CHALLENGE
Governments are increasingly aware that REDD+ frameworks will need to include benefit sharing mechanisms that promote social and environmental safeguards while seeking full and effective participation of indigenous peoples and local communities (as stated in UNFCCC Decision 1/CP.16 adopted at COP16 in Cancun in December 2010). How to design and establish REDD+ frameworks and policies in countries while guaranteeing equitable benefit sharing mechanisms and adequate incentives for REDD+ purposes, however, is less clear and a significant challenge for countries trying to get ready for REDD.

APPROACH
The experience of payments for environmental services (PES) systems set up in Costa Rica, Mexico, and Ecuador in the last decade provide valuable inputs for shaping REDD+ strategies in participating countries in the Latin America and Caribbean region. Costa Rica has implemented a nationwide PES program since 1997; Mexico since 2003; Ecuador since 2008. Between them, these programs are currently helping to conserve over 3 million hectares of forests. Their experience shows how to make PES work, but also -- problems to avoid.

This activity supported by PROFOR will help share technical lessons from PES for REDD+ within the context of a South-South learning exchange initially limited to the REDD+ countries in the region. 

Although the challenges related to the appropriate design and implementation of REDD+ go beyond those of PES schemes, the PES experience in these three countries could provide insights on many of the core elements of a future REDD+ strategy. The lessons fall into five areas: 

1. Participation agreements

2. Equity or social objectives

3. Trade-offs and synergies between multiple (ecosystem) benefits

4. Measuring, reporting and verification (MRV)

5. Sustainable finance and administrative costs

RESULTS

The lessons of payments for environmental services systems set up in Costa Rica, Mexico, and Ecuador were identified and discussed in a participatory fashion, that has gradually created a regional and global community of experts around PES/REDD+ issues.  

In the process, participants identified and captured twenty-nine lessons, now available in reports in English, Spanish and French on this page.

Some of the lessons gathered under the header "Sustainable Finance in PES and REDD+" include for example:

• Diversify funding sources and duration of contracts to reduce risks.
• Enable legislative framework to engage the private sector: Use public funding during formulation, preparation and during first phases of implementation, then a combination of incentives/market funds to attract the private sector.
• Clearly define objectives and baselines, and use adaptive management techniques to improve targeting: Avoid if you can “post-modeling” baselines. Try “ex-ante” baselines if you can. Most PES schemes are now “post-modeling” which is costly and not the best choice.
• Explore options to control administration costs: Strengthen current institutions and technical teams instead of setting new ones or depending exclusively on external consultants 

The sharing of lessons across borders has helped attract interest from other partners such as FCPF and the World Bank Institute and extended the reach and longevity of these lessons. For example, six webinar sessions co-organized by the World Bank Institute and “Finanzas Carbono” attracted about 1,200 participants.

Through outreach and back to back presentations to the participants committee of the FCPF, the policy board countries of UN REDD, the Partners of the REDD+ Partnership, countries of Forest Eleven and Finanzas Carbono, the activity has reached approximately 54 countries including many countries preparing national REDD+ strategies.  Time will tell if countries will make use of PES lessons in the design of their respective REDD+ strategies when they submit their REDD+ preparation plans for evaluation in 2014-16.

CHALLENGE
Governments are increasingly aware that REDD+ frameworks will need to include benefit sharing mechanisms that promote social and environmental safeguards while seeking full and effective participation of indigenous peoples and local communities (as stated in UNFCCC Decision 1/CP.16 adopted at COP16 in Cancun in December 2010). How to design and establish REDD+ frameworks and policies in countries while guaranteeing equitable benefit sharing mechanisms and adequate incentives for REDD+ purposes, however, is less clear and a significant challenge for countries trying to get ready for REDD.

APPROACH
The experience of payments for environmental services (PES) systems set up in Costa Rica, Mexico, and Ecuador in the last decade provide valuable inputs for shaping REDD+ strategies in participating countries in the Latin America and Caribbean region. Costa Rica has implemented a nationwide PES program since 1997; Mexico since 2003; Ecuador since 2008. Between them, these programs are currently helping to conserve over 3 million hectares of forests. Their experience shows how to make PES work, but also -- problems to avoid.

This activity supported by PROFOR will help share technical lessons from PES for REDD+ within the context of a South-South learning exchange initially limited to the REDD+ countries in the region. 

Although the challenges related to the appropriate design and implementation of REDD+ go beyond those of PES schemes, the PES experience in these three countries could provide insights on many of the core elements of a future REDD+ strategy. The lessons fall into five areas: 

1. Participation agreements

2. Equity or social objectives

3. Trade-offs and synergies between multiple (ecosystem) benefits

4. Measuring, reporting and verification (MRV)

5. Sustainable finance and administrative costs

RESULTS

The lessons of payments for environmental services systems set up in Costa Rica, Mexico, and Ecuador were identified and discussed in a participatory fashion, that has gradually created a regional and global community of experts around PES/REDD+ issues.  

In the process, participants identified and captured twenty-nine lessons, now available in reports in English, Spanish and French on this page.

Some of the lessons gathered under the header "Sustainable Finance in PES and REDD+" include for example:

• Diversify funding sources and duration of contracts to reduce risks.
• Enable legislative framework to engage the private sector: Use public funding during formulation, preparation and during first phases of implementation, then a combination of incentives/market funds to attract the private sector.
• Clearly define objectives and baselines, and use adaptive management techniques to improve targeting: Avoid if you can “post-modeling” baselines. Try “ex-ante” baselines if you can. Most PES schemes are now “post-modeling” which is costly and not the best choice.
• Explore options to control administration costs: Strengthen current institutions and technical teams instead of setting new ones or depending exclusively on external consultants 

The sharing of lessons across borders has helped attract interest from other partners such as FCPF and the World Bank Institute and extended the reach and longevity of these lessons. For example, six webinar sessions co-organized by the World Bank Institute and “Finanzas Carbono” attracted about 1,200 participants.

Through outreach and back to back presentations to the participants committee of the FCPF, the policy board countries of UN REDD, the Partners of the REDD+ Partnership, countries of Forest Eleven and Finanzas Carbono, the activity has reached approximately 54 countries including many countries preparing national REDD+ strategies.  Time will tell if countries will make use of PES lessons in the design of their respective REDD+ strategies when they submit their REDD+ preparation plans for evaluation in 2014-16.

CHALLENGE
Governments are increasingly aware that REDD+ frameworks will need to include benefit sharing mechanisms that promote social and environmental safeguards while seeking full and effective participation of indigenous peoples and local communities (as stated in UNFCCC Decision 1/CP.16 adopted at COP16 in Cancun in December 2010). How to design and establish REDD+ frameworks and policies in countries while guaranteeing equitable benefit sharing mechanisms and adequate incentives for REDD+ purposes, however, is less clear and a significant challenge for countries trying to get ready for REDD.

APPROACH
The experience of payments for environmental services (PES) systems set up in Costa Rica, Mexico, and Ecuador in the last decade provide valuable inputs for shaping REDD+ strategies in participating countries in the Latin America and Caribbean region. Costa Rica has implemented a nationwide PES program since 1997; Mexico since 2003; Ecuador since 2008. Between them, these programs are currently helping to conserve over 3 million hectares of forests. Their experience shows how to make PES work, but also -- problems to avoid.

This activity supported by PROFOR will help share technical lessons from PES for REDD+ within the context of a South-South learning exchange initially limited to the REDD+ countries in the region. 

Although the challenges related to the appropriate design and implementation of REDD+ go beyond those of PES schemes, the PES experience in these three countries could provide insights on many of the core elements of a future REDD+ strategy. The lessons fall into five areas: 

1. Participation agreements

2. Equity or social objectives

3. Trade-offs and synergies between multiple (ecosystem) benefits

4. Measuring, reporting and verification (MRV)

5. Sustainable finance and administrative costs

RESULTS

The lessons of payments for environmental services systems set up in Costa Rica, Mexico, and Ecuador were identified and discussed in a participatory fashion, that has gradually created a regional and global community of experts around PES/REDD+ issues.  

In the process, participants identified and captured twenty-nine lessons, now available in reports in English, Spanish and French on this page.

Some of the lessons gathered under the header "Sustainable Finance in PES and REDD+" include for example:

• Diversify funding sources and duration of contracts to reduce risks.
• Enable legislative framework to engage the private sector: Use public funding during formulation, preparation and during first phases of implementation, then a combination of incentives/market funds to attract the private sector.
• Clearly define objectives and baselines, and use adaptive management techniques to improve targeting: Avoid if you can “post-modeling” baselines. Try “ex-ante” baselines if you can. Most PES schemes are now “post-modeling” which is costly and not the best choice.
• Explore options to control administration costs: Strengthen current institutions and technical teams instead of setting new ones or depending exclusively on external consultants 

The sharing of lessons across borders has helped attract interest from other partners such as FCPF and the World Bank Institute and extended the reach and longevity of these lessons. For example, six webinar sessions co-organized by the World Bank Institute and “Finanzas Carbono” attracted about 1,200 participants.

Through outreach and back to back presentations to the participants committee of the FCPF, the policy board countries of UN REDD, the Partners of the REDD+ Partnership, countries of Forest Eleven and Finanzas Carbono, the activity has reached approximately 54 countries including many countries preparing national REDD+ strategies.  Time will tell if countries will make use of PES lessons in the design of their respective REDD+ strategies when they submit their REDD+ preparation plans for evaluation in 2014-16.

CHALLENGE
Governments are increasingly aware that REDD+ frameworks will need to include benefit sharing mechanisms that promote social and environmental safeguards while seeking full and effective participation of indigenous peoples and local communities (as stated in UNFCCC Decision 1/CP.16 adopted at COP16 in Cancun in December 2010). How to design and establish REDD+ frameworks and policies in countries while guaranteeing equitable benefit sharing mechanisms and adequate incentives for REDD+ purposes, however, is less clear and a significant challenge for countries trying to get ready for REDD.

APPROACH
The experience of payments for environmental services (PES) systems set up in Costa Rica, Mexico, and Ecuador in the last decade provide valuable inputs for shaping REDD+ strategies in participating countries in the Latin America and Caribbean region. Costa Rica has implemented a nationwide PES program since 1997; Mexico since 2003; Ecuador since 2008. Between them, these programs are currently helping to conserve over 3 million hectares of forests. Their experience shows how to make PES work, but also -- problems to avoid.

This activity supported by PROFOR will help share technical lessons from PES for REDD+ within the context of a South-South learning exchange initially limited to the REDD+ countries in the region. 

Although the challenges related to the appropriate design and implementation of REDD+ go beyond those of PES schemes, the PES experience in these three countries could provide insights on many of the core elements of a future REDD+ strategy. The lessons fall into five areas: 

1. Participation agreements

2. Equity or social objectives

3. Trade-offs and synergies between multiple (ecosystem) benefits

4. Measuring, reporting and verification (MRV)

5. Sustainable finance and administrative costs

RESULTS

The lessons of payments for environmental services systems set up in Costa Rica, Mexico, and Ecuador were identified and discussed in a participatory fashion, that has gradually created a regional and global community of experts around PES/REDD+ issues.  

In the process, participants identified and captured twenty-nine lessons, now available in reports in English, Spanish and French on this page.

Some of the lessons gathered under the header "Sustainable Finance in PES and REDD+" include for example:

• Diversify funding sources and duration of contracts to reduce risks.
• Enable legislative framework to engage the private sector: Use public funding during formulation, preparation and during first phases of implementation, then a combination of incentives/market funds to attract the private sector.
• Clearly define objectives and baselines, and use adaptive management techniques to improve targeting: Avoid if you can “post-modeling” baselines. Try “ex-ante” baselines if you can. Most PES schemes are now “post-modeling” which is costly and not the best choice.
• Explore options to control administration costs: Strengthen current institutions and technical teams instead of setting new ones or depending exclusively on external consultants 

The sharing of lessons across borders has helped attract interest from other partners such as FCPF and the World Bank Institute and extended the reach and longevity of these lessons. For example, six webinar sessions co-organized by the World Bank Institute and “Finanzas Carbono” attracted about 1,200 participants.

Through outreach and back to back presentations to the participants committee of the FCPF, the policy board countries of UN REDD, the Partners of the REDD+ Partnership, countries of Forest Eleven and Finanzas Carbono, the activity has reached approximately 54 countries including many countries preparing national REDD+ strategies.  Time will tell if countries will make use of PES lessons in the design of their respective REDD+ strategies when they submit their REDD+ preparation plans for evaluation in 2014-16.

CHALLENGE
Governments are increasingly aware that REDD+ frameworks will need to include benefit sharing mechanisms that promote social and environmental safeguards while seeking full and effective participation of indigenous peoples and local communities (as stated in UNFCCC Decision 1/CP.16 adopted at COP16 in Cancun in December 2010). How to design and establish REDD+ frameworks and policies in countries while guaranteeing equitable benefit sharing mechanisms and adequate incentives for REDD+ purposes, however, is less clear and a significant challenge for countries trying to get ready for REDD.

APPROACH
The experience of payments for environmental services (PES) systems set up in Costa Rica, Mexico, and Ecuador in the last decade provide valuable inputs for shaping REDD+ strategies in participating countries in the Latin America and Caribbean region. Costa Rica has implemented a nationwide PES program since 1997; Mexico since 2003; Ecuador since 2008. Between them, these programs are currently helping to conserve over 3 million hectares of forests. Their experience shows how to make PES work, but also -- problems to avoid.

This activity supported by PROFOR will help share technical lessons from PES for REDD+ within the context of a South-South learning exchange initially limited to the REDD+ countries in the region. 

Although the challenges related to the appropriate design and implementation of REDD+ go beyond those of PES schemes, the PES experience in these three countries could provide insights on many of the core elements of a future REDD+ strategy. The lessons fall into five areas: 

1. Participation agreements

2. Equity or social objectives

3. Trade-offs and synergies between multiple (ecosystem) benefits

4. Measuring, reporting and verification (MRV)

5. Sustainable finance and administrative costs

RESULTS

The lessons of payments for environmental services systems set up in Costa Rica, Mexico, and Ecuador were identified and discussed in a participatory fashion, that has gradually created a regional and global community of experts around PES/REDD+ issues.  

In the process, participants identified and captured twenty-nine lessons, now available in reports in English, Spanish and French on this page.

Some of the lessons gathered under the header "Sustainable Finance in PES and REDD+" include for example:

• Diversify funding sources and duration of contracts to reduce risks.
• Enable legislative framework to engage the private sector: Use public funding during formulation, preparation and during first phases of implementation, then a combination of incentives/market funds to attract the private sector.
• Clearly define objectives and baselines, and use adaptive management techniques to improve targeting: Avoid if you can “post-modeling” baselines. Try “ex-ante” baselines if you can. Most PES schemes are now “post-modeling” which is costly and not the best choice.
• Explore options to control administration costs: Strengthen current institutions and technical teams instead of setting new ones or depending exclusively on external consultants 

The sharing of lessons across borders has helped attract interest from other partners such as FCPF and the World Bank Institute and extended the reach and longevity of these lessons. For example, six webinar sessions co-organized by the World Bank Institute and “Finanzas Carbono” attracted about 1,200 participants.

Through outreach and back to back presentations to the participants committee of the FCPF, the policy board countries of UN REDD, the Partners of the REDD+ Partnership, countries of Forest Eleven and Finanzas Carbono, the activity has reached approximately 54 countries including many countries preparing national REDD+ strategies.  Time will tell if countries will make use of PES lessons in the design of their respective REDD+ strategies when they submit their REDD+ preparation plans for evaluation in 2014-16.

CHALLENGE

Over the past two decades, several countries have reformed their state forest institutions to improve the management, administration and governance of forest resources, and the delivery of products and services from forests in response to changing market and public demand. Reforms have focused on strengthening economically and environmentally sustainable forest management.

In Vietnam, a series of restructuring steps have taken place over the past 15 years. However, progress towards transforming state forest enterprises (SFEs) into commercially viable businesses based on sustainable forest management principles has been slow, incomplete and often stalled. The most recent reform effort included the stipulation of Decree 200 in 2004, which aimed to develop and implement reform plans for SFEs, including specific plans for forest classification, forestland allocation, asset valuation, equitization, business planning, commercial timber processing sector development, and improving social and economic opportunities. Despite this, the reallocation of forestland from SFEs to communities, which was viewed as a core element of reform, has been particularly slow.

SFEs in Vietnam control about 40% of all forestland and are believed to still hold substantial forest estates, including some of the most valuable natural forests. Significant uncertainty exists, however, regarding the extent and quality of these remaining forests. Illegal logging, poor governance and vested interests are complicating the overall picture. Vietnam’s natural forest resources are important for rural development, poverty reduction and upland livelihood security since most of the remaining natural forests are located in upland areas where the poorest ethnic minority populations are concentrated.

APPROACH

This PROFOR-financed activity proposes to develop and support a deeper forest sector policy dialogue in Vietnam. A second objective is to complement the World Bank’s overall dialogue and program on state-owned enterprise reform in Vietnam by adding a specific perspective on forest resources management.

Expected outcomes include increased capacity of key stakeholders, particularly the policy research institute of the Ministry of Agriculture and Rural Development, to carry out performance assessments and scoring of SFEs and to formulate reform needs.

More specifically, the activity is expected to produce:

• Review of the policy framework for SFE reform and the legal aspects of equitization.
• Review of business prospects of two SFEs, concerning forest assets, land use rights certificates, and other data required for good management.
• Methodology and application of forest valuation techniques for two SFEs: The valuation of property uses three basic approaches: (1) the comparable sales approach; (2) the replacement cost approach; and (3) the income approach. Investors will mainly use the income valuation approach. To anticipate what buyers/investors will bid, the government should use the same approach with some sensitivity analyses to bracket the likely valuations of foreign investors. 
• Business plan development, one for each of the pilot SFEs demonstrating how the SFEs can improve their operations over time to become more efficient and profitable.
• Synthesis report, providing key information for understanding the situation relative to SFEs, their commercial value, and the policy environment relative to proposed sector reforms that is summarized in the main report.

In short, implementation activities include: stocktaking; a literature review of legal requirements; development of a scoring methodology and audits; review of land use, livelihoods and social issues; determining commercial prospects of SFEs; and a final synthesis report.

RESULTS

This activity is ongoing, and technical work is underway. Local experts have reviewed the regulatory framework for SFE reform and a stakeholder workshop was conducted in July. The pilot SFEs have been engaged and two technical missions were conducted to ensure readiness and participation. A preliminary analysis of each SFE was conducted, information was collected concerning assets and holdings, and draft commitment letters were drafted to formally engage the SFEs. The final synthesis report is expected by the end of June 2015.

The activity has concluded and all the outputs are being finalized for publication. Findings from the study show that:

There are 139 SFEs with 1.95 million hectares of forest, however, only 30 have commercial potential from plantation. These SFEs will have to be studied further to scale up their success in terms of their location, size, structure, financial structure, land tenure.

Additional measures to speed up reform might include (i) improving forestry and business practices to enhance efficiency and increase profits; (ii) providing incentives for and facilitating the merger of smaller SFEs to produce economies of scale; (iii) securitizing SFEs Land Use Rights Certificates; (iv) allowing for the sale and transfer of SFE Redbooks; (v) streamlining the policy framework and developing outreach programs to investors; (vi) developing practical and realistic approaches for mitigating potential employee layoffs that are expected as a result of the reform; (vii) certifying assets and holdings; and (viii) providing high-quality information to the public and potential investors. Technical assistance will be needed to guide SFEs through the financial reviews and asset valuations, develop business plans, sort through land tenure issues, improve forest and business management, and help resolve employee and labor situations, among others.

The study also finds high foreign investor risk due to shortcomings in individual SFEs and the complexity of the policy framework, posing a challenge for equitization. On the other hand, Vietnam is a favorable market in terms of environmental conditions for rapid tree growth, high prices for wood products, and close proximity and access to Asian markets. Capitalizing on assets in the sector while overcoming weaknesses in individual SFEs and simplifying the regulatory environment will be key to moving forward on reform and ensuring economic growth in the forest sector.

For stories and updates on related activities, follow us on Twitter and Facebook, or subscribe to our mailing list for regular updates.

CHALLENGE

Over the past two decades, several countries have reformed their state forest institutions to improve the management, administration and governance of forest resources, and the delivery of products and services from forests in response to changing market and public demand. Reforms have focused on strengthening economically and environmentally sustainable forest management.

In Vietnam, a series of restructuring steps have taken place over the past 15 years. However, progress towards transforming state forest enterprises (SFEs) into commercially viable businesses based on sustainable forest management principles has been slow, incomplete and often stalled. The most recent reform effort included the stipulation of Decree 200 in 2004, which aimed to develop and implement reform plans for SFEs, including specific plans for forest classification, forestland allocation, asset valuation, equitization, business planning, commercial timber processing sector development, and improving social and economic opportunities. Despite this, the reallocation of forestland from SFEs to communities, which was viewed as a core element of reform, has been particularly slow.

SFEs in Vietnam control about 40% of all forestland and are believed to still hold substantial forest estates, including some of the most valuable natural forests. Significant uncertainty exists, however, regarding the extent and quality of these remaining forests. Illegal logging, poor governance and vested interests are complicating the overall picture. Vietnam’s natural forest resources are important for rural development, poverty reduction and upland livelihood security since most of the remaining natural forests are located in upland areas where the poorest ethnic minority populations are concentrated.

APPROACH

This PROFOR-financed activity proposes to develop and support a deeper forest sector policy dialogue in Vietnam. A second objective is to complement the World Bank’s overall dialogue and program on state-owned enterprise reform in Vietnam by adding a specific perspective on forest resources management.

Expected outcomes include increased capacity of key stakeholders, particularly the policy research institute of the Ministry of Agriculture and Rural Development, to carry out performance assessments and scoring of SFEs and to formulate reform needs.

More specifically, the activity is expected to produce:

• Review of the policy framework for SFE reform and the legal aspects of equitization.
• Review of business prospects of two SFEs, concerning forest assets, land use rights certificates, and other data required for good management.
• Methodology and application of forest valuation techniques for two SFEs: The valuation of property uses three basic approaches: (1) the comparable sales approach; (2) the replacement cost approach; and (3) the income approach. Investors will mainly use the income valuation approach. To anticipate what buyers/investors will bid, the government should use the same approach with some sensitivity analyses to bracket the likely valuations of foreign investors. 
• Business plan development, one for each of the pilot SFEs demonstrating how the SFEs can improve their operations over time to become more efficient and profitable.
• Synthesis report, providing key information for understanding the situation relative to SFEs, their commercial value, and the policy environment relative to proposed sector reforms that is summarized in the main report.

In short, implementation activities include: stocktaking; a literature review of legal requirements; development of a scoring methodology and audits; review of land use, livelihoods and social issues; determining commercial prospects of SFEs; and a final synthesis report.

RESULTS

This activity is ongoing, and technical work is underway. Local experts have reviewed the regulatory framework for SFE reform and a stakeholder workshop was conducted in July. The pilot SFEs have been engaged and two technical missions were conducted to ensure readiness and participation. A preliminary analysis of each SFE was conducted, information was collected concerning assets and holdings, and draft commitment letters were drafted to formally engage the SFEs. The final synthesis report is expected by the end of June 2015.

The activity has concluded and all the outputs are being finalized for publication. Findings from the study show that:

There are 139 SFEs with 1.95 million hectares of forest, however, only 30 have commercial potential from plantation. These SFEs will have to be studied further to scale up their success in terms of their location, size, structure, financial structure, land tenure.

Additional measures to speed up reform might include (i) improving forestry and business practices to enhance efficiency and increase profits; (ii) providing incentives for and facilitating the merger of smaller SFEs to produce economies of scale; (iii) securitizing SFEs Land Use Rights Certificates; (iv) allowing for the sale and transfer of SFE Redbooks; (v) streamlining the policy framework and developing outreach programs to investors; (vi) developing practical and realistic approaches for mitigating potential employee layoffs that are expected as a result of the reform; (vii) certifying assets and holdings; and (viii) providing high-quality information to the public and potential investors. Technical assistance will be needed to guide SFEs through the financial reviews and asset valuations, develop business plans, sort through land tenure issues, improve forest and business management, and help resolve employee and labor situations, among others.

The study also finds high foreign investor risk due to shortcomings in individual SFEs and the complexity of the policy framework, posing a challenge for equitization. On the other hand, Vietnam is a favorable market in terms of environmental conditions for rapid tree growth, high prices for wood products, and close proximity and access to Asian markets. Capitalizing on assets in the sector while overcoming weaknesses in individual SFEs and simplifying the regulatory environment will be key to moving forward on reform and ensuring economic growth in the forest sector.

For stories and updates on related activities, follow us on Twitter and Facebook, or subscribe to our mailing list for regular updates.

CHALLENGE

Over the past two decades, several countries have reformed their state forest institutions to improve the management, administration and governance of forest resources, and the delivery of products and services from forests in response to changing market and public demand. Reforms have focused on strengthening economically and environmentally sustainable forest management.

In Vietnam, a series of restructuring steps have taken place over the past 15 years. However, progress towards transforming state forest enterprises (SFEs) into commercially viable businesses based on sustainable forest management principles has been slow, incomplete and often stalled. The most recent reform effort included the stipulation of Decree 200 in 2004, which aimed to develop and implement reform plans for SFEs, including specific plans for forest classification, forestland allocation, asset valuation, equitization, business planning, commercial timber processing sector development, and improving social and economic opportunities. Despite this, the reallocation of forestland from SFEs to communities, which was viewed as a core element of reform, has been particularly slow.

SFEs in Vietnam control about 40% of all forestland and are believed to still hold substantial forest estates, including some of the most valuable natural forests. Significant uncertainty exists, however, regarding the extent and quality of these remaining forests. Illegal logging, poor governance and vested interests are complicating the overall picture. Vietnam’s natural forest resources are important for rural development, poverty reduction and upland livelihood security since most of the remaining natural forests are located in upland areas where the poorest ethnic minority populations are concentrated.

APPROACH

This PROFOR-financed activity proposes to develop and support a deeper forest sector policy dialogue in Vietnam. A second objective is to complement the World Bank’s overall dialogue and program on state-owned enterprise reform in Vietnam by adding a specific perspective on forest resources management.

Expected outcomes include increased capacity of key stakeholders, particularly the policy research institute of the Ministry of Agriculture and Rural Development, to carry out performance assessments and scoring of SFEs and to formulate reform needs.

More specifically, the activity is expected to produce:

• Review of the policy framework for SFE reform and the legal aspects of equitization.
• Review of business prospects of two SFEs, concerning forest assets, land use rights certificates, and other data required for good management.
• Methodology and application of forest valuation techniques for two SFEs: The valuation of property uses three basic approaches: (1) the comparable sales approach; (2) the replacement cost approach; and (3) the income approach. Investors will mainly use the income valuation approach. To anticipate what buyers/investors will bid, the government should use the same approach with some sensitivity analyses to bracket the likely valuations of foreign investors. 
• Business plan development, one for each of the pilot SFEs demonstrating how the SFEs can improve their operations over time to become more efficient and profitable.
• Synthesis report, providing key information for understanding the situation relative to SFEs, their commercial value, and the policy environment relative to proposed sector reforms that is summarized in the main report.

In short, implementation activities include: stocktaking; a literature review of legal requirements; development of a scoring methodology and audits; review of land use, livelihoods and social issues; determining commercial prospects of SFEs; and a final synthesis report.

RESULTS

This activity is ongoing, and technical work is underway. Local experts have reviewed the regulatory framework for SFE reform and a stakeholder workshop was conducted in July. The pilot SFEs have been engaged and two technical missions were conducted to ensure readiness and participation. A preliminary analysis of each SFE was conducted, information was collected concerning assets and holdings, and draft commitment letters were drafted to formally engage the SFEs. The final synthesis report is expected by the end of June 2015.

The activity has concluded and all the outputs are being finalized for publication. Findings from the study show that:

There are 139 SFEs with 1.95 million hectares of forest, however, only 30 have commercial potential from plantation. These SFEs will have to be studied further to scale up their success in terms of their location, size, structure, financial structure, land tenure.

Additional measures to speed up reform might include (i) improving forestry and business practices to enhance efficiency and increase profits; (ii) providing incentives for and facilitating the merger of smaller SFEs to produce economies of scale; (iii) securitizing SFEs Land Use Rights Certificates; (iv) allowing for the sale and transfer of SFE Redbooks; (v) streamlining the policy framework and developing outreach programs to investors; (vi) developing practical and realistic approaches for mitigating potential employee layoffs that are expected as a result of the reform; (vii) certifying assets and holdings; and (viii) providing high-quality information to the public and potential investors. Technical assistance will be needed to guide SFEs through the financial reviews and asset valuations, develop business plans, sort through land tenure issues, improve forest and business management, and help resolve employee and labor situations, among others.

The study also finds high foreign investor risk due to shortcomings in individual SFEs and the complexity of the policy framework, posing a challenge for equitization. On the other hand, Vietnam is a favorable market in terms of environmental conditions for rapid tree growth, high prices for wood products, and close proximity and access to Asian markets. Capitalizing on assets in the sector while overcoming weaknesses in individual SFEs and simplifying the regulatory environment will be key to moving forward on reform and ensuring economic growth in the forest sector.

For stories and updates on related activities, follow us on Twitter and Facebook, or subscribe to our mailing list for regular updates.

CHALLENGE

Investing in productive functions and use of forests through sustainable forest management (SFM), forest and landscape restoration, and afforestation and reforestation, could yield significant multiple wins of climate change mitigation, increased climate change resilience and adaptation, and green growth. Through the Stimulating Private Sector Engagement in REDD+, SFM and Landscape Restoration Activity, PROFOR is building evidence to support a broader approach to REDD+ that would incorporate the potential of productive functions of forests to mitigate climate change.

Current REDD+ approaches do not into take account the climate benefits that sustainable forests could provide outside of the forest sector, particularly in three key areas: substituting fossil fuels for renewable, forest-based energy sources; substituting fossil-fuel intensive construction materials; and creating a virtuous cycle of building the forest products carbon pool through durable, long-lived wood products combined with forest re-growth. Together, these areas could amount to as much as 20 percent of the global mitigation potential.

Such a radical expansion of the REDD+ approach would also address the unsatisfied need for timber, fiber and wood-based energy, which is a key driver of forest degradation and deforestation. Projections suggest that demand for fuelwood and charcoal will keep increasing beyond the year 2050 in order to meet the needs of around 2.5 billion people. At the same time, total demand for wood will grow faster than population growth, rising from a current 3.5 billion m3 to over 15 billion m3 per year.

APPROACH

The objective of this study is twofold: (i) To broaden the understanding of how including a landscape-based approach to forest, forest-based products supply chains, and downstream industries into a broadened REDD+ architecture could help mitigate climate change mitigation outcomes; and (ii) to develop a private sector engagement strategy for enhanced private sector investment in REDD+ sustainable forest value chain and landscape restoration efforts.

The study examines six countries in detail: Ethiopia, Columbia, Mexico, Mozambique, Peru and Vietnam.  

RESULTS

All of the countries analyzed indicate that productive forests and harvested wood products (HWP) have a high potential for green growth, employment creation, and climate change mitigation. All countries are projected to have significant supply gaps of HWP, suggesting that there is substantial potential to mitigate climate change and spur economic growth by bolstering HWP value chains.

The study finds that substituting fossil-fuel-intensive materials with HWP provides the greatest mitigation benefit in all countries. Productive forests for HWP would be the second largest sequestration source in Mexico, Peru, and Colombia. In Vietnam, sawn wood production and productive forests for HWP are second most important. Ethiopia and Mozambique have much more potential to produce other industrial roundwood. Production of paper and paperboard offer a more limited mitigation potential due to the short life spans of these products.

Moreover, the study confirms that productive forests could help fill the expected gap in roundwood supply. For instance, the research projects project that Ethiopia’s demand for HWP will grow from 4.1 million m3 in 2013 to 16.7 million m3 in 2040. Increasing demand will result in a projected industrial roundwood supply gap of 13.3 million m3 in 2040, which could be addressed by establishing an additional 750,000 hectares of professionally managed productive forests.

Compared to other land use mitigation measures, HWP production offers an attractive opportunity to involve the private sector and catalyze investment in land use. A relatively small amount of public sector finance would be necessary used to stimulate large private sector investment, while also helping countries to achieve their Nationally Determined Contributions (NDC) objectives.

This study was complemented by an analytical paper on “Incentive Mechanisms towards Deforestation-Free, Forest-Smart Commodities.”

CHALLENGE

Investing in productive functions and use of forests through sustainable forest management (SFM), forest and landscape restoration, and afforestation and reforestation, could yield significant multiple wins of climate change mitigation, increased climate change resilience and adaptation, and green growth. Through the Stimulating Private Sector Engagement in REDD+, SFM and Landscape Restoration Activity, PROFOR is building evidence to support a broader approach to REDD+ that would incorporate the potential of productive functions of forests to mitigate climate change.

Current REDD+ approaches do not into take account the climate benefits that sustainable forests could provide outside of the forest sector, particularly in three key areas: substituting fossil fuels for renewable, forest-based energy sources; substituting fossil-fuel intensive construction materials; and creating a virtuous cycle of building the forest products carbon pool through durable, long-lived wood products combined with forest re-growth. Together, these areas could amount to as much as 20 percent of the global mitigation potential.

Such a radical expansion of the REDD+ approach would also address the unsatisfied need for timber, fiber and wood-based energy, which is a key driver of forest degradation and deforestation. Projections suggest that demand for fuelwood and charcoal will keep increasing beyond the year 2050 in order to meet the needs of around 2.5 billion people. At the same time, total demand for wood will grow faster than population growth, rising from a current 3.5 billion m3 to over 15 billion m3 per year.

APPROACH

The objective of this study is twofold: (i) To broaden the understanding of how including a landscape-based approach to forest, forest-based products supply chains, and downstream industries into a broadened REDD+ architecture could help mitigate climate change mitigation outcomes; and (ii) to develop a private sector engagement strategy for enhanced private sector investment in REDD+ sustainable forest value chain and landscape restoration efforts.

The study examines six countries in detail: Ethiopia, Columbia, Mexico, Mozambique, Peru and Vietnam.  

RESULTS

All of the countries analyzed indicate that productive forests and harvested wood products (HWP) have a high potential for green growth, employment creation, and climate change mitigation. All countries are projected to have significant supply gaps of HWP, suggesting that there is substantial potential to mitigate climate change and spur economic growth by bolstering HWP value chains.

The study finds that substituting fossil-fuel-intensive materials with HWP provides the greatest mitigation benefit in all countries. Productive forests for HWP would be the second largest sequestration source in Mexico, Peru, and Colombia. In Vietnam, sawn wood production and productive forests for HWP are second most important. Ethiopia and Mozambique have much more potential to produce other industrial roundwood. Production of paper and paperboard offer a more limited mitigation potential due to the short life spans of these products.

Moreover, the study confirms that productive forests could help fill the expected gap in roundwood supply. For instance, the research projects project that Ethiopia’s demand for HWP will grow from 4.1 million m3 in 2013 to 16.7 million m3 in 2040. Increasing demand will result in a projected industrial roundwood supply gap of 13.3 million m3 in 2040, which could be addressed by establishing an additional 750,000 hectares of professionally managed productive forests.

Compared to other land use mitigation measures, HWP production offers an attractive opportunity to involve the private sector and catalyze investment in land use. A relatively small amount of public sector finance would be necessary used to stimulate large private sector investment, while also helping countries to achieve their Nationally Determined Contributions (NDC) objectives.

This study was complemented by an analytical paper on “Incentive Mechanisms towards Deforestation-Free, Forest-Smart Commodities.”