China services to the buyer over time period.

China and Vietnamhave established some of the most promising payments for ecosystem services(PES) initiatives for watershed conservation and forest management. China’s SlopingLand Conversion Programme (SLCP) and Vietnam’s pilot projects for Decision 380subsequent PES laws are one of these initiatives. The selected research paperis reviewing how these two actions are meeting their environment anddevelopment objectives in terms of their institutional arrangements,implementation in practice, and sustainability prospects. The fundamentaldefinition of PES was defined as a voluntary transaction for distinctecological services, with at least one buyer, one provider, and based on thecondition that the payment continues only if the provider(s) provides thedefined ecosystem services to the buyer over time period.

Though PES does notspecifically target poverty alleviation, yet these payments can offer betteropportunities to the service providers for a diversified livelihood and greaterwell-being with fair incentives for exchange of services. Since both theparties can receive benefits from PES outcome, the acceptance by potentialparticipants may be more for PES than for the government laws or regulations. Theincentive-based environmental policy programmes, called as PES oreco-compensation in China and Vietnam, gained rapid development and globalspotlight. There has been a substantial political determination to expand pilotprograms and learn from experiences from local diversification of nationalschemes for domestic and international environment. As a result of economic growth, rapid urbanization,population explosion, and increased demand for marginal land have affected theenvironmental conditions and natural resources negatively.

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Major elementsrelated to land degradation includes soil erosion, deterioration of waterresources, deforestation, desertification and loss of biodiversity. The mountingsocial and environmental problems as a result of increasing developmentdiscrepancies and denudation of natural resources, have taken care by both thegovernments by introduction of laws, institutional frameworks, and publicprograms.This study wants to create an insight forwater and forest management, based on experiments with incentive based schemesin these traditionally command driven countries to achieve their environmentand development goals; and implications for large scale government-run programsin conserving the perception of PES from concept to action.

This is evaluatedthrough examination of program’s legal and institutional frameworks,implementation in practice, and prospects for long-term sustainability. The twonational program considered for study here are the Sloping Land ConversionProgram (SLCP) in China and the PES pilots being implemented in associationwith Decision 380 in Vietnam.  BackGround China’sSLCP : After the Yangtze River flood of 1998, China’s centralgovernment recognized the extreme impacts of steep slope farming on theecological loss of services of forest and grasslands on slopes, in particularthe effect on run-off and soil erosion. SLCP was introduced in year 1999 by thegovernment also known as Grain for Green or the Conversion of Cropland toForests and Grasslands Program, as the largest known land retirement programworldwide. The farmers with field on slopes 15-25° or greater, have the optionto transform the field into ‘ecological forest’ (timber producing) or ‘economicforest’ (farming cash crops). In exchange they were given in-kind subsidy ofgrain or cash, on annual basis. Based on type of conversion and region locationof land (w.r.

t. different fertility of land), period of compensation differed.SLCP, the first national PES program, could directly engage at household leveland encouraged voluntary participation in terms of choice of farmers forparticipation and type of land management. Vietnam’spilot projects implementing Decision 380 and subsequent PES legislation:  Withmountainous terrain and monsoonal climate, the rural upland area forest’swatershed services play significant role in Vietnam’s economy mainly asagriculture and hydropower sector. Incentive based program, Program 661(Decision No. 661/QD-TTg/1998), introduced by Vietnamese government to promotesustainable development that aimed to increase forest coverage by five millionhectares within a period of 12 years (1998-2010).

In 2007, Decision no. 380/QD-TTg/2008, a national PES policy contained legal, institutional, andfinancial guidelines pertaining to PES. Important forest watershed services aswater flow regulation, soil erosion reduction, and scenic landscape wereeconomically evaluated based on program 380. Son La and Lam Dong provincesidentified as PES pilot testing, generates high demand of municipal water and hydropowerdevelopments resulted from dense population; also, these provinces have thepotential to integrate land-management activities with biodiversityconservation and tourism from nearby national parks. Suitably, three classes of’buyers’ were specified as hydropower facilities, water suppliers, and tourismcompanies. In September 2010, the study from the success of pilot projectsassociated with Decision 380 were developed as the national ‘Payments forForest Ecosystem Services’ Law (Decree 99-CP, 2010).

EVALUATIONOF SLCP AND DECISION 380 PILOTSLegal, institutional, andadministrative frameworksSLCP: In SLCP, multiple agencies were involved including thedepartments from forestry and grain supply, to finance and land management, including the Ministry of Land and Resources, theMinistry of Agriculture, the State Forestry Administration (SFA), and theMinistry of Water Resources. Agencies were engaged in releasing thecompensation (cash and grain), management of land contracts with farmers, negotiationof disputes, selecting and measuring land area for conversion, distribution ofsaplings or grass species, issuing contracts, and monitoring results ofconversion. There is no specific legal guidance for establishment of PES likeapproaches in China. Even though complete ownership rights of natural resourcesand lands belongs to the state, by SLCP the right for land use and managementwere provided during the period of SLCP contract.

According to this policy of’whoever plants maintains and benefits,’ land-users are allowed to manage andbenefit from the products and services on their assigned land.Decision380: It elaborates the term ‘forest ecosystemservices’ (FES) for national legal framework by defining the rationale forpayments, also the responsibilities and rights of parties to the contracts.Further it defines the calculation method, form and duration of payments,manages and implements payment transactions, the roles of implementingagencies, and the budget in relation to the source of financing. Though thescheme supports payments based on direct negotiations, the language in thedocument implies mandatory participation for both the buyers and providers forthe service. If Decision 380 dictates specific rate of payments for thestakeholders, it appears the fee and tax approach has been adopted. It appearsthat the participation is not based on voluntary negotiations. Theinstitutional framework configuration promotes the vertical collaborationbetween different ministries for preparation of national PES, but thehorizontal collaboration was limited imposing challenge for effective andefficient PES implementation.

The land use rights in Vietnam are restrictiveand comprises of factors like user group, forest type and classification,forest allocation, and source of investment. The institutional framework helpsto maintain and enhance well-being-environment synergiesImplementationSLCP: SLCP gained rapid expansion by political support and ambitious target,from an initial pilot phase in 2001 with three upstream provinces to reachacross 25 provinces by 2006. Over the same period, the rate of conversion wentsix times.

The diversified and undocumented local implementation with limiteddocuments about locality’s characteristic opportunities and resources, it wasdifficult to draw any firm conclusions about SLCP implications. There werebserved significant removal of sloping farm land, but the associated impact onwatershed protection, as first objective, was unclear. Furthermore, emphasis onplanting tress was not the only solution to protect sloping soil but ratherfactors like land use, type of vegetation cover, size of basin also effects thebasin management.

Also, monoculture approach of afforestation resulted inlimited biodiversity. Absence of study of proto-type forest pre-SLCP withintargeted areas, limits the ability to substantiate claims. The budgetdeficiency of local agencies resulted in poor monitoring and enforcement of theSLCP, and failed to coordinate with farmers and providing technical assistancewith plantation.

Again, irrespective of local conditions, land use practices,or household needs, some farmers were forced for scheme subscription byneighbours and village councils in order to meet conversion targets set by highercentral councils. In poorer Ningxia province, 80% of sampled farmers wereforced to participate in SLCP.Decision380: It resulted in huge amount of payment flows.

(VND 62 billion, equiv. to US$2 million) within one to two years. Since theperiod of commissioning for pilot implementation was very short (2009-2010),with payments delivered and law enactment as primacy, the evaluationassessments becomes difficult. Though for a proper implementation, organizationof sensitivity analysis for rehabilitation of critical ecological habitats,community level awareness initiatives with capacity building and specializedtraining was performed. Also, due to availability of poor information of foreststatus and imprecise clarification and realization of voluntary transactions,prompt implementation encountered problems. Livelihoodimpacts and sustainabilitySLCP: SLCP program is indirectly targeting the poor astraditionally poor households reside on marginalized sloping uplands of China’smain watershed. The poor farmers are truly enhanced is dependent on theopportunities of alternative livelihoods and time period of contract which constraintseconomic recovery through payments from ecological degradation. High levelpayments recognized as SLCP characteristics.

In some province the householdsare willing to subscribe the scheme even in the absence of monetary paymentsbut called for enhanced usage and rental rights over the lands they reforest.In a survey of nearly 10,000 families within 16 selected counties in YunnanProvince, 95% ‘liked’ the SLCP and believed payments should continue withimprovements in market access, land tenure, subsidy duration, and greater self-selectionof tree species. With the impacts of land retirement and subsidy income onlocal economic development, the central government urged local governments toinitiate strategies encouraging off-farm business enterprise development,alternative agriculture, and broader rural development programs. A studyrevealed fair adoption of off adoption of off farm activities by farmerslimited by some constraints.

The connection between State Grain Bureau grainsupply and government investment for funding the SLCP raised ambiguity indetermining government priorities and subsequent confidence in thesustainability the SLCP for ecological rehabilitation.Decision 380: Intensive efforts were made by Decision 380 to integrate incentivebased forest watershed ecoservice schemes with development of stakeholders.Pilot projects promoted local community participation. An increase by 400% inaverage annual payments per household was there as compare to previous schemeProgram 661. Local farmers were able to participate in commercial contractswith new market opportunities with agroforestry system. Certainly over theseshort period results, doubts casts if these will sustain over long termimplementation to give the same results.

The doubts are passed overimplications of other national law ‘Decree 99’ with Decision 380 as baseline,and sustainability of similar national schemes like FES. The framework orDecree 99 seems inefficient to stimulate new livelihood opportunities. Decree99 stands inefficient for poverty alleviation due to absence of Ministry ofLabour, Invalids and Social Affairs. Also, the availability of substantialpublic and private financing is unlikely to be duplicated on similar PESschemes nationwide unlike Decision 380.

Decision 380 conducts highly dictatingcommand driven approach, making it more difficult for a voluntary participationby local communities in guiding and meeting new social norms for futureschemes.REFLECTIONS FOR THE GLOBALDISCUSSION AND DEVELOPMENT OF PESIf twoalternative scenarios for PES as incentive-based negotiations or as governmentcontrolled payments are marked as in Fig-1. Under scenario (a), themotivational driver for the transaction would be higher as service providerswould be in the best position to negotiate based on demand and supply resultingin lower internal transaction costs (TCs). The costs of having many potentialservice providers and beneficiaries, developing contracts, as well as thetechnical support needed for fair and individualized trades would tend toinflate external transaction costs. In scenario (b), well-resourced governmentscan act to procure the provision of ecosystem services for the sake of publicinterest through subsidy payments. These programs can be implemented even inthe absence of well-defined property rights, as governments can use acombination of regulatory and voluntary manoeuvres to encourage transactions. Thisinfluence would tend to reduce external costs of mobilizing actors, negotiatingand implementing contracts.

The ambiguity in property rights and the dual roleof government as intermediary and ‘buyer’ encourages principal-agent conflictsand rent-seeking behaviour. In this case, the motivational driver fortransactions would be lower, and hence internal transaction costs higher.Consequently, overall transaction costs could conceivably be of comparable sizein both scenarios unless government shifts its role to an enabler ofnegotiations governed at the collective level in reducing both internal and externaltransaction costs (Xiaoyun et al. 2006).ConclusionChina and Vietnam, which have both experienced unprecedented economicgrowth in recent decades, are offering incentives to those who adopt land usepractices that benefit society as a whole. But these programs, aimed atprotecting forests and promoting watershed conservation. And because they arecarried out on state-controlled land, farmers have little choice but to takepart and have little or no sense of ownership.

 In compensation, they are given both cash and grain subsidies andprovisions of tree seedlings. While initiated by the central government, it isimplemented by cash-strapped local agencies, many of whom are eager to findways to garner more money after they meet their conversion quotas. At the sametime, limited technical support and poor quality seedlings means that manytrees planted on former farmland often do not survive, thereby, underminingwhole projects

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