Philippines - Conservation of Priority Protected Areas Project

GLOBAL ENVIRONMENT FACILITY 1(309T Republic of the Philippines Conservation of Priority Protected Areas Project Project Document April 1994 THE WORLD BANK  GEF Documentation The Global Environment Facility (GEF) assists developing countries to protect the global environment in four areas: global warming, pollution of international waters, destruction of biodiversity, and depletion of the ozone layer. The GEF is jointly implemented bythe United NationsDevelopmentProgramme,the United NationsEnvironmentProgramme, and the World Bank. GEF Project Documents - identified by a green band provide extended project- specific information. The implementing agency responsible for each project is identified by its logo on the cover of the document. Global Environment Coordination Division Environment Department World Bank 1818 H Street. NW Washington, DC 20433 Telephone: (202) 473-1816 Fax: (202) 522-3256  Document of The World, Bank FOR OFFICIAL USE ONLY Report No. 11309-PH GLOBAL ENVIRONMENT FACILITY MEMORANDUM AND RECOMMENDATION OF THE DIRECTOR EAST ASIA & PACIFIC COUNTRY DEPARTMENT I OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE REGIONAL VICE PRESIDENT ON PROPOSED GRANTS FROM THE GLOBAL ENVIRONMENT TRUST FUND IN AMOUNTS EQUIVALENT TO SDR 2.0 MILLION (US$2.9 MILLION) TO THE REPUBLIC OF THE PHILIPPINES AND SDR 12.1 MILLION (US$17.1 MILLION) TO THE NGOS FOR INTEGRATED PROTECTED AREAS, INC. FOR A CONSERVATION OF PRIORITY PROTECTED AREAS PROJECT PART I: MEMORANDUM AND RECOMMENDATION April 15, 1994 Agriculture and Natural Resources Operations Division Country Department I East Asia and Pacific Region This document has a restricted distribution and may be used by recipients only in the performance of their officiaL duties. Its contents may not otherwise be disclosed without World Bank authorization.  Currency Eauivalents (As of March 1994) US$1.00 = P28 P1.0 = US$0.036 FISCAL YEAR July 1 - June 30 ABBREVIATIONS AND ACRONYMS asl Above Sea Level CVRP Central Visayas Regional Project DENR Department of Environment and Natural Resources DOF Department of Finance EIAs Environmental Impact Assessments GEF Global Environment Facility GET Global Environment Trust Fund GOP Government of the Philippines IPAF Integrated Protected Areas Fund LBP Land Bank of the Philippines LCB Local Competitive Bidding NGO Nongovernmental Organization NIPA NGOs for Integrated Protected Areas, Incorporated NIPAS National Integrated Protected Areas System PAs Protected Areas PAMB Protected Areas Management Board PAs Protected Areas Superintendent PAWB Protected Areas Wildlife Bureau SECAL Sector Adjustment Loan  PHILIPPINES CONSERVATION OF PRIORITY PROTECTED AREAS PROJECT GRANT AND PROJECT SUMMARY Source of Grant: Global Environment Trust Fund Grant Recipients: Republic of the Philippines NGOs for Integrated Protected Areas, Inc. Amount: SDR 14.16 million (US$20.0 million equivalent) total, of which: SDR 2.031 million (US$2.87 million equivalent) to the Republic of the Philippines SDR 12.129 million (US$17.13 million equivalent) to the NGOs for Integrated Protected Areas, Inc. Terms: Grant Obiectives: The project supports the Government's policies for the design and development of a protected area system to conserve the nation's biodiversity heritage. The project would protect ten areas of high biodiversity value; improve protected area management through strengthening DENR, incorporating local people into the management structure, and establishing permanent funding mechanisms; confirm the tenure of indigenous cultural communities; and develop sustainable farms of livelihood consistent with biodiversity protection. Financing Plan Local ForeigTn Total uS$ '000 -- Government 2,856 0 2,856 GET 15.442 4.558 20.000 TOTAL 18,298 4,558 22,856 Economic Rate of Return: Not applicable Povertv Category: Program of targeted interventions. Map: IBRD 23920R his document has a restricted distribution and may be used by recipients only in the performance of I their official duities. its contents may not otherwise be discLosed without world Bank authorization.   PHILIPPINES CONSERVATION OF PRIORITY PROTECTED AREAS PROJECT 1. Background. The Philippines includes, within its moist tropical forest, wetlands, and marine environments, an exceptionally rich assemblage of both terrestrial and marine life forms, specifically about 12,000 plant species (3,800 endemic), 170,000 species of fauna, including 960 terrestrial vertebrates (43% endemic), and about 500 species of coral. The present system of protected areas (PAs), including over 61 national parks, wildlife sanctuaries, or equivalent reserves, exists mainly on paper, for lack of resources, funds, personnel and political will. On the basis of scientific and sociological studies, a new legal framework for a "National Integrated Protected Areas System" (NIPAS) has been developed, passed Congress, and signed into law by the President; the priority areas for biodiversity conservation have been identified, and preliminary management plans for an initial core of ten priority areas have been drafted. However, the benefits of biodiversity protection primarily accrue to the international community as a whole, and the Government is unwilling to borrow externally at market rates of interest for such conservation activities. 2. This project supports the Government's policies for the design and development of a protected area system to conserve the nation's biodiversity heritage. It is an outgrowth of the recommendations of a World Bank study of environmental and natural resource management issues in the Philippines completed in 1989,/1 and a Congressional resolution the same year mandating the Government to define and develop a National Integrated Protected Areas System. The program was given high priority in the Government's environmental policy framework, the "Philippine Strategy for Sustainable Development", which was formally endorsed by the Cabinet in October 1990. Congress has passed and the President has signed into law new enabling legislation providing a secure foundation consistent with international standards for protected area designation and management. Implementing guidelines for this law, reviewed and found satisfactory by the Bank, have been issued by the Secretary of the Department of Environment and Natural Resources (DENR). 3. On paper, the NIPAS legislation and implementing guidelines have already broken new ground by embodying in law principles and approaches which elsewhere are the subject of recommendations and small-scale demonstrations. The Global Environment Facility (GEF) operation would provide a full-scale demonstration that such approaches can be successfully implemented. These features include: (a) selection of PAs based on scientific principles and studies, and categorization based on an internationally-recognized system; (b) /1 The Forestry. Fisheries and Agricultural Resource Management (ffarm) Studv (Report No. 7388-PH, January 17, 1989), later republished as a World Bank Country Study under the title Philippines Agriculture and Natural Resource Management Studv.  -2- requirement that NIPAS sites be managed according to scientifically-based management plans; (c) decentralization of management authority to the PA level, with a Management Board composed mainly of community representatives having direct planning and administrative authority; (d) recognition of tenure rights of indigenous cultural communities, and inclusion of their representatives on the Management Board; (e) use of zoning within PAs and buffer zones outside PAs to provide legal opportunities for sustainable livelihood activities for tenured residents; (f) legal authorization of a national endowment fund to receive both PA revenues and external contributions to provide a sustained means of support; and (g) promotion of an assisting role for NGOs at the national and local levels in PA management, including their representation on Management Boards and exercising management powers under contract. 4. The DENR in collaboration with local non-governmental organizations (NGOs) and research institutions selected the ten areas for early inclusion in NIPAS to represent six of the most important bio-geographic zones (out of a total of 15 such zones distinguished in the Philippine Islands). The selected areas constitute a mix of terrestrial, marine and wetland environments with high endemism; and they include six existing/candidate national parks. The sites cover a total of about 1.25 million ha of land, wetland, and water area, of which terrestrial area is 746,000 ha (Map IBRD 23920). 5. A team of international and local experts was engaged in October 1990 to develop preliminary management plans for these ten protected areas. The plans were based on review and analysis of existing bio-physical data and field collection and analysis of geographic, demographic, socio-economic, legal, and other data on the areas. The plans include preliminary delineation (based on aerial mapping of existing land uses) of the scope and boundaries of the areas and any buffer zones; and draft designs for conservation and development plans for each area, which identify monitorable objectives and goals for management of the PAs. 6. These preparatory activities were financed by a Japan-World Bank Technical Assistance Grant, as part of the Bank/IDA Environment and Natural Resources Sector Adjustment Loan./2 The SECAL has addressed policy issues of sustainable resource management affecting PAs, particularly the development of NIPAS enabling legislation and implementing guidelines, but also through provision of technical assistance for the design of NIPAS. In addition, it contains long-term investment components which strengthen monitoring and enforcement of logging regulations, and introduces sustainable livelihood activities among upland dwellers who otherwise would contribute to degradation /2 LN 3360-PH (US$158 million equivalent) and CR 2277-PH (SDR 50 million) were approved by the Board on June 25, 1991 and became effective on October 10, 1991.  -3- of forests. By providing a sound design and legal framework, the SECAL should help reduce the external threat to PAs. However, the SECAL does not finance the actual initiation and early operation of the NIPAS, and, in view of the current Government budgetary crisis, there is a strong likelihood that in the absence of concessional foreign support, the system would remain unfunded and unimplemented. 7. Pro-ect Obiectives. The proposed GEF component would: * protect ten areas of high biodiversity value; * improve DENR PA management capabilities; * incorporate local communities and NGOs into the PA management structure; * confirm the tenure of indigenous cultural communities and long- established residents of PAs; ' ! establish a permanent funding mechanism for PA management and development; and * develop sustainable forms of livelihood consistent with biodiversity protection. The project is a Type 2 project under GET, as substantial global environmental benefits would be realized. 8. Proiect DescriDtion. The GEF operation would support the Government's efforts to establish a core NIPAS system for ten sites over a seven-year period, through the financing of the following components: (a) site development (27% of total cost), including provision of appropriate levels and quality of staffing and construction of infrastructure (access roads and trails, offices, housing, visitor facilities, etc.); (b) resource management (10%), including establishment of a community- based and NGO-supported management structure, development of management plans, mapping and boundary delineation and demarcation, and habitat restoration; (c) socio-economic management (44%), directed entirely at the human population, including community consultation and training, population census, registration, and tenure delineation, but especially the development of non-destructive livelihood projects in buffer zones and multiple use areas; and (d) national coordination, monitoring, and technical assistance (18%), providing for NGO-based project coordination; monitoring of project implementation and trends in biodiversity inventories, and assessment of management impacts; and technical assistance to individual PAs and DENR's Protected Areas and Wildlife Bureau.  -4 - 9. The project addresses past weaknesses of Government administrative management of the PA system in part by integrating the NGO community into the management structure. The Government has designated the "NGO for Integrated Protected Areas, Inc." (NIPA), a legally-incorporated non-profit Consortium recently established by twelve national NGOs (including the most important national umbrella groups for community development and environmental NGOs) to be the recipient of a GET grant for the purpose of coordinating NGO support activities, providing technical assistance, monitoring implementation, and serving as trustee and manager of a Livelihood Fund (described below). Local "host NGOs" at the PA level would provide training and technical assistance, and coordinate grass-roots implementation of most activities under the supervision of each PA Superintendent and Management Board. The formation and designation of NIPA as lead NGO and grant recipient has been recommended by Government because the various Philippine NGO networks and their umbrella groups, represented on the NIPA Board, provide the best framework for the broadest possible participation by local NGOs; and collectively the Philippine NGOs have a substantial track record in managing community-based projects for sustainable development. Although NIPA's Board of Directors would be responsible for management of NGO participation in the project, and the grant which would finance this participation, overall coordinative authority for the project would rest in a Government-appointed joint Government-NGO Steering Committee, and day-to-day management of the NGO component would be in the hands of a hired, long-term professional staff. 10. The project would support the establishment of a decentralized, community-based management structure for individual PAs, based on Protected Area Management Boards (PAMBs). Preliminary management plans as drafted are regarded as an advisory input to PAMB, and all project activities at the PA level except monitoring and evaluation would be subject to PAMB agreement on work programs and budgets. 11. To be consistent with decentralized management principles, the general nature but not all the details of project activities at the PA level have been specified. Based on a structure which is a hybrid of a rural credit and a social fund project, GET financial support for development of alternative and sustainable sources of livelihood for residents or neighbors of all ten PAs would be managed as a common Livelihood Fund. Proposals for subprojects drawing on this Fund would be prepared at each PA by host NGOs for approval of each PAMB. The larger subprojects would require further screening by the NIPA technical assistance group, and approval by the Governing Board of the Integrated Protected Areas Fund, composed of government and NGO representatives. Implementation of livelihood projects would be supervised by PA host NGOs. 12. Draft management plans already include substantial baseline information on the PAs, a geographic information system indicating inter alia current land uses has been established, and monitorable objectives for each PA have been proposed. Further development of baseline information is among the initial project activities required by law and financed by the project. Monitoring will focus on the project's success at arresting habitat degradation. Full inventories of biodiversity will not be pursued because of expense; however, a quantitative system for monitoring the direction of change in biodiversity  from, e.g., indicator species will be developed under technical assistance contract and implemented in each PA by NGO contractors. 13. Project ImDlementation. The project would be implemented over seven years. Overall authority over project implementation rests with the Department of Environment and Natural Resources (DENR) , which has planning, monitoring, and approval functions at the central government level through the Protected Areas and Wildlife Bureau (PAWB) and line implementation functions at the regional level or below. An NGO-based organizational structure, coordinated through NIPA, with the assistance of a number of community-level NGOs, would provide technical and management assistance, research, and community development expertise in support of NIPAS to both the central government and individual PAs. A joint project implementation office would be established by PAWB and NIPA, with long- term staffing, including Project Manager, agreed by PAWE, NIPA and the Bank. Policy and oversight would be set by a DENR NIPAS Steering Committee which would add to the above parties representatives of senior management of DENR and the Department of Interior and Local Government. Criteria and procedures for the selection of local NGOs have been agreed with the Bank. These NGOs would be subject t-o policy direction by the PAMBs and, in day-to-day operations, would be subject to the authority of the PA Superintendent. The PAMBs, composed of representatives of central and local governments, NGOs, religious orders, and indigenous cultural communities in set proportions, are authorized by law to make basic management decisions for the individual PAs, and would be given direct authority to approve small subprojects for financing under the Livelihood Fund. A Governing Board for the Livelihood Fund, consisting of representatives of public agencies, environmental NGOs, and indigenous cultural groups, would approve and oversee major livelihood projects. Relationships and lines of authority among these parties are clearly defined by the NIPAS implementing rules and regulations, memoranda of agreement among parties, and explicit agreements with the Bank on implementation arrangements. The project would close on December 31, 2001. 14. Experience in past Bank projects (para. 17) has been that Government's approval, programming, budgeting and disbursement procedures are slow and inflexible, being especially unreliable at a time of budgetary crisis. Aside from delaying proj&ct implementation, they force technical assistance contractors to assume heavy financial risk and charge correspondingly high overhead rates. These procedures discourage NGOs operating with low overheads and no financial reserves from participation as contractors in Government-implemented projects. They also do not afford the flexibility required to operate a social fund with decentralized decisionmaking mechanisms. Consequently, Government has requested and it was agreed to direct the financing and overall financial supervision of (a) NGO participation and (b) the Livelihood Fund through a direct grant to NIPA, Inc., the disbursement of which would not be subject to normal Government budgetary and cash release mechanisms./3 NIPA would directly manage disbursement /3 In order to reimburse operational costs and technical assistance required by NIPA prior to grant effectiveness in order to become eligible to receive a GET grant, the GET grant to NIPA would include retroactive financing of such costs as incurred after December 1, 1993 to a limit of US$100,000 (0.3 percent of the total grant).  -6- and replenishments from special accounts held in the Land Bank of the Philippines. Local NGOs and Land Bank staff would assist NIPA in supervising disbursements under the livelihood component. The responsibilities of NIPA, Government, and the Land Bank are detailed in Annexes C and D and also in Memoranda of Agreement between NIPA and the Government as well as NIPA and Land Bank. 15. Project Sustainability. Management of the PA system has suffered from lack of budgetary support in the past, and the adequacy of future budgets allocated by Congress cannot be fully assured. To provide for sustainability of management resources, project design includes the following measures, for which necessary assurances were obtained from Government: (a) the GET grant would finance the major non-recurrent costs of PA establishment and development, including infrastructure, equipment, and the development of surveys and plans; however, project works would be confined to a scope for which maintenance would be affordable in the Philippines context; (b) targets for PA staff have been agreed with Government, which would finance a proportion of incremental costs of staff build-up reaching 100% by the last year of implementation, and provide an adequate operational budget; (c) the NIPAS law and implementing regulations provide that an endowment fund will be set up, to which all revenues generated from the IPAS system would accrue, and to which external as well as budgetary contributions may be made; and (d) livelihood activities, the largest portion of the project budget, would be placed under the authority of a Governing Board and the individual PAMBs on conditions which ensure considerable cost recovery to the endowment fund. This combination of measures would ensure that an endowment is built up to supplement Government budgetary resources in the post-implementation period, and that future recurrent costs (estimated at US$0.7 million per annum) do not become an intolerable burden on the budget. To provide an incentive to completion of the gazetting process (ideally by mid-1997), disbursements to those PAs which have not been gazetted will be suspended after total disbursements have reached the amounts budgeted for the first three years of the project. 16. Lessons from Previous Bank/IDA Involvement. The Bank has completed two previous projects dealing with the forestry sector, Watershed Management and Erosion Control (Ln. 1890-PH) and Central Visayas Regional Project (CVRP; Ln. 2360-PH), and has begun implementation of the Environment and Natural Resources SECAL (Ln. 3360-PH; Cr. 2277-PH) of which the proposed GEF project is a component. The first of these suffered from legal prohibitions on livelihood activities in protected areas such as critical watersheds, hindering efforts to involve and benefit the local population. As the NIPAS legislation has authorized such activities, introducing land use zoning as a control mechanism, the problem should not recur. Experience in implementing CVRP indicated the advantages of decentralized administration, direct community participation and livelihood benefits, and involvement of NGOs, all design features of the proposed GEF project. The SECAL has made good progress on both policy and investment components, increasing confidence in DENR's implementation ability. However, speed and efficiency of implementation have suffered from weak Government approval and budgetary mechanisms, as well as budgetary stringency, leading Government and the Bank to jointly propose a strong role for NGOs in implementation and a direct grant to NIPA as the mechanism for financing NGO participation and a Livelihood Fund.  -7- 17. Rationale for GET FundinQ. The protection of the ten priority sites, as an initial installment for NIPAS, has clearly established global environmental benefits. Various parts of the Philippine Islands arose or were separated from each other during several geological epochs, accounting for the exceptionally high endemism. Due to extensive logging and subsequent land use conversion, few sites remain of a condition and size to serve as refuges for the remaining flora and fauna. The ten sites proposed for protection under this project were selected by NGO-led scientific teams to provide representation of different bio- geographic zones and include examples of terrestrial, marine and wetland habitats. The biodiversity value of these sites has been confirmed by field surveys. Two of the largest and most valuable have not previously been gazetted; another is a designated ASEAN Heritage Site. Most are under threat of degradation from illegal loggers, and resident or migrant human populations. 18. The project is unique in its approach to biodiversity conservation in several respects: first, it forms part of a hybrid SECAL which has supported Government's efforts to put in place a suitable policy framework for natural resource protection and the implementation of an investment program highly complementary to the NIPAS program. The latter includes a monitoring and enforcement program designed to control illegal logging, the main threat to the PAs; and a program to introduce sustainable livelihood techniques among populations living on the fringes of the forest. 19. The project also seeks to reconcile the livelihood interests of local populations with site protection by developing a decentralized community-based PA management structure, strongly supported by community-development NGOs. This management structure would include the recognition of the ancestral domain rights of indigenous groups resident in the PAs, guaranteeing them tenure and a lead role in management. As the project concentrates on areas with high populations of indigenous people, project design meets the requirements of O.D. 4.30 on Indigenous Peoples. Tenure of existing non-indigenous settlers is also protected. Thus, the carrying out of the project is not expected to cause resettlement. The project would also designate a high proportion of GET financial support for developing non-destructive livelihood activities in buffer and multiple-use zones, following selection criteria agreed with the Bank. The project would strengthen the Government's protected area management capabilities by incorporating national and local NGOs into the project management structure, phasing in increased Government budgetary and staff support, and establishing Endowment Funds as sources of enduring post-implementation financial support. 20. Agreed Actions. During negotiations on the Grant Agreements, assurances were obtained from Government as follows: (a) Conditions of Effectiveness (i) NIPA Grant Agr-ement. All conditions required for the effective- ness of the NIPA Grant Agreements would be fulfilled. (ii) Project Coordination Unit. A Project Coordination Unit would be established.  -8- (b) Conditions of Project Implementation: (i) Government Staffing. DENR would, by no later than January 1, 1997, increase its full-time personnel assigned to each project site to numbers agreed with the Bank. (ii) Delineation of Ancestral Domains. DENR would begin delineation of ancestral lands no later than April 1, 1995, and DENR would issue Certificates of Ancestral Land Claims within six months of the completion of delineation. (iii) Conditions and Terms of Livelihood Component. Funds in support of livelihood activities would be managed and disbursed as subgrants or subloans under the authority of the Integrated Protected Areas Fund Governing Board established by the NIPAS law and regulations and appointed by the Secretary of DENR. The Board would adopt rules, regulations, and subproject selection guidelines acceptable to the Bank. (iv) Joint Project Management Office. DENR would be responsible for general oversight, coordination, and monitoring of the project. It would establish a joint Project Coordination Unit (PCU) with NIPA, with qualified management and staff, which would be given the responsibilities and resources, including office facility, required to undertake day-to-day supervision and coordination of project implementation. (v) Monitoring and Evaluation. A satisfactory monitoring plan would be submitted to the Bank for review no later than April 1, 1995, and thereafter implemented. (vi) Accounts and Audits. Separate project accounts would be maintained by Government and audited annually by auditing firms acceptable to the Bank. All audits would be submitted to the Bank within six months after the close of the fiscal year. (vii) Appointment of PAMB. At least five PAMBs would be appointed by April 1, 1995 and the remaining five by April 1, 1996. (viii) Gazetting. Government, following the prescriptions of the NIPAS Law, would issue a Presidential Proclamation declaring each project site a PA, and would submit to Congress a bill to enact such Proclamation. DENR, assisted by NIPA, would draft, and PAMBs would approve, a management plan for each site which conforms to the requirements of the NIPAS Law and also the policies of the Bank on Indigenous People and Resettlement. (ix) Governmaent Guarantees of NIPA. The Government will guarantee the performance of all the obligations of NIPA and indemnify the Bank against liabilities arising from either grant agreement.  -9- (c) Conditions of Disbursement. Disbursements to those PAs which have not been gazetted would be suspended after total disbursements have reached the amounts budgeted for the first three years of the project. (d) Conditions of Grant Default. The rescindment or abrogation of the Memorandum of Agreement among DENR, DOF and NIPA, or of the NIPAS legislation, or the dissolution of the Steering Committee, IPAF Governing Board, NIPA, or any project site designated as a PA, would each constitute a condition of grant default. 21. NGO Covenants. During negotiations on the Grant Agreements, assurances -"-e obtained from NIPA, Inc. as follows: (a) Conditions of Effectiveness: (i) GOP Grant Agreement: All conditions required for the effective- ness of the GOP Grant Agreement would be fulfilled. ! (ii) NIPA-LBP Memorandum of Agreement. A Memorandum of Agreement between NIPA and LBP delineating the LBP role would be signed. (b) Conditions of Proiect ImDlementation: (i) Delineation of Ancestral Domains. NIPA will prepare a time-based action plan and budget for delineation of ancestral land claims and farm surveying to begin no later than April 1, 1995. (ii) Monitoring and Evaluation. A satisfactory monitoring plan would be submitted to the Bank for review no later than April 1, 1995, and thereafter implemented. (iii) Joint Project Management Office. NIPA would establish a joint Project Coordination Unit (PCU) with DENR, with qualified management and staff, and assign it the resources required to undertake day-to-day supervision and coordination of project implementation. (iv) Conditions and Terms of Livelihood Component. NIPA would draft rules, regulations, subproject selection guidelines, application procedures and forms, all acceptable to the Bank, for the approval of and implementation by the IPAF Governing Board, and would enter into agreements with subgrant and subloan recipients specifying the latter's obligations. (v) NIlPA-LBP Memorandum of Agreement. LBP would be entitled to a fee of 2% on disbursements of subloans or mixed subgrants-subloans, and 2% on recovery of principal and interest from subloans. (vi) Management Plans. NIPA would assist in drafting, and cause the PAMBs to review and approve, a management plan for each site which conforms to the requirements of the NIPAS Law and also the policies of the Bank on Indigenous People and Resettlement.  - 10 - which conforms to the requirements of the NIPAS Law and also the policies of the Bank on Indigenous People and Resettlement. (c) Conditions of Disbursement. (i) Livelihood Fund Rules and Procedures. The rules and procedures for administration of the Livelihood Fund, as adopted by the IPAF Governing Board, would be reviewed and accepted by the Bank (ii) IPAF Governing Board. The IPAF Governing Board would be organized and appointed. (iii) Gaz-tting. Disbursements to those PAs which have not been gazetted would be suspended after total disbursements have reached 50% of the total grant, that is, the amount budgeted for approximately the first three years of the project. (d) Conditions of Grant Default. The rescindment or abrogation of the Memorandum of Agreement among DENR, DOF and NIPA, the Memorandum of Agreement between NIPA and LBP, or NIPA's Charter, or the bankruptcy of NIPA, or the repeal of the NIPAS legislation would each constitute a condition of grant default. 22. Benefits. The project would enable the Government to implement its National Integrated Protected Areas System program on an initial core of ten PAs, establishing for the first time a sound framework for conservation management based on legislation and implementing guidelines which recognize and attempt to reconcile the multiple objectives of biodiversity conservation, sustainable livelihoods for local populations, and tenure rights of indigenous cultural communities. Most directly, it would protect ten sites of recognized international importance, which are now unprotected and subject to degrading forces. These sites encompass over 400,000 ha of primary forest, as well as additional areas of coral reef and wetlands, and constitute the most pristine habitat remaining for the endemic and endangered species of the Philippines. A population exceeding 100,000, largely members of indigenous cultural communities residing in or around these PAs, would benefit from efforts to establish their land tenure, protect their cultures, provide non-degrading sources of livelihood, and enlist them in protective activities. 23. Risks. Project implementation involves four main risks: (a) a weak civil service structure may have difficulty coping with the more innovative aspects of the project, (b) conflicts among groups within communities may hinder formation of a local consensus on plans and programs which reconcile economic growth and biodiversity protection, (c) budgetary stringency may slow implementation of the project, and (d) the gazetting process may not be completed. Mitigating these risks, the innovative aspects of the project are all prescribed by law and administrative regulation, and the project would provide substantial managerial and technical assistance in implementation to the civil service through the NGOs. The NIPAS law further alleviates the main source of social conflict by balancing protection and livelihood concerns and confirming land tenure, and by providing for the establishment of PAMBs, which can serve as a mechanism for local conflict resolution. The local NGOs supporting each PA,  through their efforts at enhancement of community dialogue, are the major vehicle for concensus formation, and the provision of adequate resources for development of alternative sources of livelihood is also crucial to reducing conflict over protected resources. The provision of a direct grant to NIPA in support of all NGO activities and the Livelihood Fund would protect most project activities from bureaucratic delays. Finally, the Grant Agreements call for cancellation of the undisbursed portion if clear indications emerge than gazetting of the protected areas will not be accomplished. 24. Environmental Assessment. The project has a "B" classification, which means that no formal environmental assessment is required. The project's primary objectives focus on environmental protection and should result in stronger institutional capabilities. The NIPAS law requires environmental impact assessments (EIAs) for all infrastructure in PAs. The ecological research component of the proposed project can be used to finance EIAs, and the organization of the PAMBs and the development of management plans provide a decentralized, front-line mechanism for review of ElAs. Finally, the NIPAS legislation, implementing rules and regulations, and overall project design are consist!ent with the operational directive on indigenous peoples. Attachments Washington, D.C. March 29, 1994  - 12 - Schedule A PHILIPPINES CONSERVATION OF PRIORITY PROTECTED AREAS Estimated Costs and Financina Plan Estimated Costs: Local Foreign Total ------- (US$ 000) ----- Site Development 4,004 947 4,952 Resource Management 1,707 280 1,987 Socio-Economic Management 8,499 1,828 10,327 National Coordination, Monitoring & TA 2.413 864 3.277 Total Base Costs 16,623 3,920 20,543 Physical Contingency 184 145 329 Price Contingency 1.515 AU 1.980 Total Project Cost 18,322 4.531 22.853 Financina Plan: Local Foreign Total ------- (US$ 000) ------- GET 15,469 4,531 20,000 Government or Bilaterals 2.853 0 2.856 Total 18.322 4,531 22,853  - 13 - Schedule B Page 1 of 2 PHILIPPINES CONSERVATION OF PRIORITY PROTECTED AREAS Procurement Methods and Disbursements (US$ million) Procurement Method/1 Items LCB Other/2 Total 1. Works Government 0.56 1.41 1.97 (0.56) (1.41) (1.97) NIPA, Inc. 0.24 0.24 (0.24) (0.24) 2. Goods Government 0.22 0.23 0.45 (0.22) (0.23) (0.45) NIPA, Inc. 0.20 0.20 (0.20) (0.20) 3. Consultancies Government 0.14 0.14 (0.14) (0.14) NIPA, Inc. Local NGO TA 3.52 3.52 (3.52) (3.52) Ecological Monitoring 0.59 0.59 (0.59) (0.59) 4. Miscellaneous Government 3.16 3.16 (0.31) (0.31) NIPA, Inc. Project Management 2.57 2.57 (2.57) (2.57) Livelihood Fund 10.01 10.01 (10.01) (10.01) Total 1.02 21.83 22.85 (1.02) (18.98) (20.00) /1 Figures in parentheses show GET financing. /2 Includes force account works, shopping, salaries of direct NGO hires, incremental operating costs, and consultancy contracts.  - 14 - Schedule B Pace 2 of 2 Disbursements Amount I of Expenditures Categorv (USS million) to be Financed Grant to GOP (1) Civil Works 1.97 1001 (2) Equipment 0.45 1001 of foreign and local (ex-factory) expenditures and 70% of local expenditures for other items (3) Incre. Operating Cost 0.31 l10/a (4) Technical Assistance 0.14 1009 Subtotal 2.87 Grant to NIPA. Inc. (5) Livelihood Fund 10.01 100% (3) Project Coordination & TA -National NGO TA 2.65 1001 -Local NGO TA 3.89 1001 -Ecological Monitoring 0.59 1001 Subtotal 17.13 TOTAL 20.00 /a Reimbursed on a declining scale: 1994 40%, 1995 30%, 1996-2000 201 until funds in this category are exhausted. Estimated Disbursements Bank FY 1994 1995 1996 1997 1998 1999 2000 2001 -------------------(US$ million)--------------------- Annual 1.6 3.1 3.2 3.0 2.5 2.5 2.5 1.6 Cumulative 1.6 4.7 7.9 10.9 13.4 15.9 18.4 20.0  - 15 - Schedule C PHILIPPINES CONSERVATION OF PRIORITY PROTECTED AREAS Timetable of Key Project Processing Events (a) Time taken to prepare the project: 39 months, Oct. 1990-February 1994 (b) Prepared by: Government with assistance from NGO consortium (c) Approved by GEF Participants: June 1991 (d) Appraisal Mission Departure: March 1992 (e) Negotiations: April 1994 (f) Planned Date of Effectiveness: May 1994 (g) List of Relevant PCRs & PPARs: Loan No. Project PCR Date 1890-PH Watershed Management and Erosion Control June 24, 1991 2360-PH Central Visayas Regional Project June 23, 1993 The project was prepared by the following team: Tom Wiens, Principal Agricultural Economist, EAlAN, Task Manager Colin Rees, Sr. Ecologist, ASTEN Shelton H. Davis, Sr. Sociologist, ENVAP Hemanta Mishra, Consultant, Protected Area Management Ponciano Bennagen, Consultant, Indigenous Peoples Secretarial Support, Sandra Ginyard The project was cleared by Pamela Cox, Chief, EA1AN.   Document of The World Bank FOR OFFICIAL USE ONLY Report No. 11309-PH GLOBAL ENVIRONMENT FACILITY MEMORANDUM AND RECOMMENDATION OF THE DIRECTOR EAST ASIA & PACIFIC COUNTRY DEPARTMENT I OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE REGIONAL VICE PRESIDENT ON PROPOSED GRANTS FROM THE GLOBAL ENVIRONMENT TRUST FUND IN AMOUNTS EQUIVALENT TO SDR 2.0 MILLION (US$2.9 MILLION) TO THE REPUBLIC OF THE PHILIPPINES AND SDR 12.1 MILLION (US$17.1 MILLION) TO THE NGOS FOR INTEGRATED PROTECTED AREAS, INC. FOR A CONSERVATION OF PRIORITY PROTECTED AREAS PROJECT PART II: TECHNICAL REPORT April 15, 1994 Agriculture and Natural Resources Operations Division Country Department I East Asia and Pacific Region This document has a restricted distribution and may be used by recipients onLy in the performance of their officiaL duties. Its contents may not otherwise be discLosed without WorLd lank authorization.   PHILIPPINES Conservation of Priority Projected Areas Technical Report Table of Contents Paqe I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 II. BIODIVERSITY. HABITAT DESTRUCTION & PROTECTED AREAS IN THE PHILIPPINES . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 A. Biodiversity in the Philippines . . . . . . . . . . . . . . . . . 3 B. Habitat Destruction and Biodiversity Loss . . . . . . . . . . . . 5 C. Protected Area System . . . . . . . . . . . . . . . . . . . . . . 6 D. Priority Areas for Protection . . . . . . . . . . . . . . . . . . 9 E. Proposed Protection Strategy . . . . . . . . . . . . . . . . . . 11 III. THE PROJECT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 A. Summary Description . . . . . . . . . . . . . . . . . . . . . . . 16 B. Detailed Project Description . . . . . . . . . . . . . . . . . . 16 C. Proposed Project Cost and Financing . . . . . . . . . . . . . . . 21 D. Procurement . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 E. Disbursement . . . . . . . . . . . . . . . . . . . . . . . . . . 25 F. Accounting, Reporting and Auditing . . . . . . . . . . . . . . . 26 IV. PROJECT IMPLEMENTATION. . . . . . . . . . . . . 26 V. NEGOTIATIONS, EFFECTIVENESS. AND DATED COVENANTS IN THE GRANT AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 VI. PROJECT BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Risks . . . . . . . . . . . . . . . . . . . . . . . . . . .35 Tables in the Text Table 2.1: The Ten Priority Sites . . . . . . . . . . . . . . . . . . . . 12 Table 3.1: Project Cost Summary . . . . . . . . . . . . . . . . . . . . . 21 Table 3.2: Project Financing Plan . . . . . . . . . . . . . . . . . . . . 22 Table 3.3: Procurement Method . . . . . . . . . . . . . . . . . . . . . . 24 Table 3.4: Disbursement Plan . . . . . . . . . . . . . . . . . . . . . . 26 Figures in the Text Charts Chart 1: Project Organization . . . . . . . . . . . . . . . . . . . . . . . 28  Anr.exes Annex A: Cost Tables Annex :: _-dicative List of Candidate Priority Sites Annex: C: Proposed Ccnservation Objectives for Ten Priority Sites 'nne:x : L__eiihood Fund: Terms and Conditions of GEF Support Anrnex :: ProjecZ 7piementation Schedule: NGOs for Integrated Protected Areas, Inc. Annex F: National Integrated Protected Area System (NIPAS) Implementing Rules and Regulations  PHILIPPINES CONSERVATION OF PRIORITY PROTECTED AREAS TECHNICAL REPORT I. INTRODUCTION 1.1 The Philippines includes, within its moist tropical forest, wetlands, and marine environments, an exceptionally rich assemblage of both terrestrial and marine life forms. However, these environments receive almost no protection from degradation, as the present system of protected areas (PAs), including over 61 national parks and wildlife sanctuaries exists mainly on paper, for lack of resources, funds, personnel and political will. On the basis of scientific and sociological studies, a new legal framework for a "National Integrated Protected Areas System" (NIPAS) has been developed, passed Congress, and signed into law by the President; implementing rules and regulations issued; the priority areas for biodiversity conservation have been identified; and preliminary management plans for an initial core of ten priority areas have been drafted. This project would initiate full implementation of the NIPAS program by funding the protection and development of the priority sites. 1.2 The protection of the ten priority sites, as an initial installment for NIPAS, has clearly established global environmental benefits. Various parts of the Philippine Islands arose or were separated from each other during several geological epochs, accounting for an exceptionally high endemism. Due to extensive logging and subsequent land use conversion, few valuable sites remain of a condition and size to serve as refuges for flora and fauna. The ten sites proposed for protection under this project are among the few large and relatively pristine sites, selected by Philippine scientific teams under the leadership of World Wildlife Fund, Inc. (U.S.) (WWF), an international non-governmental organization (NGO), and local NGOs, to provide representation of different bio- geographic zones -- distinct in their endemic flora and fauna and cultural associations -- and also to include examples of terrestrial, marine and wetland habitats (Map IBRD No. 23920). The sites include a total of about 1.5 million ha of land, wetland, and water area, of which the terrestrial area is 500,OOQ ha. The biodiversity value of these sites was confirmed by field surveys. All but two of the sites are at least partially gazetted for protection; another is a designated ASEAN Heritage Site. 1.3 Preliminary management plans have been completed for these ten areas, financed by a Japan-World Bank Technical Assistance Grant, as part of the Bank/IDA Environment and Natural Resources Sector Adjustment Loan (SECAL) ./1 The SECAL is a hybrid which addresses policy issues of sustainable resource management affecting PAs, and includes technical assistance for the design of NIPAS and long-term investment components strengthening monitoring and enforcement of logging regulations, and introducing sustainable livelihood activities among upland dwellers who otherwise would contribute to degradation /1 LN3360-PH (US$158 million equivalent) and CR 2277-PH (SDR 50 million) were approved by the Board on July 30, 1991 and became effective on October 10, 1991.  of forests. The SECAL thus will result in a sound design and legal framework, and reduce the external threat to PAs. However, the SECAL did not finance the actual initiation and early operation of the NIPAS, because of the reluctance of Government to borrow for such purposes at market rates. In view of the current Government budgetary crisis, it is likely that, in the absence of support from the Global Environment Trust Fund (GET), the IPAS system would remain unfunded, and hence unimplemenced. 1.4 The Government has accorded high priority to the design and development of a protected area system to conserve the nation's biodiversity heritage. The approach it has followed emerged from the recommendations of a World Bank study of environmental and natural resource management issues in the Philippines completed in 1989,/2 and from the Government's environmental policy framework and action plan, the "Philippine Strategy for Sustainable Development" (PSSD), which was formally endorsed by the Cabinet in October 1990. Republic Act No. 7586 (June 1, 1992) establishing NIPAS, and corresponding implementing Rules and Regulations issued by the Secretary of the Department of Environment and Natural Resources (DENR), have already broken new ground by embodying in law principles and approaches which elsewhere are the subject of recommendations and small-scale demonstrations. The Global Environment Facility (GEF) operation would provide a full-scale demonstration that such approaches can be successfully implemented. These features include: (a) selection of PAs based on scientific principles and studies, and categorization based on an internationally-recognized (International Union for the Conservation of Nature) system; (b) requirement that NIPAS sites be managed according to scientifically-based management plans; (c) decentralization of management authority to the PA level, with a Management Board composed mainly of community representatives having direct planning and administrative authority; (d) recognition of tenure rights of indigenous cultural communities, and inclusion of their representatives on the Management Board; (e) use of zoning within PAs and buffer zones outside PAs to provide legal opportunities for sustainable livelihood activities for tenured residents; (f) legal authorization of NIPAS endowment funds to receive both PA revenues and external contributions to provide a sustained means of support; (g) promotion of an assisting role for NGOs at the national and local levels in PA management, including their representation on Management Boards and exercising management powers under contract. 1.5 The project is unique in its approach to dealing with the threat of degradation or destruction of habitat in the PAs, in several respects: first, it has the reinforcement of a hybrid sector adjustment operation which has supported Government's efforts to put in place a suitable policy framework for natural resource protection and the implementation of an investment program highly complementary to the NIPAS program. The latter includes a monitoring and enforcement program designed to control illegal logging, the main threat to the PAs; and a program to introduce sustainable livelihood techniques among populations living on the fringes of the forest. /2 The Forestry. Fisheries and Agricultural Resource Management (ffarm) Study (Report No. 7388-PH, January 17, 1989), later republished as a World Bank Country Study under the title Philippines Agriculture and Natural Resource Management Study.  1.6 Second, the project seeks to reconcile the livelihood interests of local populations with site protection by developing a decentralized community- based park management structure, strongly supported by community-development NGOs; by recognizing the ancestral domain rights of indigenous cultural groups resident in the PAs, and providing them with a significant role in management; and by designating a high proportion of GET support for developing non- destructive livelihood activities in buffer and multiple-use zones. This approach fully meets the guidelines of O.D. 4.20 on Indigenous People which applies to the project as a whole, and thus no separate indigenous peoples' plan is necessary. Tenure of existing non-indigenous settlers is also protected. Thus, carrying out of project activities is not expected to cause resettlement. 1.7 Third, the project would strengthen the Government's protected area management capabilities by drawing national and local NGOs into the project management structure in support of the civil service, phasing in increased Government budgetary and staff support, and establishing an endowment fund as a source of enduring post-implementation financial support. II. BIODIVERSITY, HABITAT DESTRUCTION AND PROTECTED AREAS IN THE PHILIPPINES A. Biodiversity in the Philippin-s 2.1 Although knowledge of Philippine biodiversity is quite incomplete, a good foundation was laid down in the first half of the century and has been partially updated by a handful of Philippine biologists. This is summarized in Table 2.1. However, many parts of the country remain underexplored and undercollected, particularly the Sierra Madre Mountain Range in Luzon, interior mountains of Mindanao, limestone forest areas of Samar-Leyte Islands, and the swamps and marshes of Mindanao./3 2.2 The Philippine forests are among the world's richest in terms of biodiversity, containing some 8,500 species of flowering plants, 3,800 species of indigenous trees, 33 species of gymnosperms, 1,035 species of ferns and fern allies, and 640 species of mosses. About 3,500 plant species are endemic to the country. Faunal diversity includes around 270 species of reptiles, 556 species of birds, and 210 species of mammals. The wetlands, ranging from coastal mangroves, estuaries and mudflats to high altitude volcanic crater lakes, also harbors great diversity (aside from the large numbers of migratory waterbirds which inhabit or feed in them). Coastal wetlands support over two-thirds of fish species at some point in their life cycle. As transitional zones between land and water, marshes and lake margins host organisms characteristic of either land or water as well as those specifically adapted to marshlands, including amphibians such as crocodiles (e.g., the endangered Crocodylus mindorensis) . The manarove areas have minimal species diversity and little or no endemism, but are unique as habitats and important as sources of nutrient enrichment and spawning grounds for aquatic life. /3 Three of these areas are represented in four of the ten sites.  -4- 2.3 The marine environment is part of the Indo-West Pacific Region, recognized as the world's highest biodiversity area in the marine environment. The Philippines, Malaysia and Indonesia have been called the "coral triangle", on which the most diverse habitat in the marine tropics is centered. Over a third of the 2,200 fish species reported in the Philippines are reef-associated. Its coral may include between 400-500 species and their associated benthos are likewise as diverse. 2.4 Endemism and Habitat Uniaueness. Species unique to a particular locality, as a percentage of total species found in that locality, is a measure, of endemism. The high endemism in the Philippines is explained by geological and biogeographic evidence that Luzon, Mindanao, Mindoro, and Negros-Panay were not in recent epochs connected to the Asia mainland, although Palawan may have been connected to Borneo during the Pleistocene. As a result, five large and distinct faunal regions are defined by these islands, and the Philippines has the highest percentage of faunal endemism among ASEAN countries. In addition, the 7,107 islands of the Philippines, subject to varying exposures to shifting tradewinds and typhoons, possessing mountains of great height, and as a result varying and peculiar distributions of rainfall, encompass a wide spectrum of ecological niches and habitat types. 2.5 The major habitat types include: (a) lowland evergreen forest, from 200-800 meters above sea level (asl), dominated by dipterocarp tree species and to a large extent converted to broad-leaf second growth forest, cogon (Imierata cylindrica) or talahib (Saccharum spontaneum) grasslands, or croplands following logging and shifting cultivation; (b) pine forests (Pinus kesiva and merkusii) , at 600-1,500 meters asl or even higher, found in Northern Luzon and Mindoro; (c) mossy forests at higher elevations, characterized by mosses, leafy liverworts, filmy ferns, orchids, vines, PodocarDus, oak, Svmclocos, Tristania, Eugenia, Dacrydium, and Myrica; (d) coral reef communities and seagrass beds around the islands; and (e) brackishwater habitats, such as mangrove swamps, nipa (NiDa fruticans) swamps, estuaries, mudflats, etc. Rarer or unique habitat types not previously studied in the Philippines include: (f) ultra-basic forests; (g) limestone (Molave) forests; (g) sago palm (Metroxylon saqu) forest; and (h) peat swamp forest.  - 5 - 2.6 The ten sites proposed for GEF project support provide an initial representation in NIPAS for each of the habitat types listed above (and 10 additional subtypes) . The covered habitats also provide virtually the only remaining sanctuaries for each of the endangered species mentioned above. B. Habitat Destruction and Biodiversity Loss 2.7 Although there have been no systematic studies of biodiversity loss in the Philippines, all the evidence points to a severe rate of decline in habitat. The old-growth dipterocarp forests, dominated by a multitude of hardwood species loosely classed as Philippines mahogany, covered about ten million ha four decades ago, but by the early 1980s the area had fallen to something over two million ha. A 1987 SPOT satellite land use survey, conducted as part of a Bank study, found that less than one million hectares remained, confined mainly to northeastern Luzon (40%), Mindanao (29%) and Palawan (10%). This area, which has been logged in recent years at rates of 100-200,000 ha per annum, has recently been brought within an administrative ban on logging in virgin forests. However, the Government's ability to enforce this ban is still minimal, and the pressure due to domestic timber shortage is growing. The remaining forest area -- some 3-4 million ha of logged-over and disturbed and/or second-growth forests, under threat from shifting cultivators and small-scale illegal logging -- may also not last until the end of the century. 2.8 The coastal zone has also been continuously subject to destructive pressures due to physical and chemical damage to coral reefs, disruption of ocean habitat through bottom trawling, clearing of mangroves for firewood and fishpond conversion, and pollution of freshwater lakes, swamps, rivers, and coastal waters. Approximately 450,000 ha of mangrove were thought to exist in 1918, which had dwindled to around 200,000 ha in 1980 and 149,000 ha in 1987-88. Almost no old-growth mangrove can be found today (about 10,000 ha have been identified in Palawan and Zamboanga del Sur). A 1976-81 underwater survey of Philippine reefs at 600 sites found that coral at about one-third of the sites was in "poor" condition (0-25% cover), 40% "fair" (25-50% cover), and under 6% "excellent" (75-100% cover). The better sites tend to be remote or along less populated coastlines. Where fishing pressure is high, reef degradation is associated with dynamite blast fishing, cyanide use, and other destructive practices. 2.9 As indications of the consequences of habitat destruction for biodiversity, it is estimated that about 60% of endemic Philippine flora are now extinct, and some 18 species of mammals, birds, and reptiles are on the list of endangered species. Two endemic species of particular symbolic importance (featured on Philippine stamps and coinage) are on the verge of extinction -- the tamaraw (Bubalus minorensis) and the Philippine eagle (PithecoDhaQa leffervi). In the marine environment, five Tridacna species and two Hipocvus species have been included in Appendix II of CITES. The dugong DuQone duqon is likewise endangered from intensive hunting and habitat destruction, as are marine turtles (Chelonia mvdas and Eretmochelvs imbricata). Although these and other species have some nominal sanctuaries in the Philippine park system, these parks have almost all been degraded in varying degrees as a result of human encroachment and currently stand virtually unprotected.  - 6 - C. Protected Area System 2.10 The foundations for the existing national park system of the Philippines were laid in 1932 in Legislative Act No. 3915 ("An Act for the Establishment of National Parks Declaring Such as Game Refuge and Other Purposes"). This law allowed reservation of national parks for aesthetic, historical and scientific reasons, but gave only one specific objective -- the protection of wildlife, and did not distinguish between "national parks" and "game refuges" (i.e., wildlife sanctuaries)> The act permitted tree cutting. under certain conditions. The implementing rules and regulations, issued two years later as Forestry Administrative Order 7, were amended in 1947 to allow, inter alia, logging and establishment of sawmills. Due partly to the ambivalent and vague conservation objectives in the original enactment, subsequent establishment and preservation of PAs was haphazard. In general, the pre- eminence of commercial logging pushed the administration of parks and wildlife to insignificant corners of the forestry bureaucracy, and the lack of active field presence of park management or governmental commitment to conservation in practice relegated the parks to the commons. As the demand for land increased, the encroachment of settlers in the protected areas became a major problem. As commercial logging of production forests progressed, so also did illegal logging inside protected areas proliferate. 2.11 A 1983 official study of the legislative status of the national park system also found that: (a) out of the 62 national parks gazetted since 1910, only 45 were theoretically at least partially under DENR jurisdiction, two had been lost to reclassification, another reclaimed and no longer physically in existence, and 14 scattered among other government agencies; (b) park boundary amendments in 1910-82 had resulted in the loss of 29,000 ha of national park lands; (c) the administration of national parks had undergone five major institutional changes; (d) overlapping and inconsistent legislation affected 14 national parks; and (e) the parks had been subjected to agriculture, reclamation, land subdivision, logging, and mining. 2.12 The major issues in protected area management in the Philippines are described below: 2.13 Low Standards of Protection. None of the sites of existing or potential national parks in the Philippines can yet meet the standards of the International Union for the Conservation of Nature and National Resources (IUCN), as all areas of biological importance and adequate size (more than 10,000 ha) have human settlements within their boundaries, lack even minimal visitor facilities, and are subject to conflicting land uses. There are, however, a number of sites which, with careful boundary definition and proper development and management, could eventually reach IUCN standards. 2.14 Poor Administration and Management. While DENR is the primary institutional agent of the government for the protected areas, other agencies (National Power Corporation, National Irrigation Authority, Philippines National Oil Corporation, Departments of Tourism and Agriculture, University of the Philippines) have jurisdiction over some parks. Within DENR, the Protected Areas and Wildlife Bureau (PAWB) has primarily provided staff services to the central  office of DENR, while direct management of PAs has been devolved to the regional offices of DENR. Of 548 personnel supposedly working in the protected area management at the regional level, only half are actually in the parks. There are, on average, only four employees per park, mostly untrained park wardens with minimal authority and budgets. 2.15 Minimal Public Expenditures. The total national budget for !990 for field activities :n protected areas and wildlife management was US$574,000, almost all salaries and benefits of the above personnel; and the total budget for PAWB was US$826,000. There was no explicit allotment for development and maintenance of the protected areas. In view of the prevailing budgetary situation, it is unlikely that significant incremental budgetary resources can be made available for PAs within the next two years. The Government has therefore found it necessary to seek external support for the development and maintenance of some protected areas with high conservation values from sources such as the GET, debt-for-nature swaps, international NGOs, and various bilateral and multilateral sources of grant assistance. 2.16 Inadeauate Human Resources. The critical shortage in this area is indicated by the fact that, even within PAWB, there is only one individual with Master's level training in protected area management, one Doctorate in wildlife ecology, and two Masters in forestry with majors in wildlife management. Most of the technical personnel of PAWB and the regional offices have bachelor degrees in forestry and the biological sciences. This is due to the absence of suitable specialized academic programs in the Philippines: the forestry curriculum has emphasized forest production and utilization, due to the lack of career opportunities in the past in protected area management. 2.17 Land Claims of IndiQenous Cultural Commiunities (ICCs). The areas of the Philippines where biodiversity remains most intact are usually relatively remote, difficult of access, and forbidding to human occupancy. As such, these areas have often become the last refuges of indigenous cultural communities -- populations distinct in culture and/or race from the dominant lowland population, which has historically expanded its areas of control and exploitation to cover virtually all of the better agricultural lands. This expansion has been abetted by nationalization of all land not under titles during the colonial period, leaving ICCs with only customary rights which are now recognized by the Constitution but not yet clarified by law or administrative procedure. Many of the areas gazetted as national parks lie within territories traditionally occupied by ICCs, and claimed by them as "ancestral domains." In many of these areas there is ongoing conflict between immigrant settlers who have attempted to establish land claims through swidden cultivation on land which was both ICC ancestral domain and gazetted as national park. 2.18 The ICCs vary in their means of livelihood from hunting and gathering to intensive, settled cultivation. In general, those occupying "pristine" wilderness areas have in the past pursued sustainable livelihoods compatible with the maintenance of biodiversity. Indeed, so-called "pristine" areas have been shaped by such human occupancy over centuries. ICC occupation and use is therefore compatible with protection and conservation except where traditional approaches to livelihood have been radically disturbed by external influences (e.g., employment in illegal logging or commercial-scale gathering). At the same  -8- time, ICC leadership is supportive of government programs to further principles of protection and conservation, although only if this is accompanied by recognition of their ancestral domain rights and preservation of traditional livelihood rights. 2.19 The ICCs, through their leadership organizations and various supportive NGOs, have sought public and legal recognition of their ancestral domain rights, i.e., collective ownership rights of territory traditionally occupied. Their case finds legal backing in an early Supreme Court ruling that land occupied "from time immemorial" by ICCs was excluded from nationalization as "unoccupied" land, and ICC ancestral domain rights are also recognized by the 1987 Constitution. These rights have not been observed in practice, and land claimed by ICCs has been treated as public land, subject to government management. The previous administration was sympathetic to ICC claims, and supported draft legislation which would have established a mechanism to settle these claims. The legislation however did not pass both houses of Congress during the last session, and in the interim, DENR established procedures for delineating ancestral domain claims pending their recognition by law. DENR also developed collective tenure instruments, not prejudicial to ICC land claims, which were used to turn over management rights for some forests to ICCs. 2.20 Encroachment by Micratinc Population. Shortage of arable land, unchecked population growth, and economic distress have been forces contributing to a migration from the lowlands to upland areas where access has been opened by creation of logging roads and land clearing has been facilitated by prior logging. Migrants have typically settled and farmed on public forest land bordering the protected areas, and, in the absence of proper boundary markers or active patrolling, have expanded their cultivation into the PAs. Similarly, loggers and their families have turned to illegal logging or cultivation as means of livelihood when forest logging concessions were cancelled. In such areas, there may be a high degree of complicity among local government, the military, and insurgents in promoting or protecting environmentally destructive activities. Furthermore, the population of non-ICCs occupying land within or surrounding the PAs now greatly exceeds the ICC population. 2.21 In the past, it has proven extremely difficult to evict or resettle well-established encroaching populations in the Philippines, particularly where the encroached area was no longer forested and not effectively protected. In a society where Torrens titles are held by only a tiny fraction of land occupants, evidence of long-term occupancy and improvements may be accepted by local courts as sufficient proof of tenure rights. It has also been difficult to prevent or control extractive uses of forests and coastal waters, when alternative forms of livelihood for impoverished populations could not be provided. However, non-ICC communities also recognize the negative consequences of resource degradation, and can be persuaded to abandon such practices, given assistance in pursuing non- destructive, alternative sources of livelihood. 2.22 Role of NGOs. During the last few years, a few indigenous environmental NGOs have taken steps to protect and study some of the PAs. These include the Haribon Foundation, Tubbataha Foundation, Bicol National Park Foundation, and Nature's Crusaders, all active in protection and community-based resource management. Recently Conservation International and the International  -9- Council for Bird Preservation have supported research activities. These NGOs have raised about US$500,000 from abroad to support their activities. World Wildlife Fund (U.S.) initiated a debt-for-nature swap in the Philippines, raising over rTS$2 million equivalent in support of particular national parks, training, research, and NGO activities, and assisted USAID in extending this concept to set up a Fund for the Philippine Environment with an endowment of over US$ 10 million. 2.23 In addition, at the local level, a far larger number of NGOs are engaged in small-scale, community development activities within or on the fringes of national parks. Although some of these NGOs have limited objectives and pursue a narrow range of activities, a number share a broad focus on rural economic development and poverty alleviation, and have the management expertise and flexibility to expand their activities by hiring additional staff in proportion to available external support. NGOs have more skill and experience in working with local communities than government staff in DENR. Hence a partnership of government, NGOs, and local community organizations is more likely to succeed in implementing a biodiversity conservation program. D. Priority Areas for Protection 2.24 With support from a Japan-World Bank Technical Assistance Grant, a consortium of NGOsL4 carried out an 18-month study in 1990-92 to design a National Integrated Protected Area System (NIPAS) and identify priority areas for inclusion in that system. For ten areas identified as having highest priority for inclusion, preliminary management plans were also drafted, as an input to the preparation of this project. 2.25 One starting point for these studies was a division of the Philippine Islands into 15 bio-geographic zones (recognized by IUCN), as shown in the map (IBRD 23920). These are comprised of five fairly large faunal regions (identified on the basis of Pleistocene geology); subzones thereof based on climate, lithology, topography, and floral composition; and three small-island chains isolated by very deep waters. An official objective of DENR was to insure that NIPAS contained at minimum one PA for each bio-geographic area. An "indicative list" of 342 candidate sites was also compiled, consisting of a list of existing national parks, game refuges, and wildlife sanctuaries; sites recommended by a 1988 Haribon Society-WWF Project; and sites proposed as wetland protected areas by the Asian Wetland Bureau and U.P. Marine Science Institute. This list provided potential candidates from each of the bio-geographic zones; however, some zones offered few remaining viable sites. /4 Overall coordination provided by WWF (U.S.), U.P. Science Foundation (College of Science, U.P. Diliman), and Foundation for Sustainable Development, Inc., with subcontracts to other NGOs, viz. the Philippine National Museum, U.P. Marine Science Institute, Asian Wetland Bureau, Computer Literacy Center, Economic Development Foundation, Forestry Development Center, and consultancies in legal studies and boundary delineation groups.  - 10 - 2.26 To eliminate highly degraded sites and those with little conservation value, the indicative list was reduced to around 62 (Annex B) in a process combining (in sequence) studies of previous reports, aerial photographic coverage, and satellite imagery; workshops involving the project team, DENR, and NGOs; direct field verification by the survey team or field offices of DENR; and a concluding/synthesizing workshop. 2.27 Pending detailed surveys, all 62 sites remain potential candidates for inclusion in NIPAS. However, two groups of ten sites were further identified as first and second priority selections for near-term inclusion and support from external sources./5 The considerations in selecting the priority sites included: (a) desire to represent as many distinct biogeographic zones as possible; (b) desire to include in the initial groups of sites terrestrial, wetland, marine, and mixed ecosystems; (c) conservation values of various sites, including endemism, biodiversity, endangered species, remaining pristine habitats, size, uniqueness, and scenic values; (d) size considerations -- a target of 30,000 ha for terrestrial parks, and an ideal size of 100,000 ha in the broader bio- geographical regions; and (e) practical considerations, such as preference for sites already gazetted (to minimize legal and political difficulties and cost of land acquisition), not highly degraded, and relatively secure. 2.28 The decision on highest priority sites was not difficult. Although choice of marine and wetland sites required evaluation of several alternatives, there are only about five sites of sufficient size, endemism, and relatively undisturbed conditions available to reflect the five major faunal regions (including Palawan, which is already represented by the St. Paul site). One important site -- Mt. Iglit-Baco in Mindoro -- was designated among the top ten sites, for expansion into a Mangyan Heritage NP. However, in community consultations, the resident ICCs expressed a desire to remain outside the legal framework of NIPAS and instead press their ancestral domain claims. Simultaneously, the end of U.S. military occupation of the Subic Military Reservation made available an exceptional tract of virgin forest contiguous to the Bataan National Park, and the local ICC proved enthusiastic about NIPAS participation. Consequently, a combination of Bataan NP (itself among the short list of twenty sites) and Subic Forest was accepted to replace the Mangyan Heritage NP for priority support. /5 An additional site, St. Paul Subterranean River National Park (3,901 ha in Palawan), was treated as a special case, as it has already received substantial assistance under a WWF-sponsored debt-for-nature swap.  - 11 - 2.29 The ten priority PAs (Table 2.1) cover three of the five major faunal regions, seven biogeographic zones, and about 1 million ha, of which 500,000 ha of land area are included. This may be compared with the present 715,000 ha total area of national parks and wildlife sanctuaries (not including Palawan). The selected sites cover the entire latitudinal and altitudinal range of the Philippines. The features and conservation objectives served by protection of these sites are summarized in Annex C. 2.30 Three sites have been previously gazetted as national parks or game refuges (Mts. Kitanglad and Apo; Bataan National Park) . Apo Reef was designatedf a Marine Park and Tourist Zone in 1980. The Northern Sierra Madre Nature Park is currently managed as a protected area./6 The forested areas of the Subic Military Reservation (3,500 ha), which would be incorporated into the Bataan NP, have been de facto protected during U.S. military occupation. One of six islands within the propfsed Turtle Island Nature Park is presently legally protected as a marine turtle sanctuary. Mt. Apo is additionally included in the 1982 United Nations List of National Park and Equivalent Reserves, and in 1984 was named by the Association of South East Asian Nations as an ASEAN Heritage Site. Siargao Island is a declared wilderness area and mangrove swamp forest reserve, but is otherwise not formally protected. With the exception of the Batanes Islands and small parts of the No. Sierra Madre site, the remaining terrestrial areas are classified as public forest land. Acquisition of new land is therefore not a major issue. E. Proposed Protection Strategy 2.31 The overall protection strategy is (a) to develop a new legal framework for the Philippine protected areas system (in the form of NIPAS enabling legislation and implementing rules and regulations); (b) gradually bring within the scope of NIPAS (through gazetting) those priority parts of (or additions to) the existing protected areas system for which staffing, financial resources, and prior management planning are sufficient to facilitate genuine protection; and (c) implement a PA protection and development program which elicits the fullest cooperation of population resident in or around the protected areas. The first element of this strategy was developed as part of the IBRD/IDA Environment and Natural Resources Sector Adjustment Program, and has been achieved as a condition of tranche release for the policy component of the SECAL (para. 1.3) prior to the presentation of this report to the Regional Vice President. The two remaining elements are to be pursued under the GET-supported investment component of the SECAL. 2.32 NIPAS Legislation and Implementing Guidelines. The NIPAS enabling legislation, Republic Act No. 7586, which passed Congress in February 1992 and was signed by the President in June 1992, was designed to remedy the deficiencies /6 Under Executive Order and Letter of Instruction 917-A dated September 1979; which, however, covers all forest lands within a 45-km radius of Palanan Point in Palanan, Isabela. This area includes three towns, and the shape does not correspond to natural features, hence boundaries would need redefinition.  Table 2.1 The Ten Priority Sites BIOGEOGRAPHIC NAKE OF CATEGORY LAND WATER AREA TOTAL AREA ZONES PROTECTED AREA AREA (HA) (HA) (HA) Batanes Batanes Protected Protected 20,323 193,255 213,578 Landscapes and Landscapes and Seascapes Seascapes Sierra Madre Northern Sierra Madre Nature Park 240,229 15,716 255,945 Nature Park Zambales Bataan Nature Park Nature Park 27,168 - 27,168 Mindoro Apo Reef Marine Nature Nature Park 29 15,798 15,827 Park Western Visayas Mount Canlaon Nature Nature Park 32,348 - 32,348 Park Sulu Turtle Island Marine Nature Park 392 136,396 136,788 Nature Park Mindanao Mount Apo Nature Park Nature Park 65,476 - 65,476 Mount Kitanglad Nature Nature Park 31,143 - 31,143 Park Siargao Wildlife Wildlife 60,390 101,213 161,603 Sanctuary Sanctuary Agusan Marsh Wildlife Wildlife 22,464 43,342 65,806 Sanctuary Sanctuary (Wetland) TOTAL 499,962 505,720 1,005,682  - 13 - of previous legislation, in accordance with the recommendations of the Philippine Strategy for Sustainable Development, by providing that: (a) the existing protected areas be evaluated and reclassified, employing new classifications embodying management objectives and in accordance with internationally understood and recognized criteria/7; (b) the power to establish and abrogate protected areas, and alter their boundaries, be vested in Congress, to prevent the previous, practice of frequent changes as government administrations changed; (c) adoption of a two-tiered management plan, combining integration of administration and management at the top and more direct participation in on-site management by the local community through the vehicle of a representative management council; (d) indigenous and other local communities be included in management, and the need for community benefits in the form of livelihood be recognized; (e) the de facto tenure of indigenous groups and long-established settlers be given de lure recognition; (f) active management planning in the PAs be implemented, and devices to facilitate sustained financial support of the system, such as endowment funds, be authorized; (g) the principles of preserving biological diversity and promoting sustainable development be given balanced recognition; and (h) enforcement mechanisms and penalties be strengthened. 2.33 To clarify the legislation and translate its principles into a workable implementation framework, Implementing Rules and Regulations (IRR) for the NIPAS legislation (Department Administrative Order No. 25, Series of 1992) were issued by the Secretary of DENR on June 29, 1992. The IRR, which were reviewed and agreed by the Bank (attached as Annex G), give legal backing to the elements of protection strategy discussed below. 2.34 GazettinQ. The NIPAS legislation provides that all existing protected areas are designated initial components of the NIPAS system, but continue to be governed under previous legislation pending specific gazetting in NIPAS. These areas are to be documented by maps and legal descriptions within one year, and protected in the interim. Within three years, following appropriate studies, the Secretary of DENR must recommend to the President which of the initial areas should be included or excluded from the NIPAS. The President, through /7 Essentially those proposed by the International Union for the Conservation of Nature (IUCN).  - 14 - proclamation, will then designate the recommended areas as protected areas, pending formal Congressional gazetting or de-gazetting. De-gazetted areas revert to the category of public forest unless otherwise classified by Congress. Gazetting of the initial components of NIPAS by Congress thus would mark the completion of a transition from the prior legislative framework to full implementation of NIPAS legislation. 2.35 Implementation Strategy. The key elements of implementation strategy, as applied in the GEF component design, include the following: (a) Larger and improved PA staff (government and NGO): numbers of staff involved in protection and administration at the PA level should be increased, with staff selection to favor junior and/or better quality staff, reinforced by an intensive training program; (b) Reliable, if small, Government budget: the annual Government budget should provide for basic operations costs commensurate with the scale of the work program in each PA; (b) Zmployment of local residents: staffing would give preference to local residents, especially members of indigenous communities, to build an increasing community stake in resource protection and provide livelihood opportunities; (c) Management Boards with adequate representation of local groups and substantial management powers: selection of the PA Management Board (PAMB) would be the culmination of community organizing and educational activities. The members would be nominated by and represent various local constituencies, including local governments, NGOs, and tribal communities. The PAMB would be given primary management responsibility for the PAs, subject to review by the Secretary of DENR. (d) Management plans subject to Management Board approval: Although project staff or consultants might draft a Management Plan, the final management plan and subsequent revisions would have to be approved by the PAMB, with adequate representation of ICCs on PAMB and direct consultation with ICCs where management decisions may infringe on ancestral domain rights (management planning thus would be fully consistent with Bank Operation Directive 4.20); (e) Sustainable financing for PAs: as a supplement to budgetary resources and provision for long-term PA development, an Integrated Protected Areas Fund (IPAF) should be established as an endowment for the support of PAs (collectively and individually) which would accept external funds (donor and private contributions, debt-for-nature swaps, etc.) and retain earnings from PA fees and shares of revenues based on PA resources, such as eco-tourism;  - 15 - (f) Up-front resolution of tenure and ancestral domain issues: the process of population and ethnographic census, land survey and identification of ancestral domains, and issue of tenure instruments would be put at the forefront of implementation, to obtain early public support by local communities and indigenous cultural groups; (g) Local resolution of conflicts between livelihood and protection needs: with the PAMB having lead responsibility, and with oversight by DENR and assistance from NGOs, a zoning and regulatory approach would be applied within a framework of negotiations among all parties, to rapidly contain and then phase out livelihood activities which are incompatible with management objectives; where PAs overlap with ancestral domains, this approach would be pursued in close partnership with indigenous cultural communities; (h) External support for alternative, sustainable livelihood development: the quid pro quo required in eliminating incompati- ble or unsustainable activities is support for alternatives. These would be proposed as individual subprojects by the PAMB, prepared with local NGO assistance, and, in the case of large subprojects, appraised and prioritized centrally, and finally approved and funded by the IPAF Governing Board. A decentralized and consultative project selection mechanism requires a flexible disbursement mechanism based on a "social fund" approach; (i) External grant support for ecological research: although a small amount of funds should be reserved for inventorying and monitor- ing of biodiversity changes, employing mainly local people, a major project should concentrate its resources on protection, and seek cofinancing support for biodiversity research; (j) Parallel Government-NGO project implementation, to reinforce and strengthen institutions: at both national and local PA levels, lead or host NGOs should be tasked to share responsibility with PAWB and local PA administrators respectively for project implementation. The primary NGO responsibilities should be to provide technical assistance and project coordination at national and local levels, while PAWB at the national level and field staff of DENR at the local level would have primary responsibili- ty for PA development and rehabilitation planning and implementa- tion, patrolling and other protection activities. Other responsibilities would be shared, and a part of donor financial support for protected area management should be disbursed directly as a grant to the NGOs to protect against implementation delays resulting from budgetary problems and bureaucratic processes; and (k) Long-term Ownership and Institution Building. The duration of external support should be long enough to leave behind strong  - 16 - management institutions at all levels, and external financing should be replaced at project closure with Government budget and an endowment fund depending on income-generating activities. III. THE PROJECT A. Summary Description 3.1 The proposed GEF component would provide program support for the development, conservation and management of resources within ten priority sites under the Government's new National Integrated Protected Area System (NIPAS) program, based on already completed draft management plans, enabling legislation, and implementing guidelines. It would lay the foundations for a long-term, efficient program of management and administration of PAs which could be sustained with a reasonable level of Governmental and external support and substantial NGO involvement. For the priority sites, the project would support, over a seven-year period: (a) site development (25%), including appropriate levels and quality of staffing and construction of infrastructure (access roads and trails, offices, housing, visitor facilities, etc.); (b) biodiversity and resource management (10W), including establishment of a community-based and NGO-supported management structure, development of management plans, mapping and boundary delineation and demarcation, and habitat restoration; (c) socio-economic management (49%), including community consultation and training, population and ethnographic census, registration, and tenure and ancestral domain delineation, and non-degrading livelihood projects in buffer zones and multiple use areas; and (d) coordination of the national program, monitoring and evaluation of component implementation, ecological monitoring and inventorying within the ten designated PAs, and NGO-based technical assistance to individual PAs and DENR' s Protected Areas and Wildlife Bureau (16%). B. Detailed Project Description 3.2 Site Develovment (US$ 5.7 million). This component would reinforce the currently weak Government presence in the ten priority PAs and establish programs for protection (through regular patrolling) and the education of visitors. The Government would provide (US$2.8 million) incremental staff, basic equipment, operational expenses, construction of on-site housing, offices, visitor center, watchtowers, etc., and a modest development program to include access road rehabilitation, trail construction, and visitor facilities. A commitment was obtained at Negotiations that the Government, by no later than  - 17 - January 1,1997, would increase its civil service or contract staffing of individual PAs from present levels of zero to four, to numbers agreed for each site, ranging from three professionals and three support staff at Apo Reef Marine Nature Park to 19 professionals and five support staff at Subic-Bataan Protected Area. Additional NGO hires (US$0.55 million) of local residents including members of indigenous cultural groups, to be trained as Park Pangers and reporting to the Superintendent, would bring PA staffing levels within the range of 11-30 per PA during the implementation period. 3.3 Equipment for each PA would include (a) motorized vehicles (Asian Utility Vehicle and motorcycle) for offsite transport and horses for patrolling (or boats for marine/wetland sites) ; (b) radio communications equipment; (c) basic office equipment and furniture; and (d) power generator. O&M costs would include vehicle fuel and maintenance expenses, horse feed, office supplies, uniform and travel allowances. PA Superintendent and staff would be expected to reside on site for extended periods at an administrative and visitor center to be established in each park, hence a complex consisting of visitor center, offices, dormitories, and related facilities would be provided, as well as watch towers or cabins for patrols. Access roads to most sites are extremely poor, and few trails have been constructed or marked for visitor use, which situation would be remedied by the project. 3.4 Resource Management (USS 2.2 million). The component, implemented almost entirely by NGOs (US$2.1 million), supports the establishment and operations of the Protected Area Management Board and NGO-based support staff, as well as resource management operations including mapping and boundary delineation and marking, and restoration of degraded areas within PAs. For PAs with large resident populations, provision is made for construction (or optional rental) of a project management center usually sited in the buffer zone (optionally consolidated with the PA administrative center) and to include offices, dormitory, and meeting room. A local NGO/S contracted to coordinate implementation at each PA would provide support services for the Board, which would meet as often as once a month initially, as management plans are developed and approved. The NGO would also provide technical staff to manage site restoration projects, as needed./9 Surveying and boundary delineation (US$143,000) would be contracted out by Government to surveying firms or accomplished by force account, with assistance from Park Rangers/Foresters. /8 For the purposes of implementation, local NGO refers to a consortium consisting of a lead NGO with rural community development objectives and demonstrated capabilities of managing site development projects (which may be either a private voluntary organization (PVO) with hired staff or a regionally- based consultant firm willing to accept not-for-profit overhead rates), and linked NGOs contracting for implementation of specific activities or at specific sites. Candidate NGOs for each PA have been identified, although further screening and negotiations would be required to finalize participation. /9 Material and labor costs of site restoration would be drawn from the pooled Livelihood Program funds, described below; any restoration projects -- e.g., reforestation -- would be prepared and evaluated as with livelihood projects.  - 18 - 3.5 Socio-Economic Management (US$ 11.3 million). The component would support NGO-implemented productive activities mainly targeting the local community (as well as training for PA staff). Qualified staff would be hired by NGOs to pursue four distinct programs (the project would finance staff, equipment, materials and operating costs): (a) Information, Education, and Communication (IEC) staff would be responsible for both PA staff training and educational outreach to the local community; (b) Tenure Surveying staff would survey farm lots and ancestral domains, to enable occupants to qualify for tenure instruments; (c) Census and Registration would be a one-year program to meet legal requirements for gazetting by providing information on occupants, as well as documenting tenure claims; and (d) Livelihood Program staff would be responsible for community organization and preparation and implementation of livelihood projects, which would begin in the second year of implementation. Agreement was reached at negotiations that delineation of the ancestral land claims of indigenous cultural communities and farm surveying would be programmed and budgeted for inception no later than April 1, 1995, and that DENR would issue Certificates of Ancestral Land Claims within six months of the completion of delineation. 3.6 The majority of funds (US$ 10.7 million, including NGO technical staff) in this component would be administered to generate alternative livelihood activities for local residents, including indigenous communities, living within the PA or buffer zone, and, through recovery of subloans or profits on community enterprises, generate a permanent endowment for each PA [para. 2.35 (h)]. The NIPAS legislation authorizes the creation of a national Integrated Protected Area Fund (IPAF), with an appointed Governing Board, to serve as a permanent endowment fund for the protected areas, receiving revenues generated from PA management as well as contributions from all sources. Consistent with this framework, the project would create a Livelihood Fund (US$10 million) as a disbursement component to be managed by an NGO (see para. 3.7) under the guidance of the IPAF Governing Board and disbursed as loans or small grants in support of small projects involving ecotourism support facilities, agroforestry, mariculture/aquaculture, conservation agriculture, handicrafts, marketing, and employment-generating infrastructure projects. The IPAF would be established and its Governing Board appointed by Government during the first year of implementation. Detailed proposals for livelihood projects would be prepared by NGO field staff beginning in the first year of implementation, screened by loan officers of the Land Bank of the Philippines (LBP), and endorsed by PA Management Boards. Projects requiring finance in excess of P100,000 would be further appraised by the national Project Coordination Unit (PCU), and approved by the IPAF Governing Board. Responsibility for oversight and loan recovery would be shared between the local host NGO and loan officers of the LBP. Eligible projects would have to contribute to the objective of generating non-degrading sources of livelihood, and be self-sustaining over the long run. For fully financially-viable projects, loans on commercial terms would be extended. Otherwise, small grants would meet part of the financing requirements. The organization and management of the Livelihood Fund (see also paras. 4.5-4.6), procedures for subproject selection, and terms and conditions of support are described in Annex D. Assurances were obtained at negotiations that funds in support of livelihood activities would be managed and disbursed as subgrants or subloans under the authority of the Integrated Protected Areas Fund Governing  - 19 - Board established by the NIPAS law and regulations and appointed by the Secretary of DENR. NIPA would draft and the Board would adopt rules, regulations, subproject selection guidelines, and application procedures and forms, and the review and acceptance by the Bank of the rules and procedures would be a condition of disbursement. 3.7 National Coordination, Monitoring and Technical Assistance (US$ 4.2 million). A joint Government-NGO NIPAS Project Coordination Unit (PCU), would be established in a common office facility to provide overall national coordination, monitoring, and technical assistance in project implementation, with mutually-agreed long-term staffing, including a Project Manager responsible for day-to-day operations. Policy and oversight would be determined by a DENR NIPAS Steering Committee, which would include representatives of senior management of DENR as well as PAWB and NGO representatives. The Government would contribute PAWB administrative staff and support staff (project officer, accountant, bookkeepers, secretaries/clerks, etc., totalling US$365,000)), and the remainder (US$2.6 million) would be NGO-implemented. The Government has designated as lead NGO the INGO for Integrated Protected Areas, Inc." (NIPA), a legally-incorporated non-profit Consortium recently established by 12 national NGOs (including most umbrella groups for community development and environmental NGOs/l0) for the purpose of managing NGO participation in this project. The formation and designation of NIPA as lead NGO and grant recipient has been recommended by Government because the various Philippine NGO networks and their umbrella groups, represented on the NIPA Board, provide the best framework for the broadest possible participation by local NGOs; and collectively the Philippine NGOs have a substantial track record in managing community-based projects for sustainable development. 3.8 A Memorandum of Agreement (MOA) signed by representatives of DENR, the Department of Finance, and NIPA inter alia designates NIPA as grant recipient, extends a Government guarantee to the Bank against liabilities arising from implementation by Government or NIPA, establishes Government's authority to give guidance to the project, and assures of Government's continuing efforts to support NIPA's activities in relation to the project. The establishment of a joint NIPA-PAWB PCU and signing of the NIPA-LBP MOA defining LBP's role (para. 4.6) would be conditions of effectiveness of both grants. The rescindment, abrogation, or adverse amendment of the MOA among DENR, DOF and NIPA, the MOA between NIPA and LBP, NIPA's Charter, or the bankruptcy of NIPA, or the repeal of the NIPAS legislation, would each constitute conditions of grant default. The Bank and Government have agreed that the grant to NIPA should include financing /10 The consortium consists initially of the following non-profit corporations or foundations: Association of Foundations; Community Extension and Research for Development; Cooperative Foundation Philippines; Earth Savers Philippines; Green Forum-Philippines; Haribon Foundation for the Conservation of Natural Resources; Nature Crusaders of the Philippines Foundation; Philippine Institute for Alternative Futures; Philippine Foundation for Environmental Concerns; Philippine Rural Reconstruction Movement; Tribal Communities Association of the Philippines; and Women's Action Network for Development.  - 20 - for both the NGO technical assistance and the Livelihood Fund, for the following reasons: experience in ongoing Bank projects has been that Government's approval, programming, budgeting and disbursement procedures are slow and inflexible, being especially unreliable at a time of budgetary crisis. Aside from delaying project implementation, they force technical assistance contractors to assume heavy financial risk and charge correspondingly high overhead rates. These procedures discourage NGOs operating with low overheads and no financial reserves from participation as contractors in Government-implemented projects (NGOs are limited to 15* fee rates). They also do not afford the flexibility required to operate a social fund within decentralized decision making mechanisms. 3.9 Although NIPA's Board of Directors would be responsible for management of NGO participation in the project, and the grant which would finance this participation, overall coordinative authority for the project would rest in a joint Government-NGO Steering Committee. Day-to-day management of the NGO component would be in the hands of a hired, long-term professional staff, consisting of local or foreign specialists in the following subject areas, for varying terms of service: program administration and management, conservation, park design, resource economics, infrastructure, training/IEC, legal affairs, community development, indigenous affairs, financial/budgeting, and agribusi- ness/marketing. The staff would act as advisors to PAWB and would have primary responsibility for provision of training and assistance to PA field staff and coordination of all subcontracted field support by other NGOs. Detailed terms of reference for the national NGO technical assistance are included in Annex E. In addition to personal services, the component would finance equipment, office supplies, and operation costs. In order to maximize the transfer of expertise to PAWB and facilitate Government-NGO coordination, a commitment was obtained from Government and NIPA at negotiations that the joint PCU would be given qualified management and staff and the responsibilities and resources, including an office facility, required to undertake day-to-day supervision and coordination of project implementation. 3.10 NIPA would draft a monitoring plan for the project, for the approval of PAWB, following principles proposed by the Bank (para. 4.9 below). A commitment was obtained at negotiations that a satisfactory monitoring plan will be submitted to the Bank for review no later than April 1,2995, and thereafter implemented. Regular reporting on project implementation would be a joint responsibility of NIPA and PAWB. A pool of funds amounting to US$586,000 would be managed by NIPA in cooperation with PAWB to finance contractual biodiversity inventory work, studies assessing the viability, sustainability and ecological impact of activities within individual PAs, and surveys supporting monitoring and evaluation of project implementation. Research would be carried out by local universities and NGOs with methodological guidance by the national PCU and substantial employment of local residents in implementation. Proposals would be reviewed by the national PCU and approved by the Director of PAWB. NIPA would also provide staff to serve as secretariat to the IPAF Governing Board, and would oversee the activities of other NGOs in supervising implementation of livelihood subprojects.  - 21 - C. Proposed Project Costs and Financing 3.11 Estimated project costs, net of taxes and inclusive of physical contingencies at 15% of civil works and equipment costs and price contingencies based on an exchange rate of P28=US$l prevailing in February 1994, and Bank projections of domestic and international inflation rates, are as follows (detailed project costs are given in Annex A): Table 3.1 PROJECT COST SUMMARY US$ '000 Foreign Local Foreign TotalExchange (%) A. Site Development PA Establishment 2,939 448 3,386 13% Basic Infrastructure 245 202 448 45% PA Development 821 297 1,118 27% Sub-Total 4,004 947 4,952 19% B. Resource Management Site Infrastructure 76 75 151 50% Maps & Boundaries 131 0 131 0% Mgmt. Board Operations 1,090 205 1,295 16% Site Restoration 411 0 411 0% Sub-Total 1,707 280 1,987 14% C. Socio-Economic Management Consultation, Training, & Awareness 353 0 353 O% Land Surveys 136 0 136 0t Census and Registration 93 0 93 0% Livelihood Activities 7,917 1,828 9,745 20% Sub-Total 8,499 1,828 10,327 18% D. National Coordination, Monitoring & TA 2,413 864 3,277 26% Total Base Cost 16,623 3,920 20,543 19% Physical Contingency 184 145 329 44% Price Contingency 1,515 465 1,980 25% TOTAL COST 18,322 4,531 22,853 20%  - 22 - 3.12 Estimated project financing plan is as follows: Table 3.2 PROJECT FINANCING PLAN (USS '000) GEF Core Government or Program Other BilateraL Total Activities Amount % Amount % Amount % Local Foreign A. Site Devetopment PA Establishment 937 25% 2,821 75% 3,757 16% 3,261 497 Basic Infrastructure 564 100% 564 2% 309 255 PA Development 1,407 100% 1,407 6% 1,033 375 B. Resource Management Site Infrastructure 190 100% 190 1% 95 95 Maps & Boundaries 143 100% 143 1% 143 0 Mgmt. Board Operations 1,440 100% 1,440 6% 1,212 228 Site Restoration 449 100% 449 2% 449 0 C. Socio-Economic Mgt Consultation, training, and awareness 387 100% 387 2% 387 0 Land Surveys 149 100% 149 1% 149 0 Census and Registration 102 100% 102 0% 102 0 Livelihood Activities 10,667 100% 10,667 47% 8,533 2,133 D. Ecological Research 586 100% 586 3% 393 194 E. National Coordination, Monitoring & TA 2.978 99% 32 1% 3.010 13% 2.255 755 Total Disbursement 20,000 88% 2,853 12% 22,853 100% 18,322 4,531 3.13 Financing for this project would be provided by the GET (US$20 million) and the balance by the Government of the Philippines (GOP). GOP contribution would cover, in proportions increasing to 100% over the implementa- tion period, incremental civil service and contract positions required at each PA, the PAWB staff for the PCU, and operations costs at the PA level. Additional sources of grant cofinancing may be identified, especially for NGO activities and ecological research, although most donor activities will proceed in parallel taking advantage of the institutional framework supported by the GEF project. Assuming annual GOP budgetary support is sustained at US$500,000 (covering salaries and operations cost) after project closure, earnings from PA fees and licensing revenues as well as recovery of subloans from the Livelihood Fund could be committed to capital maintenance (about US$200,000), improvements and other uses. 3.14 In order to free project implementation from hindrances due to tedious Government approval, programming and budgeting mechanisms which otherwise discourage NGOs operating with low overheads and no financial reserves from participation in Government-implemented projects, the Government has requested that two GET Grant Agreements be concluded: a US$2.87 million grant agreement with the Ministry of Finance on behalf of DENR and a US$17.13 million grant  - 23 - agreement with NIPA, Inc. The former would finance such elements as civil works, equipment, incremental operating costs, and surveying and mapping assistance, through the normal management mechanisms. The latter would finance the NGO project coordination and technical assistance component and the Livelihood Fund. Special Accounts in U.S. dollars for these two components would be maintained in the Land Bank of the Philippines. In order to reimburse operational costs and technical assistance required by NIPA prior to grant effectiveness in order to become eligible to receive a GET grant, the GET grant to NIPA would include retroactive financing of such costs as incurred after December 1, 1993 to a limit of US$100,000 (0.6 percent of the total grant). 3.15 The responsibilities of NIPA would be defined in Schedule 2 of the Grant Agreement between NIPA and the GET and in Annex E below (see also Section IV) . All activities of other NGOs in support of the project would be managed and financed through contracting by NIPA, which would be the authorized signatory of the LBP Special Account for this purpose. NIPA would also exercise supervision over uses of project funds by subcontracting NGOs, and would arrange regular audits of project accounts at each level. Equipment or capital improvements provided under the NGO component would be turned over to DENR at project closure. D. Procurement 3.16 Civil works would be simple, small, dispersed, located in isolated rural communities, and labor intensive. They would provide employment to labor from beneficiary communities. Most of the civil works would cost under US$50,000 and are expected to be carried out by force account, mainly by site-level Project Management Units, with an estimated total of US$1.4 million. Civil works contracts from US$50,000 to US$200,000, with an estimated total of US$800,000, would be awarded through LCB procedures acceptable to the Bank. Contracts for goods from US$50,000 to US$200,000, with an estimated total of US$220,000, would be procured using local competitive bidding (LCB) procedures acceptable to the Bank. Any contracts for goods or civil works over US$200,000 (none are expected) would be procured under international competitive bidding (ICB) . Domestic suppliers would be granted a price preference of 15% or the custom duties and import taxes, whichever is less, when competing under ICB. Goods valued at less than US$50,000, up to a total of US$10.5 million, may be purchased through prudent shopping based on a comparison of at least three price quotations. This includes small items of equipment and procurement under the small loans and grants of the Livelihood Activities subcomponent. Incremental operating costs and project management costs amounting to US$5.7 million would not be suitable for procurement through tendering or shopping. The first LCB contract for goods and works, all ICB contracts, and any contract (including consultancies) in excess of US$100,000 (US$50,000 for individual consultants) will be subject to prior review. Project works would all be carried out on government-owned land, and no land acquisition would be financed by the GET grants. 3.17 Contracts for project coordination and technical assistance, totalling about US$4.3 million would be awarded and carried out in accordance with Bank Guidelines for the Use of Consultants. Subcontracts for field support to individual protected areas, financed from the grant to NIPA, would be designated for qualified NGOs, selected for the skills, experience and social  24 - commitment required to mobilize local communities for participation in protected area management, manage local alternative livelihood projects, and plan and carry out a long-term biodiversity conservation program. These are qualities which are not well-developed in the civil service (paras. 2.22-23) or for-profit consulting communities. The roles and selection criteria for NGOs are described in Annex E. 3.18 The estimated procurement plan is shown in Table 3.3. Table 3.3 PROCUREMENT METHOD (US$ million) Procurement Method/1 Items LCB Other/2 Total 1. Works Government 0.56 1.41 1.97 (0.56) (1.41) (1.97) NGO 0.24 0.24 (0.24) (0.24) 2. Goods Government 0.22 0.23 0.45 (0.22) (0.23) (0.45) NGO 0.20 0.20 (0.20) (0.20) 3. Consultancies Government 0.14 0.14 (0.14) (0.14) NGO Local NGO TA 3.52 3.52 (3.52) (3.52) Ecological Monitoring 0.59 0.59 (0.59) (0.59) 4. Miscellaneous Government 3.16 3.16 (0.31) (0.31) NGO Project Management 2.57 2.57 (2.57) (2.57) Livelihood Fund 10.01 10.01 (10.01) (10.01) Total 1.02 21.83 22.85 (1.02) (18.98) (20.00) /1 Figures in parentheses show GET financing. /2 Includes force account works, shopping, salaries of direct NGO hires, incremental operating costs, and consultancy contracts.  - 25 - E. Disbursement 3.19 Disbursements for all expenditures would be based on full documenta- tion, except for: (a) contracts for works and equipment that cost less than $100,000 equivalent, (b) force account procedures, (c) incremental operating cost, and (d) grants and loans for livelihood subprojects approved by the IPAF Governing Board. in such cases disbursements will be made against statements of expenditure (SOE). Minimum size of withdrawal applications for direct payment (outside Special Accounts) will be US$50,000 equivalent. Supporting documents for disbursements based on SOEs would be kept by the project agencies for review by external auditors and Bank supervision missions. NIPA would open a US$ Special Account in the Land Bank for the NGO technical assistance component, and an initial deposit of US$ 700,000 would be made, equivalent to about eight month's reimbursements for eligible expenditures. Payments for personal services and operational expenses allowable under the grant would be eligible for disbursement from this account. An Integrated Protected Areas Fund (IPAF), an endowment fund for the protected areas system, would be established within six months of project effectiveness, and a Governing Board appointed, as a condition of disbursement for the Livelihood Fund (para. 4.8) . NIPA, as trustee, would set up a US$ Special Account in the Land Bank for the Livelihood Fund, and an initial deposit of US$ 990,000 equivalent would be made, equivalent to about eight months' reimbursements for eligible expenditures. Grants or loans for livelihood subprojects, approved by the IPAF Governing Board and/or PA PAMBs, would be eligible for disbursement from this account. The application and feasibility study for any subproject costing in excess of US$50,000 would be submitted to the Bank (as Trustee) for review on a "no objection" basis prior to the signing of the grant or loan agreements. DENR would open a Special Account in the Central Bank and an initial deposit of US$250,000 would be made, equivalent to about four month's expenditures. In view of the large number of small expenditures expected from these components, replenishment would be against SOEs. The Disbursement Plan for GET grant funds is as follows:  - 26 - Table 3.4 DISBURSEMENT PLAN (US$ '000) Disbursement Amount Percent Items (US$) Financing Grant to GOP (1) Civil Works 1.97 100% (2) Equipment 0.45 70-100%/a (3) Incre. Operating Cost 0.31 10%/b (4) Technical Assistance 0.14 100% Subtotal 2.87 Grant to NIPA (5) Livelihood Fund 10.01 100% (3) Project Coordination & TA -National NGO TA 2.65 100% -Local NGO TA 3.89 100% -Ecological Monitoring 0.59 100% Subtotal 17.13 TOTAL 20.00 /a One hundred percent of foreign and local ex-factory, 70% of other local. /b Reimbursed on a declining scale: 1994 40%, 1995 30%, 1996-2000 20%, until funds in this category are exhausted. The project would close on December 31, 2001, and the grant on June 30, 2002. F. Accounting, Reporting and Auditing 3.20 It was agreed at negotiations that DENR and NIPA would maintain separate project accounts for their respective portions of the project, which would be audited annually by firms whose qualifications are acceptable to the Bank. Separate project accounts would also be maintained by NGOs under contract to NIPA, and these would also be subject to annual audit by a private firm acceptable to the Bank. For the Livelihood Fund,a rolling sample audit by a qualified private auditor, under contract to the NIPA, would be conducted of subproject accounts at random times and places, and submitted to the Bank to verify that funds were used for the purpose applied for and uses are adequately documented. Subprojects where the total approved grant and loan exceeds P100, 000 would be audited annually. Audit reports would be submitted to the Bank within six months of the close of the fiscal year. A quarterly report on project progress and statements on project expenditure, consolidating Government and NGO- implemented components, would be submitted to the Bank by the PCU. IV. PROJECT IMPLEMENTATION 4.1 The project would be implemented over seven years. Oversight responsibility for the project rests with the Department of Environment and  - 2 7 - Natural Resources. The Implementing Rules and Regulations for NIPAS (see Annex G) give initial authority for policy and program review to a NIPAS Steering Committee appointed and chaired by the Secretary or his representative and including as members relevant senior officials within DENR, representatives of other government agencies, and NGOs. This committee would serve to coordinate the NIPAS program with other relevant DENR programs and the NGO and Governmental activities with each other. 4.2 The organizational structure for implementation (Chart 1) seeks to link bureaucratic and non-governmental institutions, taking best advantage of the skills of each. It combines (a) regular administrative lines of authority running from central DENR down to the field; (b) a parallel NGO-based organiza- tional structure providing technical assistance, research, and community development expertise in support of NIPAS to both the central government and individual PAs; and (c) Management Boards composed of public and private sector representatives, at both the central and PA levels, authorized by law to provide policy guidance, program monitoring, and (at the PA level) basic management decisions for the NIPAS. The joint NIPA-PAWB Project Coordinating Unit, with a full-time Project Manager, would provide the day-to-day leadership which coordinates between administrative authority and supporting NGOs at the national level; the PAMB and its NGO-based secretariat would provide this coordination at the PA level. 4.3 Government Administration. Field operations within DENR have been regionalized, and the NIPAS management follows this scheme by placing each individual PA under a resident PA Superintendent, who would report jointly to the PA Management Board (PAMB) and the DENR Regional Executive Director, assisted by the Regional Technical Director in charge of the Protected Areas and Wildlife Division. The Regional Executive or Technical Director would chair the PAMB and be responsible for enforcing its policies. Decisions of the PAMB would be subject to review by the Secretary of DENR, and the Director of PAWB would serve a staff function in advising the Secretary on all NIPAS matters. The PAWB Director would also be responsible for coordination of technical assistance financed by the grant to government, system-wide planning, and monitoring of the NIPAS program. 4.4 Management Boards. Both the individual PAMBs and a Governing Board for the IPAF would be appointed by the Secretary. The PAMB's functions provide the local community with comprehensive management power: it shall (a) decide matters relating to planning, resource protection and general administration of the PA; (b) approve proposals, work and action plans, and guidelines for management as embodied in a Management Plan; (c) demarcate and delineate protected area boundaries, buffer zones, ancestral domains, and recognize the rights and privileges of indigenous communities;/11 (d) promote projects on /11 Chapters VII-VIII of the NIPAS Implementing Regulations (Annex F) describe the legal framework for tenure in declared protected areas. As all indigenous groups and immigrants in residence for five years before PA establishment under NIPAS are entitled to tenure, and as park boundaries may be redefined to exclude heavily settled areas, project activities will not require resettlement (para 1.6).  Chart 1. Project Organization Grant to NIPA |GEF Disb7urse-ment | NIPAS Secretary rant to IPAF Steering overnment LGoverning Board LCommittee - A I r _ _ a; | Dept of Budget & _ _ _ _ _ _ A _ _ \// __ _1 _ Management/ _________________ __ - - j ~~ ~~~DENR NIPA-PAWB DENR __ _ Landc Bank Project Coordination Operations Livelihood NGO Special Unit __ Fund Accounl A DENR Regional Office Executive Dir Universities ____ and Research Institutions Protected Area Budgetary approvals Management Board Funds flow Supe rntedent rLine of authority ; Host Nz No~~~~~~~l | ~PA Superintendent|. | Rclail | P~~~~roject Mgr| Financial Institution T Linked NGOs | | NGO Staff | | PA Gov't Staff  - 29 - biodiversity conservation and sustainable development, ensuring that the Management Plan provides livelihood benefits for local residents; and (e) monitor and evaluate the effectiveness of local PA government administration and NGO or private programs. The PAMB has a prescribed membership composition, representing virtually all involved governmental or non-governmental constituencies, who nominate its members for confirmation by the Secretary. Its Executive Committee, selected by the PAMB as a whole, would consist of the Regional Technical Director as Chairman and three members representing respectively local government units, NGOs, and indigenous cultural communities. A commitment was obtained at Negotiations that at least five PAMBs would be appointed by April 1, 1995 and the remaining five by April 1, 1996. NIPA would assist in drafting, and cause the PAMBs to review and approve, a management plan for each site which conforms to the requirements of the NIPAS Law and also the policies of the Bank on Indigenous People and Resettlement. 4.5 The IPAF Governing Board will consist of seven persons, three representing government (of which LBP would provide one representative), two NGOs, and two indigenous cultural communities. Its function would be to manage and oversee the IPAF, an endowment fund for the NIPAS system (with separate accounts for each PA). As authorized by law, all revenues of the NIPAS system (taxes, license fees, fines, contributions, etc.) would accrue to the IPAF rather than the general revenues. At least three-fourths of revenues generated by each PA would accrue to accounts on its own behalf, the remainder being distributed among PAs or otherwise allocated by the Governing Board for the types of support activities or projects authorized by law. Authority to disburse IPAF funds is vested jointly in the Governing Board and individual PAMBs, subject to approval by the Secretary of DENR. Although the project's Livelihood Fund would not be maintained as an endowment and is not legally equivalent to the IPAF or necessarily subject to its rules of operation, the IPAF Governing Board would be appointed to serve concurrently as Governing Board for the Livelihood Fund and all recovery of subloans or other project income would accrue to the IPAF. NIPA, which provides a Secretariat to the IPAF Board and serves as trustee for the Livelihood Fund, would ensure that funds are disbursed for properly approved projects, are used for the prescribed purposes, and duly repaid. It would also train and supervise local NGOs in subproject identification, preparation and implementation. 4.6 Inasmuch as the Livelihood Fund would operate like a rural credit pro- ject, financing through subgrants and subloans the projects of eligible beneficiaries (para. 3.6), the involvement in financial management of the Land Bank of the Philippines (LBP), as the premiere rural credit institution, has been sought. The LBP would serve as depository institution for the NIPA grant; as ex- officio members of the IPAF Governing Board and individual PAMBs, evaluate subprojects and beneficiaries; disburse on a wholesale basis to participating retail financial institutions (RFIs); propose a list of suitable RFIs based on accreditation criteria agreed with NIPA; recover principal and interest from RFIs on subloans to credit the accounts of PAMBs and IPAF; and monitor and report to the IPAF Governing Board on the performance of the RFIs. Eligible RFIs may include credit cooperatives, cooperative banks, private commercial banks, or non- profit non-governmental organizations (NGOs) with substantial experience in management of retail credit.  - 30 - 4.7 As conditions of disbursement of the Livelihood Fund, prior to submission of an initial disbursement request, the IPAF Governing Board would be organized and appointed, and the rules and procedures for administration of the Livelihood Fund would be reviewed and accepted by the Bank. The LBP, in its role as depository institution and wholesaler of funds, would be entitled to a fee of 2* on disbursements of subloans or mixed subgrants-subloans, and 2* on recovery of principal and interest from subloans. 4.8 NGO Organizational Structure. The responsibilities of NGOs in the project are defined in an Implementation Schedule (Annex D) and would be extended by cooperative agreement or contract to other participating NGOs. NIPA would represent the participating NGOs in direct dealings with the Bank, and would bear direct responsibility for management and supervision of disbursement or reimbursement of project expenditures by participating NGOs. NIPA would provide technical assistance to NIPAS and coordination for other NGOs participating in the project. It would appoint a Project Manager and establish a joint Project Implementation Unit with, and in support of, PAWB and its operations would be subject to oversight by the NIPAS Steering Committee of DENR. In addition to providing long-term technical assistance and management support, it would identify, screen, and develop contracts with local NGOs, which would provide assistance to each PA in project management, conservation and protection, community outreach, and the development of alternative livelihood activities, under the guidance of PAMB and subject to the authority of the PA Superintendent. Research support for specific PAs would also be provided by subcontracting with national and local universities and research institutions. At each PA, a subcontracted host NGO will hire a full time project manager, accountant, and other support staff to coordinate project activities of all site-level NGOs. A draft terms of reference for site management NGOs is also included in Annex E. 4.9 BudQetarv Approvals and Flow of Funds. A budgetary approvals mechanism would be used to maintain overall governmental authority over project activities, whether government- or NGO-administered. Each implementing unit would prepare an annual work program and budget for consolidation and approval by the appropriate superior units (Chart 1). The PAMB at each PA would review and approve the annual consolidated budget and work program for local PA administration and supporting NGOs. The endorsed NGO program and budget would be further reviewed by NIPA, the governmental budget by the regional office of DENR, and activities financed from the national Livelihood Fund by the IPAF Governing Board. The PCU (NIPA-PAWB) would consolidate work programs and budgets for overall review and approval by the NIPAS Steering Committee of DENR, and incorporation of the governmental portion in the national budget for Congressio- nal appropriation. GET reimbursements to NIPA would be justified on the basis of inclusion in budget and work programs approved by the NIPAS Steering Committee, but would not require individual DENR endorsement, in order to eliminate a common source of delays. 4.10 MonitorinQ and Evaluation. The primary and secondary objectives of the project for each PA, as listed in the draft management plans, are summarized in Annex C. These objectives, subject to ground truthing and vetting by the PAMBs as part of their review and approval of management plans and development of specific work programs, form the overall criteria set for project evaluation. Development of baseline information on each PA, including socioeconomic data and  - 31 - resource profiling, is among the initial project activities required by law and financed by the project. This will be compiled into a GIS system, developed during preparation, which already reflects aerial surveys of land use. A repeat aerial survey of each PA will be conducted in the fourth year of the project to assess the project's initial success at arresting habitat degradation. Full inventories of biodiversity will not be pursued because of expense; however, a quantitative system for monitoring the direction of change in biodiversity from, e.g., indicator species will be developed under technical assistance contract and implemented in each PA by NGO contractors. Monitoring of routine project implementation will be pursued at several levels and in parallel, with monitoring of the project as a whole for impact on people and biodiversity; NIPA monitoring as well the implementation by their cooperators; Land Bank monitoring financial status of retail institutions involved in Livelihood Fund delivery; PAWB monitoring performance of civil servants at the PA level; and DENR viewing performance in the context of the overall SECAL. NIPA will draft an overall plan which incorporates these roles, and the Director of PAWB would have general responsibility for approving the design of the monitoring and evaluation system. Separate quarterly monitoring reports would be submitted to the Bank by NIPA with the endorsement of the NIPAS Steering Committee. A mid-term evaluation would be conducted in the fourth year of the project by independent consultants selected by the Bank, and decisions made on project structure and work program for the remaining years of implementation based on its recommendations. 4.11 NIPAS legislation requires that the Secretary of DENR recommend to the President and the President recommend to Congress on the gazetting of each individual PA as part of the NIPAS system within a fixed time frame. Should any of the ten priority PAs not be approved for gazetting, the long-term prospects for sustainable management would be poor. Therefore, it was agreed at negotiations that Government, following the prescriptions of the NIPAS Law, would issue a Presidential Proclamation declaring each project site a PA, and would submit to Congress a bill to enact such Proclamation. As conditions of disburse- ment, disbursements from both Government and NIPA grants to those PAs which have not been gazetted will be suspended after total disbursements have reached 50%- of the total grant, that is, the amount budgeted for approximately the first three years of the project.  - 32 - V. NEGOTIATIONS, EFFECTIVENESS AND DATED COVENANTS IN THE GRANT AGREEMENT Government Covenants 5.1 During negotiations on the Grant Agreements, assurances were obtained from Government as follows: (a) Conditions of Effectiveness (i) NIPA Grant Agreement. All conditions required for the effective- ness of the NIPA Grant Agreements would be fulfilled (para. 3.8); (ii) Project Coordination Unit. A Project Coordination Unit would be established (para. 3.8); (b) Conditions of Prolect Implementation: (i) Government Staffing. DENR would, by no later than January 1, 1997, increase its full-time personnel assigned to each project site to numbers agreed with the Bank (para. 3.2). (ii) Delineation of Ancestral Domains. DENR would begin delineation of ancestral lands no later than April 1, 1995, and DENR would issue Certificates of Ancestral Land Claims within six months of the completion of delineation (para. 3.5). (iii) Conditions and Terms of Livelihood Component. Funds in support of livelihood activities would be managed and disbursed as subgrants or subloans under the authority of the Integrated Protected Areas Fund Governing Board established by the NIPAS law and regulations and appointed by the Secretary of DENR. The Board would adopt rules, regulations, and subproject selection guidelines acceptable to the Bank (para. 3.6). (iv) Joint Project Management Office. DENR would be responsible for general oversight, coordination, and monitoring of the project. It would establish a joint Project Coordination Unit (PCU) with NIPA, with qualified management and staff, which would be given the responsibilities and resources, including office facility, required to undertake day-to-day supervision and coordination of project implementation (paras. 3.8-3.9). (v) Monitoring and Evaluation. A satisfactory monitoring plan would be submitted to the Bank for review no later than April 1, 1995, and thereafter implemented (para. 3.10). (vi) Accounts and Audits. Separate project accounts would be maintained by Government and audited annually by auditing firms acceptable to the Bank. All audits would be submitted to the  - 3 3 - Bank within six months after the close of the fiscal year (para. 3.20). (vii) Appointment of PAMBs. At least five PAMBs would be appointed by April 1, 1995 and the remaining five by April 1, 1996 (para. 4.4). (viii) Gazetting. Government, following the prescriptions of the NIPAS Law, would issue a Presidential Proclamation declaring each project site a PA, and would submit to Congress a bill to enact such Proclamation. DENR, assisted by NIPA, would draft, and PAMBs would approve, a management plan for each site which conforms to the requirements of the NIPAS Law and also the policies of the Bank on Indigenous People and Resettlement (para. 4.11). (ix) Government Guarantees of NIPA. The Government will guarantee the performance of all the obligations of NIPA and indemnify the Bank against liabilities arising from either grant agreement (para. 3.8). (c) Conditions of Disbursement. Disbursements to those PAs which have not been gazetted would be suspended after total disbursements have reached 5096 of the total grant, that is, the amount budgeted for approximately the first three years of the project (para. 4.11). (d) Conditions of Grant Default. The rescindment or abrogation of the Memorandum of Agreement among DENR, DOF and NIPA, or of the NIPAS legislation, or the dissolution of the Steering Committee, IPAF Governing Board, NIPA, or any project site designated as a PA, would each constitute a condition of grant default (para. 3.8). NGO Covenants 5.2 During negotiations on the Grant Agreements, assurances were obtained from NIPA, Inc. as follows: (a) Conditions of Effectiveness: (i) GOP Grant Agreement: All conditions required for the effective- ness of the GOP Grant Agreement would be fulfilled (para. 3.8). (ii) NIPA-LBP Nemorandum of Agreement. A Memorandum of Agreement between NIPA and LBP delineating the LBP role would be signed (para. 3.8). (b) Conditions of Prolect Implementation:  - 34 - (i) Delineation of Ancestral Domains. NIPA will prepare a time-based action plan and budget for delineation of ancestral land claims and farm surveying to begin no later than April 1, 1995 (para. 3.5). (ii) Monitoring and Evaluation. A satisfactory monitoring plan would be submitted to the Bank for review no later than April 1, 1995, and thereafter implemented (para. 3.10). (iii) Joint Project Management Office. NIPA would establish a joint Project Coordination Unit (PCU) with DENR, with qualified management and staff, and assign it the resources required to undertake day-to-day supervision and coordination of project implementation (para. 3.9). (iv) Conditions and Terms of Livelihood Component. NIPA would draft rules, regulations, subproject selection guidelines, application procedures and forms, all acceptable to the Bank, for the approval of and implementation by the IPAF Governing Board, and would enter into agreements with subgrant and subloan recipients specifying the latter's obligations (para. 3.6). (v) NIPA-LBP Memorandum of Agreement. LBP would be entitled to a fee of 2% on disbursements of subloans or mixed subgrants-subloans, and 2% on recovery of principal and interest from subloans (para. 4.7). (vi) Management Plans. NIPA would assist in drafting, and cause the PAMBs to review and approve, a management plan for each site which conforms to the requirements of the NIPAS Law and also the policies of the Bank on Indigenous People and Resettlement (para. 4.4). (c) Conditions of Disbursement. (i) Livelihood Fund Rules and Procedures. The rules and procedures for administration of the Livelihood Fund, as adopted by the IPAF Governing Board, would be reviewed and accepted by the Bank (para. 3.6). (ii) IPAF Governing Board and LBP Role. The IPAF Governing Board would be organized and appointed (para. 4.7). (iii) Gazetting. Disbursements to those PAs which have not been gazetted would be suspended after total disbursements have reached 50% of the total grant, that is, the amount budgeted for approximately the first three years of the project(para. 4.11). (d) Conditions of Grant Default. The rescindment or abrogation of the Memorandum of Agreement among DENR, DOF and NIPA, the Memorandum of Agreement between NIPA and LBP, or NIPA's Charter, or the bankruptcy  - 35 - of NIPA, or the repeal of the NIPAS legislation would each constitute a condition of grant default (para. 3.8). VI. PROJECT BENEFITS 6.1 The project would enable the Government to implement its National Integrated Protected Areas System program on an initial core of ten PAs, establishing for the first time a sound framework for conservation management based on legislation and implementing rules and regulations which recognize and attempt to reconcile the multiple objectives of biodiversity conservation, sustainable livelihoods for local populations, and tenure rights of indigenous cultural communities. Most directly, it would protect ten sites of recognized international importance, which are now unprotected and subject to degrading forces. These sites encompass over 400,000 ha of primary forest, as well as additional areas of coral reef and wetlands, and constitute the most pristine habitat remaining for the endemic and endangered species of the Philippines. A population exceeding 100,000, largely members of indigenous cultural communities residing in or around these PAs, would benefit from efforts to establish their land tenure, protect their cultures, provide non-degrading sources of livelihood, and enlist them in protective activities. Although Government is expected to budget for an appropriate increase in the level of basic staffing and operating budgets over the life of the project and absorb additional staff following project closure, the combination of establishment of endowment funds and financing of sustainable, income-generating livelihood projects (ranging from tourism to agro-forestry) provides additional assurance that PA management activity will be sustainable beyond the life of GET financing. Risks 6.2 Project implementation involves four main risks: (a) a weak civil service structure may have difficulty coping with the more innovative aspects of the project, (b) conflicts among groups within communities may hinder formation of a local consensus on plans and programs which reconcile economic growth and biodiversity protection, (c) budgetary stringency may slow implementation of the project, and (d) the gazetting process may not be completed. Mitigating these risks, the innovative aspects of the project are all prescribed by law and administrative regulation, and the project would provide substantial managerial and technical assistance in implementation to the civil service through the NGOs. The NIPAS law further alleviates the main source of social conflict by balancing protection and livelihood concerns and confirming land tenure, and by providing for the establishment of PAMBs, which can serve as a mechanism for local conflict resolution. The local NGOs supporting each PA, through their efforts at enhancement of community dialogue, are the major vehicle for concensus formation, and the provision of adequate resources for development of alternative sources of livelihood is also crucial to reducing conflict over protected resources. The provision of a direct grant to NIPA in support of all NGO activities and the Livelihood Fund would protect most project activities from bureaucratic delays. Finally, the grant agreement calls for cancellation of the undisbursed portion if clear indications emerge that gazetting of the protected areas will not be accomplished (para. 5.ld).  PI IILIPPINES CONSERVATION OF I'RIORI'I'Y PRO'ITECED AREAS 'I'otal Project Costs By Year and Component (IJSS I 28.0 1994 1 995 1996 1997 1' )8 1999 2000 Local Forcign 'I'otal local Forcign Tl1al lFORE Aclivilies -------------- Costs by Year (Pesos millions) ------------------- ------- Pesos niillions -------- ------ USS millions ------- l'ercent A. Site Development PAEstablishment 17.57 11.42 13.15 13.17 13.17 13.17 13.17 82.28 12.53 94.81 2.94 0.45 3.39 130/0 Basic Infrastructure 9.33 2.77 0.09 0.09 0.09 0.09 0.09 6.87 5.67 12 54 0.25 0.2() 0.45 45% PA Development 1.42 11.80 11.80 3.52 1.10 1.18 0.49 22.97 8.32 31.30 0.82 (.30 1.12 27% Sub-Total 28.31 25.98 25.03 16.78 14.36 14.43 13.74 112.12 26.52 138.64 4.00 0.95 495 19% B. Resource Management Site Infrastructure 3.96 0.09 0.09 0.02 0.02 0.02 0.02 2.12 2 10 4.22 0.08 0.08 0.15 50%. Maps& Boundaries 3.66 0.00 0.00 0.00 0.00 0.00 0.00 366 (.00 3.66 0.13 0(.00 0.13 0% Mgmt. 3oard Operations 9.40 5.06 4.78 4.26 4.26 4.26 4.26 30.52 5 75 36.27 1.09 0 21 1 30 16%i6 Site Restoration 0.00 1.92 1.92 1.92 1.92 1.92 1.92 11.49 0.00 11.49 0.41 0.00 0 41 0