General Comments and Discussions on Policies

The limit is not more than 30 hectares, the maximum term is 50 years and is considered for communication if needed. Households allocated forestry land by the State are entitled to the rights to convert, transfer, lease, inherit, mortgage and contribute capital using the value of land use rights. Organizations (state-owned forestry farms) are not entitled to convert land use rights. RSX land that is not used for 24 consecutive months will be revoked. The Law also stipulates that competent authorities are authorized to decide on the conversion of land use purposes of economic organizations and individual households.

- Decree No. 02/CP dated January 15, 1994 on allocation of forestry land to households

Households and individuals using forestry land stably and long-term for the purpose of forestry are prescribed: forestry land that has been allocated to organizations, households and individuals are entitled to the rights to transfer

exchange, transfer, inheritance, mortgage according to the Land Law and be granted a land use right certificate. The time to receive the transfer is 50 years for households and individuals, but if the tree has a business cycle of over 50 years, it will be transferred.

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- Decree No. 01/CP dated January 1, 1995 of the Government on land allocation for agricultural and forestry production purposes stipulates: State-owned enterprises

The State allocates land to implement forestry land contracts, the contract term for production and business cycle, and the contract wages are agreed upon.

- Decree 163/1999/ND-CP dated November 16, 1999 of the Government on assignment

Land , forestry land lease stipulates: The State allocates planned forestry land for construction and development of RSX without collecting land use fees to households and individuals directly engaged in agriculture and forestry with a land limit of no more than 30 hectares and a term of 50 years. If forestry trees are planted with a cycle of more than 50 years, when the term expires, the State will still lease them for use. This Decree also stipulates: The State leases planned forestry land for RSX development to organizations, households and individuals for a term of no more than 50 years. In case of a need to lease land for more than 50 years, the Prime Minister must decide but not more than 70 years.

Decrees No. 02/CP (1994), 01/CP (1995), 163/CP (1999) and the Land Law (amended in 2003) have many specific regulations on land allocation to organizations, households and individuals for stable, long-term use as well as according to business cycles, gradually creating a solid legal framework for land ownership with different levels of incentives.

These open regulations have encouraged and attracted all economic sectors to participate in forest protection and development, especially production forests. However, the current fragmented allocation and division of land is one of the major difficulties for the goal of concentrated RSX planting, causing hesitation for investors because in reality it is difficult to find land for large-scale forest planting.

* Investment, credit and land use tax policies:

- The Law on Domestic Investment Encouragement (amended) and guiding documents stipulate: The State establishes investment support funds to provide medium- and long-term loans with preferential interest rates. Investment activities in afforestation, forest protection, forest product processing, technical services directly serving forestry (such as building bridges, roads, wharves, etc.)

land, nursery, seedlings,...) are classified into group A - the industry sector that needs to be encouraged. Production forest planting activities are mostly carried out in mountainous areas, areas with difficult economic and social conditions (belonging to list B), areas with

Particularly difficult conditions (Category C) should also be given incentives. Thus, considering both criteria, most investment activities in the field of planting and protecting RSX satisfy both industry and local incentives. Therefore, they enjoy the following policies: Exemption from land use fees, exemption from land rent, exemption from land use tax, and corporate income tax incentives. However, this is only the legal framework, and implementation in localities depends on many factors such as: local economic potential, State investment capital, etc.

- Decision 264/92/CP dated February 22, 1992 on forest development investment policy stipulates that the investment subjects are projects to develop industrial forests (paper, mines, wood chips, specialties) with investment time from forest planting to technological maturity. The capital recovery period and simple interest are paid once in the main exploitation year equivalent to the value of the annual exploited products but not exceeding 5 years; the interest rate is 30 - 50% of the normal interest rate (about 7% per year).

+ Preferential credit : The main purpose is to support investors in the spirit of the law on encouraging commercial investment (amended), the Government issued Decree 43/1999/ND-CP dated June 29, 1999 on State development investment credit; Decree

Decree No. 50/1999/ND-CP dated July 8, 1999 on the organization and operation of the development support fund

Implemented in 3 forms: Investment loans, post-investment interest rate support, investment credit guarantees.

Investment loans: applied to development investment projects with the ability to recover capital directly, including concentrated raw material forest planting projects and projects to build forest product processing facilities. Raw material forest planting projects and construction of forest product processing facilities in areas with difficult socio-economic conditions (list B), the loan amount shall not exceed 50% of the total investment according to the investment decision of the competent authority. For investment projects in areas with particularly difficult socio-economic conditions (list C), the loan amount shall not exceed 70% of the total investment according to the investment decision of the competent authority. The loan term shall not exceed 15 years, the loan interest rate shall be equivalent to the investment rate of the project.

equivalent to 70% of the average medium and long-term loan interest rate. When the market interest rate fluctuates above 15%, the Ministry of Finance will make a decision to adjust. The loan interest rate is determined at the time of signing the first contract and remains the same throughout the loan period. The overdue debt interest rate is equal to 150% of the medium-term loan interest rate. During the grace period, if the principal is not yet paid, the interest must still be paid. Afforestation is 5.4%/year and construction of artificial board processing facilities is 3%/year (since 2002).

Post-investment interest rate support: applied to afforestation projects that have not received investment loans or investment credit guarantees from the State's development investment credit capital. The amount of post-investment interest rate support is determined by the total invested loan capital x 50% of the investment credit interest rate.

Circular 43/2003/TT-BTC dated May 7, 2002 of the Ministry of Finance provides guidance for organizations, households and individuals who invest their own capital to plant RSX, which are rare and precious timber species with a cycle of over 30 years, the state will support an average of 2 million VND/ha. However, there must be a plan.

Project and technical process approved by competent authority.

Official Dispatch No. 95/CP-NN dated January 23, 2003 of the Government on the afforestation mechanism under the 5 million hectare afforestation project stipulates that from 2003, the State will provide a maximum loan of VND 10 million/ha for afforestation with commercial interest rates, and pilot support of VND 1 - 1.5 million/ha for some households.

Investment credit guarantee: The guaranteed subjects are investors with projects.

Concentrated raw material forest planting project but has not received post-investment interest rate support,

not allowed to borrow or only partially borrowed investment development credit capital. Investors who want to be guaranteed must meet all the following conditions: have been assessed for a loan by a credit institution and have a written request for guarantee; have the Development Support Fund approve the financial plan, loan repayment plan, and must have assets to secure the guarantee.

For investors who are not state-owned enterprises, when guaranteed, in addition to using assets formed from loan capital to secure the guarantee, there must be collateral worth at least 50% of the guaranteed capital.

+ Trade credit:

- Decision No. 67/1999/QD-TTg dated March 30, 1999 of the Prime Minister on a number of bank credit policies serving rural agricultural development and a number of other documents stipulate: For forestry production households, state-owned commercial banks lend up to 10 million VND, for households

For families doing forestry farm business, banks lend up to 20 million VND, borrowers do not have to mortgage assets, just submit a loan application, original land use right certificate or confirmation from the government

Local land area in use has no dispute.

- The Law on Agricultural Land Use Tax 1993 (LUR) and many other documents guiding the implementation of the above law stipulate: the tax rate is 4% of the value of exploited products for timber trees and perennial trees harvested once.

- Circular No. 09/2002/TT-BTC dated January 23, 2002 of the Ministry of Finance guiding the exemption and reduction of agricultural land use tax from 2002 according to Decision No. 199/2001/QD-TTg dated December 28, 2001 of the Prime Minister stipulates: subjects exempted from agricultural land use tax include households and enterprises with forest land area in communes under the Government's Program 135, poor households. Land for growing RSX in areas not under Program 135, not poor households, is only entitled to a 50% reduction in agricultural land use tax, meaning that it must pay a tax rate of 2% of the value of exploited products.

- Decision No. 661/TTg dated July 29, 1998 of the Prime Minister on the Project of planting 5 million hectares of new forests has been oriented from 1998 to 2010, planting 2 million hectares of new forests for industrial raw materials for paper, artificial boards, mine pillars, and precious wood forests.

Rare. Some other documents also have planning for paper raw material areas, wood raw material areas for mine pillars,...

- Decree No. 09/2000/NQ-CP dated June 15, 2000 of the Government on the policy of shifting the agricultural economic structure emphasizes the development of trees used as raw materials for paper, artificial wood panels (bamboo, acacia, pine, eucalyptus, etc.), timber trees and trees used as raw materials for processing handicrafts and fine arts products.

The above policies have provided incentives such as exemption from usage fees.

land, land rent, exemption from land use tax, etc., but it seems not enough due to obstacles in capital as well as loan interest rates, loan limits and terms, loan procedures, etc.

That is why investment in technology, especially intensive farming, is still not given much attention or has been cut short.

* Policies on exploitation, transportation and forest product market:

- Decision No. 136/CP dated July 31, 1998 amending a number of regulations on procedures for exporting forest products stipulates: Forest owners when exploiting forests only need to notify the Commune People's Committee if the purpose is on-site use; notify the forest rangers if the purpose is commercial. The transportation of planted forest wood by households only needs a certificate from the forest rangers, if it is a business, it needs an additional financial invoice for sales.

- Decision 661/98/CP , in the policy section on product benefits and consumption

For production forests, it is stipulated that forest owners have the right to decide the time and method of exploitation; all exploited products are freely circulated. Processing and exporting processed products from planted forests is encouraged; in cases where domestic facilities do not use up all the raw materials or do not have the conditions to build a processing facility, raw products can be exported.

- Directive No. 19/TTg dated July 16, 1999 on measures to promote the consumption of planted forest wood : Encourage the promotion of the use, consumption and export of planted forest wood.

- Decision No. 80/02/TTg dated June 24, 2002 on encouraging the consumption of agricultural products (including forest products) : Encourage enterprises to sign contracts for the consumption of forest products with producers to link production with processing and consumption of forest products. Producers are allowed to use the value of land use rights in capital contributions, shares, joint ventures, and associations with enterprises processing, trading and importing and exporting forest products.

- Decision 160/TTg dated September 4, 1998 on the planning of the paper industry until 2010 and Decision 149/98/TTg dated August 21, 1998 on the planning of timber mining areas completes the planning of concentrated commodity forestry production areas, and supports the construction of infrastructure in raw material areas.

- Decision 40/2005/BNN dated July 7, 2005 on promulgating the Regulation on exploitation of timber and other forest products stipulates:

- With concentrated production forests of State organizations using budget capital and non-refundable aid capital: the determination of exploitation age and issuance of exploitation license are decided by the Department of Agriculture or the company or corporation; the forest owner decides on the exploitation method; exploited wood is freely consumed and circulated.

- With planted forests, garden timber, and scattered trees of self-funded organizations and enterprises, forest owners have the right to decide on all exploitation issues; if borrowing capital from loan sources

Incentives, the determination of exploitation age and the granting of exploitation licenses are decided by the Department of Agriculture or the company or corporation; forest owners decide on the exploitation method; exploited wood is freely consumed and circulated.

- For forests planted by households, individuals, and communities using aid capital and the budget, forest exploitation is carried out according to specific regulations of each project and decided by the District People's Committee.

With the above decisions, the State has truly opened the door for people to freely develop the planting and consumption of forest products originating from RSX not only in the domestic market but also in the export sector. The flow of raw materials from planted forests has truly been able to connect from the planting stage to the processing and consumption of products. In fact, many effective production linkage models have emerged between processing facilities and forest product purchasing and transportation units. The above decisions also create an important legal basis to contribute to the completion of the planning of concentrated raw material areas towards stable and sustainable production of goods, linking the creation of processed raw materials with product consumption, and investing in infrastructure for exploitation and transportation. However, a major concern of RSX growers is the unstable price of the product due to traders forcing down prices. Contracts for linkage or land allocation for RSX cultivation have been broken in many places because when it is time to harvest, the contractor does not comply with the rate.

Sharing as signed without strict sanctions also causes hesitation for forest owners.

* Other related policies :

Decision 187/CP on innovation of organization and management mechanism of state-owned forestry farms : Raw material forestry farms are maintained to operate under a business mechanism, have the right to decide the time and method of exploitation and have a plan for reforestation, forest products exploited from planted forests are freely circulated. Money from selling exploited products after paying the costs of forest creation, exploitation, transportation, and consumption, is set aside for a fund according to regulations. The State will re-grant all business income to the forestry farms to

Investment in forest regeneration and implementation of public services approved by the Provincial People's Committee. The State allocates to the forestry enterprise capital from the budget that was previously invested in forest plantation to supplement the enterprise's own capital. The State invests 100%, approved by the Provincial People's Committee, for the forestry enterprise to build main roads, wharves, etc. Production forests are the property of the forestry enterprise and are entitled to mortgage.

- Resolution No. 28/TW of the Politburo dated June 16, 2003 on continuing to reform state-owned forestry farms: Forest farms that are managing forests and land for growing RSX continue to invest in intensive farming, new varieties associated with raw material areas and processing (both in terms of organization and economic contracts) operating under a business mechanism. Forest farms with production and business functions are transferred to renting land from the State and enjoy domestic investment incentive policies.

- Decision No. 129/QD-UB dated November 12, 2004 on the issuance of temporary regulations on the rights and obligations of households and individuals assigned to lease and contract forests and forestry land in Bac Giang province stipulates: when exploiting, the owner of the contracted household is entitled to 2.5% of the value of forest products after paying tax for 1 year of forest protection contract, the remaining amount is paid to the contracting party; if the household also invests, it is divided according to the capital contribution ratio and working days.

Each party's activities are converted into money; if the household invests its own capital, it will receive 95% of the value of the exploited product after tax, the rest will be paid to the contracting party.

- Directive No. 19/04/TTg dated June 1, 2004 on a number of solutions for developing wood product processing and export : Setting criteria to strive for 2 billion USD in wood and wood product export turnover by 2010; Urgently reviewing and approving the fund for primary forests.

materials, focusing on large, rare timber trees for handicrafts; Selecting a suitable forest planting structure for each region; Supplementing policies to encourage economic sectors to invest in forest planting and processing to produce products to meet domestic and foreign consumption needs.

Decisions and decrees on the reform of the organization and management mechanism of state-owned forestry farms have ended a long period of planned, subsidized forest planting and low forest planting efficiency. The State has granted autonomy in production and business to forestry farms, which have the right to decide on the time and method of investment and exploitation and are free to circulate products. However, forestry farms are still not autonomous and must be subject to the direction of their direct superiors.

Decision 178/01/TTg, Resolution 03/2000/TTg, Directive 19/04/TTg,... have contributed to supplementing and perfecting the principled regulations in documents on

land, encouraging non-state farms, planning large timber supply areas, allocating capital to support production for state-owned economic sectors. However, implementation is still slow, everyone does their own thing.

4.3.1.2. General comments and discussions on policies

With the system of policies related to forestry development in general and RSX planting in particular, it can be seen that the State has also paid great attention to promoting the development of production forests such as: policies on land, investment and capital support, policies on benefits, circulation and consumption of products, attracting all economic sectors including foreign investment,...

It must be admitted that initially there have been positive changes and innovations in policy mechanisms, both macro and micro, such as: planning of raw material areas for paper and mine pillars has been relatively well-defined; land allocation to households; priorities for afforestation on wasteland and vacant land.

barren hills and areas with difficult economic and social conditions, etc. have contributed significantly to attracting investment from foreign projects. Policies on exploitation, circulation and other support policies have also contributed positively to attracting economic sectors to participate in activities promoting the development of production forests, gradually socializing the forestry profession. However, it has not yet created enough motivation.