VIETNAM
Deforestation, reforestation and industrial plantations
by Chris Lang

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The Vietnamese government started its first plantation programme in 1956. However, in the last decade, government support to plantation development has accelerated, first through Programme 327 and, since 1998, through the Five Million Hectare Reforestation Programme (5MHRP).

This section looks at Programme 327 and the 5MHRP followed by a brief look at some of the laws the government has passed which benefit the development of industrial plantations.

On 15 September 1992, the then-Prime Minister, Vo Van Kiet, announced Programme 327 in Decision 327-CT. The Decision, entitled "On the policy of the use of open and barren hills, alluvium shores and water bodies", aimed to achieve the following:

• regreening of the major part of the degraded hills,
• utilisation of bare land in hilly areas, of coastal alluvial flats, and of water bodies for production of goods and supply of industrial raw materials,
• fulfilling the programme for fixed cultivation and sedentarisation,
• stabilising and gradually improving the material as well as the spiritual life of people in new economic zones and of people belonging to ethnic minorities,
• creating incomes to the State and consolidating the national security (GOV 1992b).

Article 1 of Decision 327-CT encourages the establishment of projects on bare land and degraded hills "in order to use the land". Article 2 gives priority to "projects with quick return of funds", and aims for the promotion of a "close linkage between processing industries and the domestic as well as the international market". Article 10 emphasises international cooperation particularly involving funding from the private sector, and Article 11 encourages state enterprises, households, companies, and foreign joint ventures to invest in plantations on bare lands in new economic zones (GOV 1992b).

The targets for reforestation under Programme 327 were ambitious, with the government aiming to plant five million hectares in 10 years (Nguyen Cat Giao 1995: 26). The actual number of projects established is difficult to ascertain, however, as reports vary from 1,200 projects at a cost of US$60 million, (Nguyen Cat Giao 1995: 28), to 800 projects at a cost of US$50 million (Nam Binh 1994: 5) both in September 1994, to 426 projects at a cost of US$12 million, in June 1994 (VN 1994c: 1).

The areas planted, and the areas of forest land allocated for future planting are even more difficult to establish. MARD estimates that 638,500 hectares of tree plantations were established under the project between 1992 and 1998 (Salmi et al 1999: 7).

Programme 327's objectives changed as time went on. In 1993, the government abolished state funding of forest enterprises, leaving many state forest enterprises with a funding crisis (Doran and Vo Quy 1993: 3). Programme 327 provided a life-line through which forest enterprises could continue to receive state funding.

In 1995, the Prime Minister issued Decision Number 556 which amended Programme 327 by focussing the programme on protecting forest from shifting cultivation and replanting bare land and hills on land classified as protection forest or special use zones, especially in mountainous and midland areas (Fortech 1998: 4) (Salmi et al 1999: 7).

In 1996, the programme became the "National Program to Create and Protect Watershed Protection and Special-use Forest". "Regreening bare hills" was now to be the focus (Fortech 1998: 4). Plantations for production were removed from the programme (Salmi et al 1999: 7).

In May 1995, representatives of Vietnam's Ministry of Forestry visited Washington, in order to present programme 327 to the World Bank, hoping to attract Bank funding for the project.

They were unsuccessful, and by 1998, Programme 327 had cost the government approximately US$213 million (Salmi et al 1999: 19).

In 1998, the World Bank hired Australian forestry consultants Fortech to "describe, analyse and evaluate" Programme 327. Although official data reports that Programme 327 was largely successful, Fortech's report is very critical of the Programme and states: "In practice, the Government acknowledges that the area of natural forest in protected and production areas has decreased; forest plantation programs have mostly failed; and that rural development in mountainous communities has stalled. Plantations established under the Program do exist in the field but are generally poorly stocked and suffer low growth rates. Industrial plantations also exist but these are located in a few selected areas and only on good soils. The majority of land targeted for Program 327 funding is poor quality and degraded" (Fortech 1998: 11).

Among the problems listed by Fortech's consultant are a top down bureaucratic approach, land allocation that does not involve local people, poor silvicultural practices, the project was simply imposed on poor households without their input, and Vietnam has little land available for large scale tree plantations (Fortech 1998: iii).

Fortech's consultant points out that projects designed under Programme 327 allow villagers little opportunity to use land allocated for tree planting according to their knowledge of what would work best. The consultant comments that bureaucrats in Hanoi, who must approve the projects, "cannot possibly choose projects relevant to the constraints facing local people" (Fortech 1998: 12).

Although projects under Programme 327 did sometimes provide some benefits to households, it was only once the trees could be cut down. For example, if the project involves reforesting bare land households received a percentage (usually 50%) of the income when the trees are cut and sold (Fortech 1998: 6). However, while they wait for the trees to grow, villagers lose access to their land. One of the key reasons that plantations fail in Vietnam is due to damage from grazing animals – the land that appears to be simply "bare land" is in fact often already in use.

The problem is summed up by Fortech's consultant, Scott Poynton: "The Government sees land in 327 project areas as plentiful, bare and unproductive. Local households view it differently. For them, land is scarce. Households adjacent to bare land establish and defend use rights over the bare areas. They will use as much of it as they can to grow food. If the land is unable to support food crops, they'll try cash crops such as rubber, coffee, tea or fruit trees. If these fail, the land will be used for grazing as cattle or buffalo can return annual income. Trees are generally the last option tried by local people because of the long wait for income. It is not surprising that most 'fast growing' tree plantations in Vietnam suffer extensive grazing damage" (Fortech 1998: 15-16).

Perhaps as a result of its failure to secure World Bank funding for Programme 327, the Vietnamese government proposed a new and bigger programme to replace it: the Five Million Hectare Reforestation Programme (5MHRP).

The programme was developed in a report entitled, "Strengthening of reforestation, re-greening of open land and bare hills as a way to reduce harvesting in natural forests" (MARD 2000). On 5 December 1997, the 10th National Assembly agreed the "Resolution On Establishment of Five Million Hectares of New Forest".

The Prime Minister announced Decision 661/QD-TTg on the Five Million Hectare Reforestation Programme on 29 July 1998. The government established a fund (known as Fund 661) to fund projects under the programme (MARD 2000).

Decision 661 outlines the following targets for the programme:

• Efficiently protect the existing 9.3 million hectares of forest;

• Create two million hectares of special use and protection forests, as watershed protection and to protect against wind, sand and waves. One million hectares of the total area is to be established through natural regeneration and one million through plantations;

• Create three million hectares of production forest, of which two million hectares is to be plantations to provide raw material for paper, pit-props for mines, timber, and one million hectares of long-term industrial crops and fruit trees;

• 50 million trees per year to be planted around houses, offices, schools and along roads and dykes to provide fuelwood and material for domestic furniture (MARD 2000).

The programme's target is to increase the area of "forest" in the country to 14 million hectares by the year 2010. The target area – five million hectares – came from French maps of 1943 which indicate that 43 per cent of Vietnam was then forested, five million hectares more than official figures in the mid-1990s when the programme was first dreamed up. Of the five million hectares the government plans to designate one million hectares to plantations for pulp production.

According to Article 1 of Decision 661, the programme aims to:

• Speed up forest plantation, re-green bare land, protect existing forests as well as new forests, and increase the forest cover to more than 40% of the country;

• Create employment, increase rural incomes, develop production and ensure national defence and security; and

• Create raw material areas and develop industries to process forest products (MARD 2000).

Article 2 states, "With regard to protection forest, priority investment should be given to the vital key protection regions, head waters, reservoirs, especially the headwaters of the hydropower projects, cities, coastal protective areas and areas with urgent need of ecological rehabilitation" (MARD 2001a).

Article 2 also states: "people are the driving force for establishment, protection, and regeneration of forests and are entitled to enjoy benefits from forest-related activities" and "the creation of new forests will be implemented in the form of a number of local projects designed in close cooperation with the local people" (MARD 2001a).

In December 1998, during the Consultative Group meeting in Paris, international aid agencies got involved when they agreed to form a partnership to support the 5MHRP (MARD 2000). A year later, in December 1999, a Memorandum of Agreement to form a formal Partnership was signed between MARD and the representatives of 15 aid agencies and NGOs: World Bank, ADB, FAO, World Food Programme, WWF, IUCN, UNDP, JICA and the governments of Finland, Sweden, Holland, Japan, Switzerland, Germany, Denmark.

The total planned investment up to 2010 is US$2.5 billion, of which US$1.4 billion is to come from international aid agencies (Fortech 1998: 19). In its first two years of existence the 5MHRP received US$70 million each year in official development assistance, 70 per cent of which was non-refundable aid (VNA 2001b).

A "Joint Partnership Steering Committee" was established consisting of representatives of the Vietnamese government and international aid agencies.

The Swedish International Development Agency (SIDA) is one of the agencies involved in the discussions with the government about the 5 Million Hectare Reforestation Programme. Rolf Samuelsson, First Secretary at the Swedish Embassy in Hanoi, described SIDA's attitude to the project: "We think it's perhaps a rather squarishly top down plan type of programme, political agenda and so forth. But as Sweden is very much encouraging partnerships and sector-wide programme approaches we think this programme, for all its constraints, is a good starting point for a dialogue with the government on forestry issues" (Samuelsson 2001).

Other agencies involved in the Joint Partnership Steering Committee include the Netherlands, Germany, FAO, UNDP, WWF and the World Bank. Some of these agencies are already involved in funding or are planning other reforestation projects in Vietnam. (See section on International Support, below.)

While the aid agencies and the Vietnamese government discuss the future funding of projects the government has started planting. In 1999, 206,000 hectares of "forests" were planted, out of a target of 310,000 hectares. The target for 2000 was for 403,000 hectares with a state budget of approximately US$25 million.

MARD has even attempted aerial seeding, dumping 7.5 tons of pine and acacia seeds in an area of 2,500 hectares in Lai Chau province (VNA 1999). This was not a one off event but part of a two-year project costing US$700,000 (Nhan Dan 28 June 1999).

In 2000, around 400 projects were implemented under the 5MHRP. however most of these were projects that had carried over from Programme 327. SFEs tend to prepare new projects that are in any case similar to those under Programme 327, partly because this is what they are used to, but partly because there are no clear guidelines, criteria or indicators for project implementation and monitoring under 5MHRP (MARD 2001a).

In April 2000, UNDP reported that most of the resources supporting the 5MHRP Task Forces had come from Germany and UNDP, through existing projects: REFAS and PROFOR (UNDP www 1). (See section on International Support, below.)

FAO provided US$287,000 for technical support for the 5MHRP between 2000 and 2001. The support aimed (among other things) to "improve the methodology used for evaluating forest land in Viet Nam with respect to its potential and its suitability for specific purposes of tree planting and natural forest regeneration" (FAO www 1). An agreement was signed by permanent Deputy Agriculture and Rural Development Minister, Nguyen Van Dang and FAO representative in Vietnam, Fernanda Guerrieri, on 7 December 2000.

The Partnership of aid agencies, NGOs and the Vietnamese government established three Task Forces to investigate the proposed 5MHRP and to come up with recommendations. The Task Forces had the following tasks:

I: Clarification of the 5MHRP;

II: Forest Policy, Strategy, Institutions; and

III: Forest Sector Investment, Assistance Needs, Financing Strategy and Partnership Support Structure (UNDP www 1).

At the end of this study phase of the 5MHRP, WWF and the World Bank, through their "Forest Alliance", contributed US$10,000, "for the Partnership to build on the study results in the 2nd phase of the Partnership" (WWF 2001).

In April 2000, UNDP Vietnam stated on its web-site "At present, the participation of the Vietnamese side in

the Partnership process does not yet fully reflect the importance of the 5MHRP for the sector. Meetings and work in the Task Forces appears to be driven mostly from the donor side and not be well linked to the on-going 5MHRP implementation process" (UNDP www 1).

In April and May 2001, a Joint Formulation Team (one international consultant and three Vietnamese consultants) produced a Forestry Sector Support Framework. The co-chairman of the Partnership Steering Committee is Wijnand van Ijssel, First Secretary at the Netherlands' Embassy in Hanoi. In mid-November 2001, the Minister of Agriculture and Rural Development and heads of international aid agencies signed a revised MoA. The name of the 5MHRP Partnership changed to the Forest Sector Support Program and Partnership (FSSP&P) and now covers the entire forestry sector (UNDP www 2).

The international aid agencies backing the 5MHRP appear to be using the programme to encourage further privatisation in Vietnam. For example, "If the Government wants to achieve similar development results in forestry as have been realized in the agricultural sector, however, it needs to provide the necessary framework conditions. These conditions would include reducing government's productive activities and leaving enough room and freedom for the private sector to develop" (MARD 2001a).

Under 5MHRP the government only funds protection "forests" leaving commercial plantations and other production forests to the private sector. So far there have been way more protection projects established than commercial plantations under the project. "In the list presented by the Ministry of Agriculture and Rural Development in late 1999, 483 domestic projects in the National Five Million Hectare Reforestation Programme belong to the categories 'protection forestry projects' (364) and 'production forestry projects' (119)" (Vu Hoai Minh et al 2000: 17).

The five million hectare programme is not only aimed at increasing the area of industrial tree plantations. It also states that "land allocation must be conducted openly and democratically" (MARD 2000). However, the projects under the programme must ultimately be approved by the MARD, meaning that the projects must fit in with the bureaucratic requirements of Hanoi-based officials. There is a danger that local people's knowledge and skills will be excluded from the design of the projects.

A report produced for MARD in 2001 under the 5MHRP, states that shifting cultivation provides the main source of food for many people in Vietnam and also plays an important role in natural regeneration and the conservation of biodiversity. "More often than not, forest clearance is the result of spontaneous migration, which leads to the loss of parts of 'resident' shifting cultivators' fallow land." Further, over the last twenty years, few shifting cultivators have actually abandoned their shifting agriculture. MARD's report concludes, "the assumption that ethnic minorities are principally responsible for forest clearance would be a misleading one within the framework of the 5MHRP initiatives" (MARD 2001a).

Yet, Le Sau, the director of the National Institute of Forest Survey and Planning was reported in 2001, to have stated that in addition to defoliation by American forces during the war, ethnic minority groups practising "slash and burn" agriculture destroyed forested areas (AP 2001). When government officials carry out land allocation and land use planning in indigenous peoples' areas attitudes such as Le Sau's can predominate. To many government officials fallows are simply "unused lands". Local people thus lose part of their farmland when it is targetted for reforestation. If fallow areas are planted with trees, farmers have no choice when the time comes to re-use the land, other than to clear another area for their crops, or to cut down the planted trees. Further, current tenure regulations do not permit joint ownership by communities. Common land is therefore at risk of being privatised through the land allocation programme.

The 5MHRP provides a new source of funding for State Forest Enterprises. Since 1993, SFEs have not received yearly management fees but have to compete to receive state funds for forestry projects. For SFEs with little land available for plantations, the 5MHRP provides an incentive to clear forest and apply for funding to set up plantations.

In addition, a report prepared for the 5MHRP in December 2000 points out that there are no safeguards within the programme to prevent planting up of land that is not naturally forested, such as grasslands and mudflats (MARD 2000).

Many provinces have classified their "forests" with a view to securing state funding. Thus what was once production forest becomes protection forest simply in order to be eligible for funding from reforestation programmes (MARD 2001a).

The problem is summarised in a report produced for the MARD in February 2001: "Due to the shortage of financial, technical and human resources, as well as the failure to initiate enterprise reform, SFEs have largely become incapable of effective forest management, surviving instead on commissions generated through national programs" (MARD 2001a).

A further problems occurs in reporting on projects funded through 5MHRP. Because SFEs are dependent on future funding through 5MHRP there is little incentive to report accurately the success (or failure) rates of projects under the programme. A report produced in February 2001, for MARD, states that "The 5MHRP's lack of concrete objectives, criteria and indicators has mostly prevented transparent decision-making, monitoring and evaluation. Without increased possibilities for verification, provinces have to resort to the political process (and political patronism) to ensure access to Program funding. In the process, the rationale and feasibility of sub-projects becomes of secondary importance" (MARD 2001a).

The same report states, "on the one hand exotic monoculture tree plantations are often unsuited to local conditions, become vulnerable to fire, pests and diseases, and undermine the potential for biodiversity protection or rehabilitation; and on the other hand, exotic species tend to crowd out slower growing local species, as has been observed in many field sites" (MARD 2001a).

The report recommends a further study into promotion of commercial plantations: "A more thorough analysis is needed to justify the big investment in commercial plantations implied in the 5MHRP. Basically, the study should answer the question: 'Under what conditions (soil, market, infrastructure) is it feasible to invest in commercial plantations?' This study would be dynamic, and take into account available areas and their soil and climatic conditions, transport infrastructure, demand and supply situation of wood and forest products within and outside Vietnam, existing and planned processing units, market prices, production potentials under different conditions and silvicultural treatment, and production costs and returns. This study may give a basis for a national policy on commercial forest plantations and forest industry development" (MARD 2001a).

The 5MHRP includes very ambitious proposals for increasing the area of commercial plantations. Yet, more than two years into the programme, there was apparently no study of what these plantations are for. Even more alarming is that Vietnam's policy makers, and their international advisors and funders, show little interest in studying the impacts of commercial plantations on local people, their livelihoods and their environment.

Vietnam's land policy reforms began in 1981 and started by de-collectivising land ownership. This was followed in 1988 by resolution 10 NW.TW which allowed households long term land use rights (Carew-Reid et al 1999: 66).

In July 1993, the Vietnamese government introduced a new Land Law which clarified the allocation of land to families started under the 1988 resolution. Under this law, land could be allocated for 20 years for agricultural crops, and up to 50 years for forestry (Ton Gia Huyen 1995: 14). Land allocations for forestry are renewable (Salmi et al 1999: 17.18).

Since 1993, land use rights can be allocated to individuals, households and organisations (either state-owned or private). State forest enterprises can receive longer than 50 years rights to forest land but foreign companies or individuals are not allowed to receive land use rights (Salmi et al 1999: 17-18).

The 1993 Land Law was drafted with the support of the World Bank's legal department (Chossudovsky 1994: 19). During the early 1990s, the Bank carried out a land use research project in Vietnam, under the leadership of Gary Budgen, an international property law partner with Australian law firm, Mallisons Stephen Jacques. His role involved drafting policy on land use and establishing a registration system to assist the government in dealing with foreign investors (Vietnam Today 1994 Vol. 2 No. 3: 8).

The 1993 Land Law allows provincial authorities to determine land use and allows them to allocate or confiscate land accordingly. Such powers, accompanied by provincial government and forest enterprise needs to generate their own funding, have led to an increase in commercial crops, including industrial tree crops, often at the expense of subsistence economies of village communities (Houghton 1996: 39). For example, in Song Be province, one of the most popular provinces with foreign investors, investment in plantation projects has occupied large tracts of land, eroded farmers' land rights and turned farmers into permanent tenants rather than landowners (Ratcliffe 1994: 2).

In 1998, the government announced amendments to the Land Law, which divided land into six categories: forest land, agricultural land, rural residential land, urban land, special land and unused land. Forest land was divided into forested land and non-forested land planned for reforestation. The 1998 Land Law makes a distinction between "plantation forest" and "natural forest" (MARD 2001a).

The 1998 Land law amendment allows organisations, but not individuals, to use the value of timber growing on allocated forest land for mortgages. Organisations can also use the land as capital contribution for forestry joint venture projects (Salmi et al 1999: 17-18).

In November 2001, the government passed yet another revision to the land law, this time allowing foreign banks to take land use rights as collateral for loans and attempting to help set up a land market (Mekong Sources 26 November - 1 December 2001).

While land allocation has helped to improve the situation for many farmers, and contributed to a boom in rice production in Vietnam, the allocation of forest land is not straightforward. By the end of 1999, rights had been allocated to 86 per cent of crop land but only 9.8 per cent of forest land (Carew-Reid et al 1999: 66). The current land allocation process is meaningless to farmers practising swidden agriculture as they can only claim ownership to land that is currently in use. Common land rights are also not recognised under the Land Law.

The land law has important implications for plantation development. A 1999 report produced for PROFOR Vietnam illustrates the point: "Clear and secure land use rights are essential for forestry development . . . Everywhere in the world forestry, with special reference to forest plantations, has proven to be successful only where tree tenure (and more preferably, land tenure) has been legally and clearly provided" (Salmi et al 1999: 17-18).

Phan Huu Thang, of the Ministry for Planning and Investment, also confirms the importance of land allocation for plantation development: "Land allocation is proceeding but is slow and documentation for land tenure is necessary prior to any forest plantation activity. The cost of land allocation is high and this reduces the amount of funding available for plantation establishment" (Phan Huu Thang 1996: 35).

Forestry and plantation activities are taxed at various points of the operation: resource tax, agricultural land use tax, land rental, export/import tax, value-added tax and enterprise income tax. However, there is also a wide range of tax reductions and exemptions for forestry. The forest and plantation industry is often substantially protected through the import/export tax structure.

The Vietnamese government offers a number of incentives to the plantation industry, including:

• longer land leases for plantations than for other activities;
• exemptions from land rent for the first five years; and
• a 50 per cent reduction of land rent for the following five years.

However, the industry is lobbying the government for further subsidies, such as:

• revenue tax breaks of at least 50 per cent during the first five years;
• exemptions from import taxes on equipment, machinery and vehicles for plantation and processing activities; and
• low interest and long term loans (WRM 1998).

The Vietnamese government currently taxes export of woodchips. A report for the 5MHRP states that "export taxes on products in which Vietnam has a competitive advantage, such as woodchips, need to be removed" (MARD 2001a).

In January 1999, the government passed a value added tax (VAT) Law which included a zero rate for unprocessed forest products from plantations (Salmi et al 1999: 35).

In May 1997, Vinapimex had more than 15,000 tons of paper unsold because of competition from cheap imports. Later in the year, the government imposed restrictions on importing paper that could be made locally, in order to support the domestic industry (Reuters 30 June 1998).

Vietnam may in the future have to remove such tariff barriers on timber products in order to comply with Asian Free Trade Area regulations. When this happens, lower priced imports will threaten inefficient domestic production – leading either to closures or improved efficiency (cheaper production). Vietnam's plantations will be in direct competition with Australia, Indonesia and New Zealand. MARD predicts that the raw material timber market in the Pacific Rim could be flooded with low-priced wood within five years (MARD 2001a).

In March 1999, after a meeting with foreign investors, the government passed Decree 53 which provides more incentives for foreign investors in Vietnam. The incentives include:

• cheaper electricity;
• no VAT to be charged on imports that foreign companies need to manufacture goods that are to be exported;
• tax on companies transferring profits abroad reduced to five per cent; and
• companies that export more than 80 per cent of their products are exempt from land rent (Salmi et al 1999: 32).

These incentives, particularly the last one, are clearly of benefit to wood chip operations in Vietnam which export their products mainly to Japan and Taiwan. The incentives also have the effect of favouring international companies' over local companies in developing the pulp and paper industry in Vietnam.

On 22 July 1992, two months before he announced Programme 327, Vo Van Kiet announced Decision 264-CT. Entitled "On policies encouraging the investment for forestry development", this law allows the state to hand out credits at preferential interest rates (30-50 per cent of the market rate) for short rotation plantations supplying raw material for pulp and paper. Repayment of the loans is only at the end of the production cycle and the interest is simple rather than compound (GOV 1992a).

In October 1999, the government announced another decision providing cheap loans to the plantation industry: Decision of the Prime Minister No. 211/1999/QD/TTg. Under this decision, the interest rate for loans to establish industrial forest plantations is 0.81 per cent per month. Interest is charged at simple not compound rates and principal and interest is only due when the timber is cut. The loans can be made to individuals, households and forest owning institutions (Salmi et al 1999: 24). The interest rate under this decision is the same as the interest rate charged by the Vietnam Bank for the Poor in mountainous and remote areas – the plantation industry and the poor are treated as equally in need of cheap loans.

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