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Ministry of Forestry  SOCIALIST REPUBLIC OF VIETNAM
No.10 KH              Independence-Freedom-Happiness

                      Hanoi, 9 June 1993

CIRCULAR

Guidelines by the Ministry of Forestry Concerning
Implementation of Decision 327-CT

The Ministry of Forestry hereby issues guidelines for
selected issues in the forestry sector related to the
implementation of Decision 327-CT dated 15 September 1992 by
the Chairman of the Council of Ministers (now Prime
Minister) about policies for the use of bare land and
degraded hills, forests, coastal alluvial flats, and water
bodies, as follows:

A. PREPARATION OF A GENERAL FORESTRY PROGRAMME

Forestry-agriculture-industry projects are to be established
in different localities and provinces. All provinces should
prepare an outline for a Provincial General Forestry
Programme, with contents according to guidelines by the
Ministry of Forestry in document 1559/KH dated 15 August
1992. The documentation for the Provincial General Forestry
Programmes is of key importance for the Ministry of Forestry
for its preparation of the National General Forestry
Programme.

Important Points

- As definitions for different kinds of land are not the
same between the Ministry of Forestry and the Ministry of
Agriculture and Food Industry, the data on such land need to
be harmonised. The area of bare forest land needs to be
defined. The part of that area which needs a vegetation
cover should also be defined. The vegetation to be
established could consist of forest trees, different kinds
of industrial crops, or fruit trees, as long as they are
able to form a closed canopy.

- A list should be prepared of forestry-agriculture-industry
projects, divided between the three different kinds of
forest. The list should be made in order of priority.

- Draft plans should be made for centres for processing of
forest products in provinces and localities as a part of the
general programme for the province. This work needs to be
finished during June 1993.

B. PREPARATION OF PROJECTS IN FORESTRY-AGRICULTURE-INDUSTRY

1. Develop the Four Kinds of Projects Listed in Decision
327-CT

The following four kinds of project are foreseen to be
executed according to Decision 327-CT:

* Forestry-agriculture-industry projects;

* Agriculture-forestry-industry projects;

* Marine production combined with agriculture; and

* Fixed cultivation and sedentarisation.

The Ministry of Forestry is the leading agency for
management of the forestry sector. Consequently, it will
assume primary responsibility for appraisal and approval of
the forestry-agriculture-industry projects in the list
above.

The forestry-agriculture-industry projects are to be carried
out on forest land, both forested and unforested, for
example on bare land, hills, and mountains. The level of
investment for forestry occupy an important share (60-70%)
of the total State grants covering different activities such
as natural regeneration, enrichment of forests, and planting
of new forests. The role of agriculture in these projects
should be to cultivate areas of the land defied as forest
land which still have a potential for agriculture, such as
newly formed alluvial flats along rivers and the coast and
to use water bodies (if there are any).
Agriculture-forestry-fishery business should if possible be
combined, in order to produce a variety of commodities. A
network of agroforestry production units needs to be built
up, well suited to the scope and kind of goods produced in
the area of the project.

The project proposals should follow directives and
guidelines regarding their format as provided in document
1559/KH dated 15 August 1992 by the Ministry of Forestry.

2. Additional Guidelines for Selected Issues

2.1. Projects for which pre-feasibility studies have already
been approved or for which technical-economic plans were
made before the issuance of Decision 327-CT

2.1.1. Special-use forests

Implement investment according to technical-economic plans
already approved. The projects within
forestry-agriculture-industry components in buffer zones
should now be complemented according to Decision 327-CT.

2.1.2. Watershed forests

Projects in watershed forests approved before the issuance
of Decision 327-CT which are concerned with regional
planning or pre-feasibility studies may now need to be
supplemented so as to turn them into
forestry-agriculture-industry projects with a suitable
scope. In concrete terms, this means:

* For watersheds extending into several provinces (for
example the watershed of the Hoa Binh dam, of the Tri An
hydropower lake, and so on) projects should be developed for
the area concerned in each province. Each project should
have a suitable scope, but they should not overlap areas of
existing regional watershed projects.

* In areas where there are State Forest Enterprises, those
should be turned into forestry-agriculture-industry
projects. The Directors of the enterprises would then become
Project Directors, to be nominated by the leading agency for
the projects (the Ministry of Forestry).

* In areas where there are no State Forest Enterprises, new
projects on a scale of one or a few communes or a district
should be developed. A small and effective management
committee for the project should be created.

2.1.3. State Forest Enterprises with approved
technical-economic plans for new projects.

Such enterprises should now compare their project plans with
Decision 327-CT. The new projects should be of a suitable
scope. All project items should be checked for which
investments have already been made. The project might then
need to be supplemented with new items in order to turn it
into an effective forestry-agriculture-industry structure of
the locality.

2.1.4. Areas which have funds from abroad

Forestry-agriculture-industry projects are to be established
also in areas which have access to funds from outside the
country such as from the Swedish International Development
Authority (SIDA) and the World Food Programme (WFP/PAM). If
the foreign-funded projects include items which contribute
to the establishment of projects according to Decision
327-CT, these items should be seen as belonging to the new
projects so as to avoid overlapping use of funds.

2.1.5. State Forest Enterprises which carry out exploitation

These enterprises should apply the policy of setting prices
for standing trees. Then all costs associated with
exploitation and transport should be added. This would
result in a price level for the sale of logs at the woodyard
of the processing industry. If prices are established in
this way, funds will be created for the subsequent
regeneration of the forest. (The Ministry of Forestry has
already issued specific guidelines in this respect.)

2.1.6. Specialised agencies involved in project formulation

The Forest Inventory and Planning Institute (FIPI) which
belongs to the Ministry of Forestry and units under FIPI
involved in inventory and planning in forestry on the
provincial level, the Forest Science Institute of Vietnam,
the Forestry College, are units which can be contracted for
the formulation of projects within the General Programme of
Forestry for the provinces and also for the formulation of
forestry-agriculture-industry projects, and, finally, also
for seed projects.

2.2. Formulation of new projects and temporary decision
about level of grants for investments

The estimated costs for planting and maintenance of
different tree species should be presented in project
outlines. A distinction should be made between the total
costs and the level of grants provided. The policy for
investments for forestry development is well described in
Decision 264 HDBT dated 22 July 1992. Further, the different
ministries concerned have issued circulars with specific
guidelines. Now, the following temporary instructions are
given:

2.2.1. Total investment

This is the total cost for a full production cycle (for
example, in the case of a planted forest, costs for
production of the seeds, soil preparation, planting,
maintenance, and protection until the stand has reached the
age of final harvesting). The level of grants which can be
obtained corresponds to a part of this total only. The
distribution of the final production of the forest will be
made in accordance with the shares in the total cost
contributed from the State budget and from other sources.

2.2.2. Temporary decision about distribution of budget and
level of investment grant

In each project, funds for investment should be distributed
between the three kinds of forest (special-use, protection,
and production). In forestry-agriculture-industry projects
it is temporarily decided to allocate an average of 60% of
the annual investment funds for the following purposes:

* Grants from the State budget can be used for protection,
natural regeneration, and enrichment of protection forests
and special-use forests, and also for forests producing
large logs with a rotation of above 20 years. It is now
temporarily decided to apply the following levels of such
grants:

+ Protection and natural regeneration for poor forests: On
average 20,000 to 50,000 dong per hectare per year. The
grant is to cover all costs until the canopy has closed. For
the first year, the grant is 40,000 to 70,000 dong per
hectare because it will have to include the cost for design.
The normal time until the canopy closes is 5 to 8 years.

+ 50,000 dong per hectare per year for essential watershed
forests, for forests close to areas of forest destruction,
for forests located close to where people are now changing
from shifting cultivation to fixed cultivation and
agroforestry, for special-use forests, and for buffer zones
allocated to people for protection and natural regeneration.

+ 30,000-40,000 dong for forests along roads, for amenity
forests close to inhabited areas, for watershed forests on
islands, and for other forests in areas where people already
have stable production but where there is a need to allocate
forests to the people for protection and natural
regeneration.

* For mountainous and sparsely populated areas with a low
level of forest destruction and where there is a need to
allocate, forests to the people, the level should not be
more than 20,000 dong per hectare and year.

* Enrichment of poor forests (by other methods than natural
regeneration). The level of grant can be up to 400,000 dong
per hectare for enrichment planting with a density of 300
seedlings per hectare. In addition, 20,000 dong per year may
need to be spent for protection during 8 years so as to
ensure survival rates of above 90%.

* For production forests with rotation below 20, years,
credits will be provided according to Decision 264-CT
(specific guidelines have also been issued).

* For forests where investments were made before the
promulgation of Decision 327-CT, the project Directors
concerned should prepare a list of all investments already
made which serves purposes in accordance with that Decision.
They are also to make plans for the future investments
needed in order to continue the project in accordance with
Decision 327-CT. In concrete terms, this means that future
investments for forests with rotations above 20 years which
were planted in 1992 can be made with grants from the State
budget. For forests with rotations below 20 years, further
investments will have to be financed with loans.

2.2.3. Bare lands and denuded hills

Natural regeneration

Land which does not bear forest but are covered by other
kinds of vegetation (grass, bush) and are able to reforest
themselves should be protected for natural regeneration.
Investment needs are about 30,000 dong per hectare per year
for a period of 5 to 8 years in order for the forest canopy
to close. For the first year, the cost might be 50,000 dong,
including the cost of design.

Plantation

Grants from the State budget can be provided for watershed
forests, including forests producing large logs, soil
improving species, fruit trees, and industrial crops which
are cultivated in areas where a vegetation cover is needed
for watershed protection. The level of State grants is about
1.9 million dong per hectare to be spent over a period of 3
years. 1,500 seedlings per hectare should be planted, of
which 50% should be of local species. The remaining 50%
should consist of fast-growing species, soil-improving
species, and fruit trees.

For forests protecting arable land against moving sand in
coastal areas, the grant may be up to 1.2 million dong,
depending on the zone and the kind of tree structure
created. After 3 years, the plantations will be inspected.
If the result is acceptable, then an additional amount of
20,000 dong per hectare will be given annually for 5 years
for protection purposes.

For special-use forests, State grants will be provided
according to economic and technical plans made. In the
buffer zone, the rules will be the same as for watershed
forests given above.

For production forests with rotations below 20 years, the
policies about credits for investments according to Decision
264-CT will be applied. (Specific guidelines have been
issued.)

2.2.4. Seeds and nurseries

The Ministry of Forestry will continue to manage and make
the necessary investments in the system of nurseries and
national seed stands. The Ministry will also make plans for
the supply of seeds needed for the implementation of the
National General Forestry Programme.

Based on the Provincial General Forestry Programmes and the
needs of the entire country, each province should propose a
provincial seed project to be submitted to the Ministry of
Forestry for approval. It should cover the following points:

* Selection of natural forests and planted forests to be
transformed into seed stands, seed forests, and seed forests
with new species.

* Establishment of a system of nurseries in order to meet
the need for seedlings for different projects.

* A plan for seed supply, particularly for supply of seeds
of important and new tree species. The seeds must be clearly
registered and must be tested by the Ministry of Forestry.

Each provincial forest seed project is to he appraised and
approved by the Ministry of Forestry. The People's Committee
of the province will be the leading agency for the projects.
Files about the annual progress of the projects are to be
kept by the province and by the Ministry of Forestry.

For nurseries belonging to forestry-agriculture-industry
projects, the following rules apply:

* State grants will be provided for the establishment of a
part of the infrastructure of the nurseries. Such costs will
be regarded as a part of the investment of the projects. The
costs of production of seedlings are instead regarded as a
part of the cost of plantation.

* Establishment of nurseries with a production capacity
above 500,000 seedlings per year is to based on adequate
economical and technical studies. Smaller nurseries need to
prepare economic and technical reports.

2.3. Allocation of forests and forest land

Forestry and agricultural production in the
forestry-agriculture-industry projects will be performed by
households on a contractual basis. For this reason, it is
necessary to continue the process of allocating forests and
forest land in accordance with official document 300/CV-RD
dated 8 May 1993 by the General Department for Land
management.

2.4. Agricultural production

A sum corresponding to 20% of the total State fund for the
projects will temporarily be used for development of
agricultural crops and animal husbandry in order to create a
viable forestry-agriculture-industry structure in projects.
The money will be allocated in the form of an interest-free
loan.

2.4.1. Industrial crops

In forestry-agriculture-industry projects, industrial
long-term crops such as coffee, tea, and mulberry and
short-term industrial crops should be cultivated in certain
areas. These crops can be grown under an open forest canopy
or in a forest plantation until its canopy has closed.

State funds in the form of interest-free loans can be
provided to households, of workers and farmers who have been
allocated land for their long-term use to be used for the
creation of tree formations suitable for the area.

In the area of the project, there may be a large-scale
plantation of long-term industrial crops established in
accordance with a programme for industrial crops of the
agricultural sector, like rubber, tea, and so on. Such
plantation can become incorporated into the new projects as
a special component. Credits for activities related to such
plantations will have to be arranged in accordance with the
programme for industrial crops of the Ministry of
Agriculture and Food Industry.

2.4.2. Food crops

The areas in the projects to be used for food crop
cultivation must be clearly defined. Irrigated paddy must be
cultivated only in suitable areas. Small water conservancy
structures may be built in order to supply water for two or
even three crops. For dry-land cultivation of food crops,
attention should be paid to the following issues:

- Forest should be planted along the contour lines. Create
forest strips along the contour where there is soil erosion.

- Practise crop rotation and use soil-improving tree
species.

- Select rice seeds which give high yield.

2.4.3. Garden economy

The home garden is an important resource for the households
and is a key component for long-term stability of the
economic situation of the households. For that reason,
priority should be given to that issue when assistance is
provided to newly established home gardens. Demonstration
models should be created showing techniques for seed
selection, soil preparation, intensive cultivation, and so
on.

State grants can be used in support of garden economy in
certain cases, such as for people participating in fixed
cultivation and sedentarisation projects, for people
settling in new economic zones, and for people moving to
project areas. The grants can be used for clearing and
preparation of land, seedlings of fruit trees, forest trees
producing logs, and soil-improving trees. Depending on the
site, the amount can be 300,000 dong per household if they
need to open new land and 500,000 if they need to perform
that work. The total area per household would be 0.3 to 0.5
hectares, depending on the site.

2.4.4. Animal Husbandry

In forestry-agriculture-industry projects, initial attention
should be focused on large domestic animals, such as
buffaloes, cows and oxen, deer, and goats. About one hectare
per household needs to be set aside for pasture for the
animals. The households can get interest-tree loans for the
initial purchase of female animals. Poor households which
have no funds can get up to 1.5 million dong in the form of
grant for purchase of two female animals.

2.5. Establishment of infrastructure and public welfare

About 20% of the total State funds for
forestry-agriculture-industry projects can be provided in
the form of grants for the following purposes:

- Preparation of fields for small-scale irrigated paddy
cultivation in places where this is the best use of the
land.

- Creation of small water conservancy structures in
forestry-agriculture-industry projects, suitable for
household use of land prepared for irrigated paddy,
industrial crops, and homegardens. The structures should
whenever possible the combined with other structures. For
example, an irrigation dam can also serve as a road.

- Certain kinds of minor transport infrastructure can be
included in forestry-agriculture-industry projects, such as
forest roads, rural roads connecting communes and villages
to be used for pedestrians, bicycles, and animal-pulled
carts. Funds can also he used for small bridges. Major roads
will have to be financed from other sources.

- forestry-agriculture-industry projects can include small
hydroelectric power stations for household supply of
electricity. The capacity would be about 5-30 kW. Such
stations will only be established in remote areas outside
the national electricity grid.

- Basic welfare facilities should be established within
forestry-agriculture-industry projects. Examples are the
construction of primary schools (grades 1-4), clinics, water
supply in areas of water shortage. The size of the
facilities must be suitable for the population in the area;
they should be small but serve their function for long.

2.6. Non-commercial economic units

Investment funds for non-commercial economic units within
forestry projects consist of funds for fixed cultivation and
sedentarisation to be used to help households establish
fixed cultivation and to settle, for households invited to
migrate and settle in project areas. The amount of grant for
each household will he set according to the policy of the
Ministry of Labour, War Invalids, and Social Affairs, the
State Planning Committee, and the Ministry of Finance. These
funds can also be used for extension in forestry and
agriculture.

2.7. Appraisal and approval of projects

Appraisal and approval of projects is to be made according
to guidelines by the State Planning Committee.
Forestry-agriculture-industry projects managed by units
outside the forestry sector, such as the army, police, and
youth volunteer groups, need certificate from provincial
People's Committee and approval from the Ministry of
Forestry before they submit the project proposal for
approval.

Forestry-agriculture industry projects, forest seed
projects, botanical gardens (or arboretum) need to submit
only to the Ministry of Forestry. The Ministry will appraise
forestry-agriculture-industry projects with an investment
level (grants and interest-free loans) up to 11 billion dong
for subsequent approval by provincial People's Committees
(except seed projects which also will be approved by the
Ministry). After the provincial authorities have approved
the projects, copies of the project documentation should be
sent to the Ministry of Forestry, to the State Planning
Committee, and the Ministry of Finance. Projects over 11
billion Dong are to be appraised by the sub-committee on
project appraisal of the State Planning Committee which
subsequently submits the project to the Prime Minister for
approval.

C. MANAGEMENT AND IMPLEMENTATION OF PROJECTS

1. Project implementing agency

Forestry-agriculture industry projects carried out on land
belonging to the three kinds of forest (special-use,
protection, production) will be of the hollowing kinds:

- Projects creating watershed forests, coastal forests, or
forests for environmental purposes.

- Projects creating special-use forests and buffer zones.

- Projects creating production forests.

- Projects on botanical gardens or arboreta.

- Forest seed projects.

Except for projects on botanical gardens and forest seeds,
the project implementation agency should be the following:

- Wherever there are State forest enterprises, those will be
the project implementation agencies.

- In areas where there are no state forest enterprises, the
project implementation agency will be the following:

* In watershed projects under the management of a Management
Board, the Head of the Board will carry out the functions of
project implementing agency.

* In projects in special-use forests under the management of
a Director, the Director will carry out the functions of
project implementing agency.

Project implementing agencies may at the same time be
directly responsible for the use of the funds. In other
cases, for example when a project has several sub-projects,
the project implementation agency will appoint some units to
be directly responsible for the utilisation of the funds (be
fund management units). The functions and duties of the
project implementation agency and the fund management units
are defined in Regulation 385-HDBT (now the Government). For
forestry-agriculture-industry projects, the project
implementation agencies must note that the households
constitute independent economic units. They can sign
contracts for forest work and also often have land for
long-term cultivation of industrial crops, V.A.C. economy,
and animal husbandry. All these assets are used in order to
create a stable basis for the household economy. The project
implementation agency has the duty to organise supply of
production inputs and marketing of outputs from the
households. The project implementation agency is a state
enterprise or a non-commercial economic unit. State
management agencies (such as the State Planning Committee)
cannot be nominated as project implementation agencies.

The project implementing agency receives the grants from the
Government and are responsible for use of those funds. It
also receives the funds for credit purposes and re-lend
these funds to households for their production. The project
implementation agency also is responsible for the repayment
of the credit funds to the State, for verification that
credit funds are used for the intended purpose, and for the
overall socio-economic results of the project.

Rights of the project implementing agency

The project implementation agency has the right to take
certain steps in relation to households within the project
if they deviate from agreements made. Thus, if households do
not follow contracts made for forest work or do not use land
allocated in accordance with plans made, then the project
implementation agency has the right to solve the matter in
one of the following ways:

- Request the household to fulfil the obligations in the
agreements;

- Reduce the payment for the work in comparison with the
original agreement;

- Retrieve the area covered by the contract;

- Stop payments of loans or require the loan-paying agency
to stop such payments;

- Request retrieval of land area already allocated.

Both the project implementing agency and members of the
project management committee are entitled to receive
payments from the management fund of the projects.

Rights and duties of households

The households have the following rights:

- Sign contracts for forestry work according to labour
available in the household;

- Sign contracts for management of a piece of land within
the area of a state forest enterprise;

- Receive a land area for long-term use outside a state
forest enterprise, to be used for cultivation of industrial
crops, food crops, garden, animal husbandry, etc. The size
of the area will be determined on the basis of land
available;

- Receive payment directly from the State for forest work
according to contracts signed;

- Enjoy the benefits from State investments in
infrastructure and public welfare;

- Benefit from services provided by the project
implementation agency related to provision of production
inputs and marketing of outputs.

The households have the following duties:

- Carry out agricultural and forestry activities according
to plans;

- Use the land in an effective way and increase the
fertility of the soil;

- Follow regulations in the laws applicable;

- Pay taxes to the State in accordance with the law.

2. Leading agencies for the projects

The leading agencies for the projects need to engage other
state units in order to carry out their state management
functions. One of them is the sub-committee on project
appraisal of the State Planning Committee mentioned under
B.2.7. above. They will also need a special unit under the
provincial department of forestry of agriculture and
forestry. This unit would assist the leading agency for the
projects with the following duties:

- Assist and provide guidelines for the formulation of
forestry-agriculture-industry projects;

- Assemble annual investment plans in accordance with
Decision 327;

- Monitor use of funds in the projects, monitor progress in
the projects, follow the activities of outside units which
assist the project in solving problems.

3. Costs for formulation and implementation of projects

The Government will annually provide funds for the following
duties (in accordance with Guidelines No.32 TC/DT dated 7
April l993 by the Ministry of Finance):

- Formulation, appraisal, and approval of projects;

- Provide supplementary funds for allocation of land and
forest in the project according to Guideline 300/CV-RD dated
8 May 1993.

- Give support to extension in forestry and agriculture, to
transfer of technology and management skills, including
propaganda and training, holding of seminars and workshops.

The project implementation agency will assemble annual plans
for the use of those funds and submit them to the State
Planning Committee for approval. The amount is not to
surpass 5-6% of the total grant from the State budget.

4. Annual project inspection

The project implementing agency and the provincial board set
up to implement Decision 327 should regularly monitor the
progress of the projects and annually report to the Central
Board for implementation of Decision 327 and to the Ministry
of Forestry.

The project implementing agency and the provincial 327 board
should analyse the progress of each major component of the
projects. Only after they have all been approved can the
progress of the entire project be approved.

This circular will come into effect on the day it is
distributed. If there appear problems in the implementation
of Decision 327, the local units responsible should
immediately report to the Ministry of Forestry and to the
Central 327 Board so that the problem could rapidly be
solved.

Minister of Forestry

Signed: Nguyen Quang Ha

ANNEX

Stages in Plantation Development

Stage l: Planning and tending until the canopy closes.
Duration: 3-5 years, divided into 2 phases:

Phase 1: Planting, including: seedling production, soil
preparation, tree planting proper, replacement of failures,
tree tending, soil conservation and protection activities.
Duration at least 12 months;

Phase 2: Maintenance and protection until the plantation
closes its canopy or is firmly established, including
further replacement of failures, maintenance operations,
soil dressing, pest and disease control, prevention of
encroachment.

Stage 2: Maintenance and protection of established
plantation until the stands reach their biological or
economic maturity. Duration 5 - 40 years, divided into 2
phases:

Phase 1: First thinning (giving no commercial products) +
maintenance + protection. Duration 2-5 years

Phase 2: Intermediate thinning + stand improvement +
protection. (If the tree species are short-rotation ones,
they might never enter this phase).

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