Chapter I

INTRODUCTION

1.1. BACKGROUND TO THE PROBLEM

The Millennium Development Goals are a set of goals which all countries in the world are trying to attain. These goals require implementation of a mix of policies, including in poverty degradation and environment protection. Forest protection is one of foremost targets in environmental policies in the world. In recent years, there has been increasing evidence of the inverse impacts of forest depletion on the environment such as global warming, climate change due to the release of carbon, loss of biodiversity, higher intensity and frequency of natural disasters, increased soil erosion, watershed degradation and consequent downstream effects. Therefore, forest protection has been receiving increased concern from the world community. In Vietnam, series of development policies including the Comprehensive Poverty Reduction and Growth Strategy and the Five Million Hectare Reforestation Program have been being carried out.

Despite the increasing demand for protection of natural forests, the intensity and scale of forest use have significantly increased in recent years, mainly in developing countries. According to the Food and Agriculture Organization of the United Nations (FAO, 1993), the loss of forest area of the developing region during period 1980-1990 amounts to 163 million ha, of which 154 million ha is in the tropics. Tropical forests are being lost at the rate of 10 million hectares annually, most of this due to shifting cultivation (Serageldin, 1993). National governments in these countries, especially in

Indonesia, the Philippines, Thailand, and Vietnam, tend to blame shifting cultivators, usually members of ethnic minorities, for rapid loss of forests (Le, 1996).

Viet Nam is not an exception in the common picture of the developing world. Under the Ministry of Agriculture and Rural Development (MARD, 2000), statistics from Vietnam’s Department of Forestry Development show that more than half of the country’s 19.08 million hectares of mapped forested land has now been identified as bare hills and wasteland. Some 60,000 to 70,000 hectares of the nation’s forests are destroyed every year. The World Bank (1995) estimates that the principal causes of deforestation in Vietnam are agricultural encroachment, firewood collection, logging, and fires in which agricultural encroachment, shifting cultivation and firewood are the main contributors in the Northern Mountain Region and the Central Highlands.

Vietnam remains one of the poorest countries in the world. With nearly 80% of its population living in rural areas, Vietnam is dependent on its agricultural and natural resources. The poverty rate is relatively high in upland, remote, and isolated areas and ethnic minority areas. According to

Do (1994), 50 of 54 ethnic groups in Vietnam practice shifting cultivation. He estimates that 7% of Tay, 16% of Nung, 45% of Thai and 100% of almost all the remaining ethnic minority groups are involved in slash-and-burn activities, a main cause leading to deforestation and forest degradation.

how the relationship between deforestation and poverty is?" is established. With an increase in income, the poor may prefer to invest in maintaining the quality of soil on existing cleared land, or increasing yields by expanding agricultural areas. Understanding how the poor make agricultural production and investment decisions will help policy makers find effective solutions not only to improve the living standard of poor people but also to slow the rate of deforestation.

1.2. REVIEWS OF RELATED STUDIES

There are a lot of papers studying the situation of deforestation or poverty in Vietnam, but only at the disaggregated level. A few of them are interested in causes of deforestation, and poverty was implied to be one of the main causes, directly or indirectly through shifting cultivation, increasing the rate of deforestation in Vietnam.

The Center for Natural Resources and Environmental Studies (1998) shows that the socio-economic root causes of biodiversity loss in the mountainous areas of Northern Vietnam consist primarily of high natural population growth rates, traditional agricultural and hunting practices, and the inefficiency of the APCs. This paper also showed that poverty in Vietnam is the root cause of a number of factors. As a rule, poor people are either landless or have been pushed to areas of low agricultural potential with steep slopes and infertile land. Poor farmers extract what they can from the environment to support themselves, and have little time or resources to invest in resource conservation or management.

According to Pham (1999), the violent spontaneous migration in recent years had caused a lot of socio-economic as well as environmental problems for Dak Lak province. The spontaneous migrants of which 30% belongs to more than 30 minority groups, due to the lack of close control, clear good quality forests freely and convert them to arable land. Most of them go deep into the forest to practice shifting cultivation, even into nature reserve areas, and protected and special use forests on the borders with neighbor provinces.

Similarly, Dang et al (2002) showed a bandwagon effect in coffee planting in the Central Highlands. Many farmers even planted coffee on very slopping hillsides or on the top of the hill where soil and water conditions were not suitable for coffee. As a result, the yield was very low and caused high soil erosion.

The papers and studies mentioned above proved that poverty is one of the main causes of deforestation. However, this relationship was only analyzed under the description aspect. Further, due to the lack of generality, a comprehensive picture of Vietnam has still been unclear and indistinct. Therefore, I choose the topic "The link between poverty and deforestation. The case of Vietnam" with the hope of overcoming these defects.

By focusing on the relationship between poverty and agricultural production and investment decisions, this paper also contributes to empirical microeconomic research on the behavior of rural smallholders in Vietnam.

1.3. FOCUS AND SCOPE OF THE THESIS
1.3.1. Focus

This thesis focuses on the key research question: "How is the relationship between poverty and deforestation?” In order to clarify this problem, some following sub-questions will be mentioned.

- What roles does forest have? What are causes of deforestation? How does deforestation affect sustainable development?

- What is poverty? How is poverty measured? What are causes of poverty? How does poverty affect sustainable development?

- Are the relationships between agricultural inputs and income or between cleared land and household size or borrowing constraints positive or negative?

- What should the Government do to decrease poverty but not to increase deforestation?

1.3.2.Scope

The thesis uses the information of poverty and deforestation in the period of 1993-1998 to run the model. Because of insufficient data and information, the thesis only examines the relationship between income (instead of poverty indicator) and cleared land (a main direct cause of deforestation). This study uses a sample of 299 households having forest. 

1.4. SOURCES OF INFORMATION AND METHODOLOGY
1.4.1. Sources of information
The study uses data from "Vietnam Living Standard Surveys" 1992-93 and 1997-98 that are collected by the General Statistics Office (GSO) with financial support from United Nations Development Programme (UNDP) and Swedish International Development Authority (SIDA) and technical assistance from the World Bank. This thesis also uses other information sources from GSO and from newspapers, reports and articles.

1.4.2. Methodology
The thesis applies poverty-deforestation hypothesis (strong hypothesis): increases in household income will be negatively correlated with land clearing and will be positively correlated with the use of inputs that increase or maintain yields. Investigating the relationship between poverty and the land-clearing decision requires taking the household as the unit of analysis.

1.5. LIMITATION OF DATA AND INFORMATION
The limitation of the data and information may prevent the study from better results. Firstly, household income calculated from VLSS 1992-93 reveals inaccuracy. Therefore, the missing or inaccurate data will be corrected from VLSS 1997-98. However, the inconsistent information of income in VLSS 1992-93 compared with VLSS 1997-98 may face some problems and this may affect the results of the study. Secondly, the information for shifting cultivation in VLSS does not exist. Using change in cleared land (including all types of land without forest) representing deforestation will partly limit the estimated results. Moreover, the information for types of land in both VLSS is not completely incompatible, as land could be sold or bought in the period 1993-1998.

Therefore, this data is just convenient for the purpose of identifying the sign between variables. In the future, the author would like to discuss this problem again when there are better data sets for analyzing.

1.6. STRUCTURE OF THE THESIS
The thesis includes 5 chapters: chapter I explains the reasons, objectives, methods and data of the thesis; chapter II goes into analyzing problems related to sustainable development, forest and deforestation, poverty and the link between poverty and deforestation; chapter III presents common deforestation and poverty situations in Vietnam; chapter IV describes data and illustrates the regression results in order to define the relationship between deforestation and income, household size or borrowing constraints, and income-agricultural input connections; and finally, in chapter V, conclusions and suggestions are mentioned.

Chapter II

                ANALYTICAL FRAMEWORK     

2.1 SUSTAINABLE DEVELOPMENT
2.1.1 Concept
According to the definition of World Commission on Environment and Development (WCED, 1987), 'sustainable development is the development that meets the needs of the present without compromising the ability of future generations to meet their own needs'.

2.1.2 Dimensions of sustainable development
The economic view of sustainable development

The ecological view of sustainable development

The socio-cultural view of sustainable development

2.1.3 Challenges to sustainable development in developing countries
Most developing countries are characterized by low per-capita income, high population growth rate and a dependence upon agricultural production. Therefore, their foremost challenge to sustainable development is rural poverty because the poor will continue to destroy their immediate environment to survive.

2.2 FORESTS AND DEFORESTATION
2.2.1 Role of forests
For ecological sustainability

For economic and social development

2.2.2. Causes of deforestation
Property rights

Population

Income

Environmental Policies

2.2.3. Effects of deforestation on sustainable development
a) Environmental impacts

b) Social impacts

c) Economic impacts

2.3 POVERTY
2.3.1. Measuring the poverty indicator
The World Bank's poverty lines

The World Bank (1995) establishes the international standard poverty line based on a minimum requirement of 2,100 calories per day per capita with the assumption that a household devotes 70% its total expenditure on food. The remaining 30% expenditure is assumed to buy other necessary items such as clothes, health, education and transportation.

GSO's poverty line

The GSO (1992) also relied on the method using food expenditure to compute poverty lines. According to GSO, a household is in poverty if its income is insufficient to buy rice for providing 2,100 calories per person per day. This measure makes no allowance for non-food expenses. So it creates a lower threshold than the one used by the World Bank.

MOLISA's poverty line

MOLISA established the rice equivalent poverty line by classifying a household as a hungry one if its monthly per capita rice equivalent income is less than 13 kg of rice. Those with a monthly per capita income that is less than 15 kg, 20 kg, and 25 kg of rice equivalent in mountainous areas, islands, plain, midland rural areas, and urban areas respectively are considered to be poor.

2.3.2 Causes of poverty
Household size and dependants

Gender disadvantage

Education

Isolation disadvantage

Lack of access to productive resources

Employment

Unforeseen shocks

2.3.3 Effects of poverty on sustainable development
Researches and policies have tended to focus on the relationship between poverty and sustainable development, represented by environment factor, in terms of pointing out that the poor are both victims and agents of environmental degradation: victims in that they are more likely to live in ecologically vulnerable areas, agents in that they may have no option but to deplete environmental resources, thus contributing to environmental degradation. However, it is also acknowledged that the poor often have actions that conserve the environment. Great physical and spatial variability in natural resource endowments also seem to complicate the picture (Rachel et la. 1997).

2.4. POVERTY AND DEFORESTATION - WHAT IS THE LINK?
2.4.1 The forest-dependent poor
2.4.2 Poverty - ambiguous impacts on forests
At the macroeconomic level, forest loss is positively related with both economic growth and poverty reduction.

At the microeconomic level, poverty tends to make cheap labor available, which makes it attractive both to cash in low-return forest rents (degradation) and to undertake labor-intensive investment in forest clearing (deforestation).

2.4.3. The poverty-deforestation hypothesis
Simple model

According to Alix Peterson Zwane (2002), the effect of poverty on deforestation is theoretically ambiguous and depends on the relative profitability of intensification (or sustainable agriculture) and clearing. Therefore, in the case of deforestation, environment and development policies must be implemented on the basis of empirical evidence rather than theory.

To find out how poverty may interact with deforestation, we consider the following scenario: Household A lives for 2 periods, P₁ and P₂, and begins with wealth W. The household cannot borrow, but can save at a certain rate of interest. All wealth is consumed at the end of P₂.

The household has two equal-sized plots of forested land (j and k). The household can cultivate on these plots using one of two techniques, A and B. The respective production cost and yield are C_A and C_B, Y_A and Y_B. The cost of clearing land is C and is independent of the production technique used. Assume that Y_A > Y_B, and C_A < C_B, but using technique B allows a plot to be farmed more than one time. If technique A is used, the plot is degraded and must be abandoned.

Figure 2.1 - Household's land-use options

Source: Alix Peterson Zwane (2002)

Figure 2.1 shows the household’s options as well as the ambiguous relationship between land use and poverty. Forest land is denoted by the letter F and abandoned land is imagined by a blank cell. The letters A and B denote cultivated land using one of the possible techniques.

Among options, option 1 is clearly the least costly strategy in period 1. Lack of the ability to borrow, households with the lowest wealth can only pursue this strategy. As wealth increases, whether option 2 or option 3 is preferable depends on each household’s decision; option 4 is the choice that requires the largest investment. When option 4 is chosen, the most output is generated, but if environmental externalities were considered, this might not be the socially preferred outcome.

In this study, the so-called conventional wisdom on the relationship between poverty and deforestation will be used as a strong version of “poverty-deforestation hypothesis” (or written succinctly as “poverty-deforestation hypothesis”). That is: increase in household income will be negatively related with land clearing and will be positively related with the use of input that increase or maintain yields. The weak version of the poverty-deforestation hypothesis might predict that the link between income with both land clearing and input use will be positive, but income elasticity of land clearing will be smaller than the income elasticity of input use.

Now consider a policy that increases initial effective wealth for the poorest households, such as a micro-credit program, but not so much that option 4 becomes feasible. If the poverty- deforestation hypothesis holds, then as W increases, households selecting option 1 will switch to selecting option 3. This means that increasing wealth does not increase environmental degradation in period 1. If households selecting option 1 prefer to select option 2 as wealth increases, there is a short-run trade-off between deforestation and increase in income. Theoretically, there is no way of determining which outcome is most likely. The decision will depend on the relative yields of Y_A and Y_B, the relative production costs C_A and C_B, the cost of clearing land, and the interest rate. Household size and labor availability would also affect this decision if the possibility of an imperfect labor market were introduced.

Extended model

In this part, a more complete model of the household at the forest margin is investigated (Appendix A). The model's results show that the relationship between wealth and land use remains ambiguous. This model provides testable propositions as follows:

Proposition 1: The predicted relationship between income and the land-clearing decision is theoretically ambiguous and must be determined empirically.

Proposition 2: If imperfect labor markets exist, households with more labor per unit of land will be more likely to respond to increases in income by clearing land.

Chapter III

DEFORESTATION AND POVERTY SITUATION