Institutional Friction and Disbursement Inefficiency in PFES: Evidence from Dak Lak, Vietnam

Payment for Forest Environmental Services (PFES) is a key market-based instrument for sustainable forest management in Vietnam, yet its financial efficiency remains underexplored at the provincial level. This study examines PFES implementation in Dak Lak Province during 2022-2025, focusing on contract performance, revenue structure, and disbursement efficiency. Using descriptive statistics and institutional analysis based on official financial reports, the study identifies a persistent “disbursement inefficiency”, where only 35-40% of planned funds reached forest owners, despite relatively stable revenue streams. The findings reveal three main constraints: over-reliance on hydropower-based revenue, delays in forest-area verification, and limited digital transparency in fund management. The study further highlights institutional fragmentation and weak inter-agency coordination as key barriers to efficient fund allocation. Policy implications suggest the need for digital monitoring systems, diversification of PFES revenue sources (including carbon markets), and simplified administrative procedures to enhance payment efficiency. The Dak Lak case provides practical lessons for improving the performance of PES schemes in developing economies.