institutions, such as Village Forestry Units. The capacity of these institutions should be increased, so extension based on current research results and updated technical advice can improve farmers’ knowledge.
• providing information and extension with respect to plantation management and providing information and extension with respect to plantation establishment, in particular for reduced stocking rates and therefore reduced costs.
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• Providing information and extension with respect to understory management and fire control. Develop and enforce fire prevention regulations.
• removing regulatory hurdles to the sale of small products derived from plantation thinning. This would improve plantation management practices and provide an intermediate income to farmers.
• providing free seeds/seedlings to farmer who re-establish plantations after harvesting to discourage conversion to other cropping systems.
• Where plantations are located on high quality agricultural land, develop mechanisms for encourage farmer to replant tree on other land (e.g. land use rights, tax exemptions).
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DoF (2015) Unpublished plantation statistics, Department of Forestry, Lao PDR
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Foley, S. (2009) Laos - Planting for the Future: Environmental and Social Codes of Practice for Industrial Tree Plantations – An Overview Volume I - Main Report, and Volume II Appendices. A report commissioned by the INGO Land Issues Working Group with support from the Swiss Agency for Cooperation and Development Sean Foley, EcoAsia Limited June 2009, Vientiane.
FSC (2015) FSC’s Position on Plantations. FSC Global Development GmbH
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Lacombe, G. et al (2015) Contradictory hydrological impacts of afforestation in the humid tropics evidenced by long-term field monitoring and simulation modelling. Hydrology and Earth System Sciences, 20, 2691–2704,
Ling S. (2014) The Rationale for, and feasible approaches to, the Development of Growers Groups. Report completed as a component of the Australian Centre for International Agricultural Research (ACIAR) funded Project FST/2010/012 Enhancing Key Elements of the Value Chains for Plantation Grown Wood in Lao PDR. 136 pp.
MAF (2007) Forestry Sector Development Report for 2006/07(draft) for the 1st Stakeholder Consultation on FS2020 Implementation 14th and 15th November, 2007.
MAF and NLMA (2010) Manual Participatory Agriculture and Forest Land Use Planning at Village and Village Cluster Level, prepared by GiZ.
Maryudi, A., Nawirb, A. A., Permadia, D. B., Purwantoa, R. H., Pratiwic, D., Syofi'ic, A., & Sumardamtod, P. (2015). Complex regulatory frameworks governing private smallholder tree plantations in Gunungkidul District, Indonesia. Forestry Policy and Economics, 1-6.
Midgley, S., Mounlamai, K., Flanagan A, and Phengsopha, K. (2015) Global Markets for Plantation Teak; Implications for Growers in Lao PDR. Completed as a component of the Australian Centre for International Agricultural Research (ACIAR) funded Project FST/2010/012 Enhancing Key Elements of the Value Chains for Plantation Grown Wood in Lao PDR. 75 pp.
Newby, J.C., Cramb, R.A., and Sakanphet, S. (2014) Forest Transitions and Rural Livelihoods: Multiple Pathways of Smallholder Teak Expansion in Northern Lao PDR. Land 3, 482-503.
Ohlsson, B. and Inthirath, B. (2001) The Tropical Forestry Action Plan, TFAP, in Lao PDR: Evaluation of a Process, A report to SIDA and the Government of Lao PDR
Pannell, D. (2016) Public-Private Benefits Framework version 3. Downloaded from www.pannelldiscussion.net)
Said, A. (2015) Transaction Costs Associated with Growing and Selling Smallholder Plantation Grown Wood in Lao PDR – Incidence and Mitigations. Discussion Paper completed as a component of the Australian Centre for International Agricultural Research (ACIAR) funded Project FST/2010/012 Enhancing Key Elements of the Value Chains for Plantation Grown Wood in Lao PDR.
Schlyter, P., Stjemquist, Ingrid, & Backstrand, K. (2009). Not seeing the forest for the trees? The environmental effectiveness of forest certification in Sweden. Forest Policy and Economics, 375-382.
Smith, H. (2014) Smallholder Plantation Legality in Lao PDR: A study to assess the legal barriers to smallholder plantations and the associated timber value chain. Completed as a component of the Australian Centre for International Agricultural Research (ACIAR) funded Project FST/2010/012 Enhancing Key Elements of the Value Chains for Plantation Grown Wood in Lao PDR. 136 pp.
Smith, H. (2016) Making smallholder plantation owned wood legal: Alternatives to plantation registration. Final Report for Objective 1.2a Completed as a component of the Australian Centre for International Agricultural Research (ACIAR) funded Project FST/2010/012 Enhancing Key Elements of the Value Chains for Plantation Grown Wood in Lao PDR, 45 pp.
Smith, H. F. and Alounsavath, O. (2015) Forestry Legality Compendium for Lao PDR. Department of Forestry and Department of Forest Inspection, supported by FAO/World Bank Cooperative Programme, GIZ / Pro-FLEGT VPA Support Programme, SUFORD – SU Project (DOF - Finland / World Bank), 271 pp.
Smith, H. Keith Barney, Neil Byron, Alex Van der Meer Simo, Somvang Phimmavong, Rodney Keenan, & Vongkhamsao, V. (2017). Tree Plantations in Lao PDR: Policy Framework and Review. This project.
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Smith, H. Ling., S and Boer, K. (2017 in press) Teak plantation smallholders in Lao PDR: What influences compliance with plantation regulations? Submitted to Australian Forestry August 2016
Smith, H., Boupha, L., Boer, K., Midgley, S., Ling, S., Laity, R., Kanowski, P. (2016). Policy changes are needed to unlock the potential of the smallholder plantation resources in Lao PDR. Policy Brief: for: Enhancing Key Elements of the Value Chain for Plantation-Grown Wood in Lao PDR: Project FST/2012/012, VALTIP2.
TFT. (2015). Luang Prabang Teak Program - Narrative report for Foundation Ensemble Jun to Dec 2014.
UNDP (2014) Guidance Note for Environmental Impact Assessment for Agriculture and Forestry Plantations. Prepared for United Nations Development Program (UNDP) on behalf of the Government of Lao PDR Department of Environmental and Social Impact Assessment, Ministry of Natural Resources and Environment.
Waardenburg, R. (2012, January 26). FSC, PEFC, SFI: what’s the difference? Retrieved from 20 May 2017, http://www.rolandwaardenburg.nl/2012/01/fsc-pefc-sfi-whats-the-difference/
World Bank (2012) Certification, Verification and Governance in Forestry in Southeast Asia: Discussion Paper. The International Bank for Reconstruction/World Bank 2012. 192 pp.
Contents lists available at ScienceDirect
Forest Policy and Economics
journal homepage: www.elsevier.com/locate/forpol
Comparing the financial returns from acacia plantations with differentplantation densities and rotation ages in Vietnam
Tek Narayan Marasenia,⁎, Hoang Lien Sonb, Geoff Cockfielda, Hung Vu Duyb, Tran Dai Nghiac
a University of Southern Queensland (USQ), Toowoomba, Queensland 4350, Australiab Vietnamese Academy of Forest Science (VAFS), Vietnamc Institute of Policy and Strategy for Agriculture & Rural Development (IPSARD), Vietnam
A R T I C L E I N F O
Keywords:Acacia plantationsRotation agePlantations densityFinancial returnVietnam
A B S T R A C T
In Vietnam, planted forests account for> 26% of total forest area, with approximately two-thirds of the plan-tation area managed by smallholders and 80% of plantation wood used for woodchip production. With in-creasing demand for timber for the construction and furniture industry, the Vietnam Government is seeking toencourage growers to increase the rotation age of plantations and produce higher quality timber so that it canmeet its 2020 furniture export targets. Progress on this goal is however slow, with growers unsure about thefinancial case for increasing rotation age. Using a case study of the Ben Hai State Forestry Company (SFC), wecompare financial returns from acacia plantations by the rotation ages of 5, 6 and 10 years. The 5 year rotation isfor the sole purpose of producing woodchips whilst 6 and 10 year rotations produce both timber and woodchips.Results show that all three types of plantation produce positive returns but the return from 10 year rotationplantations (in terms of NPV and IRR) is much higher than those of others. By increasing the rotation age by1 year (6 years total) and 5 years (10 years total) from the common practice of 5 years, the net present valuesfrom the modelled plantations would increase by about 1.57 times and 4.24 times respectively. The reasons whysmallholder grower are not responding to these apparent higher present values and policies that would promotelong rotation age plantations are discussed.
1. Introduction
Over the 25 years from 1990 to 2015 the forest area in Vietnamincreased by about 5 Mha (from 9 Mha in 1990 to 14 Mha in 2015)(FAO, 2015; Pistorius et al., 2016). Plantation activities played a majorrole in this increase. Planted forests in Vietnam currently cover about3.6 Mha of land (Trung and Kim, 2016) and this is expected to increaseto 4.15 Mha by 2020 (Pistorius et al., 2016). The increase in plantedforest area has been driven by government policies and programs tosupport plantation development, the implementation of ‘decollectivi-sation of agriculture’ and ‘distribution of forestlands to local house-holds’ policies in the 1990s and Vietnam joining of the World TradeOrganization in 2006 (Meyfroidt and Lambin, 2008).
With the increased trade opportunities, the furniture industry grewexponentially. Currently, there are around 4000 wooden furnituremanufacturers in Vietnam with 16% of them receiving foreign directinvestment (Italian Trade Agency, 2014). Among other factors, theavailability of relatively cheap labour and a geographical positionaladvantage are main reasons for the increasing popularity of Vietnameseforest enterprises among domestic and foreign investors (Hoang et al.,
2015b). In 2015, Vietnam exported US$6.9 billion worth of woodenfurniture products, an increase of 10.7% from 2014, and now it is thefourth biggest furniture exporting country in the world after China,Germany and Italy (VBN (Vietnam Breaking News), 2016). It has beenexporting furniture to> 120 countries (Italian Trade Agency, 2014)with major markets being the US (> US$2 billion), Japan (US$866million), China (US$791 million), EU (US$612 million) and Korea (US$448 million) (MARD, 2015). In 2016, furniture exports were expectedto increase by> 6% (VBN, 2016).
According to Italian Trade Agency (2014) estimates, annually,around 6–7 million m3 round wood is needed in Vietnam for the fur-niture industry and this amount might have increased since then.Planted forests are major sources (> 95%) of round wood in Vietnam(Italian Trade Agency, 2014). In 2014, around 13–15 million m3 ofround wood was produced from planted forests but 80% of this volumewas used for processing woodchip mainly from the production of shortrotation, small sized and low quality woods (MARD (Ministry ofAgriculture and Rural Development), 2016). The demand for long ro-tation plantation for log production is growing to meet the increasingdemand for furniture and construction industry (Pistorius et al., 2016)
http://dx.doi.org/10.1016/j.forpol.2017.06.010Received 7 February 2017; Received in revised form 29 June 2017; Accepted 29 June 2017
⁎ Corresponding author.E-mail address: [email protected] (T.N. Maraseni).
Forest Policy and Economics 83 (2017) 80–87
1389-9341/ © 2017 Elsevier B.V. All rights reserved.
MARK
but Vietnam has to import up to 80% of the timber for its export pro-ducts (Pistorius et al., 2016). In 2015 alone, it imported raw woodmaterials valued at $1.639 billion, mainly from Laos, US, Cambodia,China and Malaysia (MARD, 2016).
In addition, approximately 80% of furniture products consumed inthe country are imported with the remaining 20% being locally pro-duced (To and Nghi, 2014). This could be partly due to the type offurniture that is exported not being in demand within Vietnam. Hence,there are market signals to suggest potential for import substitution butthere is no conclusive research on whether or not increasing rotationage is profitable for producers. In addition, Vietnam is committed toimplementing REDD+ towards meeting its Nationally DeterminedContribution (NDC) to the UNFCCC (Pistorius, 2015). The VietnamGovernment has a target to reduce greenhouse gas emissions from landuse, land use change and forestry (LULUCF) sector by 20% by 2020from 2005 levels (PM Decision No. 1775/QG-TTg dated on 21 No-vember 2012). Reducing net emissions by increasing afforestation ac-tivities could help meet these targets and be beneficial for increasingthe value of several other environmental services (Mukul et al., 2016).
Several researchers have extensively studied the environmental ef-fect of planted forests (Paquette and Messier, 2009; Baral et al., 2016).Most of them agree that the effects depend on prior and surroundingland uses, purpose of plantation, land tenure status and scale of plan-tations, rotation length and its configuration in landscape (Paquette andMessier, 2009; Batra and Pirard, 2015; Baral et al., 2016). In general,intensive timber production may result in trade-offs with many localenvironmental services including nutrient recycling, water purification,genetic diversity maintenance, recreation and some other cultural va-lues (Baral et al., 2016). If they are established on degraded lands, theymay provide better ecosystem services (Baral et al., 2014). By analysingthe interview data with 70 villagers in rural China, D'Amato et al.(2017) reported that, in general, interviewees had negative views onsoil and water environmental quality after the establishment of theindustrial plantations. Similarly, by conducting 606 household surveysin Indonesia, Pirard et al. (2017) suggests that the perception of re-spondents towards pine and teak plantations was relatively more po-sitive than that of acacia plantations. In general, short rotation plan-tations have poor environmental records than that of long rotationplantations.
Considering all these issues, the Vietnam Government recommendsall tree growers increase the rotation age of plantations and producequality round wood so that it can meet its 2020 targets of increasingfurniture export from the currently exported amount of 4.5 M m3 to6.5 M m3 and, at the same time, decrease woodchip production fromthe current amount of 6 Mt to 3 Mt (MARD, 2015). Much of this de-mand is for furniture timber is from acacia plantations, as these treeshave desired wood properties. So far, however, progress towardsachieving these goals is poor. Smallholder tree growers may be con-cerned about the costs and risks of increasing rotation age and they maylack information on the different financial outcomes from alternativemanagement strategies.
This study aimed to provide an improved understanding of the fi-nancial outcomes of different plantation management strategies foracacia plantations in Vietnam. Using data from the Ben Hai StateForestry Company (SFC)—one of the 139 SFCs in Vietnam—this studyassesses financial returns from acacia plantations with rotation ages of5, 6 and 10 years. The 5 year rotation plantations are assumed to be forthe sole purpose of producing woodchip (current common practice) andlonger rotations are for producing a combination of timber and wood-chip. Acacia species and hybrids are widely planted in Central Vietnamand currently account for over 30.55% (1.1 Mha) of the total plantedforest area in Vietnam (Nambiar et al., 2015; Trung and Kim, 2016). Itis mainly sold for export woodchips, with more 70% of woodchips inVietnam coming from this species (Forest Trend, 2013).
2. State forestry companies (SFCs) in Vietnam
Currently, there are 139 SFCs in Vietnam which manage about 14%(1.95 Mha) of the total forest area (World Bank, 2016) and 15% of theplanted forests (Nambiar et al., 2014). The rest of the planted forestarea is managed by individual households and small-holders (46% ofthe total), state management boards (17%), provincial people com-mittees (12%), private companies (4%) and other users (6%) (Nambiaret al., 2014). In 2013, these SFCs collectively produced 100,000 m3 oflogs from natural forests and 1.5 M m3 logs from planted forests (WorldBank, 2016). Some SFCs have a range of rotation age plantations andretain relatively good production data, so can provide cases to study,and from that, we can extrapolate from the findings to provide thoughtson other sub-sectors.
The precursors of SFCs were “state forestry farms”. These were es-tablished in the late 1950s and were operated by the Government andworkers' wages were paid by the state. From 1991, a series of reformscommenced and the farms were required to cover their production costs(World Bank, 2016). As a result, some enterprises were dissolved ormerged with local governments in order to improve management. Thefarms were reconfigured and given different names based on theirmajor objectives: (1) State Forest Enterprises (SFEs), that focused onforest production; (2) Management Boards, that focused on forestconservation and protection; and (3) Other forms, that managed forestscattered throughout agriculture and human settlements (World Bank,2016). From 2016, the SFEs were termed SFCs. Despite all these re-forms, most SFCs experienced some problems had excessive debt, highoverhead costs and large numbers of unproductive employees. With theobjective of making productive, profitable and self-sustainable SFEs, in2003, the Government decided to equitize—or to privatise—theirownership, often with the objective of creating worker-owned compa-nies. However, this process of equitization remains very slow, so far noSFCs with forest lands and only three wood processing units have beenequitized. In part, this is because the process involves dealing with 5laws, 23 decrees, 5 Prime Minister Decisions and 17 Ministerial Cir-culars (World Bank, 2016).
3. Methods
The study was conducted within the forest area of Ben Hai SFC,located in the Central Coast of Vietnam. This is the only forest productsSFC in the Quang Tri Province. Ben Hai SFC is managing 7357 haproduction forest including 5730 ha of planted forests and 1628 ha ofnatural forest. About 75.7% (4335 ha) of the planted forest area is oc-cupied by acacia and the rest by pine and rubber (World Bank, 2016).Total estimated assets and liabilities of this company in 2014 were US$7,771,800 and US$5,011,100, respectively (World Bank, 2016).
3.1. Quang Tri Province
Quang Tri Province is located on the North Central Coast region andis characterized by steep slopes, sharp crests, and narrow valleys oncecovered mainly by a dense broadleaf evergreen forest (Fig. 1 here). It issurrounded by the Quảng Bình province to the north, Thừa Thiên-Huếprovince to the south, Savannakhet province of Laos to west, and theEast Sea to the east. It is frequently affected by natural disasters and issusceptible to floods, storms, landslides, droughts and salinization. Theannual average temperature is 24 °C, but temperatures can drop as lowas 7 °C during the rainy season. The agriculture-forestry sector con-tributes 22.7% of the total economy.
This province covers 437,982 ha of which 241,105 ha is forests. Ofthe total forest area, 108,114 ha is production forest, 74,097 ha isprotected forest, and 58,894 ha is special use forest. The area of plantedforests has been increasing rapidly during recent years. In 2014, thetotal area of plantation was 75,221 ha and 20,966 ha of this area wascertified by FSC. Acacia and eucalyptus are very popular plantation
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species and, in 2014 alone, 399,000 m3 of timber was harvested fromthese planted forests.
3.2. Data source
The Ben Hai SFC has been planting acacia with different densitiesand rotation age, as part of normal business for many years. The re-search team, with the technical manager of the SFC, visited the plan-tation sites, woodchop factory and sawmill in August 2016 and allplantation, maintenance and harvesting activities and their tentativecosts and benefits from the harvested products were discussed. All costsand benefits from the plantations were taken from the register of theSFC and were transcribed into English. Some of the key data (price andyield) and information were further triangulated and supplementedfrom formal and informal interviews with other forest stakeholdersincluding government departments and the woodchip and sawmill in-dustry and smallholders in the Quang Tri Province. All costs and ben-efits for individual years were discounted to present terms, with 7% and12% discount rates. The 12% discount rate was chosen because it wasthe common nominal interest rate 10–12 years ago, now it is around7%.
4. Results
4.1. Returns from different types of plantations
The annual costs for establishment, tending and other operationsand income from woodchips and sawlogs for 5, 6 and 10 year rotationacacia plantations are given in Tables 1, 2 and 3. Since the plantationdensity for the five-year rotation plantation (2500 seedling/ha) ishigher than that of the six-year rotation plantation (2000 seedling/ha)and 10-year rotation plantation (1650 seedling/ha), the planting andreplanting and fertilizer costs for 5 year rotation plantations is higherthan that of the 6 and 10 year rotation plantations. There is no thinningfor the 5 year and 6 year rotation plantations but there is one thinning
at year six for 10 year rotation plantations. The additional cost items forthe 10 year rotation are thinning and transportation of thinning pro-ducts, for a 3 km distance where the woodchip/sawmill is located,which adds about US$358/ha.
Fig. 1. Showing different types of forests of the Ben Hai Company and Quang Tri Province, Vietnam.
Table 1Description of cost and income (US$/ha) from 5-year rotation acacia plantation in BenHai State Forestry Company.
Description Year 1 Year 2 Year 3 Year 4 Year 5
A Plantation &management cost(1 + II)
1019.6 169.1 57.3 9.0 9.0
I Materials and services 661.6 111.91 Seedling for main planting
(2500 seedling/ha)167.8
2 Seedling for replanting(125 seedling/ha)
8.4
3 Cost of planting tools 4.54 Land preparation & digging
holes with machine313.2
5 Fertilizer (1st yr 300 g/plant;2nd yr 200 g/plant)
167.8 111.9
II Labour cost: 357.9 57.3 57.3 9.0 9.01 For planting preparation/
designation2.7
2 For fertilizerapplication & planting materialpreparation
145.0
3 For planting and replanting 145.04 For grass cutting and weeding 56.4 48.3 48.35 For forest (including fire)
protection9.0 9.0 9.0 9.0 9.0
B Harvesting cost 1342.31 Skidding/transportation to
sawmill (3 km)447.4
2 Labour cost for harvesting 894.9C Income 4474.31 Woodchip (100 t @US$44.74/t) 4474.3
Note: Some figures could vary due to rounding error.
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The 5 year rotation plantation produces 100 t of woodchip and the6 year rotation plantation produces 96 t of woodchip and 20.8 m3 ofsaw logs. Both of these products are sold at the local woodchip/sawmillat the rate of US$44.7/t (1,000,000 VND; woodchip) and US$67.1/m3
(sawlogs).1 The 10 year rotation plantation produces 107.8 t of wood-chip (25 t from thinning +82.8 t from final harvest) and 108 m3 ofsawlogs. The selling price of woodchips for 10 year rotation plantationsis the same as the shorter rotation plantations but with larger logs, theprice for sawlogs from the longer rotation stand is US$80.5/m3.
Financial returns from the three different rotation age plantations at7% and 12% discount rates are given in Table 4. Calculated values forall the financial indicators (Net Present Value, Benefit-Cost Ratio andthe Internal Rate of Return) show that all three plantations types
Table 2Description of cost and income (US$/ha) from 6-year rotation acacia plantation in Ben Hai State Forestry Company.
Description Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
A Plantation &management cost (1 + II) 902.5 146.8 57.3 9.0 9.0 9.0I Materials and services 592.8 89.51 Seedling for main planting (2000 seedling/ha) 134.22 Seedling for replanting (100 seedling/ha) 6.73 Cost of planting tools 4.54 Land preparation & digging holes with machine 313.25 Fertilizer (1st yr 300 g/plant; 2nd yr 200 g/plant) 134.2 89.5II Labour cost: 309.6 57.3 57.3 9.0 9.0 9.01 For plantation preparation/designation 2.72 For fertilizer application & planting material preparation 120.83 For planting and replanting 120.84 For grass cutting and weeding 56.4 48.3 48.35 For forest (including fire) protection 9.0 9.0 9.0 9.0 9.0 9.0B Harvesting cost 1610.71 Skidding/transportation to sawmill (3 km) 536.92 Labour cost for harvesting 1073.8C Income 5695.91 Woodchip (96 t @US$44.74/t) 4295.32 Saw logs 20.87 m3 @US$67.11/m3 1400.6
Note: Some figures could vary due to rounding error.
Table 3Description of cost and income (US$/ha) from 10-year rotation acacia plantation in Ben Hai State Forestry Company.
Description Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
A Plantation &management cost (1 + II + III) 807.2 131.1 57.3 9.0 9.0 366.9 9.0 9.0 9.0 9.0I Materials and services 545.9 73.81 Seedling for main planting (1650 seedling/ha) 110.72 Seedling for replanting (100 seedling/ha) 6.73 Cost of planting tools 4.54 Land preparation & digging holes with machine 313.25 Fertilizer (1st yr 300 g/plant; 2nd yr 200 g/plant) 110.7 73.8II Labour cost: 261.3 57.3 57.3 9.0 9.0 9.0 9.0 9.0 9.0 9.01 For plantation preparation/designation 2.72 For fertilizer application & planting material preparation 96.63 For planting and replanting 96.64 For grass cutting and weeding 56.4 48.3 48.35 For forest (including fire) protection 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0III Thinning & transportation cost: 357.91 Thinning 223.72 Transportation of thinning products 134.2B Harvesting cost 2577.21 Skidding/transportation to sawmill (3 km) 966.42 Labour cost for harvesting 1610.7C Income 1118.6 12,402.71 Woodchips from thinning (25 t @US$44.74/t) 1118.62 Saw log 108 m3 @US$80.54/m3 8698.03 Woodchip from final harvest (82.8 t @US$44.74/t) 3704.7
Note: Some figures could vary due to rounding error.
Table 4Financial returns from three different density and rotation age of acacia plantations.
Financial indicators 5 year rotation 6 year rotation 10 year rotation
7% DR 12% DR 7% DR 12% DR 7% DR 12% DR
Net Present Value,NPV (US$/ha)
1147.6 762.1 1802.5 1221.8 4864.9 2972.4
Benefit Cost Ratio(BCR)
1.51 1.37 1.80 1.61 2.82 2.39
Internal Rate ofReturn (IRR)
27% 27% 31% 31% 33% 33%
Annual EquivalentValue (AEV) (US$/ha)
279.9 211.4 378.2 297.2 692.7 526.1
Note: AEV is annual equivalent value, discounted NPV of investment. DR is discount rate.1 During the time of field survey 1US$ = 22,350VND
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produce positive returns and are profitable enterprises. The return from10 year rotation plantations is however, much higher than that of6 year rotation plantations which, in turn, is higher than 5 year rotationplantations. This is because the 6 year and 10 year rotation plantationsproduce saw logs which attract a higher price than woodchip. As notedthough, there is a greater volume of sawlogs produced from 10 yearrotation with higher prices than that of logs produced from 6 year ro-tation. On the other hand, the plantation and fertilisation cost for the10 year rotation plantation is lower than those of shorter rotationplantations due to lower plantation density.
With a 7% discount rate, increases in the rotation age by 1 year (6 yearsrotation) and 5 years (10 years rotation) from the typical rotation age forsmallholders of 5 years, result in increases in NPVs of about 1.57 times and4.24 times, respectively. Moreover, increasing the proportion of sawlogsfrom each plantation by increasing the rotation age means more logs will beavailable along the value chain. This would generate wider economicbenefits in employment and value adding activities in sawmilling compa-nies and furniture industry, something to be examined in other work.
4.2. Sensitivity analysis: impact of fluctuating yield and price of forestproducts
To consider some of the uncertainties around key variables, sensi-tivity analyses were conducted. Tables 5a and 5b show how the valuesof different financial indicators fluctuate by changing the price andyield of sawlogs and woodchip. Given the increasing demand of bothproducts, there is a good chance of increasing the price of these pro-ducts. From 2009 to 2015, hardwood chip exports to Asian countrieshave grown steadily, particularly feeding demand from the chemicalpulp industry in China (RISI, 2016). In 2009, the amount of Asianhardwood chip imports was about 12.5 million BDMT (bone dry metrictonnes) and in 2015 it increased to 21.5 million BDMT (RISI, 2016).More than 82% of the additional imports was from Vietnam (RISI,2016). However recent changes of Vietnam government policy aimed atincreasing timber production and decreasing woodchip production(MARD, 2015), and a new tax on woodchip export applied from late2016 could potentially change the prices for woodchips, as the tax is
paid by the growers regardless of the point of collection along the valuechain. This may encourage long rotation plantations but the effectswere not apparent at the time of writing.
An increase in the area of planted forests, may however result intimber being oversupplied to the market, which could also result in aprice decrease. Therefore, price variations of forest products of −20%to +20% are considered. On the other hand, improved genetic materialand silvicultural practice may increase production in succeeding rota-tions (Hardiyanto and Nambiar, 2014) or, soil degradation and naturaldisasters may mean that productivity could decrease in the long run(Maraseni et al., 2005, 2008). Therefore, yield variations of −10% to+10% are considered.
Even if the price of forest woodchip and sawlogs decreased by 20%,or the yield decreased by 10%, NPVs are positive for all three types ofplantations at both discount rates. At a 7% discount rate, if the price ofproducts decreased by 20%, the NPVs of 5, 6 and 10 year rotationplantations would decrease by 59.5%, 45.1% and 27.7%, respectively.Returns for all types of plantation businesses are highly sensitive to adecrease in the price of products, but are more sensitive for shorterrotation plantations. Similarly, at 7% discount rates, if the yields ofwoodchip and sawlogs decreased by 10%, the NPVs of 5, 6 and 10 yearrotation plantations would decrease by 29.8%, 22.6% and 13.9% re-spectively. Yield reduction is also more disadvantageous to shorterrotation plantations. These suggest that the decreasing price and yieldfrom current amounts is less detrimental to long rotation plantationscompared to the short rotation plantations. Moreover, as noted,Vietnam imports about 80% of its requirements but, in recent times, theshipping and raw wood costs have increased (MARD, 2015) and if theabove noted policies are implemented, then there may be further in-centives for long-rotation plantations.
5. Discussions
5.1. Comparison of results with similar studies in Vietnam
Our results are comparable with results from the study by Pistoriuset al. (2016). While estimating the financial returns for four business
Table 5aSensitivity analysis for different financial indicators (if price of sawlog and woodchip change by various percentages).
If price of products change by 0% +10% +20% −10% −20%
5 yr 6 yr 10 yr 5 yr 6 yr 10 yr 5 yr 6 yr 10 yr 5 yr 6 yr 10 yr 5 yr 6 yr 10 yr
At 7% discount rate NPV (US$/ha) 1148 1803 4865 1489 2209 5540 1830 2615 6214 806 1396 4190 465 990 3516BCR 1.5 1.8 2.8 1.7 2.0 3.1 1.8 2.2 3.3 1.4 1.6 2.6 1.2 1.4 2.3IRR 27% 31% 33% 32% 35% 34% 36% 38% 36% 22% 27% 31% 16% 22% 29%AEV (US$/ha) 280 378 693 363 463 789 446 549 885 197 293 597 113 208 501
At 12% discount rate NPV (US$/ha) 762 1222 2972 1046 1545 3420 1331 1868 3867 478 899 2525 193 575 2078BCR 1.4 1.6 2.4 1.5 1.8 2.6 1.6 1.9 2.8 1.2 1.4 2.2 1.1 1.3 2.0IRR 27% 31% 33% 32% 35% 34% 36% 38% 36% 22% 27% 31% 16% 22% 29%AEV (US$/ha) 211 297 526 290 376 605 369 454 684 133 219 447 54 140 368
Table 5bSensitivity analysis for different financial indicators (if yield of sawlogs and woodchip change by various percentages).
If yield of products change by 0% +5% +10% −5% −10%
5 yr 6 yr 10 yr 5 yr 6 yr 10 yr 5 yr 6 yr 10 yr 5 yr 6 yr 10 yr 5 yr 6 yr 10 yr
At 7% discount rate NPV (US$/ha) 1148 1803 4865 1318 2006 5202 1489 2209 5540 977 1599 4528 806 1396 4190BCR 1.5 1.8 2.8 1.6 1.9 2.9 1.66 2.0 3.1 1.4 1.7 2.7 1.4 1.6 2.6IRR 27% 31% 33% 30% 33% 34% 32% 35% 34% 25% 29% 32% 22% 27% 31%AEV (US$/ha) 280 378 693 322 421 741 363 463 789 238 336 645 197 293 597
At 12% discount rate NPV (US$/ha) 762 1222 2972 904 1383 3196 1046 1545 3420 620 1060 2749 478 899 2525BCR 1.4 1.6 2.4 1.4 1.7 2.5 1.5 1.8 2.6 1.3 1.5 2.3 1.2 1.5 2.2IRR 27% 31% 33% 30% 33% 34% 32% 35% 34% 25% 29% 32% 22% 27% 31%AEV (US$/ha) 211 297 526 251 336 566 290 376 605 172 258 486 133 219 447
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models, they found that the NPV from 12 year rotation acacia (timber)plantations was much higher than that of 6 year rotation acacia(woodchip) plantations. As with our study, their results show that thedifference of NPVs among the four models increases with lower dis-count rates.
The mean annual increments (MAIs) of acacia plantations in ourcase study sites are 17.7 m3/ha/yr and 20.2 m3/ha/yr, for 6 and10 year rotations, respectively. These values are comparable with thefindings of Harwood and Nambiar (2014b) and Harwood et al. (2014)studies. Harwood and Nambiar (2014b) reported that, in Vietnam, theMAI generally increases from north to south, with about 17.6 m3/ha/yrin the north and 23.0 m3/ha/yr in the south. Similarly, on the basis ofan experiment in central Vietnam—close to our case studysites—Harwood et al. (2014) reported a MAI of 20 m3/ha/yr at the ageof 5 year acacia.
Whilst comparing the MAIs of 6 year and 10 year rotation planta-tions, we can say that the MAI in total volume is still increasing even atthe age of 10. Therefore, we can roughly say that the maximum sus-tainable yield (MSY) rotation age (when MAI is at peak)—which aims tomaximise wood volume and therefore is not affected by the price of theproducts—for acacia is above the current rotation lengths used in thisregion (Campbell, 1999; Maraseni, 2007). If the companies' or in-dividuals' aim is to maximise profit and they have the appropriate in-formation, they will cut the trees when the marginal cost exceeds themarginal benefit of keeping them for another year (Baral et al., 2014).This will depend on a range of factors, including growth rate, main-taining cost and market price. Therefore, the profit oriented rotationage, maximum economic yield (MEY) rotation, is invariably shorterthan the MSY rotation (Campbell, 1999) but, from financial return data,this may occur at a time longer than 10 years, as our study shows thatthe bigger size logs attract higher prices.
5.2. Comparison of mean annual increments (MAIs) of acacia with similarstudies elsewhere
Short rotation acacia plantations represent a relatively new venturein forest management. They are mostly confined to subtropical andtropical environments. In Southeast Asia, they expanded rapidly in the1980s to meet the increasing demands for wood supply (Harwood andNambiar, 2014b,c). In the context of climate change, short rotationplantations are considered better than long rotation plantations sincethey increase land use flexibility with more frequent replanting of dif-ferent varieties/germplasm (Harwood and Nambiar, 2014c), but, interms of financial benefits, our findings suggest that long rotationplantations could be better. Among many other factors, financial re-turns largely depend on the growth rates of a species, which largelyvary by the type of species and the climatic, edaphic and topographicconditions of a plantation area. For example: (1) in South Sumatra,Indonesia, depending on site quality, the MAI of 5.5 year for A man-gium ranged between 31.3 m3/ha/yr to 45.45 m3/ha/yr (Harwood andNambiar, 2014a); (2) in average sites of South Africa, the MAI of A.mearnsii plantations was estimated at 12 m3/ha/yr (Du Toit et al.,1998); (3) in fertile, tropical and humid areas of Australia and PapuaNew Guinea, the MAI of A. auriculiformis plantations was estimated at15–20 m3/ha/yr in 10–12 years; (4) in semi-arid West Bengal, onshallow soils, the MAI of A. auriculiformis was reported only at 5 m3/ha/yr in the 15th year (National Academy of Sciences, 1980); (5) in thehumid southern zone of Kerala, India, the MAI of A mangium rangedfrom 35 to 45 m3/ha/yr but, in the sub-humid climatic zone of northernKerala, with red loamy soils, the MAI ranged from 20 to 25 m3/ha/yr(Hegde et al., 2013); and (6) in Sarawak, Malaysia, the second gen-eration (genetically improved planting material) acacia hybrid re-corded a MAI of 28.2 m3/ha/yr at 10 years (Adam, 2015).
As noted, the MAIs of acacia hybrid plantations in our case studysites range between 17.7 m3/ha/yr and 20.2 m3/ha/yr, thus compar-able with South African, West Bengal, Australian and Papua New
Guinean values but not comparable with better sites of Malaysia,Indonesia and India (Kerala). Productivity of acacia also depends on itsgenetic varieties. In general, a MAI of improved and hybrid varieties arehigher than their counterparts. For example, from research in northernVietnam, the volume growth of acacia hybrid was 89% greater thanthat of A. mangium (Harwood and Nambiar, 2014c). Another way ofincreasing the productivity of acacia in hurricane prone areas, like ourcase study sites, could be with mixed planting. For example, in southChina, the wind-throw of A. crassicarpa decreased markedly with in-creasing ratio of eucalyptus U6 plantations. Mixed planting with a 2:1ratio of eucalyptus U6 and A. crassicarpa could obtain a maximum totalbiomass of 118.8% of the total biomass in pure eucalyptus U6 stand or169.9% of that in pure A. crassicarpa stand (Yang et al., 2009).
5.3. Thinning and stem density
In all plantation types, NPK fertilizer is applied at ages 1 and 2which may increase the proportions of trees requiring thinning andform pruning. Some researchers suggest that a high dose of fertilizer atplanting should be avoided for acacia plantations, in order to reducefertilisers' cost and thinning requirements (Bon and Harwood, 2016).There is a need for research—especially for long rotation planta-tions—to determine whether or not the current practice of applyingfertilizer in the first two years (300 g/tree in the first year and 200 g/tree in second year) and not applying in other years is advantageous.
In the case of long rotation plantations, thinning is a commonpractice as it reduces competition for sunlight and soil nutrients andassists plants in managing leaf water stress during the dry season(Huong et al., 2016). As a result, the remaining trees grow well. Huonget al. (2016) analysed the growth and physiological responses to in-tensity and timing of thinning of acacia hybrid plantations in SouthVietnam. Compared to un-thinned (planting stock 1111 trees/ha)acacia plantations, thinning to 600 trees/ha at age 2 years or to833 trees/ha at age 3 years produce wood with the highest diameter atthe age of five (Huong et al., 2016). This finding suggests that if thin-ning is not conducted, the growth rate could be hampered as early asfrom 2 to 3 years. Such early thinning may be particularly important forfast growing species such as eucalyptus (Medhurst et al., 2001) andacacia (Kha, 2001).
In our case, there was no thinning for 5 year and 6 year rotationacacia plantations but thinning was conducted for 10 year rotationplantation at the age of 6. Also, the plantation density in our case wasmuch higher (1650–2500 seedlings/ha) than that of South Vietnamwhereas mean annual rainfalls were comparable—2600 mm in SouthVietnam and 2400 mm to 2600 mm in our case study site in the QuangTri Province. The current practice of thinning at the age of 6 can pro-duce some woodchips but as a whole it may not be profitable comparedto the returns from plantations with early age thinning. Therefore, re-search on estimation of financial returns with different intensity andtiming of thinning regimes is highly necessary.
There are some other factors that need to be considered as well.Thinning may reduce the total wood volume and therefore the returnsfrom sales of higher-priced large-sized logs is likely to be offset by lowerwood volume (Beadle et al., 2013; Beadle, 2015). Moreover, thinningcomplicates plantation management and requires more skilled man-agement (Harwood and Nambiar, 2016) and thinned stands are morevulnerable to wind damage and fungal diseases (Nambiar et al., 2014;Thu et al., 2014). If the additional cost [including the risk] of thinningis higher than its additional benefits, the solution is probably plantingtrees at an appropriate spacing level.
5.4. Risk with longer rotations plantations
All forest stakeholders we interviewed in Quang Tri Province re-ported that, if the acacia is kept for> 10 years or is> 30 cm DBH(breast height diameter), the logs are likely to be attacked by insects
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and borers in the trunk that degrade wood quality. A further compli-cation may be that bigger sawlogs will require specialised heavy ma-chinery for harvesting, loading and transporting logs from the forests,as well as in the receiving sawmills. Most of the tree growers in theregion are smallholders, some of whom are poor and/or old. In general,young people migrate to urban areas for better education and earnings.Trees are means of livelihood for tree growers, they have small landarea, need quick returns and therefore favour short rotation plantations.
Another important factor pushing for short rotation plantations isthe risk of hurricanes and disease. Respondents in the regions areconcerned about the potential impacts of hurricanes that occur some-where in the region every 5 years. These risks (real or perceived) maydeter smallholder grower, who have only a limited area of trees, togrow long rotation plantations. A study that supports these perceptionsshowed that two out of ten experimental acacia thinning trials im-plemented across Vietnam by VAFS and collaborators since 2006 weredestroyed by typhoons before the age of 5 years (Harwood andNambiar, 2016). Moreover, in 2016, several hundred hectares of acaciahybrid plantations were attacked by Ceratocystis stem canker disease inSouth Vietnam and had to be felled and burned (Harwood andNambiar, 2016). Therefore, to promote long rotation plantations, theprovision of risk management tools such as insurance could be con-sidered.
5.5. Policy options to support longer rotations plantations
For each type of plantations, the financial return at a 7% discountrate is much higher than at a 12% discount rate. This is because most ofthe costs are incurred in the early stage of plantations with benefits at alater stage and therefore the benefits are more heavily discounted thanthe costs (Maraseni, 2007; Maraseni and Cockfield, 2011). As with anyinvestment with a profile of significant investments in the early periodsand paybacks or benefits much later, NPV declines as the discount rateincreases until the IRR is reached that is, the IRR is the discount rate atwhich NPV equals to zero and beyond which NPV is negative.
The difference in NPVs among the three rotation plantations de-creases with increasing discount rates. For example, NPVs for the10 year rotation plantation and the 5 and 6 year rotation plantations ata 7% discount rate are US$3717 and US$3062 respectively whereasthese values are US$2210 and US$1751 at a 12% discount rate re-spectively. Thus, as would be expected higher discount rates or greatertime preference for money, result in a lower incentive to grow trees fora longer period. The fact that smallholders are not growing longer ro-tations and larger logs, indicates either: (1) that they either lack in-formation on additional costs (in trees and fertilizer) in planting at highstocking for short rotation, or on the increased returns from growing,or; (2) that these smallholders have a high time preference for money,i.e. a desire for rapid cash flow and therefore aim to cut trees and getreturn as soon as possible.
For smallholder growers, the effective discount rate could be muchhigher than the ones used in this study. One option might be to facil-itate a secondary market, where the furniture industry, or the govern-ment, buys the standing trees from the grower at age 5, with anagreement to leave the stand for a further 5 years, to grow larger trees,with an agreed share of the future value paid to the grower when thestand is harvesting. This means that the industry and the grower sharethe risks of leaving the plantation longer. This could also be supportedthrough loan arrangements.
A discussion with several government and non-government stake-holders in the Quang Tri Province revealed that the demand of wood-chips for a processing company is much higher than the supply fromtree growers. The current production can meet about 37% of the totaldemand in the province. The higher demand of woodchip for the pro-cessing companies shows that the growers are getting good priceswhich drives short rotation plantations. This demand is working againstgovernment policy to encourage the production of larger logs to meet
the 2020 furniture export target. The Government also aims to increasethe area of certified production forests to 30% by 2020 (MARD, 2007)and one reason for this is to provide another reason for increasing therotation length of plantations, as there is a size requirement for logcertification (Hoang et al., 2015a). As of July 30, 2016, only about86,193 ha of natural forest and 113,008 ha of planted forests have beencertified (FSC, 2016), so this is not yet a significant driver of beha-vioural change.
6. Concluding remarks and recommendations
The Vietnam Government wants tree growers to increase the rota-tion age of plantations. Taking a case study of the Ben Hai StateForestry Company (SFC), we compare financial returns from acaciaplantations by the rotation ages of 5, 6 and 10 years. Results suggestthat all three types of plantation management options are profitable.The returns from 10 year plantations are however, much higher thanthe 5 and 6 year plantations. The difference in returns among the threerotation types is lower with higher discount rates. Therefore, we inferthat higher preferences for immediate income are likely to encourageshort rotation plantations (SRP).
In spite of the attractive returns from long rotation plantations(LRP), why do even SFCs still prefer SRP? This could be due to: (1) highdemand of woodchips; (2) increased risk, or perception of risk, ofhurricanes with LRP; (3) increased risk of defects and borers in largesize logs; and (4) specialisation of the sawmill industry in the processingof small-sized logs.
The financial returns estimated in the study for SFC may not bedirectly applicable to all smallholders as they may be using differentproduction systems (on a scale of< 3 ha compared to 1000s of ha),using no hired labour and no machinery and thus having a completelydifferent stream of costs and revenues. However, the proportions ofprofitability between the three rotation systems could be similar. Thena question arises as to why smallholders are resisting the longer rota-tions? There are several possible reasons: (1) they may have evenhigher effective discount rates; (2) bigger sawlogs may require me-chanised harvesting whereas small logs can be readily carried by man-power and loaded onto regular trucks without expensive, heavy ma-chinery; (3) smallholders are generally poor, trees are an important partof their daily livelihood; and (4) smallholders are old and thereforehave short time horizons. Therefore, there is a need of more substantiveanalysis of the key impediments to growing longer rotations or largersize trees and, considering the range of options (social, financial,technical, market), such analyses could address these issues.
If the Government really wants to encourage LRPs, there may be aneed to consider other or revised policy options. These may include: (1)the development of demonstration sites and running field days forforest growers; (2) promotion of alternative management optionsthrough communication and extension activities; (3) providing in-surance products against typhoon damage; and (4) better integratingwoodchip and furniture timber production. Moreover, building part-nerships among value chain actors of the timber and furniture industry,which need longer rotation plantations, could generate win-win situa-tions for all actors. Furthermore, promotion and adoption of a low costgroup certification program may support longer rotations plantations asthere is a size requirement for log certification and, therefore, growersare obliged to go with a higher rotation length. All of these need furtherconsideration and research.
Acknowledgement
This study was funded by Australian Centre for InternationalAgriculture Research (Project No: ADP/2014/047). We are highly in-debted to Professor Rodney John Keenan (University of Melbourne,Melbourne) for his reviews and constructive comments and suggestions.We are extremely grateful to all key informants and interviewees for
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their time for meetings, discussions and interviews. We cordially thankanonymous referees and editorial board for their highly valuable sug-gestions which were gratefully acknowledged.
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Comparing financial returns from three models of eucalyptus plantations in Lao PDR.
[SUBMITTED TO THE JOURNAL OF ……………….]
SOMVANG PHIMMAVONG1, TEK NARAYAN MARASENI2 , ROD KEENAN3, ET AL, 2017……………….
1Faculty of Forest Science, National University of Laos, Dongdok Campus, Vientiane, Lao PDR Email: [email protected] 2University of Southern Queensland (USQ), Toowoomba, Queensland, 4350, Australia 3Melbourne School of Land and Environment, the University of Melbourne, Parkville, Vic. 3010, Australia
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ABSTRACT
This paper presents financial analyses of three models of eucalyptus plantations namely eucalyptus monoculture, eucalyptus intercropped with rice and eucalyptus intercropped with cassava. Production and cost data were collected from the Burapha Agroforestry Co., Ltd which is located in Vientiane Prefecture, Lao PDR.
The analysis revealed that planting eucalyptus intercropped with cassava is the highest profitable. We found that both eucalyptus intercropped with cassava and eucalyptus with rice generated higher land expectation value than eucalyptus monoculture under current market circumstances. Sensitivity analysis was employed to observe the impacts on land expectation value by interest rate, prices of timber price, and yield variation. The analysis fail to include the C benefits and any full economic effects namely, indirect, induced economic spillovers such as income and employment multipliers are ignored in this analysis.
Keywords: Lao forest, plantation, financial analysis, teak, Eucalyptus.
1. INTRODUCTION
The Laos forest area is 16.14 million ha, comprising mostly modified natural forest (14.43million ha) and 223 000 ha of plantation1 (FAO 2006). Economic development in Laos is largely dependent on forests products. In recent year, the government of Laos are providing the policy instruments and incentives to increase forest cover through forest restoration and plantation development in order to reduce pressure on destruction of natural forests as well as to meet domestic wood industries (Phimmavong, Ozarska et al. 2009). As a result, the percentage of forest coverage in Laos increased from 40.34% in 2010 to 47% in 2015.
According to the most recent prediction of the United Nations (UN), there will be 9.6 billion people by 2050. In order to feed them, agricultural production should increase by 60% by 2050 (FAO 2013). Therefore, increasing population and food security are becoming major issues in all developing countries. Farmers are forced to cultivate marginal land, and farm inputs such as agrochemicals, fuels and machinery are increasing in response to the need to meet the food demand of growing populations (Maraseni, Cockfield et al. 2007; Govaerts, Sayre et al. 2009; Maraseni, Mushtaq et al. 2009; Maraseni, Cockfield et al. 2010). All these activities directly and indirectly accelerate carbon emissions, as production, storage, transportation and application of farm inputs require huge amounts of energy. Therefore, the current agriculture system is environmentally and socially undesirable. Agroforestry which is more profitable than either tree or crop monoculture (Srivastava and Pant 1979; Doyle, Evans et al. 1986; Anderson, Moore et al. 1988; Shekhawat, Sen et al. 1988) is emerging as an alternative land use strategy to tackle these problems (Bannister and Nair 2003). Including carbon benefits into an agroforestry system may further increases its profitability.
1 The major proportion of forest plantations in Laos includes rubber plantations.
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Agroforestry is even more important in Laos. Being a subsistence agrarian country, forestry is an integrated part of agriculture and rural livelihood. Approximately 80% of lao population live in rural area and heavily dependent on forest resources. Agriculture and forestry collectively accounts for 23.7% of the total GDP in fiscal year 2014-15.
Forest plantations have occurred in Laos for well over a century. Eucalyptus plantations were introduced in the late 1960s and they were planted on a small scale, mainly for experimental purposes. For instance, Eucalyptus plantations were planted by the Lao-Australian Reforestation project in the early 1973 (Ovington 1974). Initially, these plantations were developed to identify the best species, provenances, and establishment methods. The main species planted were Eucalyptus tereticornis and Eucalyptus camaldulensis.
Recently there has been increasing investment in plantations by private, national, and multi-national companies. While the area of teak plantations in Northern Laos has increased rapidly, mostly owned by private smallholders, fast growing trees namely Eucalyptus has been increasingly planted by multi-national companies in the central and southern parts (Phimmavong 2011).
Much remains unclear in regard to the analyses for financial returns of different models of Eucalyptus plantations namely agroforestry in Laos whilst they are a key issue for the development of sustainable plantation in Laos.
This paper investigates the financial return of three models of eucalyptus plantation in Laos (eucalyptus monoculture, two agroforestry models: eucalyptus intercropped with rice and eucalyptus intercropped with cassava) by applying financial profitability analysis and land expectation value (LEV). LEV is a so called a net present value (NPV) for bare land assuming perpetual land management regime. Analysis includes a sensitivity analysis which is employed to examine the impacts of LEV by interest rate, prices of timbers, and growth yield variations.
2. METHODOLOGY
2.1 Study area and agroforestry plantation model
The plantation sites of Burapha Agroforestry Co., Ltd (BAFCO) are situated in four Provinces of Laos: Vientiane Prefecture, Vientiane Province, Xayabouly Province, and Saisomboun Province. The climate of these regions is dominated by tropical monsoon with pronounced wet and dry season. There are two seasons in Laos: rainy and dry seasons. While the rainy season starts from May to September, the dry season is from October to April. The rainy and dry season are important for agriculture and forestry sector which has a major role in the Laos economy.
The landscapes in these four provinces vary from one region to another. For instance, in Vientiane Prefecture, the landscape is quite flat while Vientiane Province, it starts from flat, fertile sedimentary plains in the Nam Ngum River Valley to rugged limestone mountains in the northern and western part of the Province. Saisomboun and Xayaboury Provinces are moderately mountainous, steep valleys, and flood plains. In Xayaboury Province, Mekong river runs past through the landscape.
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The majority of soils in these areas are siliceous sedimentary formations, which have mainly been classified Acrisols and Cambisols. Due to the long traditional practices of shifting agriculture, they become acidic with relatively low nutrient concentration in some places.
BAFCO has adopted agroforestry model which involves the participation of villages. The local communities use the space between tree rows for upland rice production (year 1). Until now, the company has received the approval of land use rights for approximately 7,961 ha of land and has planted about 3000 ha with mainly Eucalyptus cumadulensis (or cross with E. urophylla, E. pellits, or E. grandis), with a few plantation area of Acacia auriculiformis.
The BAFCO agroforestry operations utilises a plantation model, whereby the wide spacing with 9m x 1m provided between tree rows allows for intercropping of agricultural crops in the first year of plantation establishment whiles eucalyptus monoculture is 3m x 3m spacing. While farmers in the villages are provided user rights to individual plots to grow rice or cassava between the trees, the company leases the entire plantation area for up to 30-year lease.
In the agroforestry model, farmers could harvest the crops for their own consumption or sale and benefit from plantation employment activities (Table 1). On one hand, the company leases land from villages, which is allocated by village chief and local authorities. On the other hand, land leased from individuals would be chosen for agricultural production for that individual household. BAFCO contribute the following payments to local authority and the state as follows: development funds for village cooperation and concessions such as Village Development Fund (KIP 1-3 million/ha); Khum (village cluster) Development Fund (KIP 40,000/ha); District Development Fund (KIP 80,000/ha), and concession payments according to laws & regulations. Table 1: Agroforestry model of Burapha Agroforestry Co., Ltd (BAFCO)
Year P 1 -
co - - - -
2 - -
3-4 - - - -
5-6 - 7 -
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For eucalyptus plantation intercropped with cassava, BAFCO usually owned cassava for the first year of the plantation cycle. In this model, local villagers can benefit from casual employment opportunities during the plantation cycle namely land preparation and clearing, weeding, planting, fertilising, pruning, thinning, and harvesting.
2.2 Financial profitability analysis There is a need to assess the financial returns of eucalyptus monoculture, and eucalyptus-
crop intercropping so that policy makers and plantation sector actors better informed about the returns from different plantation development approaches. There are several approaches to the measurement of the financial return of such land use options in the economic literature. Selecting a suitable technique depends on the purpose of the study. An investment indicators financial profitability analysis such as Net Present Value, internal rate of return, and cost-benefit analysis approach might be the preferred approach to evaluate the short-term economic impacts of forestry projects. They are most widely used in the assessment of the profitability of forestry investment. For instance, Xayvongsa (2001), Phimmavong (2004), and Manivong & Cramb (2008), utilised these profitability analyses in their economic impact assessment of forest plantation investments in Laos. Nevertheless, the results of such exercise may be misleading if not using them properly. This is because when using the net present value, the durations of two different crops varies seasonally, there is a need to annualize present value or alter the value into equivalent term at a given period of time. The Faustmann formula provides a well-known model for estimating the Net Present Value (NPV) of the cash-flows generated by the forest under certain assumptions. This is an appropriate model for estimating the present value of streams of net monetary benefits generated by the forest under certain assumptions (Samuelson 1976; Johansson and Loefgren 1985; Klemperer 1996). The Faustmann’s Formula computes the NPV of net monetary benefits of plantation investment on a unit of land under some assumptions, which could be written as the formula below (Klemperer 1996).
r
car
rCrRorWPLNPV T
T
yyT
yyT
y −+
−+
+−+=∑ =
−−
∞∞ 1)1(
)1()1(0
)()(
This Formula is well known as the Faustmann formula, after Martin Faustmann (1849). The forestry literature calls this the Land expectation value or soil expectation value, a translation from the German “Bodenerwartungswert” (Klemperer, 1996). This model solved the classic problem in forest economics, i.e., it had a solution to the problem of evaluating forest land related to the future benefit. In addition, it can be used as a guiding factor to determine the optimal land use management regimes, especially to find out the optimum rotation cycle. However, as mentioned above, this formula holds under certain assumptions. These assumptions are that: 1) the capital market is perfect, i.e., one can lend and borrow any amount of capital at prevailing interest rate without transaction costs and that future interest rates are known with certainty; 2) all future timber prices and the future price of all inputs are constant and known; 3) Field timber yields, which are functions of certain expenditure inputs are known; 4) Forest land can be bought, sold and rent in a perfect market; and 5) it is assumed that there are no restrictions on cutting
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capacity and on the composition of the indivisible forest stands (Samuelson, 1976; Johansson and Löfgren, 1985).
2.3 Data collection The data used to develop the representative plantations were derived from a combination of
the company sources and field investigation2 in Vientiane Province. Data on the plantation afforestation cost, management cost, and other input costs of representative eucalyptus plantation were collected from the enterprise and households by interviews. The data collection was conducted by the researcher team from Faculty of Forestry, National University of Laos with the help of the local staff of Provincial Agriculture and Forestry Office working as Research Assistants (RAs).
We obtained the same information mentioned above from the computer financial sheet print-outs of the companies, related reports. Furthermore, we made several physical field visits to plantation sites for numerous times in order to confirm some of the information given in the interview notes and in archived documents. We had stayed and observed the project region for a long period during the field work for agroforestry based eucalyptus in Hinheb District, Vientiane Province. The Eucalyptus price was obtained from the forestry Company (price in 2016). This price is the farm gate price, which did not include the cost of transportation (from the point of harvesting at the plantation site to the market or factory).
The Information on growth and yield for the Eucalyptus Camaldulensis species was based on the Database of Eucalyptus Growth from of the company (based on highly maintenance trail). The rotation period for this analysis is relatively fixed at 7 years. In the analysis, the mean annual increment (MAI) for the eucalyptus plantation company is good with the MAI of 28.6 m3 ha-1 year-1. Additionally, the researcher also collected other information from other sources. These included: 1) wage rate from local market, and 2) Taxes and incentives from District Offices and Provincial Office. All calculations of present and future income were based on price and costs that were prevalent in 2015-2016. The currency “Lao Kip (Kip)” is used in the analysis and is not converted to US$ because of the different purchase power with same US$ in different countries, Laos, USA or other countries. In addition, all the data in this study is in constant Kip of 2016 and all the monetary terms occurred in before 2015 are converted in Kip in 2016 using average inflation rate.
2 Data on cost and benefit from rice integrating with eucalyptus are supplemented by a thorough household survey in Hinheb districts for a period of six weeks conducted by a PhD candidate from ANU.
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3. RESULT
3.1 Financial Analysis of mono-cultural eucalyptus plantation
Table 2 shows the revenues and cost for eucalyptus plantation which are based on one hectare of monoculture eucalyptus plantation with 7-rotation age. Table 2: Cost structure and income of mono-cultural eucalyptus plantation in Vientiane, Laos
Activities Costs (LAK/ha)
Revenue (LAK/ha)
Year 0
Land Preparation & Planting 5,155,252
Land cost 402,241
Year 1 Weeding & fertilization 4,375,397
1st lift pruning 123,135
Year 2 2nd full weeding 788,064
Year 3 1st full weeding and manual herbicide application
985,080
2nd lift pruning 205,225
Year 4 Thinning 2,035,832
2,462,700
2nd full weeding and manual herbicide application
985,080
3rd lift pruning 246,270
Year 5 1st interrow firebreak weeding 246,270
Year 6 2nd interrow firebreak weeding 246,270
3rd interrow firebreak weeding 246,270
Year 7 Final harvest cost 27,089,700
Gross revenue (Timber sale at the end of rotation) 78,806,400
Taxes Margin · 15%
IRR 25% NPV 10,231,791 WPL 20,896,445
Source: Burapha Agro-Forestry Co. Ltd, 2017
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The cost of land preparation & planting is considered as the highest payment of the cost structure of the enterprise (just over 5 million Kip). The item is broken down into four sub-activity namely land clearing, road construction (2.6 million Kip), pre-plant weeding (~400,000 Kip), and planting: staking, hole digging, phosphate application and refilling (~2 million Kip). For the land clearing, it was done by a manual work done by local villagers at a cost about1,551,501 Kip per hectare or 189 USD, which was equivalent to 70% of the total land clearing budget while bulldozer and excavator accounted for 30% of the total land clearing budget.
Land cost and overhead cost are important factors in the plantation investment decisions of plantation investors which varies considerably according scale of plantation. For this analysis, the former is not taken into account in the analysis.
Weeding is conducted from the first year until year 6. The cost of weeding and fertilizer application in Year 1 stands at 4,375,397 Kip per ha or 533 USD per ha. Thinning at year 4 costs about 2 million Kip per ha or 248 USD and bring income from the sale of poles of 300 USD to the enterprise.
It is noticeable that throughout the rotation, farmers could realize the income directly from the employment activities offered by the enterprise from year 0 onwards. The activities consist of the labour for planting, fertilization, fencing, thinning, pruning, firebreaks and so on. With the enterprise wage price set at 50,000 Kip per day, the households could realize considerably from plantation activities.
At the end of rotation, about 200 m3 of logs have been harvested for sale, which bring the gross revenue of 78,806,400 Kip or 9600 USD per ha.
The enterprise has to pay for land tax representing the government’s share of the land input. The cost of land tax is 400,000 per hectare (49 USD). Taxes are 15 per cent of the net revenue.
The analysis indicates that the calculated financial NPV is 10,231,791 Kip per hectare or 988 USD per hectare with IRR of 23%, far greater than the 12% discount rate. This implies that eucalyptus’s cost of capital should be accepted. The land expectation value is calculated at over twenty million Kip per ha or 1976 USD per ha.
3.2 Financial Analysis of eucalyptus-crop intercropping (1) Eucalyptus intercropped with cassava Cost of cassava production can be divided into operation cost, tractor cost, and
transportation/loading. This operation cost is estimated at 2.5 million kip per hectare and it consists of cut shots and bundle, stump cutting, ploughing and mounding, planting cassava, pre-planting chemicals, manual weeding and singling, chemical weeding, and fertilizing (2 times).
The mechanical lifting labour and tractors cost roughly 270,000 Kip per hectare while transportation and loading are about 135,000 Kip per hectare.
The total costs of producing fresh cassava are estimated at approximately 7.4 million Kip per hectare. The total income from selling fresh cassava at the mill gate is 8.5 million Kip per ha.
In the agroforestry model, while the company own of the trees, the farmers own 100% of their most crops except for cassava. The company provides the farmers who participate in the Plantation Model for the first time with the following free of charge: rice seed, stumps for edible cassava, edible corn seed, etc. While ploughing the land between the trees was undertaken by the company, the crops are simply planted in the ploughed land. Many costs are shared in this model such as ploughing and mounding, chemicals, fertilizing, and the like. By deducting this cost, the
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total cost for producing cassava in the agroforestry model will be reduced to 5.6 million Kip per hectare.
By adding cost and benefit to eucalyptus plantation establishment cost (Table 2), NPV for eucalyptus and cassava intercropping model is 12,577,000 Kip per ha, with the IRR of 30%, greater than the 12% discount rate, exceeding the cost of capital, and implying that this agroforestry is highly profitable and well accepted. Obviously, the financial LEV of this model is over 25 million Kip (approximately $US3,130).
(2) Eucalyptus intercropped with rice In the financial analysis of agroforestry model of eucalyptus intercropped with rice, local
farmers spend a total of 22 man-days of their labour for planting and harvesting rice per hectare. With the wage rate of 50,000 Kip per day, the total cost for producing rice per hectare is 1.1 million Kip. The rice yield by the end of the year 1 on average approximately1152 Kg3. With rice price of 2300 Kip per Kg, the total revenue of producing husky rice are estimated at approximately 2.65 million Kip per hectare.
Similar to the analysis of eucalyptus intercropped with cassava, farmers can reduce several costs in this model such as ploughing and mounding, chemicals, fertilizing, and the like. By deducting this cost, the calculated financial NPV is also very high and is calculated at approximately 11.5 million Kip per hectare or 1400 USD per hectare with IRR of 28%, far greater than the 12% discount rate. The land expectation value is calculated at 23,422,821 Kip per ha or in equivalent to just over 2800 USD per ha. 4. DISCUSSION 4.1 Assumptions and returns
In Laos, the agroforestry has been commonly practiced in Northern Laos where different types of crop have been integrated with teak plantations. More recently, Eucalyptus based agroforestry has been adopted as by some of major industrial plantation forestry companies namely Burapha Agroforestry Co., Oji Lao Plantation Forest Co., and Oji South, Stora Enso Co., etc. Specially, the plantation companies are encouraging farmers towards this direction. While conducting this research we made some assumptions which may need further validations by research. For all three modes of plantations (eucalyptus monoculture, eucalyptus intercropped with rice and eucalyptus intercropped with cassava), we used the same plantations density (1111 trees/ha), same rotation age (7 year) and same amount of log production (200m3/ha) at the age of 7. In fact, these could vary. Although the plantation density is same for all modes of plantations, distance between rows and trees could be different. For example, eucalyptus monoculture could be better off with 3m x 3m spacing whereas eucalyptus intercropping could be better off with 9m x 1m spacing. Being light demanding crops, both rice and cassava may need more light and therefore 3m x 3m spacing is not suitable for them. Similarly, log production of eucalyptus intercropping could be higher or lower than that of eucalyptus monoculture: (1) higher due to use of chemicals which may stimulate the growth of trees; and (2) lower due to competition from rice and cassava which may affect the growth of eucalyptus. 3 Thank to Alex van der Meer Simo, PhD candidate - Fenner School of Environment and Society, the authors can utilize the cost and benefit of rice cultivation integrated with eucalyptus plantation in Hinheb District.
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• Similarly, in this study, rice and cassava are assumed to be planted only for the first year. Both of these crops can be planted up to three year. In general, cassava is not planted in the first year as it affects the growth of eucalyptus. Therefore, a common practice could be planting rice in the first year then cassava for couple of subsequent years.
• Here, we have not included the carbon benefits of all three modes of plantations. If we include C benefits, all three modes of plantations could provide more return.
Key conclusion of this discussion is that there is a possibility of increasing benefits from agroforestry system but we need more action based research on several issues. Additionally, the analysis does not embrace the full economic effects namely, indirect, induced economic spillovers such as income, trade and employment multipliers are ignored in this analysis. Finally, it should be mentioned that the analysis does not include many payment of the company such as development funds for village cooperation and concessions such as Village Development Fund (KIP 1-3 million/ha); Khum Development Fund (KIP 40,000/ha); District Development Fund (KIP 80,000/ha), and Concession payments according to laws & regulations. 4.2 Key differences between eucalyptus plantations to that of acacia plantations in Vietnam We have done similar research in Quang Tri province of Vietnam but the major planted species over there is acacia and closest rotation age is 6 year. Here, we are trying to explore some key differences between these two species (Table 2)
• The land preparation and planting costs for eucalyptus in Laos is much higher than that of acacia in Vietnam. In fact, this cost for eucalyptus is more than double to that of acacia. This is mainly because of difficult mountainous topography in Laos. Moreover, most of the plantations in Laos are first rotation plantations whereas in Vietnam they could be second/third/fourth rotations plantations. Therefore, the land preparation and plantation costs could be reduced in subsequent rotations. However, being leguminous species, acacia has soil nitrogen and carbon enrichment ability and therefore it has demonstrated the ability to increase production in subsequent rotations compared to the first rotation (Hardiyanto and Nambiar 2014). This may not be the case for eucalyptus species.
• In case of acacia, weeding is done only for three times whereas for eucalyptus it is done for 6 times, surprisingly 2 times in the 6th year. There is a need of research whether weeding is necessary for eucalyptus after the 4th year.
• For eucalyptus, pruning is done for three times whereas for acacia there is no pruning. It is not sure whether pruning is necessary for eucalyptus. Even if it is necessary, without further research we cannot say whether it is profitable or not.
• There is no thinning for acacia but in case of eucalyptus thinning is done at the fourth year and it yielded a net profit of US$53/ha. Here, Vietnam can learn lesson from Laos. In these comparative case studies, plantation densities for eucalyptus and acacia plantations were 1111 and 2000 trees per hectare, respectively. Although, plantation density for acacia was less than that of eucalyptus, acacia yielded net benefits from thinning. Therefore, thinning could be beneficial to acacia plantations, mainly to increase the volume of large size logs.
• Although the MAI for acacia is much lower than that of eucalyptus, NPV for acacia is higher than that of eucalyptus. This is mainly because of lower production costs and higher price of raw logs.
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• If Laos can reduce its costs—especially site preparation and planting costs and weeding and pruning costs—returns from eucalyptus plantations could increase.
Table 3: Key differences between acacia monoculture (6 year rotation) in Quang Tri Province of Vietnam & eucalyptus monoculture (7 year rotations) in Vientiane Province of Laos
Acacia monoculture in Vietnam
Eucalyptus monoculture in Laos
Land preparation & planting cost US$313/ha US$636/ha
Wedding 3 times 1st, 2nd & 3rd yr
6 times 1st, 2nd, 4th, 5th & 6th yr (2 times in 6th yr)
Pruning No 3 times 1st, 3rd & 4th yr
Thinning No 1 time (4th yr, net benefit US$53)
MAI 17.7m3/ha/yr 28.6m3/ha/yr Price (farm gate) US$62/m3 US$49/m3 NPV with 12% discount rate US$1,222 in 6 yr US$1,263/ha in 7 yr
4.3 Comparing financial returns from three models of eucalyptus plantations
The timber yields and stumpage prices for this exercise were very good for eucalyptus which result in a high LEV for three models of plantations. As illustrated in Figure 1, LEV for eucalyptus intercropped with cassava model is just over 25 million Kip, with the IRR of 30%, greater than the 12% discount rate, exceeding the cost of capital, and implying that this agroforestry model is highly profitable and well accepted. Even though LEV for Eucalyptus monoculture is the lowest, its LEV still has a high value (almost 21 million Kip per ha) with IRR of 25%, which is more than 12% discount rate.
Figure 1: Calculation results of LEV & IRRs for three models of eucalyptus plantations
20896 25693 23423
25
30 28
0
5
10
15
20
25
30
0
5,000
10,000
15,000
20,000
25,000
30,000
EucalyptusMonoculture
Eucalyptus withCassava
Eucalyptus with Rice
IRR
(%)
Lan
d ex
pect
atio
n va
lue
(000
LA
K)
LEV IRR (%)
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4.4 Sensitivity Analyses of plantation investment performance with regard to variations in interest rate, yield growth and stumpage prices
Sensitivity analysis plays an important role to systematically test how LEV would change to certain assumptions. Here, we conducted several sensitivity analyses for all three modes of plantations (eucalyptus monoculture, eucalyptus intercropped with rice and eucalyptus intercropped with cassava) to interest rate for different five level of yield growth.
The sensitivity of financial LEV of three models of eucalyptus plantations to the discount rates when MAIs vary from 14 m3 ha-1 year-1 to 40 m3 ha-1 year-1 are reported in Figures 2-4. Figure 2 indicates that a discount rate of 12%, the financial LEV of a eucalyptus monoculture growing at 28.6 m3 per ha per year are calculated at approximately 21 million Kip ha-1 compared to a higher LEV (37 million Kip per ha) when the MAI was increased to 36 m3 ha-1 year-1.
Likewise, a high growth rates tends to bring a higher land expectation value. For instance, as shown in Figure 4, with MAI of 36 m3 ha-1 year-1 and discount rate of 12 %, eucalyptus with cassava investment generates the LEV of almost 42 million Kip ha-1. By contrast, a very slow growth rate of 14 m3 ha-1 year-1 is unlikely to be financially viable (LEV of approximately 7 million Kip ha-1).
It is noticeable that with the lower growth rate of 14 m3 ha-1 year-1, all models of eucalyptus plantation investments are likely to have negative expectation values for all discount rates. For these reasons, it can be concluded that all types of eucalyptus plantations are relatively sensitive to both interest rate for all level of growth rate.
Figure 2: Sensitivity of LEV of eucalyptus monoculture to the discount rate at different MAIs
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Figure 3: Sensitivity of LEV of eucalyptus with rice to the discount rate at different MAIs
Figure 4: Sensitivity of LEV of eucalyptus with cassava to the discount rate at different stumpage prices
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Figures 5-7 show the sensitivity of financial LEV to different discount rates for five level of stumpage prices for three models of eucalyptus plantations. Figure 5 indicates that with a discount rate of 12%, when the stumpage price of eucalyptus increase by 25%, the financial LEV of eucalyptus monoculture growing at 28.6 m3 ha-1 year-1 are about 37 million Kip per ha compared to a higher LEV (over 53 million Kip per ha) when the prices go up by 50%.
Similarly, a higher stumpage prices is likely to raise a higher Land expectation value for all models of eucalyptus plantation. For instance, Figure 5 illustrates that with discount rate of 12% per year, the eucalyptus intercropped with rice witnesses the LEV of almost 40 million Kip when stumpage price increase by 25%. By contrast, a sudden decrease in prices of stumpage by 50% or $US24 per m3, we will have a negative LEV (more than 9 million Kip per ha), which is unlikely to be financially viable.
For all cases, with the lower stumpage prices of US$24 per m3, all models are likely to generate negative expectation value for almost all discount rates. By contrast, higher prices are likely to be financially viable. For these reasons, it can be concluded that all types of eucalyptus plantations are relatively sensitive to variations in prices of stumpages.
Figure 5: Sensitivity of LEV of eucalyptus monoculture to the discount rate at different stumpage prices
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Figure 6: Sensitivity of LEV of eucalyptus with rice to the discount rate at different stumpage prices
Figure 7: Sensitivity of LEV of eucalyptus with cassava to the discount rate at different stumpage prices
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5. CONCLUSION
The main implication of this financial analysis is that three model of eucalyptus plantations are highly profitable due to the fact that the timber yields and the stumpage prices for this exercise are very good for eucalyptus which result in high LEVs for the enterprise.
Though the agroforestry model can give higher LEVs than the monoculture, some barriers for this model should be mentioned here. Initially, both eucalyptus intercropped with rice and with cassava are often labour intensive than the monoculture and thus the plantation owners need to consider the intake of labour and wage. Besides this, the intercropping model needs silviculture and management techniques i.e, pruning, fertilizing, and pest control in order to prevent the production loss. Furthermore, relevant authorities namely District Agriculture and Forestry Office, Commercial Office and the like must provide effective and efficient technical and advisory assistance as this will help the expansion of agroforestry systems.
In some places in Laos, both agroforestry and monoculture are not profitable in Central Laos because of high proportion of site preparation costs & low growth yield. Therefore, if production costs namely site preparation and planting costs and weeding and pruning costs can be minimized like the experiences in Vietnam, financial returns from eucalyptus plantations are likely to increase exponentially.
Future study should be undertaken not only the financial returns of plantation but also the ecosystem services payments which are made to plantation owners in recognition of the positive externality of tree plantations. More importantly, the future study should examine the full impact of plantation development on the regional economy and its development.
ACKNOWLEDGEMENTS
The authors acknowledge constructive and helpful comments from .................................................................
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6. REFERENCES
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An analysis of financial returns for different actors of teak furniture value chain: from growers, traders, sawmill-furniture company in Paklay District, Laos to consumer in Thailand
Tek Narayan Maraseni*, Somvang Phimmavong1, Vongvilay Vongkhamsao2 Geoff
Cockfield* and Hilary Smith3
* University of Southern Queensland (USQ), Toowoomba, Queensland, 4350, Australia 1Faculty of Forest Science, National University of Laos, Vientiane, Lao PDR
2Forest Science Research Centre, National Agriculture and Forestry Research Institute (NAFRI), Vientiane, Lao PDR
3Australian National University (ANU), Canberra, Australia
Abstract
The Government of Lao PDR is developing policies to increase the plantation estate to 500,000 hectares by 2020 and is seeking to generate greater socio-economic benefits through growth in domestic processing. This study aims to analyse the financial returns for one plantation wood value chain: domestically manufactured furniture based on farm grown teak in Paklay District of Xayabuly Province. The data were collected from two groups of growers, two timber traders and an integrated sawmill/furniture company (SFC), all dependent on plantation teak for their business. These data were triangulated with and supplemented by formal and informal interviews with other forest stakeholders in the district and province. Results show that, at current price and costs, the profit per cubic meter of final product for SFC is 7.3 (in better site) to 20.3 (in poor site) times higher than that of growers’ profit and 36.4 times higher than that of traders’ profit. The whole value chain is controlled by the SFC and collaboration and co-innovation between the three actors is a distant dream at current environment. Possible options for: (1) increasing growers and traders’ incomes are discussed; and (2) government interventions to overcome current problems are suggested.
Keywords: teak plantations; growers; traders; sawmill-furniture industry; profit; Lao PDR
1. Introduction
The traditional view of a firm’s competitiveness depends on how effectively and efficiently it can mobilise its internal structures, processes and resources so that it can maximises profit margins (Collins, 2009). This view cannot make consumer value creation the central objective (Stock et al., 2010). Such firms are “supply push” in nature and believe that “they will sell whatever they produce” (Collins et al. 2015). They do not give importance to consumers’ preference and behaviour and therefore do not get good value from their products. Each firm in a chain aims to maximise its profit margins at the expense of other firms or actors in a chain. As a result, they are not efficient nor effective (Mentzer et al., 2001; Mudimigh et al. 2004; Collins, 2009). In response the concept of value chain has emerged in which it is believed that if firms are “demand pull” in nature “they will produce what they can sell” (Collins et al. 2015). The term value chain was first coined by Keith Oliver of Booz Allen Hamilton in 1982 but was described by Michael Porter in his book Competitive Advantage: Creating and Sustaining Superior Performance (Porter, 1985). A value chain is a market-focused and demand driven process and is based on whole-of-chain approach in which all actors work collaboratively to deliver a value-added product resulting in win-win outcomes for all (Adhikari, 2013). Value chain analysis is not a cure to inefficient production. It is a diagnostic tool that assists in the identification of opportunities to improve chain performance (Collins et al., 2015). In general, value chain analysis aims to answer questions related to four dimensions: (1) consumer value (what are the key attributes of the products and services consumers valued most); (2) product flow (what is produced, how is it produced, why it is produced and what are the issues in production system); (3) information flow (how actors shared the information and whether it is timely and efficient or not); and (4) relationships (how interdependent, trustworthy, collaborative and co-innovative are they) (Collins et al. 2015). Consistent with international programs, the Government of Lao PDR has had in place policies to promote the planting of trees and the development of a domestic wood processing sector since the late 19080’s (Smith et al., 2017). The overarching goals of plantation promotion have been for poverty reduction, forest cover restoration and protection and for wood production. From 1990 to 2015, the global planted forest area increased by about 66% (167.5 to 277.9 million hectares) (FAO, 2015), while during the same period, the planted forests area in Lao PDR is increased by 8820% (from 5,000 ha in 1990 to 446,000 ha in 2015), mainly because of exponentially growing foreign direct investment in the tree plantations industry, particularly for rubber, and policies that provided incentives to farmers to plant trees (Phimmavong et al., 2009; Smith et al., 2017). As a result, during the period of 2010-15, Lao PDR had the 7th highest increase in annual total forest area (including both planted and natural forests) in the world, with an annual increase of 1.1% (FAO, 2015). Through its Forestry Strategy 2020, Laos has set a target of increasing its forest cover target to reach 70% by 2020, mainly by enhancing natural regeneration (6 million ha) and plantations (500,000 ha) (Midgley et al., 2012). In order to achieve the plantation target it has implemented several policies such as land allocation to farmers for tree planting by individuals and households with land use rights, land tax exemptions (Smith, Ling and Boer 2017) for registered plantations and the distribution of seedlings at a subsidised price and the provision of concessions and leases for companies,. If the target is realised, the mature plantation resource
could have an annual farm gate value of $197 million at full production and would offer further value through primary and secondary wood processing (Midgley et al., 2011). Currently there are about 446,000 ha of tree plantations, including rubber, but the percentage of forest cover nation-wide is approximately 47% (Earth Systems, 2016; Department of Forestry, 2015). The establishment of new plantations has slowed, largely in response to a moratorium placed on some new land concessions, including for eucalyptus and rubber plantations, in 2013, due in part to concerns about the availability and allocation of land and the benefits to and impacts on local populations. As a result, the combined plantation estate (74,000 ha) held by foreign direct investment companies is well below their target of 133,000 ha (Keenan et al., 2017). Investment in plantations by farmers has also decreased due to land competition for other crops and land sales, and land loss to development activities. Slow progress is being made on enhancing natural regeneration, and while it is anticipated that programs to Reduce Emissions from Deforestation and Degradation (REDD) will increase this, it appears unlikely that Lao PDR will achieve its 70% forest cover target. Major planted tree species in Laos are rubber, eucalyptus/acacia, teak and agarwood, covering 54%, 13%, 10% and 3% of the total planted forests area, respectively (Earth Systems, 2016). Teak (Tectona grandis), the species of our concern, occurs naturally in Northern Lao PDR and planting was first promoted by the French in the 1940s in recognition of its high value but limited and decreasing supply from natural forests; only a small area remains today. Almost all of the teak in plantations has been established by farmers in northern Laos, and is managed for a range of livelihood purposes including for land tenure security, emergency needs, investment and, to a limited extent, for income generation (Newby et al 2014, Smith, Ling and Boer, 2017). These plantations also supply wood to the domestic processing industry and to international markets (Midgley et al. 2006). Recently the Government of Lao PDR has been promoting domestic wood processing and discouraging the export of unprocessed wood through a combination of policies and regulatory measures aimed at increasing the value generated and retained within the country for growers, industry and more broadly through, for example, employment generation. A recent Prime Minister’s Order (no 15/PMO 2016) placed a ban on the export of round-logs and unfinished wood products and improved value chains have been indicated in policies that aims to generate greater shared-benefits to growers, processing companies and the timber industry. This study aims to examine financial returns to three different actors (growers, traders and SFC) of teak furniture value chain in Paklay District of Xayabuly Province, in which consumer is Global House in Thailand. Other issues along the value chain are also identified. Teak is one of the most popular and valuable tree species in the tropical countries (Tanaka et al., 1998). Naturally, it is available in between 9° to 25°30’ North latitude and between 73° and 104° 30’ East longitude, encompassing central and southern part of India, Myanmar, northern part of Thailand and north western part of Laos (MAF, 2001). In Laos, as of 2001 there was 16,000ha of natural teak forests, spread over two provinces, Xayabuly and Bokeo (MAF, 2001). Teak is also widely planted in counties where it naturally occurs and in some other countries such as in Indonesia, Pakistan and Costa Rica (NAFRI and SCC, 2003). Indonesia has the second largest planted teak forests country in the world after India, where vigorously grown teak is measured as high as 45m with a DBH of 111 cm at the age of 85 (NAFRI and SCC, 2003). In Lao PDR, the exact extent of the planted teak resource is unknown; estimates are as high as 50,000 ha although these are likely to be exaggerated. A recent ACIAR study mapped over 15,000 ha in Luang Prabang Provice (Boer and Seneanachak 2016) and in Xayabuly province around 8000 ha are through to have been planted (pers comm PAFO Xayabuly).
2. Methods Taking case study of two group of teak growers from two different sites, two traders and a sawmill-furniture company (SFC) in Paklay District of Xayabuly Province, this study compares the financial returns for these enterprises. During the interviews, all the costs and benefits data for these enterprises was discussed and recorded only after their agreement. These three enterprises are selected because the growers plant teaks and then sell standing trees to these traders who in turn harvest them and sell logs to the SFC and therefore they are part of the same teak furniture value chain. For growers the teak is only one aspect of their household production systems which may also include other agricultural activities and off-farm employment, but other two enterprises only do business of teaks’ products. 2.1 Teak plantation in the study area Although the planting of teak commenced in the 1940, there was more rapid uptake in response to the land forest allocation policies of the 1980s (MAF, 2001). According to the Paklay District Agriculture and Forestry Office (DAFO) there are about 4,000ha of teak plantations in the district and about 80% (3200ha) of these have been established and managed by farmers; the remaining 20% are owned and managed by groups. Assuming each household was allocated 2 ha for plantation, conservatively, there may be over 2000 individual plantation owners in Pak Lay District alone1.
[Figure 1 here]
A warm and moderately humid climate, with a rainfall of 1500-2000 mm/yr and temperature of 12-40°C are ideal conditions for teak plantations (Kolmert, 2001). The mean annual rainfall and temperature in Paklay district are 1421 mm and 25.7°C, respectively. Therefore, climate condition of this Paklay district is well suited for teak. During the 1980’s, based on the Forest Land Allocation Program, individuals and households could be allocated up to 3 ha of land for trees. According to the teak growers, in Xayabuly the government also established a pilot Tree Plantation Group with 20 households. While the selected 20 household received some technical and capacity development support from the government and Care International which was working in the district at the time, however others did not. In this district teak is grown on different sites, but mostly on two major site conditions: (1) well-drained alluvial soil developed by Mekong River. This soil is sandy loam in texture and considered as a relatively better site for teak plantations (hereafter S1); and (2) hilly slopes where soil is not that good but has good drainage system (hereafter S2). This is considered as relatively poor site for teak plantation. Hilly slopes have different type of soils but majority of them are loamy soils, comparatively better for maize production (Luangduangsitthideth & Limnirunkul, 2016). However, these soils are heavily degraded and eroded (Luangduangsitthideth & Limnirunkul, 2016). Both types of sites are considered in this study and therefore the outcome can be applicable in both conditions. These sites do not follow any classical definition of site quality but simply represent common geographical conditions of teak plantations in the district. 1 This is likely to be an underestimate. Work in Luang Prabang province suggests the average area of plantation is less than 1 ha
2.2 Data collection and financial analysis This research is part of a larger research project “Improving policies for forest plantations to balance smallholder, industry and environmental needs in Lao PDR and Vietnam”, funded by the Australian Centre for International Agricultural Research. Fieldwork for this particular component was conducted by the second, third and fifth authors in November 2016 and first and third authors in March 2017. Six growers were interviewed with three each from each site quality S1 and S2. Plantations sites of both groups were close to roads, and ranged in size from 0.5 ha to 2.8 hectare. Their plantations were of different ages, but in order to normalise the calculation, plantation year is assumed as 2007. One of the interviewees from the S2 group was the head of the Tree Plantation Association 25 years ago and has been village leader for over 29 years. Another interviewee from S1 was born in the same village and lived over there for over 46 years. Therefore, they have good knowledge of teak plantations practices in the region. The profitability of teak plantations is calculated based on establishment costs incurred by the independent teak growers, and teak trees are sold at the farm gate. For the S1 group, the sale of standing trees occurred in two time intervals: a harvesting occurs in year 11 or at the age of 11 (i.e. 2017), twenty trees over 70cm girth at breast height (GBH) were sold at the price of US$21.75/tree (total price of US$435/ha). Selling a few trees is typical practice for teak growers who sell their standing teak trees in response to urgent needs such as school fees and weddings (Newby et al 2014). According to the growers, there will be about 730 harvestable size trees above 80cm GBH at the age of 18, which will be sold at a rate of US$25.9/tree total price of US$18,907.9/ha. In S2, all the practices are same but due to poor site, growers believe that trees reach to marketable size little later and are expected to sell at the age of 24 with a total price of US$20,473/ha. There are only two traders in the whole district and both were interviewed as part of this study. They buy logs from within 20km radius from the furniture company. They do not have permanent workers but they have two trustworthy skilled labour whom they always relied upon. Similarly, there are a couple of sawmills but only one is functioning due to wood supply issues from PMO15. We interviewed currently functioning SFC which is owned by a Thai. All the finished products are exported to Global House, Thailand, about 72 km from the SFC. In the beginning, along with the Deputy Director of the SFC the stepwise process and activities of the SFC were actively observed, and timber recovery rates, cost of different resources/inputs and benefits from different products were documented. This information was further verified from the factory registers. All the collected data were triangulated and supplemented by formal and informal interviews with the related staff from DAFO. All costs and benefits were discounted at 12% discount rates because it is an average borrowing rate of the Agriculture Promotion Bank of Paklay district. However, sensitivity analyses were done for different prices, yields and discount rates.
3. Results 3.1 Financial Analysis of teak growers of S1 Table 1 reports costs, incomes, IRR, NPV, and LEV from teak plantation in the S1 group Establishment costs in year one accounted for the highest proportion of the total cost structure and includes activities such as site clearance, firebreak, clearing the burned waste, lining/marking, purchase of basic equipment and seedlings, seedlings transportation costs, digging and planting which is the total of US$550/ha. Maintenance costs in year two involves: intensive weeding, establishing fire breaks, purchase of seedlings and seedlings transportation cost, digging, and re-planting. Other costs consist of payment for labour and land tax. The farmer must pay for land tax (approximately US$3 per hectare) from year 1 to year 3 before the plantation is eligible for registration (Smith 2014). Farmers may register their plantation, the fee for which was reported as US$56.8/ha, although this varies widely. Once registered the plantation is exempt from land tax. Registration is a legal requirement for farmers who wish to sell their trees, however the cost of registration is a deterrent (Smith, Ling and Boer, 2017). In our case, both groups of growers registered their plantations at the age of five. As mentioned earlier, at the age of 11, twenty trees were sold at the price of US$21.75/trees (total price of US$435/ha) and at the end of rotation 730 harvestable-sized trees have been left for sale at the plantation site, which would result in a gross revenue of about US$18,908/ha, with an average price of US$25.9/tree.
The analysis found that the calculated financial NPV is US$1659/ha with IRR of 20%, much higher than the 12% discount rate. This implies that teak plantation’s business is profitable. The land expectation value is calculated at US$1907/ha.
[Table 1 here]
3.2 Financial Analysis of Teak growers of S2 Table 2 shows the revenues and cost for growers’ teak plantations which are based on one hectare with 24 year-rotation age. The result of the analysis on IRR, NPV, and LEV from this teak plantation was also illustrated in Table 2. While costs structure of S1 and S2 look similar, the main differences are: (1) cost of fire breaks, cleaning burned waste and weeding, which is higher in S1 than that of S2; (2) seeding mortality rate in S1 is 15% and in S2 it is 20%; and (3) the final harvesting age (average trees >80cm BHG) for S1 is 18 year whereas in S2 it is 24 years. In S1, at the end of rotation, about 760 trees remain, which, if sold could be expected to return a gross revenue of US$20,473/ha. The analysis reveals that the calculated financial NPV is $608/ha with IRR of 15%, which is greater than the 12% discount rate. This implies that growers are marginally profitable. The land expectation value is calculated at $650/ha.
[Table 2 here]
3.3 Financial returns for teak traders Table 3 shows the estimated costs and profit for teak traders. Analysis is normalised on the assumption that on average, one hectare of forest is harvested at a time and average number of merchantable trees is 760. Price of logs over 80 cm breast height girth (BHG), close to roads is approximately $25/m3 or $18,765/ha, accounting for the highest proportion of the total cost structure (80.7%), followed by the cost of transportation to second log yard (close to sawmill), approximately $2307/ha (11.8%). The total cost of paperwork for harvesting and transportation (US$1725/ha) contributes 7.42% of the total cost.
[Table 3 and 4 here] The traders sell logs by their size. The proportion of different sized logs without bark and their factory gate selling price is given in Table 4. According to the teak volume table prepared by Paklay DAFO, a teak tree over 80cm BHG is 0.295m3 with bark and 25% of the volume is bark. Therefore, the total volume of 760 teak trees without bark is about 168.15m3/ha. The total cost for teak traders is estimated at approximately US$23,241/ha while the total income from selling the log at the mill gate is US$24,026/ha. Subtracting total revenue from total costs, the traders can obtain the profit of US$785 per ha or 3.4 % in return. The average profit per cubic meter of the final product is almost US$5. This implies that trading is marginally profitable. 3.4 Financial returns for sawmill/furniture company (SFC) Figure 2 shows the yearly cost structure for producing different types of final products for the SFC in Paklay district. All logs in the sawmill are from plantation teak bought from the same two traders. The total volume of raw logs without bark bought by the furniture company was 500 m3 per year with the total price of US$71,443 per year (the proportion of different size of logs and their prices are given in Table 4). This cost accounted for the highest proportion of the total cost structure (34%) while labour costs including management are the second highest cost (31%). The electricity costs roughly US$37,037 per year which is the third highest proportion (17%) while depreciation cost stands at US$17,728 annually (8%). The total cost of spent by this company is estimated at about US$213,420 per year. Due to the close distance of the market which is border of Paklay District (Global House, Thailand), the company spends US$4569 annually for the transportation cost (about 2% of the total cost) which is similar to the cost of business tax (US$5081/m3).
[Figure 2 here] The sawmill-furniture company produces six products: ceiling, timber for mound, window frame, wall fan frame, wood floor and parquet, almost in an equal proportion. Figure 3 reports the incomes and their profits for each cubit meter of six products. Both ceiling and timber for mound have received the highest profit (US$316/m3, each). By contrast, both wood floor and parquet received the lowest profit (about US$45/m3, each). Average profit from each cubic meter of final products is about US$171.
[Figure 3 here]
3.5 Sensitivity analysis 3.5.1 Sensitivity analyses of growers’ teak plantation investment performance with regard to variations in interest rate, yield growth and stumpage prices Sensitivity analyses have been performed to examine how LEV would response to certain assumptions namely changes in interest rate, the number of remaining trees over threshold size and stumpage prices. For these analyses, in business as usual (BAU) conditions, in S1, about 730 trees/ha above 80cm GBH will remain for harvesting at the age of 18 (the end of the rotation) while in S2, there will be about 760 trees/ha above 80cm GBH at the age of 24 (the end of rotation). As noted, for the stumpage prices, this paper refers to the future prices per tree. Figures 4-5 shows the sensitivity of financial LEV of growers’ teak plantations to the discount rates of 12% for the S1 and S2 when the number of remaining trees over threshold size varies. For the S1 (Figure 4), the financial LEV of a teak plantation with the number of trees over threshold size increasing by 25% (913 trees/ha) are calculated at roughly US$2614/ha compared to a higher LEV (US$3321/ha) when the number of trees was increased by 50% (1049 trees/ha) at the end of the rotation. Similarly, Figure 5 witnesses a higher LEV when the number of trees over threshold size of S2 was increased from the BAU scenarios. For instance, when the number of trees over threshold size was increased to 912/ha and discount rate of 12%, growers’ teak plantation are calculated to bring the LEV of US$939/ha. By contrast, a decrease in the number of trees over threshold size to 456 trees/ha is unlikely to be financially viable (-US$80/ha) when the discount rate is 13%. It is noticeable that with interest rates which are lower or equal to 10% a year for S1 and 14% a year for S2, the teak plantations are likely to have positive LEVs for all yield changes and vice versa. For these reasons, it can be concluded that teak plantations for both sites are relatively sensitive to both interest rates for all level of number of trees over threshold size per ha.
[Figure 4 and 5 here] Figures 6-7 show the sensitivity of financial LEV to different discount rates for five level of stumpage prices for two teak plantations sites. Figure 6 (S1) illustrates that with a discount rate of 12%/yr, when the stumpage price of teak increase by 25%, the financial LEV of teak plantation are also estimated to be around $US 2,614/ha compared to a higher LEV ($US 3,321/ha) when the prices go up by 50%. Similarly, a higher stumpage price is likely to raise a higher LEV for teak plantation investment. For instance, Figure 7 representing the S2 illustrates that with discount rate of 12%/yr, the teak plantation witnesses the LEV of $1011/ha when stumpage price increase by 25%. By contrast, a sudden decrease in prices of stumpage by 50% witnesses a negative LEV (-$72 per ha), which is unlikely to be financially viable. For both sites, with interest rate higher than 23% a year for S1 and 18% a year for S2, all plantation are likely to generate negative expectation values for almost all yield growth. For
these reasons, it can be concluded that both sites of teak plantations are relatively sensitive to variations in prices of stumpages.
[Figure 6 and 7 here] 3.5.2 Sensitivity analyses of return rate for teak traders (trader) with regard to variations in yield growth and stumpage prices As noted, traders buy standing trees over threshold size. If there are higher proportion of large-sized trees, logs volume may increase and so is their profitability. Figure 8 illustrates the sensitivity of profits for traders’ teak log trading to different log volumes which varies between -50 % and +50%. The analysis reveals that with the total yield of 224m3/ha, the profit of teak log trading is calculated at roughly $785/ha or 3.4% in return compared to a higher return (43% in return or the profit of US$10,815/ha) when the total volume of the log was increased by 50% (336m3/ha). On the other hand, a decrease in yield growth is likely to bring a lower profit or rate of return. For example, with total volume was decreased by 25% (to 168 m3/ha), traders’ teak log trading profit is negative (-US$4,229/ha). To sum up, teak log trading by the traders are relatively sensitive to all levels of log volume.
[Figure 8 here] Figure 9 reports the sensitivity of profit for the traders’ teak log trading to different selling prices of logs. As can be seen from Figure 9, with optimistic prices of log increasing by 25%, the profit on teak log trading are calculated at US$6792/ha compared to a higher profit of $US12,798/ha) when the price of the logs was increased by 50%. On the other hand, a decrease in log prices is likely to cause a lower profit. For example, when prices were by 50%, traders’ teak log trading profit are negative value (-US$11,228 per ha). For these reasons, we could conclude that, teak log trading by the traders are relatively sensitive to variations in prices of log.
[Figure 9 here] 3.5.3 Sensitivity analyses of profit per m3 of final products for sawmill-furniture company (SFC) with regard to variations in prices of logs Figure 10 displays the sensitivity of profit per m3 of final products for the SFC to different prices of logs. From Figure 10, it is shown that with higher prices of log increasing by 25%, the average profit of the final product is calculated at $120 per m3 compared to a lower profit of US$69 per m3 when the price of the logs was increased by 50%. On the other hand, a decrease in log prices is likely to cause a higher profit of the final products. For example, when prices were decreased by 50%, sawmill furniture company receives a higher profit (US$273 per m3 of final products). For these reasons, we could conclude that profit of final products is relatively sensitive to variations in price of logs.
[Figure 10 here]
4. Discussions Growers’ net benefits are calculated for year 2007 (plantation year) and traders and SFC’s returns are calculated for year 2017. The value of KIP for the year 2017 is not likely to be the same as that of year 2007. To make farmer’s returns comparable with the traders and sawmill owners’ returns, the net benefits of the growers is compounded to the year 2017. Analysis of all the data reveals that the profit per cubic meter (m3) of final product for farmers ranged from US$8.4 in poor site (S2) to US$23.3 in better site (S1) whereas for traders and sawmill-furniture company (SFC) these values are US$4.7 and US$171, respectively. If the volume of teak logs decreased by 25% or the selling price of logs decreased by 25%, the profit per m3 of final product for traders would be negative. Even if the volume of teak logs is increased by 25% or the selling price of logs is increased by 25%, the profit per m3 of final products for traders (US$33/m3 or US$40/m3) will be much lower than that of SFC (US$171). Even if the buying price of logs is increased by 50%, the average profit per m3 of final products for the SFC is still higher (US$69/m3) than that of traders and farmers. For the whole business, on average, the traders and SFC buy large amount of logs (about 500m3) every year. Most farmers are growers, with an average size of one ha per household, and therefore may produce about 224 m3 of logs in entire rotation length of 18-24 years. Therefore, as a whole, the sawmill enterprise is far better off than traders’ enterprise and which in turn is better off than farmers’ enterprise. Following sections discussed how farmers and traders’ income can be increased. 4.1 How farmer’s returns can be increased Both the traders and the SFC reported that the teak logs from Paklay district are of poor quality, compared to the logs from Luang Prabang Province. Therefore, the price of teak trees/logs is low. Poor seedling quality, site selection and lack of plantation management are likely contributing factors. The provision of quality seeds and seedlings was policy mechanism to promote plantations. DAFO was supposed to do this as a technical extension exercise but it has not been supported by further/ongoing funding. DAFO has a teak nursery. In order to maintain it, they have to make money. They are cost prohibitive and therefore the quality of seeds and germplasm is of not high standards. They buy seeds from one seed collector at a nominal price of 10,000 KIP/kg. Because of lower price, a seed collector may collect seeds from the floor of teak forests without considering the phenotypic characters of the mother trees as they are not supervised by an expert. Collection of inferior quality of teak seeds also observed in other parts of Laos (Hansen et al., 1997). Therefore, if the government is serious on good returns for farmers from teak plantations, they need some interventions here. Propagation of seedlings from phenotypically and genotypically superior trees may increase both the volume and quality of logs. A research by Hedegart (1995) shows that even a collection of seeds from superior trees without knowing genetic attributes may increase teak logs volume by 10-15%. Logs volume can be further amplified by using improved quality teak germplasm by cuttings or tissue culture (Dieters, 2014). Another way of increasing farmers return is through improved management. Currently, farmers do not do thinning for several reasons: (1) there is no market for the products from thinning; (2) thinnings products are not identified or defined as a forest product. Poles are recognised as a forest product if they are from harvesting activities, only with permission from the Government (Forestry Law Art 43). It is not clear whether the same harvesting approvals that apply to the harvesting of logs (which are specified in Art 2.4.1) also apply to thinnings (Smith, 2014). (3) if thinnings are of a commercial quality or volume they are subject to tax (Art 2.4.3)
(Smith, 2014); (4) plantation registration requires a minimum stocking number; (5) farmer view each tree of being of potential equal value regardless of size and quality (ACIAR 2017).Improved awareness about the benefits of thinning, refining of regulations with respect to harvesting and definitions of forest products, tax exemptions for small volumes and market development are all needed. For long rotation plantations, like teak, thinning is a necessary silvicultural practice as it reduces competition for sunlight and soil nutrients and assists plants in managing leaf water stress during the dry season (Huong et al., 2016). As a result, the remaining trees grow well. Research on teak in Luang Prabang Province of Lao PDR shows relatively small differences in the total productivity of thinned compared to un-thinned plots, but the volume increment in the thinned stands is accrued on fewer, larger diameter trees of higher value (Dieters, 2014). Therefore, in terms of farmer’s returns, thinned stands are far better than unthinned stands. In the case of teak, a better response to thinning—in terms of girth increments—is achieved for stands lower than 10 year of age than that of older age stands (10-16 years stands). In order to maximise the returns, Dieters (2014) suggest that the thinning should be done as early as 5-6 years after plantations and total stems after thinning/removing small and poorly formed trees should be around 600/ha. However, thinning may require skilled manager (Hardwood and Nambier, 2016) and a thinned stands may be more vulnerable to wind damage and fungal diseases (Nambier et al., 2014; Thu et al. 2014). In case of our study area, there were no reported issues of wind damage or fungal disease but farmers need training on timing and process of thinning. Elsewhere in the world teak logs are sold in the market by its size and its grade (Midgley et al., 2015). Price of logs also depends on its origin and proportion of heartwood to the sapwood. Teak logs from natural forest attract much higher price than that of planted forests, and within the planted forest, logs from longer rotation plantation attract higher prices than that of shorter rotation planation (Kollert, 2013). The physical and mechanical properties of teak plantation wood are not significantly different between different age groups of 10, 15, 20, and 25 years and therefore teak wood from younger plantations can also be used for furniture production and household construction (Ozarska et al. 2012). Therefore, the higher price for natural teak logs and longer rotation plantation logs is probably due to their higher proportions of heart-wood (Kollert, 2013). In general, the colour of teak wood from forests on wetter sites is darker than that of from drier sites (Kaosa-ard, 1998). Therefore, the teak logs from S1 could have better quality than that of S2. However, the DAFO staff believe that teak grown on fast growing Mekong riverside area (S1) could have lower strength compared to slower-growing hilly/sloppy area (S2). Currently teak logs are not sold on the basis of quality/grade; the development of a log grading guideline, linked to plantation management recommendations, would assist farmer’s in better understanding the value of their trees and enhance their negotiating position with respect to price. As noted, teak growers of Paklay district sell standing trees and they receive lower prices than those of teak growers in other parts of the world. For example, average domestic market price of small size teak logs at the log yards for Africa, Latin America and Asia are US$124/m3, US$129/m3 and US$149/m3, respectively (Kollert 2013). Prices for medium and large sized logs are over 1.5 and 2 times those of small sized logs. In Paklay district, farmers rarely receive a price of US$84/m3 of teak log. Although the harvesting costs are not included in this price as they are carried by traders, the price received by Paklay farmers is much lower than that of Asian average price (medium size price of US$282/m3). The practice of buying logs by the number of trees above threshold size is also not encouraging for production of quality logs and
which would have huge benefits along the value chain. If international practices of selling logs by its grade is followed, farmers will follow standard practice which may ultimately encourage them for innovation. As noted, in this district, about 25 years ago, government distributed two hectares of land for each household with the conditions of planting trees. Farmers planted trees to secure land use rights, not to grown wood for industry. Teak has served its purpose and now they would prefer to plant crops with higher, regular returns. Government policy for establishing plantations was effective but it was not supported by strong policies for market development. The government will need to provide new policy measures that motivate farers to manage their plantations and harvest their trees in way that meets the needs of the market but which does not negatively impact the long-term livelihood strategies of the farmers. Providing marketing information and technical support could be instrumental. 4.2 How traders’ returns can be increased The general hypothesis among the forest stakeholders including farmers is that the traders are rent seeking actors who receive large returns from their trading by taking advantage of growers’ growers’ limited access to markets and market information (Perdana and Roshetko, 2015; Antilla, 2016). However, this study suggests that this is not the case because: (1) traders act on behalf of farmers undertaking time consuming activities to meet the complex and costly regulations associated with timber harvesting; (2) they bear some un-official cost in connection to getting permission for harvesting and transportation of logs. Traders have very good relationships with both the downstream (sawmill) and upstream (farmers) value chain actors, along with the provincial and district government offices; and (3) they are, in fact, not deriving significant returns, which is lower than that of sawmill owner. The trader provides important linkages between the sawmill owner and the thousands of individual plantation growers thereby reducing transaction costs. Therefore, at current regulatory and marketing environment, traders are a necessary part of value chain. Similar conclusions were drawn by Antilla (2016) from a study in Northern Laos and Perdana and Roshetko (2015) from a study in Indonesia. Perdana and Roshetko (2015) suggest that the traders consistently search the marketplace to link the suppliers and demanders and minimise and facilitate the number of contacts in the marketing system. Given the current low return environment, the two traders we interviewed were not interested to continue their trade but they have an informal agreement with sawmill owner and therefore they are likely to continue for some years. Now a pertinent question is how the return for traders can be increased so that they can continue to act within the teak value chain system. Farmers are already getting lower price for their logs compared to the farmers in other parts of the world (Midgley et al., 2015) and without significant advancement in technology harvesting and transportation costs cannot be reduced. Therefore, these costs for traders are hard to reduce. However, if the government eliminates, or at least simplifies its paperwork, traders could be more competitive value chain actor, as this cost shares over 38.5% of the total cost except the trees buying costs. However, we can argue that if the government does this, the need for traders may be eliminated because famers could do the paperwork themselves. Navigating the paperwork is a key function of the trader in the eyes of the farmer.
4.3 Communication and relationship between the chain actors There are four ingredients of an effective and ideal value chain system: (1) strategic alignment so that all actors in a chain are pulling in the same consumer direction; (2) efficient and timely flow of information; (3) relationship integrity so that they are interdependent and their trust and commitment are of a high level; and (4) consumer insight so that they can achieve competitive advantage (Fearne, 2009). However, in this whole value chain system, there are many growers, only two traders and one SFC. There is no any farmers association and they are not receiving any support from government. Whole information is controlled by the Thai owner, even the deputy director of the SFC do not know many marketing information. The owner takes order from Global House, Thailand and ask SFC workers to make the same. There is no any communication, relationships and strategic alignment between the SFC, traders and farmers. Therefore, there is no chance of any collaboration and co-innovation from current teak value chain. Building partnership and sharing information between the value chain actors would be mutually beneficial to all actors.
5. Conclusions The Forestry Strategy 2020 in Laos aims to increase the plantation area to 500,000 ha by 2020. In order to achieve this target, they have implemented several policies such as allocation or lease of land for tree planting, property rights on planted trees, land tax exemption for registered plantations and distribution of seedlings in a subsidised price. It is however not clear whether the growers, traders and processors are getting appropriate shares of their investments and are encouraged for timber industry development. Undertaking case studies of one of the most popular plantation species (teak), we compared the financial returns for these three actors of teak furniture value chain in which growers, traders and sawmill-furniture company (SFC) are from Paklay District, Laos and consumer is Global House in Thailand. All three actors are enjoying positive returns from their investment. However, the returns for SFC is much higher than that of two other actors. The profit per cubic meter of final product for farmers ranged from US$ 8.4 in poor site (S1) to US$23.3 in better site (S2) whereas for traders and sawmill-furniture company (SFC) these values are US$4.7 and US$171, respectively. The SFC’s per unit profit is 7.3 (in S1) to 20.3 (in S2) times higher than that of farmers’ per unit profit and 36.4 times higher than that of traders’ per unit profit. This is not fair for the farmers as their profits are for the whole rotation (18-24 years) whereas for traders and SFC it is the returns of a single year. Moreover, compared to the growers, the traders and SFC buy large amount of logs (about 500m3) per year. Therefore the sawmill enterprise is far better off than traders’ enterprise which in turn is better off than farmers’ enterprise. There is no strategic alignment between these three actors. Whole information is controlled by SFC. All three firms are short-sighted and working for short-term gain. Farmers are not interested for second rotation plantations and planning to switch-off their business towards high demand tropical fruits crops. Traders are tired with hectic paperwork which shares over 38% of the total harvesting and transportation cost. They are currently hanging to the business just to keep their words to SFC but are planning to exit at any time. The SFC is trying to get as much profit as possible, without thinking long-term prospects, as they know that the supply of teak logs is dwindling and can be exhausted at any time. Therefore, trust, collaboration and co-innovation between the three actors are matter of distant dreams for this value chain.
If government is serious to improve current situation, an immediate intervention is necessary in several areas: (1) produce teak seedlings from elite mother trees (short-term) and improve germplasm by cuttings or tissue culture (medium-term) and supply them to growers; (2) train farmers and encourage them to do thinning between 5-6 years after plantations; (3) rather than using current practice of selling standing trees, develop provision of selling logs by its quality/grade; (4) create farmers association and equip them with market information; (5) eliminate or at least simplify current harvesting and transportation rules and regulations; and (6) create conducive environment for more traders and SFC to enter into the market as currently there is a monopoly of only one SFC and two traders in the whole district. References Antilla, J. P., 2016. Implications of traders in smallholder teak production systems in Lao
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Contents lists available at ScienceDirect
Ecosystem Services
journal homepage: www.elsevier.com/locate/ecoser
A proposed framework for assessing ecosystem goods and services fromplanted forests
Himlal Barala,c,⁎, Manuel R. Guariguatab, Rodney J. Keenanc
a Centre for International Forestry Research (CIFOR), Bogor, Indonesiab Centre for International Forestry Research (CIFOR), Lima, Peruc Department of Forest and Ecosystem Science, University of Melbourne, Parkville, Victoria 3010, Australia
A R T I C L E I N F O
Keywords:Planted forestsEcosystem servicesEcosystem service assessmentCarbonBiodiversity
A B S T R A C T
The planting of forests has been met with both scepticism and support in international forest policy andmanagement fora. Discussions regarding the values of plantations for extrinsic purposes such as timber supply,carbon sequestration, water quality and biodiversity conservation, reveal widely varying opinions across andwithin different settings. Recent research highlights the role of planted forests in providing multiple ecosystemservices to human society. However, there has been little assessment of ecosystems services, partly due to lack ofsuitable frameworks and evaluation tools. Planted forests generally have low ecosystem services values initiallyand are more vulnerable to erosion and other impacts of mismanagement than natural forests. Carefulmonitoring of change in ecosystem services values over time is therefore vital to investors and all stakeholders inplantations. Drawing on lessons derived from ecosystem services assessment for various land use types, here wepropose an easy-to-apply framework to assess ecosystem services from planted forests that could be used invarious planted forest types around the world. A necessary next step for researchers and practitioners is to testthe proposed framework under various settings.
1. Introduction
Planted forests are becoming an increasingly important part of theglobal forest estate. Commercial timber supplies from natural forestsseem to have peaked (Warman, 2014) while supplies from plantedforests are increasing (Boucher and Elias, 2014; Warman, 2014) andwill have to increase further to meet future global timber supply needs(Payn et al., 2015). In fact, planted forests were estimated in 2010 tocover 278 million ha globally and are expanding, while the area ofnatural forests continues to decline (Keenan et al., 2015). Plantedforests are expected to play a key role in achieving recently adopted,global restoration targets such as the Bonn Challenge (to restore 150million ha of degraded and deforested land by 2020) and the New YorkDeclaration on Forests as well as the objectives of Article 5 of the ParisClimate Change Agreement. As a whole, planted forests have thepotential to provide a wide array of goods, services, ecological functionsas well as direct benefits to society and the environment. The Food andAgriculture Organization of the United Nations defines planted forestsas those ‘composed of trees established through planting or seeding byhuman intervention’ (FAO, 2014). Although there is evidence ofconversion of natural-to-planted forests in the tropics and subtropics
(e.g., Ainembabazi and Angelsen, 2014; Zamorano-Elgueta et al.,2015), loss of natural forest in these two biomes is primarily drivenby agricultural expansion (FAO, 2016).
Forest ecosystem services (ES) include timber and non-timberforest products (provisioning services) and regulating, habitat orsupporting services and cultural services (TEEB, 2010). Plantedforests, either for productive or protective purposes, also have thepotential to mitigate land degradation (e.g. Stanturf et al., 2014).Demand for regulating services such as carbon sequestration and waterregulation, and for cultural services such as recreation and spiritualvalues, are expected to rise because of both increasing global popula-tion and rising standards of living (FAO, 2010; Miura et al., 2015).Therefore, the role of planted forests as ES providers has attractedincreasing attention (Brockerhoff et al., 2008, 2013; Bauhus et al.,2010; Yao et al., 2014; Vihervaara et al., 2012, Barua et al., 2014).Although the potential to enhance the ecosystem values of plantedforests has been recognised for some time (Keenan et al., 1999),Lindenmayer et al. (2015) returned to this topic more recently. Yetthere is still a need for developing tools and assessment frameworks toguide informed decision making. Vihervaara et al. (2012) providesimportant insights into stakeholder perceptions of ES from planted
http://dx.doi.org/10.1016/j.ecoser.2016.10.002Received 1 December 2015; Received in revised form 14 September 2016; Accepted 5 October 2016
⁎ Corresponding author.E-mail addresses: [email protected] (H. Baral), [email protected] (M.R. Guariguata), [email protected] (R.J. Keenan).
Ecosystem Services #vol# (xxxx) xxxx–xxxx
2212-0416/ © 2016 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/).Available online xxxx
Please cite this article as: Baral, H., Ecosystem Services (2016), http://dx.doi.org/10.1016/j.ecoser.2016.10.002
forest (but it has been criticized for inadequate research design;Paruelo, 2012). Brockerhoff et al. (2013) review biodiversity-depen-dent ecosystem services and associated management options. Severalother papers outline various aspects of ES associated with plantedforests such as climate change adaptation (Ray et al., 2014), waterconservation (Van Dijk and Keenan, 2007; Keenan and Van Dijk, 2010; Ferraz et al., 2013) and prioritisation of ES for conservation efforts(Moore, 2013). To our knowledge, a robust framework for assessing ESfrom planted forests is lacking. This paper aims to fill this gap.
Assessment of ES from planted forests can serve many purposes,including: (i) raising clarity and awareness of the relative importance ofplanted forests to policy makers, investors, environmental NGOs andlocal communities, (ii) improving the efficient use of limited funds byidentifying where planted forests can achieve greatest benefits at lowestcost, (iii) supporting new opportunities to link planted forests withmarkets for ecosystem services, (iv) providing guidance for decisionmakers in understanding user preferences and the relative value thatpeople place on ecosystem services, (v) generating information fordesigning planted forests so as to maximize their contribution to localcommunities, broader society and the global environment, and (vi)informing land use planning. In the approach outlined here, the valuesascribed to various ES is determined by the beneficiaries of theparticular ES, which range from local to national and global markets(Baral et al., 2013).
Here we review current approaches for identifying and assessing ESfrom various types of planted forests and propose a simple andpragmatic framework for assessing ES, applicable to any type ofplanted forests. To this end, we first review existing typologies ofplanted forests. Second, we re-visit classification systems and ap-proaches used to assess ES and show their relevance to planted forests.Third, we construct a matrix where different types of planted forestsare linked to specific ES. Finally, we propose an approach to assess ESfrom planted forests that is generalizable to a wide range of settings.
2. Planted forests – typologies and associated ecosystemservices
A wide range of objectives, definitions, associated typologies andclassifications for planted forests exist in the literature (Sohngen andSedjo, 1999; Helms, 1998; Ingles et al., 2002; Evans, 2009; Batra andPirard, 2015). Objectives are mainly based on (i) purpose, such asindustrial use, environmental, agroforestry, farm forestry; (ii) specieschoice, such as monoculture or mixed species, hardwood or softwood,native or exotic species; (iii) management objectives such as productionor environmental protection; (iv) rotation length – short ( < 10 yrs),medium (10 – 20 yrs), long ( > 20 yrs); (v) end use – e.g. timber, non-timber products, pulp, bioenergy; (vi) intensity of management –
intensive or extensively managed; (vii) scale of operation – large andcontiguous or small and fragmented; (viii) ownership – company,communal, share farming, out growers. A broad classification ofnatural, semi natural and planted forests is commonly used to reflectthe different capacity of various planted forests to supply ecosystemservices (Fig. 1). It is important to note that planted forests generallydiffer from natural forests in species diversity, regeneration character-istics, ecosystem functioning and associated ecosystem services provi-sion – especially in their early stages of establishment. However, insome cases, the number and types of ecosystem services from plantedforest may be similar to those of natural forests – especially later intheir establishment. A summary list of ecosystem services from plantedforests is shown in Table 1.
The magnitude (or value) of ecosystem services provided by varioustypes of planted forests may differ (see De Groot et al., 2010). Forexample, a plantation estate of exotic monoculture managed on a shortrotation basis may ultimately provide high fibre supply but is likely toprovide lower regulating and cultural services than a long rotationestate (Pirard et al., 2016) or than a mixed species or native tree
plantation (Felton et al., 2016). The human beneficiaries of provision-ing, regulating and cultural services can also differ (Fig. 2).
3. Revisiting the concepts – defining and classifying ES
Ecosystem services have been defined and classified in many waysand the ongoing debate about the implications of these classificationsfor assessment and valuation is well covered in the literature (MEA,2005; Boyd and Banzhaf, 2007; Costanza, 2008; Fisher et al., 2009;Haines-Young and Potschin, 2009; Patterson and Coelheo, 2009; Baralet al., 2014). For our purposes, we use the definition and classificationproposed by The Economics of Ecosystems and Biodiversity (TEEB),which defines ES as, ‘the direct and indirect contributions of ecosys-tems to human well-being’ (TEEB, 2010). TEEB classification replacedthe ‘supporting services’ in the Millennium Ecosystem Assessment(MEA) with ‘habitat and supporting’ services, which helps to preventdouble counting in ecosystem services audits. Other influential defini-tions and classifications frequently cited in environmental literature arelisted in Appendix A. We use the TEEB classification as it has beenmuch refined and shown to have great utility since the originalclassification of the MEA.
4. Recent trends in assessing ES
To manage planted forests for multiple ES we must be able torecognize, quantify and value the full suite of services they provide. Inthe case of planted forests, this assessment process must start at orbefore establishment and continue through various stages of plantationdevelopment – so investors can keep track of their investment andforesters can adapt rapidly to changes in management needs. Since thepublication of the Millennium Ecosystem Assessment (MEA, 2005)there has been rapid growth in the science of assessing ES and itsapplication in land use planning (Nelson et al., 2009; Tallis andPolasky, 2009; Braat and de Groot, 2012; Crossman et al., 2012;Goldstein et al., 2012). Numerous global, national and sub-nationalinitiatives on ES assessments are underway to make the concept of ESoperational and linked to policy (UKNEA, 2011; IPBES, 2014;Ruckelshaus et al., 2013). A brief summary of these initiatives andassociated outcomes is outlined in Table 3. Similarly, internationalNGOs, international donor organizations, and international financialinstitutions are involved in promoting ES assessments to link policyand decisions associated to ES (Perrings et al., 2010; World Bank,2015). Recently, the President of the United States of America issued amemorandum requiring all Federal agencies to incorporate ecosystemservices into Federal planning and decision making (White House,2015). Moreover, business and private sector organizations are in-volved in assessing and valuing ecosystem services which they oftenrefer to as ‘natural capital’ (BSR, 2014; WBCSD, 2014). In spite of thegrowing awareness and progress towards ES assessment, there are stilldifficulties in applying ES assessment to policy and decision making forinvestment (Knight et al., 2008; Laurans et al., 2013; MacDonald et al.,2014). This is mainly due to the wide diversity of approaches, unclearterminology that causes misunderstanding among non-specialists, lackof consensus about benefit of an ES approach for land use planning andconservation, high cost of implementation (Polasky et al., 2014) andtoo theoretical (Lele et al., 2013; Bull et al., 2016). The frameworkproposed here is intended to enhance communication and awarenessand local stakeholder engagement, as well as sound information toinvestors.
5. Methods and tools for assessing and monitoring ES
Maintaining and enhancing the ES available from planted forestsrequires thorough assessment and documentation. Each particular EScan be assessed at different spatial and temporal scales in relation totheir potential supply, demand and consumption, and using a range of
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indicators or metrics. This process usually involves two approaches, (i)qualitative assessment using expert or user opinion of the potentialflow or capacity in relative terms such as increasing, stable anddecreasing (Burkhard et al., 2012; Baral et al., 2014; Paudyal et al.,2015; van Oort et al., 2015; Zarandian et al., 2016), and (ii)quantitative assessments that require measurement of field-basedbiophysical outcomes, local and regional proxies, or their combinationsuch as tonnes of C per ha or ML of water per ha (Nelson et al., 2009;Raudsepp-Hearne et al., 2010; Egoh et al., 2011; also see Appendix Bfor summary of recent studies on qualitative and quantitative assess-ment of ES) that are linked to societal benefits. The assessed valuesfrom both approaches are often transferred into a “GIS environment”and displayed in ES “flow maps” to produce spatially explicit resultsand analyse trade-offs and synergies in the provision of multiple ES(Baral et al., 2014). An alternative approach, monetary valuation, isbecoming a popular ES assessment tool that can facilitate commu-nicating the importance of ES to policy makers (Hayha et al., 2015).However, economic evaluation is also a part of quantitative assess-ments and so a separate categorisation may not be required.Qualitative assessments provide valuable insights from informationnot necessarily obvious from quantitative data, but can be subjectiveand error-prone and contingent on the knowledge and experience ofthe expert in a particular landscape (Baral et al., 2014; Paudyal et al.,2015). Quantitative assessments may be more reliable but usuallyrequire considerable financial and human resources. Qualitativeassessments are useful for preliminary planning and understandingbroad trends but quantitative assessments may be required for detailedplanning, policy formulation and payment for ecosystem servicesmechanisms.
A number of tools have been developed for assessing multiple ESand display on maps, such as Integrated Valuation of EcosystemServices and Trade-offs (InVEST, Tallis et al., 2014), the Multi-scaleIntegrated Models of Ecosystem Services (MIMES, Boumans andCostanza, 2008), Artificial Intelligence for Ecosystem Services(ARIES; Villa et al., 2009), Social Value of Ecosystems Services(SoLVES, Sherrouse et al., 2011) and the Toolkit for EcosystemService Site-Based Assessment (TESSA, Birch et al., 2014). These toolsrequire qualitative and/or quantitative information about sink or flowof ES and often represented in maps. Detailed description of each tooland its associated strengths and limitations is beyond the scope of thispaper. Bagstad et al. (2013) provide an overview of 17 popular ESassessment tools and evaluate their performance using eight criteriasuch as intended uses, services modelled, analytical approaches, datarequirements and outputs, as well time requirements. The authorsfound that, (i) tools differed greatly in their performance against theevaluative criteria, (ii) a number of tools are feasible for immediate
widespread use while other require development of supporting data-bases and, (iii) some complementarity exists as certain tools could beused together. The approaches and tools associated with ES assessmentat a landscape scale can be useful in the sphere of planted forests, asproposed by Burkhard et al. (2010), Hayha et al. (2015) and Paudyalet al. (2015). For example, Burkhard's and Paudyal's approach toassessing the relative capacity of different land cover types can beapplied to planted forests in the context of their provision of multipleES.
6. Toward a framework for assessing ES from planted forests
Drawing from lessons from various ES frameworks and otherrelevant ES assessments described above we propose a simple frame-work to assess the provision of ES from planted forests (Fig. 3). Itcomprises three key components, (i) Silviculture and management forplanted forests (Fig. 3a), (ii) ES classification using TEEB categories(Fig. 3b), and (iii) common approaches to assessing ES (Fig. 3c). First,the assessor defines the scope of the assessment and identifies theobjectives and process of the assessment. Second, the key ES providedby planted forest are screened using one of the ES classification system(i.e. the TEEB classification suggested in Fig. 3b) and prioritised basedon types of planted forest and management practices (Fig.3a). Third,beneficiaries of ecosystem services are determined, and an appropriateapproach and tools selected depending on available time, data andresources (Fig. 3c). Finally, data on ES provision are analysed,synthesised and communicated to relevant stakeholders.
Clarification about the scope of the assessment including keyquestions such as underlying objectives, relevant actors, available/potential ES flows and sinks in the management area, can all be veryuseful. Other essential tasks at the scoping phase include ensuringadequate budget, data availability, suitable approaches, starting datesand frequency of measurements, and clarifying potential roles andresponsibilities of different stakeholders (Rosenthal et al., 2014).
The monetary and non-monetary values of ES are dependent on thebeneficiaries (Fisher et al., 2009; Bennett et al., 2009). That is,beneficiaries can vary from local land owners and communities topurchasers or users of ES in other parts of a catchment, or those at thescale of national or global markets (Fig. 2). The nature of the benefitalso varies. For example, those purchasing ecosystem-based goods aregenerally receiving a private benefit (Baral et al., 2013). For servicessuch as water regulation, carbon sequestration or biodiversity con-servation, benefits go to a wider range of stakeholders, both public andprivate. Determining the beneficiaries of each ES is a key requirementas this allows focus on defining ‘benefit relevant indicators’ (Olanderet al., 2015).
Fig. 1. Natural, semi-natural, planted forest and planted trees outside the forests, and their relative degree of provision of ecosystem services.The thickness of the arrows indicates relative rate of delivery of ecosystem services (figure adapted from Carle and Holmgren, 2008; Brockerhoff et al., 2013; Ferraz et al., 2013).
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Undertaking an analysis of ES provision as well as status and trendsunder past and future management scenarios can also be valuable.Rosenthal et al. (2014) suggest that such a task should involve, (i)choosing appropriate analytical tools; (ii) defining alternative manage-ment scenarios; (iii) assessing trade-offs and synergies among differentES; and (iv) linking outcomes in terms of supply and value.Understanding trade-offs is critical, because many ES are not compa-tible with particular management practices. For example, intensivesilvicultural practices in planted forests may enhance timber produc-tivity and associated ecosystem goods while compromising biologicaldiversity. In many cases, inputs and review from local experts and
Table 1List of Ecosystem Services (ES) from planted forests, description/indicators, benefici-aries, scale of production and unit of measurement. Letters in brackets represent TheEconomics of Ecosystem and Biodiversity (TEEB, 2010) ES categories: provisioning (P),regulating (R) and cultural (C) services. Scale): ‘O’ on-site (in situ delivery), ‘L’ local (off-site, 100 m–10 km), ‘R’ regional (10–1000 km), ‘G’ global ( > 1000 km). The provision ofspecific types of ES depends on a variety of factors such as type of planted forest (seeFig. 1), rotation age, species type, position in the landscape, and management intensity.
EcosystemService type
Description andrelevant references
Beneficiary/use* Scale* Unit ofmeasurement
Food (P) Provision of wildfoods such asmushrooms,berries, fruits (e.g.,Evans, 2009;FAO,2010)
Private/public O Number offoods or kgha−1
Raw materials(P)
Provision of rawmaterials forconstruction, pulpand wood, biofuelsand essential oils(e.g., Carle andHolmgren, 2008;Buford and Neary,2010; FAO, 2010)
Private O m3 or tonsha−1
Fresh water(P)
Filtering, retentionand storage offreshwateravailable forhumanconsumption orindustrial use (e.g.,Baillie and Neary,2015)
Public O-R ML ha−1 yr−1
Medicinalresources(P)
Availability ofplants fortraditionalmedicines as wellas raw material forpharmaceuticalindustry (e.g., FAO,2010)
Public O-R Number ofspecies or kgha−1
Local climateand airquality (R)
Enhancement ofrainfall and wateravailability at localscale, andregulating airquality byremovingpollutants fromatmosphere (e.g.,Pramova et al.,2012)
Public L-R
Carbonsequestra-tion andstorage (R)
Regulation ofglobal climate bysequestering andstoring greenhousegases (e.g., Penget al., 2014)
Public/Private O-R Mg ha−1
Moderation ofextremeevents (R)
Buffering againstextreme weatherevents or naturalhazards, such asfloods storms andlandslides, andhence reducingdamaging impacts(e.g. Calder andAylward, 2006)
Public O- L Number ofeventsprotected
Erosionpreventionandmainte-nance ofsoil fertility(R)
Capacity to providevital regulatingservices bypreventing soilerosion (e.g.,Oliveira et al.,2013)
Public/Private O ha yr−1
Pollination (R) Capacity to support Private/Public O-R Number of, or(continued on next page)
Table 1 (continued)
EcosystemService type
Description andrelevant references
Beneficiary/use* Scale* Unit ofmeasurement
habitat for insectsand birds thatprovide pollinationand other servicesessential for thedevelopment ofproducts, e.g. fruit,vegetables andseeds (e.g., Takiet al., 2013)
impact ofpollinatingspecies
Waterregulation(R)
Provision of landcover and henceregulation oferosion andhydrology (e.g.,Keenan and vanDijk, 2010)
Public /Private O-R m3 ha−1
Biologicalcontrol (R)
Habitat for naturalfauna and florathat act as naturalcontrols ofpredators andparasites (e.g.,Nagaike, 2002)
Public/Private O-R Number ofbeneficialspecies
Habitat forspecies (H)
Habitat for avariety of nativeplants and animals(in biodiverseplanted forests, e.g., Nagaike, 2002).
Public O-R Number ofspeciespresent
Maintenanceof geneticdiversity(H)
Capacity to supporthigh biodiversity –
by number ofspecies whichmakes them moregenetically diversethan others
Public O-G
Recreation andmental andphysicalhealth (C)
Provision of scenicand naturallandscapes thatprovide recreationareas important inmaintainingmental andphysical health (e.g., Dhakal et al.,2012; Smailes andSmith, 2001;Turner et al., 2011)
Public O-L
Tourism (C) Natural ecosystemsas sites for eco-tourism, outdoorsport, local tourismopportunities (e.g.,Dhakal et al., 2012;Smailes and Smith,2001; Turner et al.,2011)
Public/Private O-R Number ofvisitors yr−1, $ha−1 yr−1
* Adapted from Baral et al. (2013).
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other stakeholders can be helpful in refining practices to achievedesired outcomes (Rosenthal et al., 2014).
Synthesising results in an appropriate format and communicatingto relevant stakeholders in an appropriate manner are both crucial tothe application of any ES assessment undertaking. Results can becommunicated in a variety of ways, such as direct reporting (e.g. tomanagers and plantation investors) web-based maps, conferences andworkshops, and peer reviewed papers. Clear, targeted and contextua-lised communication of results can extend the impact of ES assessment(Rosenthal et al., 2014). A strong communication plan may include, butnot be limited to, (i) identifying the target audience; (ii) choosing anapproach appropriate to the target audience; (iii) selecting appropriatemedia such as visual displays, maps and figures.
7. Final considerations
In this paper we reviewed the range of ES provided by plantedforests and presented a conceptual framework to assess their delivery.As planted forests provide many ES beyond timber production andtheir expansion is increasing, effective planning and management of ESflows will require in the near future an improved evidence base. Thethree components of our framework outlined above follow a combina-tion of methodologies used by Busch et al. (2012) and Baral et al.(2014). Yet our framework specifically covers the beneficiaries of ESwhile enabling both qualitative and quantitative assessments of ESsources and sinks in the context of planted forests. We recognize thatthis framework needs testing across various types of planted forests indifferent geographic locations. We close the paper with a few con-siderations for planning and management of ES of planted forestsbased on the available literature. A framework for assessment of ES inplanted forest should enable users to design a special approach, processand methods to suit the particular needs of investors, local people,landscape and the predetermined objectives of the plantation project.The framework provided here is intended to be a valuable guide toenable users to discuss and then design an appropriate assessmentapproach for their particular landscape, forest, situation and needs.This guiding frame could be invaluable as a basis for participatorystakeholder process that could enhance transparency to all stake-holders, and encourage ongoing participation in collection of dataand adaptive management of the plantation over time.
Certification of responsible forest management is now an estab-lished part of the forest management landscape (see Meijaard et al.,2011, 2014). Market pressures and community demands will requireforest managers to demonstrate the benefits and impacts of plantedforests on a range of values and services (see conceptual diagram,Fig. 2). However, reliable measurement, verification, and monitoring,and guarantee of the maintenance of ES are key requirements forcertification (Meijaard et al., 2011, 2014).
Finally, there is considerable concern about negative effects ofplanted forests, which are often called ecosystem dis-services (Dunn,2010) and not covered in this paper. For example, negative hydro-logical effects (Engel et al., 2005; Farley et al., 2005), weed infestation(Richardson and Rejmánek, 2011), water pollution (Baillie et al.,2015), soil erosion (Evans, 2009) or impacts of extensive industrialplantation development on communities, social values and foodproduction. In our view, these are not the problem of planted forestsper se but represent failures in policy planning, management andcommunity engagement in the design and development of plantation
Fig. 2. Conceptual diagram showing local, regional and global users of regulating andcultural services produced by planted forests. Certain services are enjoyed at multiplescales, for example, climate regulation via carbon sequestration by planted forest isbeneficial to local, regional and global users. See Table 1 for ES provided by plantedforests and Table 2 for provision of ES from planted forests in relation to different landuse.
Table 2Example of ecosystem services (ES) provided by intensively managed planted forests andqualitative comparison of services relative to native forests, peatlands and degraded orcleared land. The relative provision of ES may depend on many factors, such as species,objectives, site conditions and management regime, and so is indicative only (adaptedfrom de Groot and van der Meer, 2010; Baral et al., 2013, 2014; Brockerhoff et al., 2013;Ferraz et al., 2013). See Table 1 for description of ecosystem services categories,beneficiaries and scale.
Ecosystemservices
Provision of ES from planted forests in relation to
Nativeforests
Nativegrasslands
Managedpasture
Agriculture
ProvisioningservicesFood Production Lower Lower Similar LowerTimberproduction
Higher Higher Higher Higher
Medicines Lower Lower Higher HigherFreshwater Lower Higher Lower Higher
RegulatingservicesFresh airregulation
Lower Higher Higher Higher
Carbonsequestrationand storage
Higher Higher Higher Higher
Groundwaterrecharge
Lower Lower Lower Higher
Natural hazardregulation
Lower Higher Higher Higher
Water purification Lower Lower Higher HigherDisease regulation Lower ? Higher HigherPollination Lower Lower Lower HigherErosionprevention andsoil protection
Similar Lower Similar Higher
Habitat orsupportingservicesHabitat forspecies
Lower Lower Higher Higher
Maintenance ofgenetic diversity
Lower Lower ? Higher
Cultural servicesSpiritual andreligious values
Lower Lower ? ?
Aesthetic values Lower Lower ? ?Recreation andecotourism
Lower ? Higher Higher
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estates. Although information on the occurrence of such impacts is vitalto investors in plantations, their incidence can be minimised by properplanning and appropriate dialogue with stakeholders. Following bestpractices and environmental guidelines can help to minimise effects ofweed infestation and soil erosion. Approaches such as limiting plantedforests to less than 20% in each catchment to reduce hydrologicalimpacts, limiting use of chemical and fertilisers to reduce waterpollution, choosing appropriate species with low weediness potential,using genetic conservation guidelines, incorporating biodiversity, ha-bitat and social values into planted forest design and integrating withfood production and/or conservation at local and landscape scales canovercome many of the concerns raised about planted forests.
Definition of key terms used in this paper
Assessment: The analysis and review of information derived fromresearch for the purpose of helping someone in a position of respon-sibility to evaluate possible actions or think about a problem.Assessment means assembling, summarising, organising, interpreting,
Table 3Some current international initiatives that shape the way ecosystem services are assessedand their influence in policy formulation.
Initiatives Briefdescription/aim
Influence on ESassessment andpolicy
Reference
UN MillenniumEcosystemAssessment(MEA)
A multilateralinitiativeaimed atdetailing globaland sub-globalassessments ofthe linksbetweenecosystemchange andhumanwellbeing
Documentswide-spreadimpacts –
leading toimprovedawareness -manygovernment andnon-governmentalorganizationsstarted adoptingthis concept
Tallis et al. (2009);Pistorius et al. (2012)
The Economics ofEcosystem andBiodiversity(TEEB)
To provideglobalassessment ofeconomicbenefits ofbiodiversityand ecosystemservices, andthe costsassociated withtheir loss
The launch ofthe TEEBreports has ledto variouscountriesinitiating TEEBstudies todemonstrate thevalue of theirecosystems andto encouragepolicy thatrecognizes andaccounts fortheir ecosystemservices andbiodiversity
TEEB (2010)
UK NationalEcosystemAssessment(UKNEA)
An analysis ofthe UK'snaturalenvironmentin terms of thebenefits itprovides tosociety andcontinuingeconomicprosperity –
commenced inmid-2009 andreported inJune 2011 inan inclusiveprocessinvolvingmanygovernment,academic,NGO andprivate sectorinstitutions.
Indicates policyoptions for highlevel policymakers tosecure thecontinueddelivery of theUK’s ecosystemservices;evidence base topolicy makers tostrengthendecision makingand ensureeffectivemanagement inthe future;lessonsapplicable toglobally
UKNEA (2011)
IntergovernmentalPanel onBiodiversity andEcosystemServices (IPBES)
A bodycommitted tobridging thegap betweenscience andpolicy, seekingto advisegovernmentson how to haltfurtherdegradation
Provides amechanismrecognised byboth thescientific andpolicycommunities tosynthesize,review, assessand criticallyevaluaterelevantinformation andknowledgegeneratedworldwide bygovernments,
http://www.ipbes.net/about-ipbes.html
(continued on next page)
Table 3 (continued)
Initiatives Briefdescription/aim
Influence on ESassessment andpolicy
Reference
academia,scientificorganizations,non-governmentalorganizationsand indigenouscommunities
A Long-TermBiodiversity,Ecosystem andAwarenessResearchNetwork(ALTER-net)
A networklinking 27institutes from18 Europeancountriesfocusing onecosystemsservices
Integratesresearchcapacitiesacross Europe:assessingchanges inbiodiversity,analysing theeffect of thosechanges onecosystemservices andinformingpolicymakersand the publicabout this atprovides aEuropean scalewith globalimpact
http://www.alter-net.info/
Natural CapitalProject
A partnershipcombiningresearchinnovation atStanfordUniversity andthe Universityof Minnesotawith the globalreach ofconservationscience andpolicy at TheNatureConservancyand the WorldWildlife FundUS
Has improvedthe state ofecosystemservices andhuman well-being byintegrating thevalues of natureinto all majordecisionsaffecting theenvironment;test anddemonstratehow accountingfor nature’sbenefits cansupport moresustainableinvestment andpolicy decisions
http://www.naturalcapitalproject.org/
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and possibly reconciling pieces of existing knowledge and commu-nicating them so that they are relevant and helpful to an intelligent butinexpert decision-maker (Parson, 1995).
Benefits: Positive change in wellbeing from the fulfilment of needsand wants (TEEB, 2010).
Biodiversity: The variability among living organisms from allsources, including inter alia terrestrial, marine, and other aquaticecosystems and the ecological complexes of which they are part, thisincludes diversity within species, between species, and of ecosystems(cf. Article 2 of the Convention on Biological Diversity, 1992).
Ecosystem assessment: A social process through which thefindings of science concerning the causes of ecosystem change, theirconsequences for human well-being, and management and policyoptions are brought to bear on the needs of decision-makers (UKNEA, 2011).
Ecosystem function: Subset of the interactions between biophy-sical structures, biodiversity and ecosystem processes that underpin thecapacity of an ecosystem to provide ecosystem services (TEEB, 2010).
Ecosystem process: Any change or reaction, which occurs withinecosystems, physical, chemical or biological. Ecosystem processesinclude decomposition, production, nutrient cycling, and fluxes ofnutrients and energy (MEA, 2005).
Ecosystem service: The benefits that people obtain from ecosys-tems (MEA, 2005). The direct and indirect contributions of ecosystemsto human well-being (TEEB, 2010). The concept of ‘ecosystem goodsand services’ is synonymous with ecosystem services. The service flowin MEA's conceptual framework refers to the service actually used.
Trade-offs: Trade-offs among ecosystem goods and services occurwhen an increase in one service leads to a decrease in one or moreother services, and can represent important externalities in currentapproaches to EGS management (Rodriguez et al., 2006; Bennett et al.,2009).
Synergies: Synergies occur when services either increase ordecrease due to simultaneous response to the same driver or due totrue interactions among services (Bennett et al., 2009; Chhatre andAgrawal, 2009).
Demand of ecosystem services: The sum of all ecosystemgoods and services currently consumed or used in a particular area overa given time period (Burkhard et al., 2012).
Supply of ecosystem services: The capacity of a particular areato provide a specific bundle of ecosystem goods and services within agiven time period. Here, capacity refers to the generation of the actuallyused set of natural resources and services (Burkhard et al., 2012).
Conflict of interest
No potential conflict of interest was reported by the authors
Acknowledgements
This research was carried out by Centre for International ForestryResearch as part of the CGIAR Research Program on Forests, Trees andAgroforestry and partly funded by the UK Department for InternationalDevelopment (DFID) through the KNOWFOR program, and by theAustralian Centre for International Agricultural Research.
Appendix A. Supplementary material
Supplementary data associated with this article can be found in theonline version at doi:http://dx.doi.org/10.1016/j.ecoser.2016.10.002.
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