New Guinea is one of the worldÔÇÖs Megadiverse regions, containing an estimated 7% of the world's biodiversity in less than 1% of the land area. The island of New Guinea as a whole (combining mainland PNG and IndonesiaÔÇÖs West Papua region) contains the largest contiguous area of forest remaining in the Asia-Pacific region and constitutes the third largest-tropical rainforest in the world. PNG has more than 18,894 described plant species, 719 birds, 271 mammals, 227 reptiles, 266 amphibians and 341 freshwater fish species. Endemism probably exceeds 30% for PNG and is well over 70% for Papuasia (the region from New Guinea to the Solomon Islands). It is also important to note that large gaps remain in the scientific knowledge of Papua New GuineaÔÇÖs biodiversity, and new species are constantly being discovered.The main (and possibly only) biodiversity conservation tool used in PNG is and has been protected area management. Approximately 4% of PNGÔÇÖs terrestrial area is protected in 53 PAs. Since independence in 1975 there has been a significant shift in PAs from those that exclude people (e.g. National Parks) to those where people are part of the protected area system (Wildlife Management Areas and more recently a Conservation Area (YUS)). Given that 97% of the land in PNG is under customary ownership, it is appropriate that PAs are inclusive rather than exclusive of people. A review for the World Bank / WWF Alliance for Forest Conservation and Sustainable Use showed that 73% of PNGÔÇÖs Protected Areas have minimal or no management structure, 16% had no management at all, 8% had a management structure but there were serious gaps and only 3% were well managed with a good infrastructure (IUCN 1999:26). In a more recent study by Shearman et. al. (2008) in 32 protected areas in PNG, excluding two more remote WMAs (Crater Mountain and Hunstein WMA), 25% of their forests were cleared or degraded during the period from 1972 ÔÇô 2002 (Shearman et. Al. 2008). This again demonstrates the lack of effective management, protection or conservation within existing protected areas. Three interventions are therefore needed in PNG: (i) looking at alternative PA arrangements and governance types focusing on an inclusive model; (ii) increasing the capacity of PA management in PNG; and (iii) increase the available financing of biodiversity conservation and ensuring industry buy-in to ensure sustainability.This proposed project is therefore part of a medium-term modular approach to strengthening biodiversity conservation in PNG. It complements work undertaken under the GEF-4/ Australia supported Community-Based Forest and Coastal Conservation and Resource Management project (GEFSEC PMIS 3954) to develop models for conservation in the Owen Stanley Range and New Britain Island. A second GEF 5 project ÔÇ£Strengthening the Management Effectiveness of the National System of Protected AreasÔÇØ is current under development and will strengthen national and local capacities to effectively manage the national system of protected areas, and address threats to biodiversity and ecosystem functions in these areas. The proposed project will form the third module focusing on biodiversity financing.