Joint Circular No. 65/2008/TTLT-BNN-BTC guiding the implementation of Government Decree No. 48/2007/NĐ-CP dated March 28, 2007 on principles and methods for determining the prices of various types of forests.

JOINT CIRCULAR

GUIDELINES FOR IMPLEMENTING THE GOVERNMENT DECREE NO. 48/2007/NĐ-CP OF MARCH 28, 2007 ON PRINCIPLES AND METHODS FOR DETERMINING THE VALUE OF FOREST TYPES

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Pursuant to Government Decree No. 01/2008/NĐ-CP dated January 3, 2008 on the functions, tasks, powers, and organizational structure of the Ministry of Agriculture and Rural Development;
Pursuant to Government Decree No. 77/2003/NĐ-CP dated July 1, 2003 on the functions, tasks, powers, and organizational structure of the Ministry of Finance;
Pursuant to Government Decree No. 48/2007/NĐ-CP dated March 28, 2007 of the Government on principles and methods for determining the value of forest types;
The Ministry of Agriculture and Rural Development and the Ministry of Finance hereby issue guidelines as follows:

I. SCOPE AND APPLICABLE SUBJECTS

The scope and applicable subjects shall be implemented in accordance with the provisions of Article 2 and Article 3 of Government Decree No. 48/2007/NĐ-CP dated March 28, 2007 of the Government on principles and methods for determining the value of forest types.

II. METHODS FOR DETERMINING THE VALUE OF FOREST TYPES

1. Income Method:

Determining the value of the right to use protective forests, special-use forests, and production forests that are natural forests; the value of the ownership right to production forests that are planted forests for areas requiring valuation using the income method shall be carried out as follows:

a) For special-use forests

- Determining the value of the right to use special-use forests for areas where there has been business activity related to landscape, ecotourism, resort, entertainment (hereinafter referred to collectively as landscape business), scientific research, and other forest service values obtained by the forest owner (if any) shall be as follows:

+ Calculate the average annual revenue for up to three consecutive years immediately preceding the valuation date, including:

Revenue from landscape business activities, ecotourism (ticket sales for scenic environmental areas), resort, and entertainment (if any);

Revenue from scientific research activities (if any);

Revenue from other forest services obtained by the forest owner (if any).

+ Calculate the average annual cost for up to three consecutive years immediately preceding the valuation date, including:

Costs associated with landscape business activities, ecotourism, resort, and entertainment, including: printing tickets, advertising, labor costs, management expenses, planting, nurturing, regeneration promotion, forest protection, and maintenance of facilities directly serving the landscape business activities;

Costs associated with scientific research (if any);

Taxes, fees, and other reasonable costs (if any).

These costs shall be calculated according to state regulations, labor costs based on standard rates or actual expenditures, labor costs valued at market prices at the time of valuation; any costs not regulated by the state shall be calculated based on actual market prices in the local area corresponding to the period (annually).

+ Determine the interest rate (expressed as a decimal) for one-year term deposits at commercial banks with average interest rates at the valuation date by averaging the highest and lowest interest rates for one-year term deposits at commercial banks on the valuation date.

+ Calculate the value of the right to use special-use forests for areas requiring valuation using the following formula:

Where:

- G is the value of the right to use special-use forests;

- B is the average annual revenue for up to three consecutive years immediately preceding the valuation date;

- C is the average annual cost for up to three consecutive years immediately preceding the valuation date;

- r is the interest rate (expressed as a decimal) for one-year term deposits as stipulated in Point a, Clause 1, Section I of this Circular.

+ Calculate the rental fee for special-use forests using the following formula:

Where:

- S is the rental fee for special-use forests over t years;

- G is the value of the right to use special-use forests for areas requiring valuation;

- t is the rental period (in years);

- r is the interest rate (expressed as a decimal) for one-year term deposits as stipulated in Point a, Clause 1, Section I of this Circular.

- Determining the value of the right to use special-use forests for areas without landscape business or scientific research activities shall be as follows:

For areas of special-use forests without landscape business or scientific research activities but where organizations or individuals wish to lease the forest for such purposes, the rental price shall be determined based on the following criteria according to the specific conditions of each locality:

+ Geographic location, topography, and physical features of the forest area;

+ Forest resources, condition, and quality of the forest;

+ Infrastructure projects attached to the purpose of protecting and developing the forest that have been invested in, land use coefficient for constructing facilities serving landscape business activities;

+ Economic and social development conditions, transportation systems, cultural and historical relics, and other conditions in the region where the leased forest area is located;

+ Reference to rental prices for forests leased for landscape business and scientific research activities in regions with similar conditions.

When organizations or individuals leasing the forest have stable landscape business or scientific research activities (if any) for up to three years, valuation shall be conducted according to the provisions of Point a, Clause 1, Section I of this Circular to determine a stable long-term rental price.

(Example calculation of the value of the right to use special-use forests using the income method in Appendix Table 1 attached).

b) For protective forests and production forests that are natural forests

The value of the right to use protective forests and the value of the right to use production forests that are natural forests for areas requiring valuation includes the value of the right to use forests for timber, firewood (if any), non-timber forest products, and the value of the right to use forests for landscape, scientific research, and other forest service values obtained by the forest owner (if any).

- Determining the value of the right to use and rental fees for protective forests and production forests that are natural forests for landscape business, scientific research, and other forest service values obtained by the forest owner (if any) shall be applied as for special-use forests as stipulated in Point a, Clause 1, Section I of this Circular.

- The determination of the price of the right to use protective forest, the price of the right to use natural production forest for timber, firewood (if any), and non-timber forest products shall be carried out as follows:

+ Parameters to be determined

The volume of timber in the forest at the time of valuation;

The average annual growth rate of the forest from the time of valuation to the year of harvesting according to the process;

The number of years required to reach the harvestable volume;

The permissible harvesting intensity;

The volume and yield of timber, firewood (if any) at the year of harvesting according to the process. The determination of the harvestable volume and yield of timber is based on the average annual growth rate of the forest or by comparison with a similar harvested forest in the area;

The market prices of various timber, firewood, and non-timber forest products at the delivery site at the time of valuation;

Revenue from selling timber, firewood (if any), and non-timber forest products harvested at the year of harvesting according to the process (the price level is calculated at the delivery site at the time of valuation);

+ Calculate the total annual revenue from selling timber, firewood (if any), and non-timber forest products at the delivery site from the valuation year to the end of the lease/transfer period;

+ Calculate the total costs including:

Annual costs for harvesting, transportation, and delivery of timber, firewood (if any), and non-timber forest products to the delivery site from the valuation year to the end of the lease/transfer period;

Annual costs for protecting and maintaining the forest (if any) from the valuation year to the year of harvesting according to the process;

Taxes, fees, and other costs (if any).

These costs are calculated according to the current regulations of the State, labor rates based on standards or actual expenditures, labor costs calculated at the value at the time of valuation; costs not regulated by the State are calculated based on actual market prices in the local area corresponding to each period.

+ Determine the interest rate (in decimal form) for savings deposits as stipulated in Point a, Clause 1, Section I of this Circular.

+ Calculate the price of the right to use protective forests and natural production forests for the area to be valued using the following formula:

Where:

- G is the price of the right to use the forest;

Ministry of Construction sets specific price_i is the revenue in year i from the valuation year (year 1) to the end of the lease/transfer period;

Ministry of Science and Technology: The Minister and Deputy Ministers, agencies and units under the Ministry;_i is the cost in year i from the valuation year (year 1) to the end of the lease/transfer period;

- i = 1 (valuation year), 2, 3..., t (end of lease/transfer period);

- t is the period from the valuation year to the end of the lease/transfer period;

- r is the interest rate (in decimal form) for savings deposits as stipulated in Point a, Clause 1, Section I of this Circular;

- B is the average annual revenue over the maximum three consecutive years immediately preceding the valuation year as stipulated in Point a, Clause 1, Section I of this Circular;

- C is the average annual cost over the maximum three consecutive years immediately preceding the valuation year as stipulated in Point a, Clause 1, Section I of this Circular.

(Example calculation of the price of the right to use natural protective forests and production forests calculated according to the income method in Appendix 2 and Appendix 3 attached).

c) For production forests that are planted forests

The determination of the price of ownership rights for production forests that are planted forests for the area to be valued shall be carried out as follows:

- Parameters to be determined

+ The volume of timber in the forest at the time of valuation;

+ The average annual growth rate of the forest from the valuation year to the age of technological maturity (hereinafter referred to as the harvesting age);

+ The volume and yield of timber, firewood at the harvesting age. The determination of the harvestable volume and yield of timber is based on the average annual growth rate of the forest or by comparison with a similar harvested forest in the area;

+ The market prices of various timber, firewood, and non-timber forest products at the delivery site at the time of valuation.

+ Calculate the revenue from selling timber, firewood, and non-timber forest products harvested at the harvesting age (the price level is calculated at the delivery site at the time of valuation).

- Calculate the annual revenue from selling timber, firewood, and non-timber forest products at the delivery site from the valuation year to the harvesting age;

- Calculate the total costs including:

+ Annual costs for harvesting, transportation, and delivery of timber, firewood, and non-timber forest products to the delivery site from the valuation year to the harvesting age;

+ Annual costs for protecting and maintaining the forest (if any) from the valuation year to the harvesting age;

+ Taxes, fees, and other costs (if any).

These costs are calculated according to the current regulations of the State, labor rates based on standards or actual expenditures, labor costs calculated at the value at the time of valuation; costs not regulated by the State are calculated based on actual market prices in the local area corresponding to each period.

- Calculate the interest rate (in decimal form) for savings deposits as stipulated in Point a, Clause 1, Section I of this Circular.

- Calculate the price of ownership rights for production forests that are planted forests for the area of forest to be valued using the following formula:

Where:

- G is the price of ownership rights for production forests that are planted forests;

- Bi is the revenue in year i from the valuation year to the harvesting age;

- Ci is the cost in year i from the valuation year to the harvesting age;

- i = 1 (valuation year), 2, 3..., t (harvesting year);

- t is the period from the valuation year (year 1) to the harvesting year;

- r is the interest rate (in decimal form) for savings deposits as stipulated in Point a, Clause 1, Section I of this Circular.

(Example calculation of the price of ownership rights for production forests that are planted forests according to the income method in Appendix 4 attached).

2. Cost Method:

The determination of the price of ownership rights for production forests that are planted forests for the area of forest to be valued using the cost method shall be carried out as follows:

a) Calculate the total investment costs for creating the forest for the area of forest to be valued from the start of investment creation to the valuation year, including:

- Direct Costs

+ Forest establishment costs (seedlings, materials, labor, use of equipment, machinery, tools);

+ Forest protection costs (protection work; equipment, facilities directly serving fire prevention and pest control in the forest).

- Indirect Costs

+ Management costs, design costs;

+ Taxes, fees, and other costs (if any).

The expenses mentioned above shall be calculated in accordance with the current regulations of the State, the labor cost based on the quota or the actual amount expended, and the labor cost value at the time of valuation; for any expense not regulated by the State, it shall be calculated based on the actual market price at the corresponding local area at each respective time point.

b) Determine the interest rate (expressed as a decimal) for one-year term savings deposits at commercial banks with the highest interest rates in the locality at the time of valuation.

c) Calculate the ownership value of production forests which are planted forests of the area to be valued according to the following formula:

Where:

- G is the price of ownership rights for production forests that are planted forests;

- Ci is the cost incurred in creating the forest in year i from the year of initial investment in creating the forest to the year of valuation;

- i = 1 (the year of initial investment in creating the forest), 2, 3..., a (the year of valuation);

- a is the year of valuation;

- r is the interest rate (expressed as a decimal) for savings deposits as stipulated in point b, clause 2, section I of this Circular.

(Example of calculating the ownership value of production forests which are planted forests using the cost method as shown in Annex 5 attached).

3. Comparison Method:

Determining the usage rights value of protective forests, special-purpose forests, and production forests which are natural forests; and the ownership value of production forests which are planted forests for the areas to be valued through the comparison method shall be carried out in the following steps:

a) Survey and collect information

- For the forest area requiring valuation of usage rights or ownership value:

+ Location, position, purpose of use for special-purpose forests, protective forests, production forests which are natural forests, production forests which are planted forests; transfer time, conditions; lease time, conditions;

+ Timber stock of the forest at the time of valuation; annual growth of the forest; results of landscape business activities, scientific research, and other service values obtained by the forest owner (if any);

+ Prices of various timber products, firewood, non-timber forest products on the market at the trading site;

+ Infrastructure works closely related to the purpose of protecting and developing the forest;

+ State regulations on management and utilization mechanisms of the forest.

- For the forest area already having a price or having been valued by competent authorities (hereinafter referred to collectively as the comparative forest area):

+ Location, position, purpose of use for the forest; transfer time, conditions; lease time, conditions;

+ Infrastructure works closely related to the purpose of protecting and developing the forest;

+ Transfer time, lease time, or the time when the competent authority valued;

+ Statistics of transfer prices, lease prices, or prices determined by competent authorities;

+ Time, conditions, transfer prices, or prices already determined by competent authorities and payment methods.

b) Time and conditions for collecting information on the forest area already having a market price or a price determined by competent authorities.

- Information collection time

+ The collected information must occur within the closest period to the survey and information collection time for comparison and determination of the value of the forest area to be valued;

+ In cases where such information cannot be collected within the closest period, information about transactions of transfers, leases, or valuations made by state authorities within one year prior to the valuation time may be collected;

+ If there is no information within the closest period or within one year, information about transactions of transfers, leases, or valuations made by state authorities within two years prior to the valuation time may be collected.

- Conditions of the information

The information must be collected from actual transaction results of voluntary transfers, leases on the market under normal conditions (transactions between willing buyers and sellers, tenants and landlords who have full information and understanding of the forest area they are involved in, or prices of various types of forests determined by competent authorities).

c) Compare and analyze information

Based on the collected information, conduct analysis and comparison to select similar and different criteria between the comparative forest area and the forest area to be valued. On this basis, determine the similar and different criteria to calculate and determine the value for the forest area to be valued.

d) Adjust factors causing price differences between the comparative forest area and the forest area to be valued.

The value of the forest area to be valued shall be calculated by adjusting the price difference factors between the comparative forest area and the forest area to be valued as follows:

In which, the amount of price adjustment between the comparative forest area and the forest area to be valued is the adjustment quantity for differences in location, condition, timber stock, quality of forest products, infrastructure works closely related to the purpose of protecting and developing the forest. The price difference between the comparative forest area and the forest area to be valued (which can be calculated as absolute value or percentage of the transfer price, lease price) is determined based on the assessment of competent authorities valuing the forest.

4. Application of methods for determining the value of forests:

a) The application of methods for determining the value of forests shall be carried out according to the following principles:

- The comparison method shall be applied when sufficient information and data of the comparative forest area compared to the forest area to be valued are available;

- The income method shall be applied to value various types of forests when pure income from the forest can be determined, but sufficient data on transfer prices, lease prices, or comparable market prices of similar forest areas cannot be obtained;

- The cost method shall be applied to value the ownership of production forests which are planted forests when reasonable costs invested in creating the forest can be determined, but pure income from the forest or sufficient data on transfer prices, lease prices, or comparable market prices of similar forest areas cannot be obtained.

b) When the forest area can simultaneously obtain transfer prices, prices for leasing forest use rights, ownership of planted forests on the market, or prices determined by competent state agencies, and it is possible to calculate the pure income generated by the forest area being appraised, as well as to determine reasonable costs invested in creating the forest (for production forests, this refers to planted forests), then the following methods should be used in order of priority: the comparative method, the income method, and the cost method.

c) In the following cases, it is necessary to combine multiple methods specified in this Circular to determine the price of various types of forests, and to check and compare with price levels to decide on specific prices:

- The transfer and leasing of forest use rights and ownership of planted production forests have not become widespread on the market, and collected data lacks systematicity;

- Transfer and leasing prices on the market fluctuate abnormally and do not accurately reflect supply and demand relationships for forests under normal conditions;

- The level of forest use rights and ownership prices of planted production forests determined by one of the methods is more than 20% higher or lower than the actual market prices of forest use rights and ownership prices of planted production forests.

III. DETERMINATION OF COMPENSATION AMOUNTS FOR DAMAGE CAUSED BY VIOLATIONS OF THE LAW TO STATE-OWNED FORESTS

The compensation amount for damage caused by violations of the law to state-owned forests is the sum of money that the violator must compensate the State, including the value of timber products and the environmental value of the damaged forest.

1. The value of timber products is the total value of standing trees and non-timber forest products on the damaged forest area.

For newly planted forest areas that have been destroyed before or shortly after planting, with little or no stock, the value of the forest in terms of timber products is calculated as the total investment costs from the start of the investment until the destruction. For young natural forests that have just recovered, the comparative method with newly planted forests may be used to determine the value.

2. The environmental value is calculated by multiplying the value of timber products (as stipulated in Clause 1, Section II of this Circular) by a factor k ranging from 2 to 5 (depending on the type of forest). Factor k When

a) For special-use forests, factor k is 5;

b) For protective forests, factor k is 4;

c) For production forests that are natural forests, factor k is 3;

d) For production forests that are planted forests, factor k is 2.

IV. IMPLEMENTATION

This Joint Circular shall take effect fifteen days after its publication in the Official Gazette.

During implementation, if any difficulties arise, they should be reported by the People's Committee of the province to the Ministry of Agriculture and Rural Development and the Ministry of Finance for consideration and resolution.