IFC requires that this document is made available through the World Bank InfoShop and to the locally affected community no less than 30 days prior to project consideration by the IFC Board of Directors. The Summary of Project Information (SPI) also provides details of where the ERS has been made available to the locally affected community. The SPI must be sent to World Bank InfoShop no less than 30 days prior to project consideration by the IFC Board of Directors.

This is a Category B project according to IFC’s Procedure for Environmental and Social Review of Projects because a limited number of specific environmental and social impacts may result which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines, or design criteria. The review of this project consisted of appraising technical and environmental and social information submitted by the project sponsor which was supplemented by a site visit by the industry specialist. The following potential environment, social, health and safety impacts of the project were analyzed: land acquisition, labor issues, including child labor, liquid effluents and discharges, dyes and chemicals and environmental and occupational heath and safety management.

The sponsor has presented plans to address these impacts to ensure that the proposed project will upon implementation of the specific agreed measures, comply with the environmental and social requirements—the host country laws and regulations and the World Bank/IFC environment and social policies and the environmental, health and safety guidelines. The information about how these potential impacts will be addressed by the sponsor/project is summarized in the paragraphs that follow. - Land Acquisition The sites were purchased from municipal authorities in designated industrial areas. The new weaving building is located in an industrial zone on a 3.3 ha plot purchased from the government; this was formerly low grade agricultural land with no settlements. The building has 1,200sq.m. of floor space; it is well constructed and of modern design. The new yarn dyeing plant is located in a different area of the city to comply with local regulations related to industrial effluents. It is sites on a 4,700 sq.m. plot purchased from local authorities with about 2,300 sq.m. of floor space. Land occupied by the offices and dyeing factory was not previously occupied nor used for agriculture. Two additional factories, the Visiontex weaving and sewing factory and the Como Finishing plant have been built by Babei in 2004 on developing industrial zones. Babei has also acquired a new 15 hectare site in an industrial zone in Shengzhou on which to relocate its weaving factory as required by the local authorities. Land for these three sites was formerly agricultural land, and there were a small number of houses on the site of the proposed weaving plant. This land was acquired for industrial use in 2002. Compensation of 100 times the value of annual agricultural production was paid to land users to compensation for their loss of income from agriculture. Additional compensation of 30-40,000 RMB/mu was paid for loss of land use, and those who lived on this land were re-housed outside the industrial zone in houses of at least equivalent area to those lost at no cost. Former farmers are allocated for training to the new companies who establish premises on the industrial zone. Pensions of 800 RMB/month, which is a minimum of 80% of former agricultural income is paid to those not allocated for training in the industrial companies. - Labor Issues Babei’s labor relations are good as demonstrated by staff turnover of 1% per annum, and the company has been reported in the press as a good example to be applied to others. Babei is unionized and has voluntary union membership of around 85% of the workforce or 1,100 people. Employees are paid a basic rate, attendance bonus, piece-rate and overtime payments (1.5 or 2 times the standard rate is paid when overtime is worked) and earn total wages some 40 to 50 per cent higher than other companies engaged in similar activities. Operators work according to standard Chinese textile industry practices of nine 8 hour days followed by three rest days. Employees have 10 days annual leave plus public holidays. Babei has annual wage negotiations using a formula related to corporate profits and is the only firm in Shengzhou to do so. The minimum working age within Babei is 18 years. - Liquid Effluents Liquid effluents are treated at each plant before discharge into the municipal sewer system. The municipality does not yet treat effluent before discharge to the river, though plans are being developed for a treatment works. Concentrations of suspended solids and oil and grease in Babei’s effluent slightly exceeds IFC’s guidelines. Babei will review its use of water, and its effluent treatment systems and at the office and dyeing plant will upgrade treatment if monitoring shows this is required to meet IFC guidelines. Any effluent treatment for new weaving plant will be designed to meet IFC guidelines. At all sites, discharge of coliforms will be controlled by disinfection systems. - Dyestuffs Dyes used are environmentally benign and do not contain any toxic compounds. Babei has received Oko-Tex certification that its dyes are safe; this is a requirement of its customers and compliance is checked regularly. - Environmental and Occupational Health and Safety Management. Facilities are well laid out; fire exits are well signed and fire extinguishers / fire hose points are well sited. Housekeeping is excellent at the weaving plant, though advice on improvement has been provided in the dyeing plant. Secondary containment walls will be built around generator fuel oil storage tanks. IFC has also advised on improvements to hearing protection equipment, and has advised on efficient use of energy. Emissions to air are low and well within IFC and local requirements. Much of Babei’s steam is obtained from the local power station, though this is only a small proportion of total steam produced by the power station. The local environmental protection agency monitors effluent discharges on a regular but random basis, and Babei monitors these quarterly. Babei was awarded ISO 9001 in 2000 and ISO 14001:1996 in April 2004.

The attached Corrective Action Plan provides further details of environmental issues. .

Accordingly, IFC concludes that the proposed project will meet the applicable World Bank/IFC environment and social policies and the environmental, health and safety guidelines upon successful implementation of the agreed mitigation measures.

IFC will evaluate the project's compliance with the applicable environmental and social requirements during the lifetime of the project by reviewing the annual monitoring reports (AMRs) prepared for the project covering ongoing performance of project-specific environmental, health and safety and social activities as reflected in the results of periodic and quantitative sampling and measuring programs. Periodic site supervision visits will also be conducted.