An analysis of payment modalities in Vietnam – Lessons learnt from 7 provinces

An analysis of payment modalities in Vietnam – Lessons learnt from 7 provinces

Hanoi, 11th November 2015

Pham Thu Thuy and Le Ngoc Dung

Outline Background study/Research questions Methods Findings:

Equity discourse Forms of payment: In-kind vs. In cash Frequency of payment Payment distribution approach

Key messages

Key research questions What is the current discourse on benefit sharing and PFES

payment in Vietnam ? Are PFES payment made in-kind or in cash or in another

form? What criteria/factors local people use to choose in-kind and in cash payment ?

How frequently payments are being made in Vietnam ? And how does this frequency influence the PFES outcomes ?

What are existing payment mechanism be used by local people ? What are the pros and cons of those mechanism and their influence on PFES outcomes ?

Methodology

Literature review from lessons learnt on PES benefit distribution both internationally and nationwide

Semi-structured interviews: FPDFs, forest rangers and local authorities in 7 provinces

Focus Group Discussions: 15 FGDs with villagers

In-depth interviews: 351 in-depth interviews with villagers

Current equity discourse under PFES in Vietnam- Conflicting views and discourse at different level

• Benefits should go to forest stewards ("stewardship" rationale)

• Benefits should go to the poor ("pro-poor" rationale)

Benefits should go to actors with legal rights related to ecosystem services supply ("legal rights" rationale)

- Benefits should go to those who contribute to forest protection (“contribution" rationale)- actors incurring costs should be compensated ("cost-compensation" rationale)- benefits should go to effective facilitators of implementation ("facilitation" rationale)

Are PFES payment made in-kind or in cash ?

Provinces In-kind In- cash Combination of in-kind and in-cash

Son La x

Dien Bien x

Nghe An x

Bac Kan x

Lao Cai x

Thai Nguyen x

Lam Dong x

Factors influencing in-kind vs. in cashFactors In-kind In-cash Combination of in-

kind and in-cash

Distance to market and infrastructure

Long distance Close/short distance

Close/short distance

Level of incomes/wealthy

Disadvantaged communities

Relatively wealthy

communities

Disadvantaged communities

Level of trust – local communities towards governmental actors

High Low High

Existence of strong collective action and customary law

Strong presence Absence Formal and informal system exist

Financial capacities of authorities and villagers

Good capacities Weak capacities Good capacities

Pros and cons of in-kind and in-cashAdvantages Disadvantages

In cash • Greater flexibility in the use of resources

• Less prone to be seen as paternalism

• Reinvestment to other land uses• Raise participation in communal

tasks

• Reduce social motivations in case of collective action made on the basic of social norm

• Depends on financial management skills

• Investment in certain type of land uses creates pressure to forest

• Different implications of promoting collective action

In kind • More likely to lead to long-lasting benefits and predicable welfare improvement

• Potential to benefit the whole community

• Less flexibility• Might be seen as paternalism• Ambiguous implications for

promoting collective action within groups

• Depends on decision-making process

Frequency of payment ?Frequency of payment

Ratio Rationale

Son La 1 100%

Dien Bien 2 50-50

Nghe An 1 100%

Lao Cai 2 10-90 for HHs, 90-10 for state organisations

State orgs are more accountable

Bac Kan 2 50 – 50 for HHs and communities; 80 – 20 for state organizations

State orgs are more accountable

Thai Nguyen 1 100% Payment only made after ES is delivered

Lam Dong 4 20 – 20 – 20 - 40 Spread out to create stronger incentives

Paradox

PROVINCIAL FOREST PROTECTION AND DEVELOPMENT FUND

LOCAL COMMUNITIES

Small payment is okie as long as it is paid

when we need (harvesting time,

seedling requirements, school fees), and fixed when it will be made

Payment is made depend on availability and schedule of the Fund, cannot be

fixed

Paradox

PROVINCIAL FOREST PROTECTION AND DEVELOPMENT FUND

LOCAL COMMUNITIES

• Lack of incentives• Inequity between

State orgs vs. communities

State-owned orgs: 90-100%/1st payment

Individual: 20% - 30%/time

How the PFES payment is currently distributed?Province Distribute to

individual households

Payment through cooperatives

Payment to Forest Protection group

Payments to groups of households

Building infrastructure/improve communities hall

Setting up micro credit

Other forms

Son La x x x x x

Dien Bien x x x x

Nghe An x x x

Thai Nguyen

x

Bac Kan

Lao Cai x x x

Lam Dong x

3Es in options of benefit distribution intra communitiesOptions Effectiveness Efficiency Equity

Payments made to forest protection groups

Incentives for regular Low level of payment Few villagers can benefit

Common assets for community hall

Enhances community collective action

Does little to support the community’s economic development

All villagers can benefit

Building infrastructure Support livelihood development; reduce pressure on forest

Payments might not be sufficient to cover the costs of infrastructure

All villagers can benefit

Equal payments to all households

Enhances villager’s responsibility; reduce elite capture

Low level of payment All villagers can benefit (performance-based?)

Microcredit and livelihood strategies

Livelihood development; pressure on forests

A small number of households can benefit

Criteria to classify “poor” households

When to choose what BDS ?Enabling conditions

Individual households

HHs manage large area under PFES sufficient revenues and strong incentivesHomogenous conditions for HHs, neighbours have similar conditions and incentives

Group of households (10-15HHs)

HomogenousHistory of working together, same ethnic groupsWell-established groups (trust) amongst members

Cooperatives Group has a history of working towards livelihood improvements beforeAccountable structure should be in place

Village Fund Accountable systemStrong and accountable village leadershipClear monitoring and auditing protocol

Factors for relevant BDS selection Size of payment Social motivation complement with existing financial

incentives History of collective actions Leadership, financial capacity and accountability of local

management Discourse on equity and local preferences of local people on

BDS Location of the sites

Conclusions and key messages Combination of both in cash and in kind could

leverage the impacts of PFES Fixed schedule tailored to the need of local people

enhance commitment in delivering ES Ratio of payment needs to ensure the ES is

actually delivered A mixture of payment ensure benefits reach to

different groups and reduce the risks of inequity No one size fits all recipes and need to be locally

adapted Local preferences and perceptions changes

overtime - BDS has to be adapted overtime

We acknowledge the support from:the Norwegian Agency for Development Cooperation (Norad), the Australian Department of Foreign Affairs and Trade (DFAT), the European Union (EU), the UK Government, USAID, the International Climate Initiative (IKI) of the German Federal Ministry for the Environment, Nature Conservation, Building and Nuclear Safety (BMUB) and the CGIAR Research Program on Forests, Trees and Agroforestry (CRP-FTA) with financial support from the CGIAR Fund.

& all research partners and individuals that have contributed to the GCS research

Thanks