Vietnam is a mountainous country, with three-quarters of its land area covered by mountains and hills. However, according to the Vietnamese Ministry of Agriculture and Rural Development, forest cover was only 42.02% as of June 2022. Furthermore, more than two-thirds of Vietnam’s natural forests are considered degraded. The World Bank Group reports that “two-thirds of Vietnam’s natural forests are deemed in poor condition or regenerating, with only 5% remaining as rich, closed-canopy forest.”

While planted forests account for about 35% of Vietnam’s total forest area (as of June 2022, with 14,790,075 hectares), those established in the past 15 years are primarily small wood plantations used for the low-value wood chip industry. Deforestation of natural forests for resource extraction and agriculture has resulted in a number of negative consequences, including increased instability of river and stream water sources, greater difficulty controlling natural disasters, and severe soil erosion. These factors contribute to a range of harmful economic, environmental, and social impacts.

Vietnam’s planted forests: Growth and challenges

According to official statistics from the Ministry of Agriculture and Rural Development, between 2012 and 2022, Vietnam lost 289,762 hectares of natural forests. However, the area dedicated to small wood plantations for the wood chip industry has increased by 1,217,793 hectares. This rapid expansion highlights the potential for afforestation efforts to increase overall forest cover, but it raises concerns about the long-term sustainability of this approach. While these plantations contribute to rural development, particularly through job creation, they often consist of fast-growing, low-value tree species that offer limited ecological benefits compared to natural forests.

Vietnam’s forestry industry has seen a fierce competition in afforestation between companies and households over the past decade. This competition has sometimes led to clashes between communities and powerful alliances of companies and the government. Due to their isolation and lack of legal resources, local people have often been forced to give up their land or sell it at very low prices.

While agriculture is the primary source of income for people in rural areas, growing crops and raising livestock often falls short of solving their poverty. This forces them to turn to forests for additional income through activities like illegal logging, charcoal production, and even forest burning for new farmland. These practices all contribute to the degradation of existing forests and a significant reduction in overall forest cover.

Around the 1950s, a number of eucalyptus varieties were imported from Australia, with some species proving highly suitable for Vietnamese soil and climate. Although pure eucalyptus forests were common in Central Vietnam before 1975, strong development of this type of planted forest only occurred in the 1990s.

However, in the 2000s, as forest land dwindled due to a rush to plant, people began to choose acacia varieties alongside eucalyptus trees. These acacias offered the advantages of being easy to plant, fast-growing, and generating significant biomass and economic value. Furthermore, the acacia tree belongs to the legume family, which helps improve soil quality by fixing nitrogen through root nodules containing nitrogen-fixing bacteria. This helps prevent erosion, protect forests, and reduce the risk of landslides. Consequently, the acacia tree gradually replaced the eucalyptus tree, which depletes soil nutrients, as the dominant plantation species. Thanks to this shift, many households in forestry-dominated areas have confidently transitioned from upland fields with annual crops to planting acacia forests or other perennial crops.

Mr. Nguyen Hoang, a tree plantation owner in Central Vietnam, says, “The planting of production forests has grown very rapidly in recent years. Acacia and eucalyptus are the two most popular choices for growers. Acacia is particularly attractive because the lumber can be sold for a high price after about eight years. Alternatively, it can be sold to a wood chip factory after just four to five years.”

The profit potential is also attractive. After about five years of planting and caring for acacia, traders will often come to the farm to buy the trees directly. This can generate a net profit of around $1,970 – $2,750 per hectare. Leaving the trees for a few more years allows them to grow large enough for saw timber, which can increase the value to up to $5,900/ha.

However, not all rural areas have access to extensive production forest land. This has become a particular concern in recent years, as more companies and corporations are seeking land for large-scale afforestation projects.

Powerful competitors

Hoang also shared his experiences: “Working in the forest industry can actually provide a good income. As long as a household has around three hectares of forest land, combined with rice farming and animal husbandry, they can live comfortably. However, not everyone has access to forest land. In my area, there’s a significant amount of forestry land. But since around 2008, when companies like Truong Thanh Xanh or Tan Phuoc Thinh started applying for their afforestation projects, it became clear that some people were left without land. Even worse, there have been instances of these companies encroaching on existing landholdings of the locals.”

Production forestry companies, like Truong Thanh Xanh, have invested heavily in developing raw material forest areas over the past five years. Leveraging their strong capital resources, they often acquire land through government allocation or by purchasing local landholdings at low prices, sometimes even resorting to encroachment. Additionally, they have easy access to capital from commercial banks and benefit from lending programs facilitated by the Vietnam Bank for Social Policies.

Several factors disadvantage local residents, like limited capital and the absence of Land Use Rights Certificates (LURC) that  leave them vulnerable when land disputes with companies arise. Additionally, securing loans for forestry projects proves difficult due to banks’ requirements which prioritize companies over households. These include the absence of LURC, insufficient collateral, and banks’ general hesitation towards long-term lending to households. The limited access to long-term financing unfortunately incentivizes residents to harvest their trees prematurely for sale to wood chip factories, significantly reducing the potential economic value.

Companies often exploit loopholes in collaboration with corrupt officials to rent forest land cheaply, and additionally, they use their leverage to either encroach on or pressure local farmers into selling neighboring plots without LURC at low prices. For many residents, this translates to decades of work and cultivation abruptly coming to an end, when one day, the Provincial People’s Committee suddenly assigns their land to a specific afforestation company. Faced with ineffective legal challenges, the residents are forced to either accept a meager price for their land, or suffer a significant loss.

Banks favor lending to companies due to their established legal status and ability to provide collateral. However, many production afforestation companies operate with a concerning lack of transparency, even resorting to mafia-like tactics in collusion with corrupt officials to oppress locals. Once they secure the LURC or project approval from the Provincial People’s Committee, these companies leverage these assets as collateral to obtain loans from banks. After approximately 2-3 years of cultivating the forest, they often seek to quickly exit by reselling the project or selling shares to foreign companies. In some egregious cases, companies finalize sales before the ink on the Provincial People’s Committee’s approval seal is dry.

Vietnam’s forestry industry, a significant contributor to the national economy, is experiencing robust growth. In a landmark 2023 achievement, Vietnam’s forestry sector completed the first-ever transfer of 10.3 million tons of carbon emission reductions to the Carbon Partnership Fund in Forestry through the World Bank. This initiative generated $51.5 million, and Vietnam’s forestry sector set ambitious goals for 2024, aiming to maintain a stable national forest coverage rate of 42.02% while achieving a growth rate of 5.0-5.5% in forestry production value. Additionally, the sector’s target is to generate $118 million in forest environmental service revenue and reach an export value of $17.5 billion for forest products.

However, to achieve these goals and ensure a sustainable future for the industry, collaboration between companies and farmers is crucial, but Vietnamese farmers already facing economic hardship encounter significant obstacles that hinder their participation in this growing sector. Challenges like the mafia-style competition from companies with government ties, the difficulty of securing bank loans for long-term forestry projects, and cumbersome procedures associated with obtaining the LURC all strain their already challenging circumstances.

Addressing these challenges and fostering a spirit of cooperation between companies and farmers is essential to ensure that the Vietnamese forestry industry thrives while promoting the livelihoods of both parties.

See related coverage:

Land tenure lesson from Laos for forest carbon projects (commentary)

‘Drastic forest development’: Vietnam to plant 1 billion trees — but how?

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Erik Hoffner Editor

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