7. Impacts and effectiveness of logging bans in natural forests: Viet Nam - Vu Huu Tuynh and Pham Xuan Phuong

INTRODUCTION

Viet Nam’s total land area is 33 million ha. About 10.9 million ha (33.3 percent) are covered with forests, out of which 9.4 million ha (86.5 percent) are natural forests. In recent years, the Government of Viet Nam has enforced strong measures to protect the natural forests through new policies. These include land-use allocation, contracting forestland to individuals, investments in plantation development, preferential interest rates for forest protection, regeneration and afforestation, and a ban on the export of logs and lumber. The planted forest area has recently increased and the pace of natural forest removal has slowed. However, Viet Nam has many challenges such as high population growth, increasing demand for food, and spontaneous migration. Particularly in the sensitive economic zones where agricultural production is profitable, natural forests have been encroached and converted to agricultural land. The area and quality of these forests have declined unabated, directly threatening the lives of people in the mountainous areas and causing an array of other impacts. Approximately 100 000 ha of forest area are lost annually.

The Government imposed a partial logging ban in the early 1990s to address these issues, but is facing concerns about timber production losses and the livelihood of local workers. A range of questions about the impacts of the logging ban have been posed, such as:

• Where will raw materials for the forest industries come from to replace the wood supplies previously harvested from natural forests?
• How much wood can forest plantations produce?
• Does forest plantation wood meet the needs of local forest industries?
• Is the wood industry sector in need of re-structuring?
• How much investment is necessary to develop adequate supplies of plantation timber and techniques for processing it?
• What policies are needed to ensure stable production and income for forest industries?

This study of the implications of the logging ban in the natural forests of Viet Nam for forest industry, local livelihoods and the environment was conducted to partly answer these important questions. Its specific objectives were to:

• review the current situation of Viet Nam’s forests and wood product industries;
• evaluate the forestry sector’s role in relation to socio-economic development and the environment;
• identify the constraints, trends and factors affecting the development of forest products, and the capacity of the natural forests in meeting domestic demand for commercial wood and non-wood forest products;
• evaluate the impacts of the logging ban on policies and measures concerning natural forests, future forestry activities, various stakeholders and forest conservation and protection; and
• recommend complementary measures and policies to encourage the development of Viet Nam’s forest industry.

Viet Nam’s forest resources

In 1943, Viet Nam had 14.3 million ha of forests, which dropped to 11.2 million ha in 1976 and 9.3 million ha in 1995. In 2000, forests covered 10.9 million ha, or 33.3 percent of Viet Nam’s total land area. Natural forests totalled 9.4 million ha and plantations covered 1.5 million ha. Between 1990 and 1995, annual wood production from the natural forests declined by approximately 3 million m³. The area of natural forests harvested for wood production is approximately 4 million ha, now producing only about 1 million m³ of timber annually.

In 2000, planted and natural forests were categorized into three types based on utilization (Table 55):

• Special-use forests classified into 87 protected areas, comprising 7 national parks, 49 nature reserves and 31 historical, cultural and environmental sites, covering some 1.5 million ha.
• Protected forests covering 5.4 million ha. They are classified into forests for coastal protection and forests for watershed protection.
• Production forests include those areas were logging is allowed. They cover about 4 million ha (including plantations) and contain 261.1 million m³ of timber.

According to official data from the Ministry of Agriculture and Rural Development in 2000, the total timber stock was 751.5 million m³. Viet Nam’s per capita forest area and timber stock are low, with only 0.15 ha and 10 m³ per capita, respectively. If the forest area used for forestry production is considered alone, Viet Nam’s average timber stock is only approximately 0.35 m³ per capita.

The quality of vast areas of Viet Nam’s natural forests has rapidly deteriorated. In 1995, only 5.5 percent of all remaining natural forests were considered “rich forests,” meaning they had over 120 m³ per ha of growing stock. Another 16.8 percent of natural forests are categorized as “medium-quality forests” with between 80 and 120 m³ per ha of growing stock. The remaining natural forests are considered to be poorly stocked (less than 80 m³ per ha) or recently rehabilitated (Table 56). Forest plantations, concentrated mainly in the central and northeast regions, totalled about 1 million ha in area in 1995. Slightly over 600 000 ha of plantations containing almost 1 million m³ of timber were classified as production forests (Table 57). In 2000, the area of natural forests was 9.4 million ha, and for planted forests 1.5 million ha.

In 1997, the Government planned to set aside 107 special-use forests, covering an area of 2.1 million ha of which 898 000 ha are forested, to consist of 10 national parks, 65 nature reserves, and 32 historical and cultural places. It further designated 6 million ha for protection purposes, of which 3.5 million ha are forested. Under current plans, a total of 9.6 million ha, of which 5 million ha are forested, will be designated as production forests in the future, but much of this area is currently non-forested land that requires reforestation.

Demand, supply and trade of forest products

Data on the supply and demand for roundwood in Viet Nam are unreliable. The annual roundwood production from natural and planted forests, including the State and private sector, is about 2 million m³ per year (Figures 23 and 24). The annual demand for wood is approximately 4 million m³, suggesting a gap of 1.5 to 2 million m³. Domestic supply is estimated to come mainly from existing natural and planted forests after 2005. Based on the projected rate of population and economic growth, and changing trends in consumer tastes, the estimated annual demand for industrial wood products will be approximately 9.5 million m³ by 2005, double the level of current demand. This estimate excludes the demand for exports.

Table 55. Viet Nam’s forest area by function, 2000 (thousand ha)

Areas	Special-use forests			Protected forests			Production forests			National total
	Natural forests	Forest plantations	Total	Natural forests	Forest plantations	Total	Natural forests	Forest plantations	Total	Natural forests	Forest plantations	Total
Northeast	214 375	10 346	224 721	1 235 445	172 219	1 407 664	440 775	295 822	736 597	1 890 595	478 387	2 368 982
Northwest	171 469	360	171 829	666 313	47 250	713 563	46 627	31 422	78 049	884 409	79 032	963 441
Red River Delta	19 425	8 187	27 612	24 828	24 288	49 116	1 080	5 830	6 910	45 333	38 305	83 638
North of central	337 576	11 740	349 316	951 444	102 987	1 054 431	546 613	185 289	731 902	1 835 633	300 016	2 135 649
South central coast	109 071	6 068	115 139	600 715	64 102	664 817	259 530	99 805	359 335	969 316	169 975	1 139 291
Central highland	310 526	677	311 203	672 880	9 649	682 529	1 355 761	23 623	1 379 384	2 339 167	33 949	2 373 116
Southeast	258 119	9 753	267 872	642 683	80 489	723 172	515 841	74 115	589 956	1 416 643	164 357	1 581 000
Mekong River Delta	43 185	13 991	57 176	18 363	37 013	55 376	1 554	156 369	157 923	63 102	207 373	270 475
Total nationwide	1 463 746	61 122	1 524 868	4 812 671	537 997	5 350 668	3 167 781	872 275	4 040 056	9 444 198	1 471 394	10 915 592

Source: Ministry of Agriculture and Rural Development, 2000

		Area (thousand ha)	Volume
			Wood (thousand m3)	Bamboo (million stems)
Tropical evergreen broad-leafed forest		5 182	438 378
	Rich forest	(490)	(90 713)
	Medium forest	(1 389)	(170 131)
	Poor forest	(1 648)	(107 713)
	Rehabilitated forest	(1 655)	(69 821)
Deciduous forest		936	52 486
	Rich forest	(12)	(1 745)
	Medium forest	(138)	(12 867)
	Poor forest	(475)	(27 823)
	Rehabilitated forest	(311)	(10 051)
Coniferous forest		155	18 169
Mixed forest		71	8 451
Mangrove forest		35	312
Acid sulfate forest		14	426
Limestone mountain forest		395	16 454
Wood forest (sub-total)		6 788	534 676
Bamboo forest		846		4 032
Mixed forest		619	34 440	2 182
Special product forest		1
Total natural forest		8 254	569 116	6 214
Wood forest		999	14 542
Bamboo forest		29		145
Special product forest		21
Planted forest		1 049	14 542	145
Forestland*		9 303	583 658	6 359

Source: Ministry of Agriculture and Rural Development, 1997
* Forestland = Natural forest + Planted forest

• Planted forests: 200 000 ha, producing 6 to 8 million m³. By 2005, if the area of forest plantations is double the area planted in 1995, it will be possible for plantations to meet timber demands.
• Natural forests: 300 000 m³.
• Scattered trees: These are planted by people in fields and along the banks of dams, roadsides and in homegardens. Possible production estimates range from 1 to 1.5 million m³ per year by 2005.

It is estimated that by 2005, it will be possible to meet wood demand from domestic sources. However, in the short term, a shortage of 1.5 to 2 million m³ will exist if Viet Nam does not increase imports or the use of non-wood substitutes. This will especially be the case when harvesting in the natural forests is restricted and illegal logging is stopped.

Most industrial timber in Viet Nam is used for housing and construction. However, the 1.5 million m³ of sawnwood production (Table 58) meets only 60 to 70 percent of the demand.

Table 57. Area and stock volume of production forests in Viet Nam, 1995

		Area (thousand ha)	Stock volume
			Wood (thousand m3)	Bamboo (million stems)
Tropical evergreen broad-leafed and semi-deciduous forest		2 676	193 380
	Rich forest	(222)	(41 825)
	Medium forest	(557)	(57 747)
	Poor forest	(946)	(52 569)
	Rehabilitated forest	(951)	(41 239)
Deciduous forest		648	37 670
	Rich forest	(8)	(1 110)
	Medium forest	(105)	(9 557)
	Poor forest	(330)	(19 456)
	Rehabilitated forest	(205)	(7 547)
Coniferous forest		38	3 969
	Rich forest	(13)	(2 282)
	Medium forest	(8)	(859)
	Poor forest	(4)	(225)
	Rehabilitated forest	(13)	(603)
Mixed forest		15	1 694
Mangrove forest		1	8
Acid sulfate forest		6	226
Lime-stone mountain forest		3
Wood forest (sub-total)		3 387	236 947
Bamboo forest		454		3 275
Mixed forest (wood, bamboo, rattan)		303	17 961	1 162
Special product forest (birch, anise)		1
Natural forest		4 145	254 908	4 437
Planted forest		632	9 664	145
Total		4 777	264 572	4 582

Source: Ministry of Agriculture and Rural Development, 1997

Current demand for paper is 150 000 tons per year, requiring 0.75 million tons of wood raw material. By 2010, annual paper demand is predicted to be 1.2 million tons. This will require 6 million tons of wood raw materials. Forest plantations will provide 4.8 million tons or 8 million m³. To meet the demand, 160 000 ha of forest plantations will need to be harvested annually.

An annual harvest of 700 000 m³ from 200 000 ha of forests can produce 300 000 m³ of wood-based panels, which will meet 60 to 70 percent of the domestic demand. After 2005, the demand for panels is projected to increase to 1.1 million m³ per year. Therefore, 4 million m³ of raw material, the equivalent of harvesting 500 000 ha of Acacia mangium, eucalyptus, and pine plantations, will be needed.

Figure 23. Viet Nam’s supply and use of logs, 1998-1999 (logs with large diameter >30 cm)

Figure 24. Viet Nam’s supply and use of small diameter roundwood, 1998-1999 (logs with large diameter < 30cm)

Table 58. Sawnwood production for rural housing construction in Viet Nam, 1996

Region	Total (m3)
Northern highlands and midlands	339 561
Northern delta	99 703
Former Region No. 4	313 895
Central coast	175 444
Central highlands	211 647
Southeast	211 458
Mekong River Delta	177 985
Total	1 529 693

Table 59. Predicted consumption of forest products in Viet Nam, 2005 and 2010 (thousand m³)

	2005	2010
Basic construction wood	1 000	1 500
Paper pulp	4 000	8 000
Wood-based materials	-	-
Plywood	2 000	4 000
Wood for furniture	2 000	3 500
Other specialized purposes	350	500
Fuelwood	14 400	10 000
Total forest products	23 750	27 500

Since wood-based panels are mainly produced in factories with low production capacities, domestic production cannot meet the demand. Local enterprises have to import 35 000 to 40 000 m³ of wood-based panels from regional suppliers, particularly Malaysia. In addition, Viet Nam imports approximately 10 000 m³ of finished products made from wood panels. The recent growth in the demand for wood-based panels illustrates the shift in consumer preferences and the shortage in the domestic wood supply.

The current annual demand for fuelwood is 17.3 to 18.4 million m³ (30 to 32 million steres¹). Domestic annual supply is only 14.4 million m³, a gap of 3 to 4 million m³. About 8.7 million m³ of fuelwood come from natural forests, and another 5.7 million m³ from forest plantations and scattered forests. To make up for the shortage, alternative energy sources such as coal and gas are used. Biomass produces 90 percent of the energy consumed in the rural areas, of which about 70 percent are fuelwood. Coal is also commonly used in many areas and accounts for about 4.9 percent of total fuel.

Viet Nam’s total domestic wood processing capacity is 1.6 million m³ annually. The forest industry employs about 95 000 workers. In 1995, there were a total of 874 large- and medium-sized wood-processors, of which 371 were State-owned and 30 were foreign ventures. There were also 2 000 small wood-processing firms. By 1997, there were 759 large- and medium-sized wood processing firms, 473 private firms, 53 joint ventures, and 1 200 small firms, including cooperatives. The small firms employed between 10 and 100 workers. In addition, thousands of individual households produce furniture and handicrafts.

Rationale for the logging ban

Between 1943 and 1995, 5.7 million ha of natural forests were deforested, or about 110 000 ha annually. Between 1976 and 1990, deforestation accelerated to around 190 000 ha per year. Between 1991 and 1995, a total of about 100 000 ha was lost (Table 60). This represents not only a loss of forest area, timber volume and capital for development, but also a depletion of tropical plant and animal species that will be difficult to recover.

Table 60. Loss of natural forests in Viet Nam, 1990-1998 (ha)

Location	1990	1995	1996	1997	1998
Red River Delta	3	2	66	492	16
Northeast	1 872	1 051	324	292	2 944
Northwest	417	1 852	155	278	1 725
North of central	2 905	141	122	69	748
South central coast	2 028	1 832	741	670	681
Central highlands	1 640	8 568	2 149	3 002	91
Southeast	8 828	7 651	1 966	1 866	4 080
Mekong River Delta	20 080	4 585	7	455	10 190
Total	37 773	25 682	5 530	7 124	20 475

Source: Statistical yearbook (1994, 1996, 1997 and 1998)

The Government faces several challenges in protecting forest resources, such as:

• Population growth and insufficient arable land are leading to spontaneous migration and a low standard of living. Two million farmers among the 20 million people living in the forested areas are converting forests into agricultural land.
• The increasing demand for wood and forest products has encouraged illegal logging in natural forests.
• Low educational attainment, limited awareness of forest laws, and the belief that forests should be for human use, contribute to continued deforestation of Viet Nam’s forests.
• Out-dated technology and timber-processing methods that produce excessive waste accelerate the country’s rate of deforestation.

The Government has recognized that stronger measures must be introduced to protect and develop the natural forests, stabilize forest ecosystems, and ensure sustainable development. As a result, it imposed logging restrictions and banned the export of wood products in the early 1990s. In 1997, logging was banned in most natural forests.

IMPLEMENTATION OF THE LOGGING BAN

The export of roundwood, sawnwood and rough-sawn flooring planks was banned in 1992. Logging in watershed protection and special-use forests, and forest exploitation in seven provinces in the north was also halted. Five years later, the Government imposed a logging ban to further strengthen forest development and reforestation of barren hills. A permanent logging ban was imposed in special-use forests, and a 30-year logging ban was instituted in critical watersheds. All commercial logging was also prohibited in remaining natural forests in the northern highlands and midlands, the southeast, and in the Mekong River and Red River Delta provinces. The long-term objectives of the logging ban and forest conservation programs are to:

• improve Viet Nam’s wood production capacity by protecting and improving 9.3 million ha of existing forests, and reforesting an additional 5 million ha;
• increase forest cover by 45 percent and double the land area of long-term agricultural crops;
• create jobs, increase personal income, and improve the standard of living for more than 20 million farmers in the mountainous areas by allocating agricultural and forestland to encourage them to participate in forest protection and development;
• provide farmers in these regions with the resources to plant 3 ha of trees each to generate an estimated annual income of US$ 1.5 to US$ 2 billion, enabling each person to eventually earn US$ 70 to US$ 100 per year and each household to receive US$ 350 to US$ 500 per year from the sale of timber; and
• provide enough fuelwood and other forest products to meet domestic demands.

The logging ban covers 4.8 million ha of forestland, accounting for 58 percent of the country’s natural forests. The Government has also formulated policies to allocate forestland to Government organizations (such as the Forest Management Board), State-owned forestry and agricultural enterprises, households and individuals for long-term and sustainable use. Government organizations were allocated special-use and protection forests in critical and very critical areas. Households and individuals were allocated up to 30 ha each in less critical areas for a maximum of 50 years. Rights can be transferred, inherited, mortgaged or leased. An extension of rights may be granted if the land is used according to Government goals. Government organizations are permitted to subcontract land to other users.

The Ministry of Agriculture and Rural Development (MARD) determines harvest volume, intensity and locations. Selective logging permits are granted in some less critical natural forests with a high timber volume in the central highlands and central coast. MARD has also directed local forestry agencies to consolidate the management of transport and trade of forest products. It is developing a national network of control stations for land, ship and rail transport at strategic locations for the collection and distribution the forest products.

Under the new policy, logging is permitted in only 19 provinces. The Government aimed to reduce timber harvesting in selected areas from 25 000 to 12 000 ha, and to reduce harvest volume from 620 000 to 300 000 m³ by 2000 (Table 61).

Currently, there are at least 3.1 million ha of bare land in the country urgently requiring reforestation. The national land-use plan includes a target of reforesting more than 2 million ha and regenerating 5 million ha by 2010. From 1998 to 2000, more than 3 million ha were to be planted for commercial use. Approximately 2 billion trees are to be planted in small stands around residential areas, schools and roadsides by 2010. It is estimated that eventually these trees will annually produce 2 million m³ of timber for processing and 5 million m³ of firewood.

Table 61. Logging ban progress indicators in Viet Nam, 1996-2000

Basic indicators	1996	1997	1998	1999	2000
Number of forest enterprises with logging permits	241	204	170	140	105
Number of forest blocks with logging permits	1 252	-	-	-	515
Volume permitted to be logged from natural forests (m3)	620 000	522 700	300 000	160 000	300 000
Annual permitted logging area (ha)	25 000	22 000	19 300	15 600	12 000

Source: Ministry of Agriculture and Rural Development

Institutional arrangements for implementing the logging ban

The Forest Management Board is responsible for managing and protecting Viet Nam’s national parks and nature reserves. Wherever possible, the Board will move the people who live in the national parks and reserves to alternate locations, providing them support to improve their lives. When it is not feasible to relocate people, the Board will contract them to carry out forest protection and management activities. Several types of arrangements are available to encourage people to protect forest resources. An annual salary of up to 50 000 VND² per ha may be provided for forest protection for a maximum of 5 years. People can also collect fuelwood and use wood residues from areas under protection. People are also provided timber for home construction and repair, and they may be allocated agricultural and forestland for farming.

Local Administrative Boards are also being established to manage and protect “critical” and “very critical” forests that are environmentally sensitive and degraded. The Boards contract local residents living in these areas to protect, regenerate and improve forests under similar arrangements and salaries. In addition, the contractors have access to selectively cut timber, up to a maximum of 20 percent of the stock volume until the forests are fully mature. They receive financial aid from the Government to plant and manage the forests for the first three years, after which they will use their own funds. These forest managers are allowed to use industrial tree crops and fruit trees for commercial purposes as long as they maintain a 50 percent forest cover on the protected lands.

Individuals who have received land-use certificates for the less critical protected forests are also given the right to use forestland for agricultural purposes as long as the forest canopy is left intact. They are allowed to selectively harvest mature trees. Individuals allocated land with no forest cover can use such land for commercial purposes. If they establish timber plantations, they are entitled to the timber harvested.

The Government encourages all organizations and individuals, including foreigners, to invest in plantations. It extends loans for such investments at an annual interest rate of 7 percent. Loans can be for 10 years and are repayable when the plantation is mature and commercially viable. All wood-processing enterprises must provide funds for community-based planting of forests on allocated land within the area planned by the Government. The enterprises sign contracts with households for planting the forests and are responsible for utilizing the harvested forest products.

The Government plans to plant 400 000 ha of forests to supply Viet Nam’s wood-based panel industry. Since these plantations can be harvested on 10-year cycles, 40 000 ha can be harvested each year, yielding 2 to 3 million m³ of timber annually. This is estimated to be sufficient to produce over 1 million m³ of panels annually.

To meet the needs of the paper industries, 1 million ha will be planted. Eucalyptus, mixed with other perennial trees, will cover 400 000 ha. Other species will cover approximately 600 000 ha.

The demand for wood imports is projected to increase by 500 000 m³ annually. Therefore, other sources of wood products should be identified to help meet domestic demand, including suppliers such as Malaysia, Laos, Cambodia, Myanmar and Russia. The Government should also help domestic forest processors obtain licenses to import raw and finished wood products. It should impose tariffs on wood products imported for consumption or for re-manufacturing for export.

The logging ban will result in a sharp drop in the volume of fuelwood from the natural forests. Meanwhile, fuelwood demand will continue to increase as Viet Nam’s population and average annual income increase. To meet the demand, the following measures will be necessary:

• encourage farmers to plant fast-growing trees, with seedlings and technical support provided by the Government;
• supply affordable electricity to rural areas;
• develop reasonably priced farming equipment and train farmers in the use of biogas; and
• impose a high tax on the transport and trade of fuelwood to restrict the commercialization fuelwood. Encourage consumers to use cheaper fuels. Limit the use of fuelwood for brick making, tiles, pottery, and porcelain.

The Government has introduced socio-economic development programs in 4 central highland and 14 northern mountainous provinces aimed at eliminating poverty, generating employment opportunities, increasing income and improving the living standard. Special attention has been placed on resettling the 3 million individuals displaced by the logging ban by the year 2000.

Approximately 300 forest enterprises will have to redirect their activities to afforestation and forest management under the Forest Management Board. About 15 000 workers are to be allocated land by the “People’s Committees” for appropriate activities or be forced to find other employment outside the forests. In the meantime, workers are to be contracted to protect special-use forests and manage commercial forests.

To offset supply shortages to forest industries, the Government will also have to make loans available at low interest rates for reforestation, improving processing technologies and relocating their facilities. Tax exemptions for firms that have suffered from the logging ban need to be considered.

IMPACT ASSESSMENT OF THE LOGGING BAN

Demand, supply, trade, and export of Viet Nam’s major forest products

After the imposition of the logging ban, Viet Nam’s roundwood production declined by about 1.2 million m³ from previous levels (Table 62). The annual shortage of roundwood in the mid-1990s was between 500 000 to 800 000 m³. Some forest enterprises were forced to import timber. Others had to reduce processing volumes or resort to alternative products.

Table 62. Roundwood production in different regions of Viet Nam, 1990-1998 (thousand m³)

Region	1990	1995	1996	1997	1998
Red River Delta	237.8	264.2	180.3	153.6	150.6
Northeast	733.6	563.6	690.6	486.7	469.0
Northwest	280.3	254.0	237.9	226.7	219.5
North of Central	505.0	323.4	367.1	290.7	224.1
South Central Coast	213.5	280.1	287.1	316.9	259.4
Central Highlands	529.6	327.3	345.7	279.2	215.5
Southeast	484.1	259.8	230.7	198.3	174.3
Mekong River Delta	461.6	381.5	494.1	527.9	494.0
Total	3 445.5	2 653.9	2 833.5	2 480.0	2 206.4
Volume from State natural forests	1 100.0	700.0	620.0	522.7	300.0

Since the establishment of the logging ban, forest plantations are supposed to be the main supplier of timber. However, most of the planted trees are still immature, and the bulk of the supplies are from scattered trees instead. In 1993 and 1994, the annual volume harvested from State plantations was 220 000 m³. Since 1995, the average harvest from State-owned plantations has been 250 000 to 300 000 m³ annually.

Illegal logging activities are common close to population centers, along streams and in isolated areas. Forests with many high-valued species are being degraded rapidly. About 100,000 m³ of illegally harvested logs are confiscated each year.

Viet Nam’s fuelwood production declined by over 3 million m³ between 1990 and 1998 (Table 63). Annual fuelwood production capacity is estimated to be around 21 to 24 million steres, falling short by 9 to 10 million steres. If the 5 million ha afforestation project is successful, then the domestic supply of fuelwood will meet demand after 2005.

Table 63. Viet Nam’s fuelwood output, 1990-1998 (thousand steres)

Region	1990	1995	1996	1997	1998
Red River Delta	575	501	494	484	464
Northeast	9 681	10 224	9 822	9 165	9 373
Northwest	3 272	3 169	2 810	2 772	2 700
North of Central	7 576	7 838	7 612	7 354	7 067
South Central Coast	2 757	2 013	1 923	1 796	1 687
Central Highlands	2 651	2 182	1 907	1 745	1 203
Southeast	2 650	1 107	1 587	1 361	1 058
Mekong River Delta	2 897	2 912	2 672	2 680	2 418
Total	32 059	29 946	28 827	27 357	25 970

Note: 1 m³ = 1.74 million steres

Table 64. Viet Nam’s leading wood product exports, 1990-1996 (thousand m³)

Products	1990	1991	1992	1993	1994	1995	1996
Logs	435	349	394	397	390	400	390
Flooring planks	43	36	19	41	4	4	-
Sawnwood	280	504	259	284	78	-	-

Table 65. Value of Viet Nam’s forest product export revenues, 1990-1996 (million US$, current price)

	1990	1995	1996	1997	1998
Wood and wood products	150	115	160	187	120
Total value of forest product exports	270	153	212	240	150

The Government recently began to strictly regulate imports of wood products. The Viet Nam Forestry General Corporation (VINAFOR) is responsible for coordinating the import and supply of wood for domestic forest product manufacturing firms. However, in some provinces near the border, wood is still imported to meet provincial demand through Government and import/export organizations with established ties to suppliers in Laos and Cambodia. Viet Nam’s total annual wood imports are estimated at approximately 300 000 m³. Roundwood alone makes up between 200 000 and 250 000 m³, the bulk of which is imported from Laos.

Prices of forest products

Reduced timber volumes as a result of the logging bans combined with the growing demand for wood products have increased prices. For example, the average price for pit-props in Quang Ninh, in northeast Viet Nam, doubled from 1991 to 1997 (Table 66). Roundwood and fuelwood prices have increased 25 to 100 percent between 1991 and 1998 depending on the product and species (Table 67). The price for sawnwood from natural forests has also increased by up to 81 percent (Table 68).

Table 66. Average prices of pit-prop at Quang Ninh (thousand VND/m³)

Pit-prop types	1991	1996	1997	1998	Ratio of change (1998/1991)
Pit-prop for support of workings (2.2-2.4 m long, Ø 13-19 cm)	250	356	407	445	1.7
Pit-prop for chocking (1.2 long; Ø 6-10 cm)	200	292	308	350	1.7
Average pit-prop price	220	345	405	434	1.9

Table 67. Viet Nam’s domestic prices for roundwood and fuelwood, 1991 and 1998

Product	Location	Price		Ratio of change (1998/1991)
		1991	1998
Firewood (VND/stere)	Lang Son	120 000	150 000	1.25
Species under group 5-8 (VND/m3)	Hoa Binh	350 000	550 000	1.87
Species under group 5-8 (VND/m3)	HCM City	420 000	850 000	2.02
Acacia (VND/m3)	Tuyen Quang	220 000	300 000	1.36
Rubberwood (VND/m3)	HCM City	450 000	600 000	1.50
Styrax (Ø = 14 cm; VND/m3)	Yen Bai	250 000	360 000	1.44
Others (VND/m3)	HCM City	350 000	500 000	1.42

Table 68. Sawnwood prices in Viet Nam, 1991 and 1998 (VND/m³)

Product	Location	Price		Ratio of change (1998/1991)
		1991	1998
Pine	Lang Son	550 000	1 000 000	1.81
Pine	HCM City	1 600 000	2 500 000	1.58
Species under group 3-4	Quang Nam	1 500 000	2 500 000	1.66
Species under group 5-8	-	1 000 000	1 500 000	1.50
Species under group 4	Hoa Binh	1 300 000	2 000 000	1.50
Mixed species	HCM City	1 100 000	1 800 000	1.60

The price of wood for paper increased up to 1.5 times between 1991 and 1994. From 1995 to 1998, however, the price was relatively stable because supplies from forest plantations and scattered trees supplemented imported paper pulp.

Development of wood and associated industries

Logging in Viet Nam is implemented primarily by State enterprises. Approximately 10 000 workers were employed in logging during the 1980s. By 1997, only 2 000 individuals were employed in the logging sector and the number of available jobs is declining further.

From 1993 to 1998, the structure of the forest industry changed dramatically. Around 120 logging enterprises that did not own forestland were contracted by the Government to protect and manage State reforestation projects. However, due to recent changes in the Government’s objectives, from a goal of afforestation to one of protecting special-use forests, these enterprises are facing difficulties in redirecting their operations.

The wood supply shortage has led wood-processing companies to consider new technologies to improve product quality, utilizing lesser-used species and plantation timber, extending the use of raw materials and wood residues, and encouraging alternative activities that use less wood. Enterprises have increased investments in processing technologies, diversified their product mix, shifted to higher value products, expanded the market and changed consumer tastes for wood products.

The shortage of timber has had a substantial effect on the performance of wood product companies. Their numbers declined substantially in Ho Chi Minh City between 1993 and 1998, especially the smaller establishments (Table 69). Many found it difficult to adapt to shortages of raw materials or invest in new technologies to utilize lesser-used species and timber from plantations.

Table 69. Number of wood product enterprises in Ho Chi Minh City, 1993-1998

Year	State enterprises	Non-State enterprises	Joint venture enterprises	Small enterprises
1993	46	78	-	680
1994	53	92	5	500
1995	53	92	5	500
1996	53	91	6	660
1997	36	78	6	324
1998	33	60	7	300

Source: Ministry of Agriculture and Rural Development

Table 70. Volume of wood used by the wood-processing industry in Ho Chi Minh City (m³ roundwood)

Year	Volume of wood used for processing
	Natural forests	Forest plantations	Total	Percentage from plantations
1993	129 000	63 000	192 000	32.8
1994	135 200	202 300	337 500	60.0
1995	136 000	224 000	360 000	62.2
1996	135 300	195 000	330 000	59.0
1998	55 765	194 235	250 000	77.6

During the 1990s, the wood-processing sector in Ho Chi Minh City employed approximately 35 000 workers. By 1997, the number had declined to 30 630 workers and only 24 170 were employed full time. This decline does not include workers in small cottage industries who were forced out of business as a result of the timber supply shortage.

The changes in the number of wood-processing enterprises and in the volume of wood consumed are shown in Table 71. In many provinces, some enterprises have reduced production and shifted to other products. Many establishments have closed completely or operate only several months a year, thus affecting the efficiency of capital investment and employment of many workers. Overall, however, the number of non-State companies increased significantly (Table 72).

The drastically reduced number of small-scale establishments in Ho Chi Minh City excludes the hundreds of family businesses that were forced to close either because there was no timber available or because the price for raw materials became too high. The higher cost of timber also reduced the profit margin of many small firms, although there are some notable exceptions. The number of processors increased in some provinces because they found alternative timber sources. Gia Lai province is one example. In 1994, the province had 13 private wood processors; by 1997, there were 22. In Hoang Anh province, private wood processors have begun to regularly import logs from Myanmar and Laos, and lumber from Malaysia and Brazil. They contributed 2.1 billion VND to Government revenues in 1996, and nearly 3 billion VND in 1997.

Due to the raw material shortages, private enterprises in the wood-processing sector have started to obtain much of their raw materials from forest plantations and international suppliers. They are also beginning to import processed components such as hardwoods, fiberboards and woodchips, for further processing. While stable supplies of softwood logs and lumber from North America and Scandinavia are available, Vietnamese imports are still not organized enough to access these sources.

If Viet Nam’s private wood-processing industry is to continue operations and be successful, companies must redesign their production lines to meet domestic demand. However, the few private firms that have done so have low processing capacity, and their equipment is outdated. Technological innovations and upgrading of facilities require a large amount of capital. However, the Government has no system to provide loans to private wood-processing firms. Programs needed to promote domestic production of wood-based panels include temporary tax exemptions for processors, reduction of turnover and equipment taxes, and government subsidies to offset processors’ land rental costs.

One way to develop the wood-processing industry is to encourage foreign investment, including joint ventures. However, since the logging ban, foreign investors are concerned over the stability of the domestic timber supply and Viet Nam’s overall economic development. Many joint ventures were short term with only limited foreign participation. This situation is in sharp contrast to the investor expectations for viable industrialization and the necessary modernization of the sector. As a consequence, the level of foreign investment mobilization is low.

The logging ban, low regeneration rates in natural forest, limited industrial capacity and rising demands have lead to a nation-wide paper shortage. In 1990, the average annual consumption of paper per capita was only 1.8 kg. While domestic paper production has increased in recent years, domestic production volume is still about 30 to 40 percent below domestic demand. The serious paper shortage has even reached the point that there is not even enough paper for students’ notebooks and textbooks.

Primary materials used as raw materials by the paper industry are wood, bamboo and rattan. The forests that supply the country’s paper mills are centered in five provinces: Ha Giang, Lao Cai, Yen Bai, Tuyen Quang and Phu Tho. The forest plantations were developed at the same time that the Bai Bang paper mill was built (1971-1972). Since 1991, the wood volume harvested from the natural forests has been reduced in contrast to the increasing volume from forest plantations. It is estimated that the current annual capacity of the Bai Bang and Viet Tri mills is 70 000 tons. Despite the logging ban, the surrounding plantations have the capacity to supply the mills in the future.

Table 73 shows the domestic pulpwood supply in comparison to demand. According to the Government’s plan to develop Viet Nam’s paper industry, by 2010 the country’s paper mills will have an annual production capacity of approximately 250 000 tons. Without developing plantations further there will be a pulpwood supply shortage.

The logging ban also affects other non-wood industries. For example, from 1991 to 1998, Viet Nam’s annual pit-prop production was only 70 to 80 percent of domestic demand (Table 74). The domestic shortage of pit-props relative to demand increased from 20 000 m³ in 1991 to 50 000 m³ in 1998. By the end of 2000, the shortage is estimated to be approximately 58 000 m³ of pit-props and after 2000, it is expected to be 60 000 m³.

Table 71. Changes in wood processing enterprises in selected provinces of Viet Nam, 1993 and 1998

Province/city	1993					1998
	Total no. of firms	State-owned	Non-State	Joint venture	Volume of wood consumed (m3)	Total no. of firms	State-owned	Non-State	Joint venture	Volume of wood consumed (m3)
HCM City	145	53	92	5	377 500	100	33	60	7	250 000
Dong Nai	53	14	39	4	42 400	63	11	41	11	43 000
Quang Tri	13	2	11		5 750	20	3	17		14 000
Gia Lai	29	16	13		33 000	35	13	22		43 000
Binh Dinh	12	10	21		21 300	35	13	22		43 000
Nghe An	34	13	21		21 450	34	14	20		14 000
Ha Tinh	24	11	13		20 000	30	15	15		14 000
Thua Thien Hue	32	4	28		6 000	35	8	27		7 750
Da Nang	30	20	10		26 350	18	14	4		21 700
Kon Tum	20	8	12		16 800	19	10	9		27 500
Khanh Hoa	19	10	9		24 000	19	15	4		17 130
Dac Lac	45	32	13		93 700	60	42	18		80 000
Ha Noi	73	45	28		120 000	-	-	-	-	-

Table 72. Changes in non-State wood-processing enterprises in Viet Nam, 1990-1995

	1990	1991	1992	1993	1994	1995
Wood-processing enterprises (number)	131	146	207	358	400	473
Small-scale household and wood-processing industries (number)	59 500	70 375	69 898	86 358	90 000	95 000
Value of output from non-State wood-processing industry (billion VND)	427.2	448.2	470.2	480.3	675.3	882.6

Table 73. Supply and demand for paper pulp in Viet Nam, 1991-1996

Year	Demand (thousand tons)	Supply (thousand tons)	Supply/demand (percent)
1990	160	134	83.8
1991	195	217	111.3
1992	195	179	91.8
1993	170	158	92.9
1994	185	154	83.2
1995	190	233	122.6
1996	200	199	99.5

Table 74. Supply and demand for pit-props in Viet Nam, 1991-1998

Items	1991	1995	1996	1997	1998
Output of underground coal (million tons)	2	2.8	3.2	3.6	3.7
Pit-props used (m3/1,000 tons of coal)	50	50	50	50	50
Total demand for pit-props (thousand m3)	100	140	160	180	186
Total supply of pit-props (thousand m3)	80	120	130	130	136
Balance (shortage)	- 20	- 20	- 30	- 50	- 50

Income and contribution to the gross domestic product

In 1992, Viet Nam had about 420 forest enterprises with permits to harvest natural forests and plantations. By 1998, only 231 of these enterprises generated sufficient revenues to pay workers’ wages and insurance. Some workers employed by these enterprises earned more from farming and contract logging. These income sources of income were reportedly more stable.

About 120 enterprises were involved in protecting and managing the natural forest. Prior to the logging ban, some of these firms had been forest owners and derived their income from logging. Several had participated in the “327 program,” a national program for re-planting cut-over forestlands and barren hills. These enterprises earned only 60 to 70 percent of their previous logging income by participating in the program’s forest management and protection activities.

Some State forest enterprises are no longer permitted to exploit natural forests, their planted forests have not yet matured, and land is not available for agriculture. Loans for planting additional production forests are difficult to obtain. Workers are only able to obtain contracts for forest protection in very small areas. In the absence of sufficient budgets and revenues, the workers’ monthly income has dropped to only about 50 to 60 percent of the minimum wage regulated by the Government.

The logging restrictions have also affected the income of around 90 000 people participating in forest product processing. About 30 000 workers in the large and medium enterprises have been severely affected. Since the early 1990s, the export of sawnwood was banned and the annual logging quota has steadily decreased. The annual production of wood from forest plantations increased, but not enough to offset reduction in harvests from natural forests. Some establishments adapted by exporting only the permitted secondary finished wooden products. The output value of wood and forest product processors (including both State and private enterprises) fell markedly. Most enterprises operated at only 50 to 60 percent of their capacity. Workers’ incomes declined to 70 to 80 percent of the 1990 to 1991 levels. The income from forest products processing dropped by 60 to 70 percent. Thousands of family, village and cooperative wood-processing establishments stopped production or operated for only a few months each year. As a result, they lost a notable part of their former income.

From 1990 to 1998, gross forest product revenues in 1994 prices increased only 15 percent overall and only 2 percent annually (Table 75). Growth of Viet Nam’s forestry output also slowed. From 1990 to 1998, Viet Nam’s income from processing forest products decreased, while that from forest plantations and other forestry activities increased (Table 76). However, the rate of growth in these two sectors was low. According to Government statistics, the forestry sector contributed approximately 1.8 percent to the country’s GDP and employed 3.9 percent of the labor force.

The logging ban has particularly affected the forest harvesting (exploitation) and wood processing sub-sectors. Revenues from timber harvests and wood products processing declined from 4 265 billion VND in 1990 to 3 698 billion VND in 1998 (1994 prices), a 13 percent decline in revenue (Table 75). Their contribution to total forestry revenues declined from 86 percent to about 68 percent (Table 76).

From 1990 to 1998, the share of revenues derived from forest plantations and development went from 13.3 percent to 20.3 percent. From 1992 to 1998 the value of this sub-sector varied, but averaged about 1.1 billion VND annually, demonstrating that the level of investment in forest plantations was low.

Gross revenues from exploitation declined by almost 8.8 percent between 1990 and 1995. Revenues from State-owned forests declined significantly from 411.5 billion VND to 335.2 billion VND, a decline of almost 19.5 percent. On the other hand, revenues from the private processing industries increased from 427.2 billion VND in 1990 to 882.6 billion VND in 1995, an increase of more than 106 percent (Table 77).

Table 75. Viet Nam’s gross forest product revenue, 1990-1998 (billion VND)

Year	Plantation and development of forest	Forestry products exploitation and processing	Other forestry	Total
1990	652.3	4 265.1	51.6	4 969.0
1991	877.3	4 180.1	100.0	5 157.4
1992	1 172.0	3 821.9	99.5	5 093.4
1993	907.9	3 984.7	148.9	5 041.5
1994	1 146.2	3 907.6	153.1	5 206.9
1995	1 224.7	3 996.1	313.0	5 533.8
1996	1 135.6	4 216.7	277.7	5 630.0
1997	1 058.1	3 717.8	671.9	5 447.8
1998	1 102.0	3 697.6	1 170.7	5 970.3

Table 76. Structure of Viet Nam’s gross forestry output by sub-sector, 1990-1998 (1994 prices) (percent)

	1990	1995	1996	1997	1998
Forest plantation and development	13.3	20.3	20.2	19.4	20.3
Forest products exploitation and processing	85.7	77.0	74.9	68.2	68.0
Other forestry	1.0	2.7	4.9	12.4	11.7

Table 77. Viet Nam’s gross revenue from logging and wood products processing (1989 prices) (billion VND)

	1990	1991	1992	1993	1994	1995
Wood and forest products exploitation	1 182.1	1 159.4	1 140.6	1 093.7	1 068.0	1 078.6
Wood exploitation	411.5	385.2	313.5	346.2	346.6	335.2
Firewood	476.9	453.5	430.9	475.1	455.3	449.2
Forestry products processing
State sector	145.5	147.4	140.8	126.3	127.9	169.6
Non-State sector	427.2	448.3	470.1	480.9	675.3	882.6

Forest conservation

Many provinces have closed access to the natural forests and have strengthened measures for regeneration and protection of the forests through implementation of the logging ban. From 1992 to 1997, the Government conducted regeneration programs on 2 198 ha of natural forests. According to estimates, 55 percent of the total area identified were protected through the logging ban.

As a result of the measures taken, the forest cover increased by 1.5 percent per year on average. After Hoa Binh province imposed the logging ban, its natural forests increased from 112 789 ha (1993) to 117 843 ha (1998). Phu Tho province regenerated more than 32 000 ha of land, of which over 14 000 ha were depleted secondary forests. In the central highlands, implementing appropriate silvicultural measures in the depleted forests helped rehabilitate 6 000 ha of natural forests between 1994 and 1998. The annual forest cover destroyed by fire also declined (Table 78). In part, this is due to blocking access to the natural forests, reducing logging residues, and implementing conservation and protection measures. Unfortunately, the continuing deforestation and destruction of the natural forests far exceed the rates of afforestation and development of plantations.

Table 78. Annual forest area destroyed by fire in Viet Nam, 1990-1998 (ha)

	1990	1995	1996	1997	1998
Red River Delta	3	-	69	-	16
Northeast	237	340	1 554	150	1 035
Northwest	-	364	1 355	55	1 634
North of central	630	94	128	247	642
South central coast	-	80	41	257	606
Central highlands	395	1 046	424	123	370
Southeast	3 450	3 433	608	603	2 950
Mekong River Delta	15 560	1 072	20	314	10 156
Total	20 275	6 429	4 198	1 749	17 409

RECOMMENDATIONS

Although the logging ban has provided important benefits, negative impacts have resulted in the areas of employment, income generation, and availability of fuelwood and timber. The logging ban was instrumental in closing many natural forests from further exploitation, yet additional adjustments and policy changes are required to assure a strong forest economy and adequate protection and conservation. Some recommendations to bring about long-term success are noted below.

Restructuring and developing the forest industry

• Create a mechanism within the wood-processing sector for diversifying production and products.
• Encourage coordination aimed at making the most efficient use of the wood processing enterprises’ capacities.
• Encourage the use of timber from forest plantations and imports.
• Improve processing technologies to enable the production of higher valued products from lower volumes of raw materials; investments should be in technology for processing wood from forest plantations.
• Establish key enterprises as models of modern wood processors, which manufacture quality products that can compete in regional and international markets.
• Set up a network of satellite enterprises around these key enterprises to support production and to make full use of their capacities.
• Purchase only necessary and modern equipment.
• Build clusters of integrated facilities for processing wood-based panels, including pressed fiberboard, and increase the rate of utilization of available wood.
• Establish processing facilities for laminated and bamboo boards to fulfill special and export demands.
• Facilitate joint ventures, producer associations, and expand technical cooperation with other countries by allowing owners to borrow capital externally at competitive interest rates. The restructuring of the forestry sector also needs to be supported by policies that allow enterprises to rent or lease production machinery from foreign countries.
• Develop a stable and clear legal framework, and simplify import and export procedures for wood-processing enterprises.

Restructuring of State-owned wood harvesting and forest product enterprises

• Restructure State-owned forest enterprises into three categories:

a. State forest enterprises that manage and harvest natural forests. These enterprises should operate according to free market practices. The main duties of the enterprises should include protection, regeneration and enrichment of forests, and timber harvesting in accordance with sustainable production principles and economically efficient operations.

b. State forest enterprises that manage closed natural forests for regeneration, but are not allowed to harvest. These enterprises require budgetary allocations from the Government and are responsible for silvicultural activities (e.g. protection, regeneration and enrichment of forests).

c. State forest enterprises responsible strictly for forest protection. It is possible to transfer these functions to the Forest Management Board forestry extension stations. Alternatively, these protection duties could be transferred to households or village/hamlet/communities.

To achieve the goals for natural forest protection and conservation, organizational and individual incentives need to be provided. To achieve national objectives, more use needs to be made of the considerable potential and contributions of individual farmers, local cooperatives and associations, private enterprises, foreign investors and joint ventures, as well as local and national governments. Incentives for greater participation in the forestry sector are needed in the following areas:

• Wood imports: It is difficult to link imports with the needs of individual companies since their demands for raw materials are quite heterogeneous. Although some have established direct contacts with suppliers, they still need better information on market prices and forecasts of trends and market outlooks.
• Policies and measures on biomass energy sources: The Government should invest more in the development of biomass energy sources. It is necessary to include biomass in national energy planning and to stimulate new investments in production and marketing of biomass energy, particularly for rural areas.

CONCLUSIONS

The logging restrictions in combination with the major national afforestation program of 5 million ha by 2010 are timely. These pertinent policy decisions are of strategic significance in raising the national capacity for protecting Viet Nam’s natural forests, its environment and biodiversity. They create the pre-requisites of sustainable forest resource management and contribute to global environment protection. At the same time, better government policies and policy guidelines are needed to facilitate closer links between raw material suppliers in the region and the processing industries. Restructuring of the forest product industry, improved efficiency, together with the planned shift towards plantation timber can help Viet Nam meet export and domestic demands, generate employment, increase incomes and stabilize the livelihoods of more than 20 million rural people living in the forests.

The logging restriction policy has also had some undesirable impacts on the wood-processing industries, including the following:

• There is an increasing deficit in raw materials, without effective and timely measures to supplement supplies through imports. This has resulted in an imbalance in supply and demand, increasing competition in the market.
• The current market mechanisms are preliminary and macro-economic controls are poorly developed. The Government has created market distortions through past policies of production and distribution of timber products, and has restrained market efficiencies. Unstable wood prices have reduced wood-processing operating capacities to only 50 to 60 percent of the designed capacities. Some companies were forced to shift their line of production, thus affecting capital investments. The Government has planned to restructure the network for wood-processing establishments. However, in practice this is still based on previous patterns of timber supplies coming from the natural forests. Planning has not yet adequately considered forest product consumption and markets for raw materials. Furthermore, reforms have only been initiated for State-owned enterprises, and not for the private sector.
• Due to the shortage of wood from natural forests, the wood-processing enterprises have to rely on wood from forest plantations, which is often of different species, size, quality and end-use attributes. These companies have sought to develop their capacities to produce wood-based panels and composites that can utilize the lower grade materials. To enhance profitability, they have also sought to improve secondary or value-added products. Nevertheless, the current production levels of both State and non-State sectors are low. Only a few establishments have integrated equipment, while the remaining enterprises are still using outdated and inefficient machinery. Thus, a considerable amount of capital investment is required to innovate and modernize the enterprises.
• Due to the logging ban, enterprises authorized to log from natural forests now receive significantly lower annual logging quotas than before. Some enterprises have nearly ceased harvesting. Since the Government has not reorganized the timber supply system properly, many enterprises have to rely on their own resources. In spite of such difficulties, they have sought to generate employment for workers, and to shift to other activities such as forest protection and establishing plantations. However, Government budgets for these activities are limited and only a small number of jobs can be created for the employees previously working in wood-processing enterprises.

For the reasons outlined above, the Government needs to facilitate the comprehensive adjustment of both State-owned and private enterprises to re-orient their production or reduce output, and assist workers who are unemployed because of the logging ban.