HUE UNIVERSITY COLLEGE OF ECONOMICS THE ADVANCED PROGRAM FACULTY OF ECONOMICS AND DEVELOPMENT STUDIES -  - SCIENTIFIC RESEARCH ECONOMIC EFFICIENCIES OF THE FOREST CERTIFICATION GROUP IN TRUNG SON COMMUNE, GIO LINH DISTRICT, QUANG TRI PROVINCE Group members: NGUYEN THI THUY MINH HOANG THI MY HANH PHAM THI THU HA DAO THI NGOC BICH Hue, December, 2015 HUE UNIVERSITY COLLEGE OF ECONOMICS FALCULTY OF ECONOMICS AND DEVELOPMENT STUDIES -  - SCIENTIFIC RESEARCH ECONOMIC EFFICIENCIES OF THE FOREST CERTIFICATION GROUP IN TRUNG SON COMMUNE, GIO LINH DISTRICT, QUANG TRI PROVINCE Group members: Supervisor: NGUYEN THI THUY MINH HOANG THI MY HANH PHAM THI THU HA DAO THI NGOC BICH Assoc Prof Dr TRAN HUU TUAN Agreement of acceptance: …………………………………… K45 ADVANCED PROGRAM BACHELOR OF AGRICULTURAL ECONOMICS-FINANCE Hue, 2015, December ACKNOWLEDGEMENT Firstly, we would like to express my sincere gratitude to my advisor Assoc Prof Dr Tran Huu Tuan for the continuous support of our research, for his patience, motivation, and immense knowledge His guidance helped us in all the time of research and writing of this research We would also like to show gratitude to teachers at Hue College of Economics who have taught us professional knowledge we used in this research In particular, we would like to thank all the staffs working at department of forestry Quang Tri, they were enthusiastic to help me during the time of research Also we thank farmers in Trung Son commune who answered our questionnaires and gave us helpful knowledge for our research Last but not the least, we would like to thank our family: our parents, our brothers and sisters for supporting us spiritually throughout writing this research and our life in general Hue, 2015, December TABLE OF CONTENTS ABBREVIATIONS LIST OF TABLES LIST OF FIGURES ABSTRACT PART I INTRODUCTION .1 Rationale 2.Objectives 2.1 General objective 2.2 Specific objective 3.Scope and study subjects 3.1 Scope 3.2 Study subjects 4 Methodology 4.1 Data collection 4.1.1 Secondary data 4.1.2 Primary data .4 4.2 Data analysis PART II CONTENTS AND RESULTS CHAPTER SCIENTIFIC BACKGROUND 1.1 THEORETICAL BACKGROUND .6 1.1.1 Forest and its role in economics, society and environment 1.1.1.1 Forest resources 1.1.1.2 Roles of forest .7 1.1.1.3 Concept of forest certification 1.1.2 Theory of economic efficiency 12 1.1.2.1 Concept and essence of economic efficiency 12 1.1.2.2 Method to determine economic efficiency 14 1.1.2.3 Criteria for economic efficiency 15 1.2 PRACTICAL BACKGROUND 17 1.2.1 The situation of forest certification application in the world and Viet Nam 17 1.2.1.1 In the world 17 1.2.1.2 In Viet Nam 20 1.2.2 The situation of exporting and importing wood and certified wood in Viet Nam 22 1.2.2.1 Exporting 22 1.2.2.2 Importing 25 CHAPTER EFFICIENCIES OF THE FOREST CERTIFICATION GROUP IN TRUNG SON COMMUNE, GIO LINH DISTRICT, QUANG TRI PROVINCE…… 26 2.1 STUDY SITE 26 2.1.1 Natural condition 26 2.1.1.1 Geographical location 26 2.1.1.2 Topography 27 2.1.1.3 Climate 27 2.1.1.4 Hydrology 27 2.1.1.5 Soil resources 28 2.1.2 Social and economic conditions 28 2.1.2.1.Population and labor force characteristics 28 2.1.2.2 Land use situation 29 2.1.2.3 Facilities and Infrastructure 30 2.1.3 Overall condition to develop the forest plantation in Trung Son 31 2.1.3.1 Advantages 31 2.1.3.2 Disadvantages 32 2.2 SITUATION OF FSC CERTIFICATION APPLICATION IN TRUNG SON 32 2.2.1 General situation of forest plantations in Trung Son 32 2.2.2 Description of the Forest smallholder certification groups in Trung Son 33 2.2.2.1 Forest smallholder certification group 33 2.2.2.2 Structure of the Forest smallholder certification group 33 2.2.2.3 Activities in Forest smallholder certification group 34 2.2.3 Some difficulties in Forest smallholder certification group management 37 2.2.4 Some advantages, disadvantages for FSC small group in Trung Son 38 2.2.4.1 Advantages 38 2.2.4.2 Disadvantages 39 2.3 EFFICIENCIES OF FOREST CERTIFICATION IN TRUNG SONCOMMUNE 40 2.3.1 Characteristics of respondents 40 2.3.2 Economic efficiencies 40 2.3.2.1 Cost-benefit analysis of FSC forest plantation 41 2.3.2.2 Cost-benefit analysis of non-FSC forest plantation 44 2.3.2.3 Sensitive analysis 45 2.3.3 Environmental efficiencies 47 2.3.4.Social efficiencies 48 CHAPTER 3: SOLUTIONS TO IMPROVE ECONOMIC EFFICIENCY OF FOREST CERTIFICATION……………………………………………………………………….51 3.1 Solutions on land planning 51 3.2 Solutions on market and product consumption 51 3.3 Solutions on investment and credit policy 51 3.4 Solutions on planting and caring techniques 52 3.4.1 Varieties 52 3.4.1 Extension 52 3.5 Solutions on infrastructure 52 3.6 Solutions on propaganda and popularization 52 PART III CONCLUSION AND RECOMMENDATIONS 53 1.1 CONCLUSION 53 1.2 RECOMMENDATIONS 54 REFERENCES 56 ABBREVIATIONS BCA Benefit-cost analysis BCR Benefit to cost ratio CoC Chain of Custody EU European Union FFCS Finnish Forest Certification System FLEG Forest Law Enforcement and Governance FSC Forest Stewardship Council IRR Internal rate of return ISO International Organization for Standardization ITTO International Tropical Timber Organization KfW German government-owned development bank LACEY U.S law which prohibits the trade of illegal timber and timer products MARD Ministry of Agriculture and Rural Development NGO Non-governmental organization NPV Net present value PEFC The Program for the Endorsement of Forest Certification P&C Principles and Criteria US The United State USD The United State Dollar VG Village Groups VCG Village certification group VGL Village Group Leaders VND Vietnamese dong WWF World Wildlife Fund LIST OF TABLES Table Current State of Sustainable Forest Management Certification in Vietnam… 21 Table Export markets of Vietnam's wood and wood products in the first 10 months of 2014………………………………………………………………………… ……….23 Table Distribution of population in Trung Son commune………………….…… …29 Table Organizational levels of the Trung Son Group Certification Scheme…….……34 Table General characteristics of respondents……………………………….…………40 Table Comparison of purchase price between certified and non-certified acacia timber ………………………………………………………………… …… …… ….41 Table Cost and revenue structures of FSC Forest plantation with timber purpose in years………………………………………………………… …………… …… ….42 Table Cost-benefit analysis of FSC forest plantation with timber purpose in years…………………………………………………………………………… ……….43 Table Cost and revenue structures of non-FSC forest plantation with timber purpose in years…………………………………………………………… …………… .….44 Table 10 Cost-benefit analysis of non-FSC forest plantation with timber purpose in years…………………………………………………………………………… ……….45 Table 11 Sensitive analysis of two scenarios of forest plantation with timber purpose in years…………………………………………………………………………………… 46 LIST OF FIGURES Figure Vietnam's wood and wood products export structure by market in first 10 months of 2014………………………………………………………………………… 24 Figure Map of Trung Son commune……………………………………………… 26 ABSTRACT Forests play a very important role in the national economy and social life Nowadays, pressure of population growth and the impact of economic development have made a decline on forest area and forest resources People only notices in harvesting, they not know combining harvest with the economic development and sustainable management, so illegal harvesting activities have still occurred Many laws and programs have been implemented, contributing to considerably increase in forest area Besides, Forest Certification is an interesting initiative that is supplement for public regulation to promote better forest management Worldwide, there are many countries have successfully adopted the model and contributed to sustainable forest management, especially the protective forests and special-use forests In 2010, Trung Son has been awarded as one of two first Groups in Viet Nam certified against Forest Stewardship Council (FSC) required This research represents the benefits of FSC Forest Certification Group in Trung Son in economic, environmental and social aspects In term of economic effect being analyzed by cost-benefit analysis, FSC forest plantations brought great efficiency to farmers with Net present value of VND52.378 million per hectare over years, it’s approximate VND20 million larger than Non-FSC plantations Moreover, through 10 Principles and 56 Criteria, it has positively contributed to society and the forest sustainable management Finally, this research figures out some problems in participation as well as management the FSC certification group and then suggests their solutions Some recommendations are also provide in order to enhance its efficiencies and promote the expansion of forest certification 2.3.2.2 Cost-benefit analysis of non-FSC forest plantation Table shows the cost and revenue structures of non-FSC forest plantation with timber purpose in years The production cost from year to year was quite the same with FSC forest plantation However, cost for year th is higher due to the higher transportation cost for chip wood The total cost in years for non-FSC forest plantation was VND39.99 million/ha, higher than FSC forest plantation VND 3.6 million/ha Table 9: Cost and revenue structures of non-FSC forest plantation with timber purpose in years Unit: VND1000/ha Year No Contents 1st 2nd 3rd 4th 5th 6th 7th 10250 10250 150 3500 1600 3000 900 1000 100 2600 2600 0 2000 500 100 600 600 0 0 500 100 400 400 0 0 300 100 100 100 0 0 0 100 100 100 0 0 0 100 25940 39990 25940 39990 0 0 0 100 8800 2640 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 1.10 1.11 Costs Production cost Design Site preparation Seedlings Fertilizer Planting Weed control Protection Harvesting Transportation of logs Transportation of chip wood to factory Contribution to local authority Revenues Total 14300 100 113124 113124 2.1 Logs (D>15cm) 60500 2.2 Chip wood (D