The role of Payment for Forest Environmental Services (PFES) in financing the forestry sector in Vietnam

Since being implemented nationwide in 2011, Payment for Forest Environmental Services (PFES) has been a breakthrough policy in Vietnam. PFES, where benefiting enterprises and organizations pay for forest-derived ecosystem services, aims to financially incentivize forest managers to better protect and develop their forests. The PFES policy requires users of forest environmental services to make payments to suppliers of these services. Services, as outlined in Decree 99, include: watershed protection; natural landscape beauty protection and biodiversity conservation for tourism; forest carbon sequestration and the reduction of greenhouse gas emissions through the prevention of deforestation and forest degradation; and the provision of forest hydrological services for spawning in coastal fisheries and aquaculture. In 2010, the Government of Vietnam established fixed payments for watershed and landscape beauty protection services. The government also identified specific forest environmental service users to pay these PFES fees, such as water supply companies, hydropower plants and tourism companies; and suppliers to receive PFES revenue, such as forest owners, i.e. individuals, households, communities or organizations who hold forested land titles. PFES revenues have since become an important source of income for the sector: resulting in more effective forest protection and development, increased income for forest owners, and reduced pressure on the state budget. This brief highlights the increasing role and importance of PFES in financing the Vietnamese forestry sector, discusses how PFES finance can be used strategically to invest in forestry development, and proposes policies and measures to overcome on-the-ground challenges faced during PFES implementation. This brief is based on a literature review, in-depth interviews with government, civil society, academic and private sector actors in Vietnam, and consultation workshops undertaken as part of CIFOR’s Global Comparative Study on REDD+.