IFC requires that this document is made available through the World Bank InfoShop and to the locally affected community not 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, environmental and social information submitted by the project sponsor. The following potential environmental, health and safety and social aspects of the project were analyzed: - Corporate environmental, social and health and safety management systems - Site selection and land acquisition policy - Emissions to air and water - Solid wastes - Handling of hazardous materials - Fire safety and emergency response - Labour and workplace conditions

The company 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 company/project is summarized in the paragraphs that follow. Whenever RAK Ceramics has built a new production line or factory anywhere in the world, the company has replicated its current best practice while taking account of local conditions. The proposed new investments will be green-field plants hence their designs will closely match that of the existing plants in UAE and Bangladesh, and can therefore be expected to have high technical standards. Corporate Environmental, Social and Health and Safety Management. - Health, Safety and Environmental (HSE) Management Systems. It is the policy of RAK Ceramics that all its operations should comply with applicable local environmental and safety laws and IFC environmental and social policies and guidelines. RAK Ceramics is currently developing a health, safety and environmental (HSE) management system for its Bangladesh factory, and expects to complete system design by August 2003. It is the intention to seek certification of this management system to ISO 14001 and OHSAS 18001 standards and ultimately to integrate HSE management with the quality management system. HSE practices developed in Bangladesh will be replicated throughout the group, with adaptation for local circumstances, and will be adopted in UAE and in the proposed new investments in Iran and Algeria. - Land Acquisition The company confirms that all land for future manufacturing operations will be acquired on a willing buyer, willing seller basis, taking due account of relevant IFC safeguard policies which may differ on a site by site basis. - Social Issues RAK Ceramics provides free accommodation and meals for its workers and their families, and partly as a result has a very low rate of staff turnover. In countries where it operates, the company has become involved in community activities. In Ras Al Khaimah it annually donates some $1.5 million to local schools, hospitals, the office of civil defense and needy individuals such as the poor, disabled or old. RAK Ceramics will continue such practices in new manufacturing locations. The minimum age of all RAK Ceramics employees is 18 years. Emissions to Air and Water - Emissions to Air Potential emissions to air are dust arising from manufacturing operations and products of combustion, drying and firing operations. Centralized dust collection systems are provided for all process operations (e.g. ball mill, dried ware inspection, glaze spraying) in which dust may arise. Solids collected in these systems are reused in the process. In RAK Ceramics’ manufacturing plant in the UAE, bunker fuel oil is used in four 7.3 MWe generators and a number of spray dryers. Air emissions from these machines are not known and will be measured. Diesel oil is used as fuel in standby generators which are used infrequently. In UAE, LPG is used in several other spray dryers, in tile pre-dryers and in sanitary ware and tile kilns. Emissions levels from these machines are not known and will be measured but are expected to be low for the following reasons. - Fuel is sulphur free, therefore oxides of sulphur are not present in exhaust gases. - Process fired heaters use low NOx burners. - Spray dryers are equipped with cyclone separators and wet scrubbers. New plants will use natural gas or LPG as fuel and will adopt low NOx burners meeting IFC’s NOx emissions criteria. Air emissions are reduced by a number of energy efficiency measures including:  - recovery of heat from the kiln exhaust to the pre-dryers; - high standards of kiln insulation and use of lightweight kiln cars; - consistently high kiln loading; - variable speed fan drives; - metering and active management of gas used in furnaces. All of the above give excellent levels of energy efficiency. New factories will adopt similar technology and should also be highly efficient. - Emissions to Water At the UAE factory, water is supplied by several desalination plants, using heat recovered from generators and by tanker and is expensive. Considerable attention is therefore given to minimizing water use. This has included adoption of a dry-milling technology for one tile line: this is being monitored and will be replicated to other plants if successful. Effluent from the residential complex is treated in the site’s waste water treatment plant, with treated water re-used in the process and to irrigate garden areas. Process effluent contains clay particles. At UAE effluent passes through a series of settling tanks. The resulting cleaned water is reused in tile preparation. Settled clay is collected periodically. At UAE this clay is used for landfill of land owned by the company. At the new plants it will be sold for landfill. No process or sanitary waste effluent leaves the factory. All water is ultimately evaporated in one of the drying processes. Storm water is not expected to be contaminated, hence it is directed to public drainage without treatment. - Solid Waste Solid waste comprises rejected fired wares, plaster molds, dust from pollution control devices, tote bags used for raw material delivery and waste water treatment plant sludge. The volume of solid ceramic material waste is reduced by in-process recycling: all ceramic waste except the very hard porcellanato tiles can be used in the dry-milling process. Rejected materials from the casting section, dry ware inspection and glaze spraying is re-used in preparation of sanitary ware bodies. Excess glaze from the spraying section is collected, reprocessed and reused. Some ceramic material waste is not recycled and is used for land filling on the UAE site to prepare for further expansion. In other plants, this material is readily saleable as material for land filling. Tote bags, in which raw materials are supplied are collected and sold to recycling companies. Waste water treatment plant sludge is disposed of to landfill by the local municipality. Landfill gas is collected and used for power generation at that facility. - Hazardous Materials RAK Ceramics has provided a list of all materials used in glaze and pigments. None of the materials to be used contains cadmium, lead or any other heavy metal. Secondary containment walls will be built around oil storage tanks so as to retain the oil in the event of a spill or leak. Improved procedures and simple instruction boards will be developed for LPG unloading points. Procedures will be developed to ensure that chemicals are always unloaded and stored in appropriate hazardous materials stores. - Fire Safety and Emergency Response. Fired heaters are all provided by the Italian company SACMI, one of the world leaders in ceramics industry machinery. Gas control systems, and the kiln, furnace and dryer lighting procedures meet worldwide best practice standards. Other than fuel, the only inflammable materials used in the process are paper packaging cartons. Fire extinguishers and buckets of sand are provided in the packaging area and elsewhere. A fire alarm system is installed, and firefighting stations, supplied by electric and engine-powered pumps, are installed in packaging areas of the UAE factory. Regular testing and flushing of the fire system will be instituted. Fire fighting stations will be more clearly marked. The provision of emergency lighting will be reviewed, together with consideration of evacuation routes from production areas, and improved as required. Emergency response plans currently under development in Bangladesh will be used as models for the other RAK Ceramics sites. For the new sites these plans will be developed as the factories are built. - Labour and Workplace Conditions RAK Ceramics has undertaken to commission ambient air quality and noise monitoring studies. Parts of the UAE factory appear rather dusty. Protective dust masks are provided and their use appears almost universal. Noise levels appear high in the tile polishing and cutting areas, though noise readings are not available. Workers in these areas did not appear to make use of hearing protection devices. These will be provided and their use enforced. UAE and the sites of the other proposed factories have extremely high summer ambient temperatures (high 40s Celsius), and therefore very high internal temperatures are experienced. Buildings are ventilated mechanically and fans are provided for internal air movement. Drinking fountains are widespread in production areas and isotonic drinks and electrolyte are provided to workers.

This ERS contains the full environmental and social documentation prepared for the project.

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 activities. Periodic site supervision visits will also be conducted.