VZCZCXRO5165
OO RUEHAST RUEHDT RUEHLN RUEHMA RUEHPB RUEHPOD RUEHTM RUEHTRO
DE RUEHHM #0031/01 0130100
ZNR UUUUU ZZH
O P 130100Z JAN 09
FM AMCONSUL HO CHI MINH CITY
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5303
INFO RUEHHI/AMEMBASSY HANOI PRIORITY 3526
RUEHHM/AMCONSUL HO CHI MINH CITY PRIORITY 5539
RUCNARF/ASEAN REGIONAL FORUM COLLECTIVE
RUEHZN/ENVIRONMENT SCIENCE AND TECHNOLOGY COLLECTIVE
RUEHC/DEPT OF INTERIOR WASHINGTON DC
RHMFIUU/DEPT OF JUSTICE WASHINGTON DC
RUEAEPA/HQ EPA WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC

UNCLAS SECTION 01 OF 02 HO CHI MINH CITY 000031 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/MLS, USAID/ANE, EEB/TPP/BTA/ANA, OES/STC, OES/ENRC (SCASWELL AND 
HSUMMERS) 
INTERIOR FOR INTERNATIONAL AFFAIRS (KWASHBURN AND KSENHADJI) 
JUSTICE FOR ENVIRONMENT AND NATURAL RESOURCES (JWEBB) 
USDOC FOR 4431/MAC/AP/OPB/VLC/HPPHO 
TREASURY FOR CHUN 
 
E.O. 12958: N/A 
TAGS: ECON ETRD EAGR EIND SENV SOCI PGOV PREL VM
SUBJECT: ENVIRONMENTAL FEES FIGHT POVERTY, SAVE FORESTS IN VIETNAM'S 
CENTRAL HIGHLANDS 
 
REF: 08 HCMC 1099 "WILDLIFE PROTECTION AND SUSTAINABLE DEVELOPMENT" 
 
HO CHI MIN 00000031  001.2 OF 002 
 
 
¶1. (SBU) Summary.  Vietnam has lost a staggering 80 percent of 
its old-growth forest in the last 20 years, a calamity that the 
GVN's underfunded and unenforced Forest Protection program '661' 
has failed to prevent.  A USAID-supported Payment for 
Environmental Services (PES) initiative, however, is harnessing 
market incentives and fiscal reforms to channel payments from Ho 
Chi Minh City (HCMC) power and water utilities and private 
sector tourism companies to rural households in neighboring 
provinces to conserve standing forests.  As it enjoys high-level 
GVN political support, the PES program stands to serve as a 
national, and ultimately regional model, as a well as a 
framework to incorporate future carbon offset payments.  End 
summary. 
 
Sound of Chainsaws leads to National Park Crime Scene 
--------------------------------------------- -------- 
¶2. (SBU) When, during EconOff's visit to the Central Highlands' 
Yok Don National Park (NP), the roar of a chainsaw broke the 
jungle silence, the park ranger serving as guide asked to borrow 
EconOff's cell phone.  After the ranger called for 
reinforcements, a dozen Forest Protection Department (FPD) 
officers descended upon a makeshift loggers' camp and detained 
ten loggers, two chainsaws, and the bicycles on which they were 
smuggling large blocks of illegally cut wood out of the park. 
The ranking FPD officer noted that the local poachers were 
invariably too poor to afford the mandated fines, so instead 
suffered confiscation of their tools and a month of unpaid labor 
in the park.  Despite this successful episode, the park staff 
and media report that the approximately 100 FPD rangers assigned 
to protect the forests and wildlife in the 285,000 acre park, 
Vietnam's largest, are fighting a losing war of attrition with 
local timber poachers. 
 
Underfunded and Unenforced GVN Program Fails Forests 
--------------------------------------------- ------- 
¶3. (SBU) Denuded hillsides in Dak Lak province outside Yok Don 
NP -- as well as frequent media reports of illegally clear cut 
or burned forests throughout the Central Highlands -- attest to 
the failure of the GVN's efforts to enlist local stakeholders in 
forest protection efforts. Using public funds, Forest Protection 
program '661' contracts individual families to protect 75 - 100 
acres of forest for an annual payment of roughly $200.  While 
not an insignificant sum in the poverty stricken Central 
Highlands, $200 is insufficient incentive for families to 
actively protect forests, especially as they can illegally 
"sell" the timber for thousands of dollars, usually without fear 
of legal repercussions.  As a senior FPD official told EconOff, 
"since the forest protection contracts are not policed, the 
program cannot succeed." 
 
Harnessing Market Incentives to Keep Trees Standing 
--------------------------------------------- ------ 
¶4. (SBU) In neighboring Lam Dong province, a pilot USAID - 
supported payment for environmental services (PES) initiative 
will compensate the province's rural poor for protecting 
watershed forests that are the source of much of Bien Hoa's and 
HCMC's drinking water and hydroelectric power.  Public utilities 
Electricity of Vietnam (EVN) and the Saigon Water Corporation 
(SAWACO) have contracted to pay environmental service providers 
$3.3 million in 2009.  This includes an average $730 annual 
stipend to some 3,000 rural households in the Dong Nai river 
basin to maintain standing forests.  Implementing NGO Winrock 
International plans to monitor compliance by purchasing 
satellite images (for one dollar per 2.4 acres) of the 
contracted areas with the agreement and support of public 
security agencies on this potentially sensitive issue. 
 
Rationale Incentives Get SOEs on board the PES express 
--------------------------------------------- --------- 
¶5. (SBU) Winrock used technical data to make the link between 
deforestation, increased sedimentation and loss of operating 
capacity at their plants to convince an initially skeptical EVN 
and SAWACO that PES was an investment, not a cost.  Winrock 
engaged the utilities in lengthy discussions about how to 
monetize the impact of siltation on turbine wear, decreased 
reservoir capacity, and unstable seasonal runoff (which leads to 
dry season power shortages) and the improvement in water quality 
 
HO CHI MIN 00000031  002.2 OF 002 
 
 
brought about by forest floor filtration.  These talks helped 
the utilities establish the monetary value of conservation 
efforts so that they could pass that value from power and water 
consumers (including hydropower, urban consumption and 
irrigation) to the rural poor protecting watershed forests. 
 
Fiscal Decentralization Key to Implementing PES 
--------------------------------------------- -- 
¶6. (SBU) The last building block for a successful PES framework 
was GVN policy changes to allow effective collection and 
distribution of environmental services payments.  Winrock 
advised the Prime Minister's Office of Government on a fee 
system that allows government entities such as municipal water 
authorities to charge fees for environmental services, and on 
including PES in Vietnam's Biodiversity Law.  Further fiscal 
decentralization, which allows HCMC utilities to transfer funds 
to environmental service providers in other provinces, bypassing 
Hanoi ministries, streamlines the process and increases 
efficiency.  This is a first for the GVN and took place with 
full support and guidance from the Ministry of Finance. 
 
Comment 
------- 
¶7. (SBU) The GVN's publicly-funded forest protection effort 
'661' has degenerated into a low-value rural anti-poverty 
program that is not fulfilling its stated function.  The 
ambitious PES program being piloted in the Central Highlands, on 
the other hand, incorporates market incentives, progressive 
behavior by stereotypically retrograde SOEs, and an innovative 
market-based fee system for environmental services policies that 
is among the first of its kind in Asia.  As a result it has 
tremendous potential to simultaneously advance economic 
development, reduce rural poverty and attain environmental 
protection goals.  The PES project also appears to have 
high-level GVN political interest and support, indicating it can 
be replicated nationally, and serve as a regional model.  The 
PES system also constitutes a framework into which carbon 
offsets payments could easily be incorporated, the value of 
which for Vietnam according to some climate change analysts 
could exceed $100 million annually. 
 
¶8. (SBU) Specifically, the PES program is working with national 
and provincial officials to establish carbon offset payments for 
forest conservation in the Lam Dong province pilot site as a 
model for a national-level program.  At the regional scale, 
Winrock is partnering with the Asian Development Bank, the 
Association of South East Asian Nations' Center for Biodiversity 
and the United Nations Economic and Social Commission for Asia 
and the Pacific to catalyze and implement national PES support 
programs across the region.  The PES model will be replicated in 
Cambodia and Aceh at the request of the Cambodian and Indonesian 
governments under this regional program.  End Comment. 
 
¶9. (U) This cable was coordinated with Embassy Hanoi. 
FAIRFAX