The Asian Development Bank (ADB) supported the provincial authorities of Quang Nam in Viet Nam to scale up the implementation of payments for forest environmental services (PFES) through a technical assistance financed by the Governments of Sweden and Norway. The project pilot-tested two innovations---the group approach and the use of a geographic information system---to speed up PFES planning and implementation in the province. Starting with five villages in Ma Cooih commune, the initiative expanded to include two more communes in the Song Bung 4 watershed. This publication shares lessons and insights gained from this experience, and with it ADB intends to contribute to developing a robust, affordable, and sustainable process of planning and implementing PFES at the provincial level, thereby helping accelerate its implementation.

Key messages Despite being a new funding source, PFES now contributes 22% of total forestry sector investment.The impact of PFES funding differs by location and actor group.To enhance the scale of PFES, and its impac

As natural ecosystems continue to degrade, mainly due to human activities, payment for ecosystem services (PES) is becoming an increasingly popular way to use market logic and economic rationality in ecosystem management. This study aims to understand how payment for forest environmental services (PFES) policy, initially introduced as a neoliberal concept, has been shaped by a local context in which it is situated: Vietnam. It was found that PFES understandings and practices differ significantly from the ideal portrayed in the neoliberal PES definition, with very weak elements of conditionality and voluntariness. The neoliberal logic to address environmental problems by providing monetary incentives does not correspond with the views held by the Vietnamese PFES participants and is barely translated into implementation. Although PFES has brought some changes to policy conceptualization and discourses, these changes don’t significantly alter the pre-existing forest governance structures at local and national levels. It is recommended that PES be understood and analysed in its situational history, practices and scales; in Vietnam PFES is characterized by an actor-oriented, learning-based approach to co-invest in stewardship.

This policy learning tool is primarily designed for policy makers and government officers who need to carry out M&E and report on the progress and impact of Payment for Forest Environmental Services (PFES policies). While this policy learning tool is designed to meet policy makers’ need to understand the impact, opportunities and challenges of PFES, it can also be adapted by analysts, program sponsors and managers, practitioners in research and research funding organizations, and professional evaluators for their own needs in understanding and identifying areas for PFES improvement.

Research on payments for ecosystem services (PES) schemes indicates that few of them in fact implement full marketization on the ground, highlighting the need for better understanding of the performance of incompletely marketized PES models. One prominent example of a PES program with incomplete marketization is Vietnam's Payments for Forest Environmental Services (PFES) scheme, a payment for environmental services program that has been progressively rolled out across over 40 provinces since 2008. The program is notable both for its spatial extent and its implementation, collecting funds primarily from taxes on water consumption in hydroelectric dams and water companies and redistributing it through a diverse array of contracts managed at provincial and national levels to protect and plant new forests. We assess the impact of PFES using matched two-way fixed effects models and matched multi-period difference-in-differences estimation. These methods both suggest that PFES restrains forest loss at a rate comparable to or greater than state-managed protected areas. Importantly, these effects are weak or nonexistent until PFES has been established for over three years. Taken together, these findings provide strong evidence that state-managed PES-like programs can perform well in forest protection even if they lack full marketization.