Unlocking natural forest's value and standardizing traceability in Vietnam's forest product value chain

These are proud figures, reflecting decades of achievements in forest protection and development. However, financial resources for this work remain extremely limited. The state budget directly allocated for forest protection accounts for about 13% (around VND 2,000 billion per year) of the total resources, while revenue from Payments for Forest Environmental Services (PFES) reaches about VND 3,000 billion annually, along with initial income from forest carbon credit transactions.

The natural forest logging ban introduced in 2011 has helped reduce exploitation pressure but has also closed off direct revenue streams from forests. Many national parks and nature reserves still rely mainly on state funding rather than operating under an ecological market mechanism. Forests have been preserved in terms of area, but their socio-economic value has yet to be fully realized.

Meanwhile, the value chain of wood and forest products has been growing strongly. In 2024, exports reached about USD 16.25 billion. The forestry sector has set a target of USD 18 billion in exports for 2025, and as of September 15, 2025, export turnover had already reached USD 11.3 billion.

Along with this growth come major challenges: key markets, especially the U.S. and the European Union, are tightening traceability requirements, enforcing EUDR, and imposing low-emission standards. These are both barriers and drivers of innovation.

Longstanding issues

First, natural forests are public assets owned by the people and managed by the government. Yet, most of the funding for protection comes from the private sector, particularly hydropower and water supply companies through PFES. Forest protection is a public responsibility, but with a limited state budget and financial resources, depending on a few contributors, the mechanism remains unsustainable.

Second, the natural forest logging ban has preserved forest areas but also drastically reduced revenue streams. Apart from PFES, carbon credits, and ecotourism in certain places, most natural forests have yet to generate stable benefits.

Third, while forest cover has increased, quality and community livelihoods have not kept pace. Many forest areas are degraded, biodiversity is declining, and smallholder tree growers struggle to access markets. Compliance costs with international standards risk falling on their shoulders.

Fourth, wood exports have reached tens of billions of USD, but data systems and traceability remain fragmented. The national forest resource database is under development and does not yet meet international markets’ demands for full traceability to the source.

Finally, Vietnam has launched its pilot carbon market (ETS) for 2025-2028, allowing up to 30% offsets through credits. However, the linkage between forest carbon assets and industrial emission reduction obligations is still unclear. As a result, forest carbon assets remain an untapped treasure.

Dual challenge and four major value streams

This can be framed as a dual challenge: on one hand, forest protection is a public responsibility but lacks stable resources; on the other, the wood and forest product chains have gone global but still lack robust traceability data to overcome international barriers.

To address this, forestry should be approached through four major value streams.

First, ensuring the raw material supply of seeds, silviculture, and large timber. Second, deep processing, furniture design, and green materials generate tens of billions of USD in added value annually. Third, ecosystem services such as water, tourism, biodiversity, and carbon are emerging streams with significant potential. Finally, data and certification, ranging from traceability to carbon monitoring (MRV), are prerequisites for international integration.

Not every value chain converges all four streams, but this framework provides the orientation to upgrade current fragmented chains into complete, sustainable, and comprehensive systems.

The solution 'unlocking' value

For seeds – silviculture – large timber, the focus is on improving plantation productivity, enhancing quality, and strengthening natural forest management. This requires developing high-yield varieties, expanding certified large-timber plantations, and piloting ecological contracts in which state funding is paid based on performance outcomes such as forest cover, reduced fires, and increased carbon stock, rather than uniform budget allocations.

In advanced wood processing, interior design, and green materials, the solution is to establish green wood-processing industrial clusters across all three regions, applying renewable energy and circular by-product technologies. Each product must carry an identification code and cultivation history, not only to comply with EUDR but also to elevate the brand of Vietnamese wood.

For ecosystem services, PFES needs to be expanded towards PFES++. Beyond hydropower and clean water, industrial zones, tourism, and beverage businesses should be included as payers, aiming to increase revenue by 20-30% in the coming years. At the same time, provincial-scale natural forest carbon projects of 50,000 hectares or more should be developed and linked to ETS to open new revenue streams. Piloting biodiversity credits in national parks associated with tourism will also pave the way for major infrastructure to "offset purchase" for nature conservation.

The most urgent priority for data and certification is standardization. Each hectare of forest must have a digital identification code and a traceability record, cwhich is onsidered a mandatory condition for participation in all markets, from PFES and carbon to timber and tourism.

Completing the national forest resource database, connecting licensing–certification–verification systems, and establishing a national MRV framework with one set of standards, one registry, and one verification body will form the foundation for Vietnam's integration into ETS and international credit markets.

To make policies right, it is essential first to unlock the value of natural forests and standardize traceability across the forestry value chain (with raw materials mainly sourced from plantations and imports).

As PFES expands, the carbon market connects, biodiversity credits are piloted, forest-based tourism grows, data is standardized, and budgets are allocated based on results, each hectare of forest will no longer rely solely on subsidies but truly become a profitable asset of the green nation. This is the pathway for Vietnam’s forests to be not only green in area but also green in economy, socially sustainable, and firmly integrated into the global market.