Project area. The project will cover four representative river basins with 23 watersheds extending over 1.13 million hectares. The area comprises 12 provinces with an estimated population of around 2.7 million, 88 cities and municipalities, and some 1,735 barangays (villages).

Target group. The project will target about 350,000 households, mostly from vulnerable and marginalized sectors. Its main beneficiaries will be upland farmers, indigenous peoples, women and the internally displaced populations of Mindanao. Institutions that manage the upper river basins concerned will also be strengthened.

Project objectives. The project will reduce and reverse the severe environmental degradation taking place in the four representative basins. It will help improve livelihoods in these areas through the effective provision of ecosystem and biodiversity services. Livelihood improvements will be sustained by increasing incentives to upland communities and indigenous peoples, building the management capacities of local government units, encouraging private-sector participation to stabilize and/or increase beneficiary access to ecosystem services, and improving land-use and natural resource management efficiencies.

Project description. In addition to project management and support services, the project will have three components:

• River basin/watershed management and investment planning. The project will create a culture of responsible river basin management at various levels. To this end, river basin "indicative development plans" and watershed management plans will be developed, adopted and implemented with the participation of local stakeholders. Watershed management and implementation plans will give due consideration to cultural and social impacts especially on indigenous peoples, women and children. The plans will also take into account biodiversity conservation, climate change mitigation and adaptation, and other environmental services. Different forms of payment for environmental services (PES) will be explored for eventual adoption. A geographical information system will be used to monitor performance.

• Smallholder/commercial/institutional investments. Activities under this component are aimed at achieving environmental targets (protection/restoration) and/or socio-economic targets (increased productivity and income, and access to basic services for beneficiaries). A range of field investments, identified through the first component, will enhance livelihoods, increase incomes and strengthen local economies in order to provide local communities with an incentive to modify detrimental land use practices and provide options for more profitable and sustainable systems. Investments in indigenous areas will reflect plans and programmes identified in ancestral domain sustainable development and protection plans and will specifically relate to smallholder, commercial and institutional initiatives aiming at conservation and economic productivity enhancement.

• Capacity strengthening for river basin management. This component focuses on building institutional and local stakeholder capacities for river basin management at various levels - national, river basin and watershed. This requires a shift in focus from political to ecological/hydrogeographic jurisdictions.

Important features. Poverty, inequality and loss of livelihoods contribute significantly to environmental degradation, especially in fragile ecosystems such as the uplands. The project will arrest this degradation, rehabilitate and conserve the watersheds, proactively respond to climate change vulnerabilities, and introduce integrated ecosystems management approaches thereby improving the livelihoods of concerned communities. The proposed project is the third phase of a project initiated by the Asian Development Bank. It is consistent with the Government's long-term vision and plans for the forestry sector and aligned with the Government's strategy, set out in the Medium-Term Philippine Development Plan for 2004-2010, "to fight poverty and build prosperity for the greatest number of the Filippino people." The project is also consistent with the first strategic objective of IFAD's results-based country strategic opportunities programme for the Philippines, which is to empower poor upland women and men to achieve higher incomes and improved food security by enhancing their access to and control over land and water resources and enabling them to gainfully use these in environmentally sustainable endeavours. It also complies with the IFAD Policy on Engagement with Indigenous Peoples. The project is innovative in terms of the phased devolution of environment and natural resources management and the mainstreaming of biodiversity in the overall landscape within river basins. It is also innovative in that it will bundle PES payments with credits for reducing emissions from degradation and deforestation: known as REDD+, this is a set of steps designed to use market/financial incentives to reduce the emissions of greenhouse gases through forest conservation, sustainable forest management and the enhancement of carbon stocks. Finally, it is innovative in its provision of block grants to indigenous peoples' organizations to revive indigenous knowledge systems and practices in environment and natural resources management within river basins beyond dominant and homogeneous areas such as those in the Cordillera Administrative Region.

Cofinanciers and domestic contribution. IFAD is expected to cofinance this project with the Climate Change Fund and the Global Environment Fund. The domestic contribution is provisionally set at US$17.2 million.