The majority of the poor in Vietnam Five in the country's hilly and mountainous areas. Many upland farmers provide significant environmental services that benefit the wider community. They do this through the environmentally friendly ways in which they implement forestry and other tree based land use activities. These services include watershed protection, biodiversity conservation, carbon storage and the preservation of landscape beauty. These environmental services are important because they support ecological balance, serve as the base for economic activities and provide a wide range of amenities for society (Francisco 2002).
This is recognized by the Vietnamese government and by international agencies and non-government organizations (NGOs) based in Vietnam. They provide incentives and rewards to some upland farmers to afforest and reforest bare hills and mountains and other areas. In Vietnam, upland reforestation and afforestation work started extensively in the early 1990s, under the support of PAM (the United Nations' Food Program), and through Program 327 (a nationwide reforestation programme) and other reforestation programmes. In 1998 the Vietnamese government launched the Five Million Hectares Reforestation Program (5MHRP), as a continuation of Program 327, in order to increase the existing forest cover of about 28 per cent to 43 per cent by the year 2010. The majority of upland farming households undertake reforestation work, and they are now the primary owners of planted forests.
The main problem facing the country's uplands is that a significant number of upland farmers still do not manage their land in sustainable ways and often clear cut the forest. Moreover, the majority of upland farmers are not paid for those environmental services they do provide. This problem is compounded by the fact that many of the planted forests managed by upland farmers are in ecologically sensitive/fragile areas.
The Payments for Environmental Services (PES) approach has emerged in recent years as a promising ecosystem conservation concept and tool. It also has the potential to improve the livelihoods of environmental service providers. A variety of PES programmes that pay individuals or groups for supplying ecologically valuable goods and services are already in operation (Ferraro 2001).
Given this situation, it is worthwhile to explore the potential for PES in Vietnam. This research study did that using an experimental approach. Payments were made to farmers who managed reforested/afforested plots in a sustainable way through, for example, selective cutting and complementary planting. The experiment was intended to answer the following questions:
* What factors determined a person's decision to join the study's PES scheme?
* What changes would take place in the allocation of household labour resources as a result of the adoption of the study's PES scheme?
* The cost of a PES programme includes not only the amount paid to the households but also the transaction costs (TC) associated with establishing and monitoring the scheme. How much would the TC of the project be?
II. Principles of Payments for Environmental Services
Payments for environmental services (PES) can be broadly understood as economic incentives that are provided in return for environmental services. These services can be provided by environmentally beneficial activities such as reforestation, watershed protection and soil conservation. The performance of a PES in achieving environmental objectives is often measured in terms of changes to land uses that are likely to generate the desired services. This is because environmental services can be hard to measure and monitor directly. PES are designed and implemented to make it more worthwhile, in both financial and livelihood terms, for individuals and/or communities to maintain, rather than to degrade natural resources. …