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 onsite review and 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 suitability; - Energy efficiency; - Emissions to air and water; - Solid wastes; - Hazardous materials; - Fire safety and emergency response; and - Employment opportunities and social activities.

RAK Ceramics and the company have presented plans to address these impacts to ensure that the proposed project will upon implementation 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 build new production lines or factories anywhere in the world, it replicates its current best practice while taking account of local conditions. The proposed new investment will be an additional 20,000 square meters/day tile production line at its existing production plant in Gao Yao, in Southern China. The new production line will be based on Italian equipment and will closely match those of RAK’s recently-constructed plants in UAE and Bangladesh, and can therefore be expected to have high technical standards. 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. At IFC’s prompting, RAK Ceramics has developed a health, safety and environmental (HSE) management system for its Bangladesh factory, with 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. This work in Bangladesh will be replicated throughout RAK’s manufacturing sites with adaptation for local circumstances, and will be adopted at the RAK China operations. The proposed new ceramic tile line will be implemented on land already in RAK China’s possession. The plant site is located within an area developed for light industrial use in the outskirt of Gao Yao city and the local infrastructure is well developed. The company confirms that all land for its Chinese factory was acquired in 2002 after a land acquisition procedure including full compensation of the previous users, taking due account of relevant IFC safeguard policies, which are comparable to the federal Chinese rules for land acquisition. Air emission from both the existing and the new proposed tile production line include dust arising from manufacturing operations and products of combustion, drying and firing operations. Currently raw materials are stored partly in open piles on concrete surfaces and partly in closed structures to minimize dust creation. When the project is finalized all raw materials will be stored in closed structures. Centralized dust/process water collection systems are provided for all process operations (e.g. wet ball mill, spray drier, press, and polishing) in which dust or process water may arise. Solids collected in the pre-kiln systems are reused in the process, while solids collected in the polishing water recycling system is removed by contractors and used for filling. It is not expected that air emissions from fired heaters will have any adverse environmental impacts for the following reasons: - Fuel used in the existing plant (diesel oil) is low to medium sulfur containing. The new line will be designed for LPG-gas burning and after the new line has obtained stable production the existing line will also be converted to this low sulfur fuel; - Process fired heaters will use low NOx burners; and - Spray dryers are equipped with cyclone separators and wet scrubbers. The new line will also be equipped with energy efficiency measures including: - Provisions for future recovery of heat from the kiln exhaust to the pre-dryers; - High standards of kiln insulation; - Consistently high kiln loading; - Variable speed fan drives; and - Metering and active management of gas used in furnaces. These techniques are used in UAE and give excellent levels of energy efficiency. The new line at the RAK China plant will adopt similar technology and should also be highly efficient. All water for the facility is delivered from the municipal system. Process effluent, especially from the tile polishing operation, contains clay particles. The process effluent pass through a series of settling tanks with the cleaned water being 100% recycled in the tile preparation. The sanitary waste water is discharged to the municipal wastewater treatment plant in Gao Yao for treatment before discharge. Solid waste comprises rejected fired wares and settled clay from the process water recycling system. This inert solid waste is collected periodically by a contractor and deposited in approved locations. RAK China is currently producing polished and unpolished porcelain tiles and will as part of the proposed project introduce the production of glazed tiles. With specific focus on the glazed tiles, RAK China will ensure (by using European Union approved glazes) that none of the materials to be used contains cadmium, lead or any other heavy metal. Fired heaters at the new line will all be provided by leading European manufacturers. Gas control systems, and the kiln, furnace and dryer lighting procedures will meet worldwide best practice standards. Other than fuel, the only inflammable materials used in the process are paper packaging cartons. Fire extinguishers and water based fire fighting systems are installed together with a fire alarm system throughout the factory. The fire-fighting systems and emergency exits are clearly marked. A emergency response plan has also been developed and adapted for local circumstances at the RAK China plant. This plan includes teams deployed on each shift. These emergency response teams are trained every second month in corporation with the local firefighting department. RAK China currently has 410 permanent local employees and 16 expatriates. This will expand to 510 permanent local employees when the proposed project becomes operational. Temporary employment opportunities will also exist e.g. in a section packing for the local tile market, hereby raising the average local employment to approximately 750 persons. The minimum age of all RAK Ceramics employees is 18 years.

This ERS contains the full environmental and social documentation prepared for disclosure on 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 as reflected in the results of periodic and quantitative sampling and measuring programs. Periodic site supervision visits will also be conducted.