Key environmental, health and safety, human resources and social issues that were reviewed included MCS-P’s environmental and social management system, including its relationship to MCS Group level procedures and systems; labor and working conditions; contractor management, site selection and assessment; building design and efficiency. These issues were reviewed in relation to the four known projects for IFC financing but their adequacy for future, yet underdetermined projects was also assessed.
PS1: Social and Environmental Assessment and Management System
IFC has undertaken a number of E&S supervision visits in relation to its 2007 investment at Group level. These focused on the businesses that were specified as beneficiaries of IFC’s 2007 financing, including the Coca Cola bottling plant, Goyo cashmere and a cellphone network. MCS-P projects were also a recipient, including the Central Tower and Sky Resort projects. E&S performance was rated as good on most counts, although with concerns on (1) slow progress on E&S action item on life and fire safety (L&FS: see PS4) and the absence of IFC Performance Standards as a benchmark in some social and environmental impact assessments. MCS will expedite work in these areas. A L&FS completion audit is a condition of the new financing, as is a more specific requirement on integration of Performance Standards into assessments for new projects. The latter is particularly important for the new financing, as once the MCS Tower, Tsetsii, Shine Ger and Orchlon School (Phase I) projects are completed, the subsequent exposure of IFC funds is undetermined.
Social and Environmental Assessment
Mongolia has a well established law on environmental impact assessment (EIA), introduced in 1998 and amended in 2002. It specifies an initial application to the Ministry of Nature, Environment and Tourism (MNET) which determines the nature and extent of impact assessment required. Larger projects (scope, footprint and/or impacts) require the project proponent to submit a detailed EIA prepared by a government-licensed entity. Once a project is approved by MNET, a summary of the project’s EIA is published on the Agency’s web site (www.mne.mn). As a general principle, redevelopment of brownfield urban sites do not require an EIA, greenfield projects do. For the current MCS-P portfolio to which IFC will have exposure, Shine Ger is the only greenfield project (Tsetsii was within the existing site boundary of the UHG development) and the original EIA for the land parcel was approved in May 2011. The recommendations from the EIA are captured in an action plan for the mitigation of soil, surface water and ground water contamination; dust nuisance; water usage; vegetation impact; chemical and waste management; worker health and safety and routine monitoring programs. A second assessment was subsequently requested by MNET to reflect the joint-venture status and project design specifics. This is due for completion in Q3 of 2012.
For any future project (not listed under the Project Description section of this review summary) where IFC’s corporate loan is utilized, MCS-P will ensure that the requirements of the Performance Standards are addressed within the site assessment process, with a clear determination of what Performance Standards apply. Assessments will then be responsive to local regulation and Performance Standards, and action plans arising from the assessment process, with related budgets to support implementation will then implemented bring about compliance with both. For each project where IFC financing will be deployed, IFC will retain prior review rights of the E&S assessment documentation to ensure Performance Standard analysis is adequate and to support MCS-P in the management of the process and outcome.
Management Program
Historically, E&S management practices and systems were decentralized within the MCS Group, with some operating companies engaging more obviously through programs initiated by joint venture partners or suppliers. The PS2 and PS3 sections provide examples. As of March 2011, a number of operating companies are internationally certified for quality management (ISO 9001) and food safety (ISO 22000). Others have achieved equivalency to ISO 14001 (an environmental management standard) through participation in the programs of partners (Coca Cola, Heineken). MCS Group joined the UN Global Compact in 2011 and will submit its first progress report during 2012.
At Group level, MCS has a hierarchy of E&S management policies and procedures which also reflect majority and minority positions and joint-venture partnerships. There are also a number of guidelines, which have voluntary status in terms of implementation by operating companies.
As described in the ESRS for the Shangri-La Ulaanbaator project, MCS-P typically develops a Contract Quality Plan (CQP), a Project Execution Plan and a Construction Method Plan which govern all aspects of the construction process including sub-contractor management. Included in these documents are E&S provisions and requirements such as those on safety management. MCS-P monitors site conditions including E&S performance through daily inspections, weekly meetings and compilation of weekly reports. MCS-P retains a project office at development sites staffed with a team of technical and safety engineers and other project staff to manage the construction process.
Consultation and Grievance
The EIA Law makes no formal provision for public consultation regarding the environmental and social impacts of a project. MNET requires the project proponent to conduct an opinion survey among those people directly affected by a project, and to incorporate both the findings of this survey and proposed measures to address any public concerns in the Detailed EIA submitted by the proponent for approval. In UB, public consultation for development is seen as part of the overall planning process, particularly through the ‘Citizens Representative Khural’ (an elected citizens’ committee) and the provisions in the Urban Development Law (to consult with the public and relevant professional bodies on city planning). Authorities mentioned in the law are required to publicly announce decisions made in relation to the urban development issues and anybody with a complaint has the right to petition against. During building construction, the State Inspection Agency is the relevant authority and with the right to stop construct if it finds violations of permit requirements or valid complaints from petitioners. MCS is not aware of any concern or complaint raised to date in relation to any of its developments.
While national law does provide a mechanism for grievance, MCS-P will establish a complementary option dedicated to its own activities, with the objective to receive and facilitate resolution of affected communities’ concerns and grievances about E&S performance whether or not the development is required by regulation to undertake an EIA. While the core principles of grievance mechanisms are consistent and clearly stated in PS1, its structure will need to be adaptable, as developments may have different contexts from each other. This will be addressed within the Project Execution Plan.
Community Engagement
MCS’s engagement with the public is undertaken through a corporate website, which provides information on each of the Group’s company activities. EIA information related to the Group’s capital development projects is posted on the Ministry of Nature and Environment website.
The MCS research team (part of MCS Holdings) has undertaken a community impact survey for the UHG mine (where the Tsetsii housing project is being developed). Qualitative and quantitative techniques have been used and the methodology could be used for other operating companies, including MCS-P. Brand and corporate image surveys are conducted annually.
PS2: Labor and Working Conditions
Human Resource Policy and Management
Through ongoing supervision of its 2007 investment into MCS Group, IFC has been able to assess the corporate requirements with regard to fair, safe and healthy working conditions in the operating companies and has concluded that MCS Group complies with PS2. At Group level, MCS has a comprehensive set of policies and procedures relating to recruitment processes, employment practices (including prohibition of child or forced labor), working conditions, worker health screening, performance evaluation career progression and professional development, ethics and training needs (including health and safety). Like all other operating companies, MCS-P is required to implement, monitor and report back on any exceptions to the procedures.
The MCS Group’s overall HR program is based on the requirements of the Mongolian Labor Law and a series of Procter and Gamble standards, initially used by one operating company but now evolved into the corporate procedures described above and which are consistent with the ILO declaration on fundamental principles and rights at work.
The Office of the Group Vice President for Human Resources undertakes an annual organizational culture survey to sample the opinions/grievances/ suggestions of all employees regarding wages, benefits, working conditions, relations with management and professional development. The results of the survey are reviewed by Group management and consolidated into an Action Plan that is circulated among the entire workforce. The Vice president for Human Resources is accountable for the implementation of the Action Plan.
Worker’s Organizations
There is a strong tradition of organized labor and worker’s rights in Mongolia inherited from Soviet influences. The workforce of the Group’s companies is not unionized but there is no restriction to any employee joining a union. A UB construction workers’ union helped its members secure substantial wage increases in 2008.
Non-Discrimination and Equal Opportunity
As of April 2012, MCS-Properties employed 660 full time staff, of which 276 are women (42%). This is a lower than the aggregate figure for MCS Group of 48% female employees, due to the nature of some construction related tasks.
MCS Group has an equal opportunities policy.
Retrenchment
There has been no retrenchment associated with IFC’s investment in the Group, nor has there been any in relation to MCS-P.
In joint venture scenarios, such as with the Kerry Group for the Shangri-La UB hotel, procedures to address labor and working conditions are agreed and reflect MCS expectations at Group level.
Occupational Health & Safety
A well established network of Health and Safety Officers serve each of the operating companies within the MCS Group. Health and safety requirements, indicators and incidents are tracked continuously, with detailed reports available for review. For 2011, Group level performance in relation to total incidents was 1.78 per 200,000 hours and for lost time accidents, 0.30. For MCS-P, both figures were zero. Improvement targets are set forward for three years and performance tracked at aggregate and group level. For 2011, the improvement target for lost time accidents was met but not the one for total incidents. Other metrics are also tracked annually e.g. number of permits issued within MCS-P to work at height (167), hot work (16), excavation (93) and high voltage (8). The data and analysis illustrates a sophisticated approach to occupational health and safety management. An IFC visit to the Shine Ger construction site provided further verification, with appropriate signage, personal protective equipment, storage and on-site working practices observed.
PS3: Pollution Prevention and Abatement
As with occupational health and safety, operating companies are expected to monitor emissions, including progress against targets and any exceedance of statutory limits. Similar to the human resource policy development described in PS2, the management and monitoring program was initiated in one subsidiary working with a joint venture partner (Heineken) and then evolved into a corporate program. For MCS-P, the design and construction stages are those with the most potential for pollution prevention and abatement opportunities as buildings may be subsequently sold or managed by third parties.
For Shine Ger, the 1617 units are designed for efficiency around pedestrian only streets with shops at ground level - the first such concept in Mongolia. The units are 20m2 to 60m2 and ‘smart box’ design. The footprint of the smaller units mirrors that of the traditional ger, except with internal compartmentalization and full amenities. (‘Shine Ger‘ translates to ‘new ger’). The units are constructed with double glazing and high quality insulation, as required by the Mongolian building code. As affordable housing, the construction cost/m2 of Shine Ger and Tsetsii was a key metric and as such, energy and water efficiencies beyond legal requirements were not implemented. At other developments, MCS-P has utilized additional design features, such as low-E coated window glass and radiant floor heating systems with localized temperature controls.
IFC has recently introduced the EDGE program, which aims to construct greenfield buildings that are 20% more efficient than their benchmarks. At the time of this disclosure, IFC and MCS-P had held preliminary discussions on its potential to complement the Company’s own efforts to identify low-maintenance, energy-efficient and financially competitive options for its developments. A cost/benefit assessment for energy and water efficiency measures will form part of the E&S assessment required for all developments for which IFC finance will be used.
UB has a well developed and extensive municipal infrastructure, with power, heat, water and wastewater treatment available to developers who fund the connection into the central network for each service. For Shine Ger, this comprised approximately 2km length of pipework, including a new bridge over the Tuul River. Thereafter, service fees are paid by the owner/occupier or by the management company. At present, there is no apparent concern about carrying capacity, with developers encouraged to utilize the central system. There is also a municipal solid waste collection program serving household and commercial developments.
During construction, MCS-P staff provides contractor oversight, which includes collection and safe disposal of wastes. Much of the solid waste is recycled (wood, soil, metal) and that which cannot be is collected by a licensed waste collection agency.
Emergency Planning and Response
All MCS Group operating companies met the internal target to have emergency preparedness and response plans in place by the end of 2011.
Ambient Considerations
Dust suppression measures are taken during construction, including shrouding of buildings and damping down of construction site roadways.
Greenhouse Gas Emissions
The total surface area of the four buildings described as the Project is 165,524m2, which represents a GHG emission of 73,400mt through construction related activities.
PS4: Community Health, Safety and Security
Building Design and Safety
UB sits on the boundary of low (0.8) to moderate (1.6) probability of seismic risk, with an area of very high (>4.0) probability located immediately to the west. To address seismic risk, the Government of Mongolia differentiates on building height, with towers exceeding 50m (and/or 17 stories) in height having additional requirements. Location within the city and foundation design also influence requirements, with those constructed on mud/soil ‘cushions’ having less seismic-risk design parameters than those in contact with bedrock. Design features for seismic risk are first assessed as part of the construction permitting process, where developers must consult with the State Expertise Office for Design, Exploration and Research, which issues an opinion on the building design, including seismic protection. Final approval is granted at completion by the National Emergency Management Agency.
The same agency is also responsible for life and fire safety aspects of buildings. For those with public access, IFC requires that they are designed in accordance to an internationally recognized code as well as local requirements. For MCS Tower and the Orchlon School facility, the NFPA code (as used for the Shangri-La UB hotel) is being considered. An E&S Action Plan item from IFC’s 2007 Group level investment was the engagement of a qualified life and fire safety engineer to review MCS buildings with public access against the relevant requirements in IFC’s EHS guidelines. The review highlighted a number of material L&FS risks, many of which were relatively straight-forward to address. Others required structural changes, significant investment or negotiations with a third party to implement. As a condition of the proposed MCS-P financing, a completion audit for the L&FS review is required, confirming where recommendations have been closed out and where not, a timeline with appropriate resources or a proposed alternative course of action to IFC’s satisfaction.
An additional outcome from the L&FS review was the drafting of a life and fire safety procedure which, like those described in the PS2 section, operating companies will be expected to adopt, implement, monitor and report against. This was approved in May 2012 and it . will bring a consistency of approach.
Security
The sites of all MCS-P construction projects are secured by personnel from established private security contractors and only authorized construction personnel, contractors and suppliers are allowed access. MCS-P staff manages day-to-day delivery of construction materials to building sites to minimize the impact of vehicle traffic on surrounding communities.
PS5: Land Acquisition and Involuntary Resettlement
IFC’s assessment considered the land acquisition aspects related to current MCS Property projects and the procedures in place for future projects. None of the current projects are associated with land transactions that trigger the provisions of this Performance Standard. For any future projects where IFC’s corporate loan is utilized, MCS-P will ensure that the requirements of PS5 are addressed within the site assessment process, with a clear determination of whether any of its requirements apply. In such cases, action plans, with related budgets, will be developed to support implementation. See PS1 for further details.
Private ownership of land is not recognized in Mongolia. When state-owned enterprises are privatized, the Government leases long-term “possession” rights for those assets to successful bidders for those enterprises. Similarly, the Government leases possession rights to greenfield sites for capital development projects to project proponents. Within designated urban areas, the Government allots the possession right for 0.7 hectares to each household for a housing plot. These possession rights are transferable. While there is a mechanism of “eminent domain” exercised by the government to obtain land for capital development projects, there is no established framework for the compensation of households affected by such acquisition.
The more common practice is a willing-buyer, willing seller transaction, particularly for plots in high-value areas of UB. Such plots typically support a family living in a ger and the purchase price can be sufficient for the seller to acquire an apartment with multiple rooms and amenities.
For MCS Tower in central UB, the 0.19ha plot is currently occupied by a single family residence. Acquisition will be through a willing buyer-willing seller negotiation (with the current owner being provided with a residential apartment within the Tower on completion and housing in another MCS-P development in the interim).
The 10ha Shine Ger plot is located on the western side of Yarmag Bridge, between the Tuul River and the road which skirts the northern boundary of the Bogd Khan SPA. The land was unoccupied, with the development rights being assigned by the UB government to MCS-P’s joint-venture partner (Puma Real Estate LLC).
For the 10ha lot for the affordable housing at Tsetsii (Gobi – UHG mine site), the land was assigned by the local government (Tsogt Tsetsii soum). It was previously unoccupied.
The 2.5ha plot for the Orchlon School is located in Khan-Uul District, 15th khoroo, between the Tuul River and the railway line that bisects UB. The School will represent Phase I of MCS-P’s construction plan: subsequent phases will include commercial, residential and cultural (sports arena) buildings. The land was unoccupied prior to acquisition.
PS6: Biodiversity Conservation and Sustainable Management of Living Natural Resources
The majority of current or proposed MCS-P developments are in the urban center of UB and on brownfield sites. Development of such sites does not require an EIA under Mongolian law and no known ecological values are or were associated with such. The small lot at Tsetsii is representative of the continuous Gobi land type of the area and within the boundary of the current mine development.
The southern side of UB is bounded by Tuul River and beyond that, the Bogd Khan Special Protected Area. This covers 14,000ha and was the world’s first established protected area, declared in 1778. It was listed as a Biosphere Reserve by UNESCO in 1996. Its values are both ecological (forest-steppe ecosystem, fauna including the Siberian Marmot, Arctic Hare, Musk and Roe Deer) and cultural (a sacred mountain since 12th Century, over 800 known burial sites). A map of the SPA is attached to this document.
25% of the total land area falls into the Limited Use Zone, which acts as buffer to the core and conservation zones. The 1994 national Law on Special Protected Areas allows for low impact tourism and recreational activities within the Limited Use Zone, but prohibits residential or commercial development.
In 2008, the UB City Government approved a new urban development plan for up to 2020, which included the development of the Zaisan Valley. The Government subsequently petitioned the Ministry of Nature, Environment and Tourism (MNET) to excise Zaisan from the Limited Use Zone. As an SPA is the highest level of legal protection, such a decision requires parliamentary approval.
In anticipation of the change in zoning status, the MNET issued construction permits for residential development (exact number unknown). Together with tourism and recreation permits, the Zaisan area has been extensively developed, including the American International School and the new Mongolian Supreme Court building. MCS also received construction permits for two developments: Zaisan II and Budda Gardens. (Zaisan I was fully permitted before the 2008 petition was lodged).
At the time of publication of this ESRS, parliament has not approved the petition for change in Zaisan’s zoning status.
For legally protected areas, PS6 requires that the client act in a manner consistent with defined protected area management plans, consult key stakeholders and implement additional programs, as appropriate, to enhance the conservation aims of the protected area. As no residential development in Zaisan can demonstrate such until the zoning issue is resolved, IFC finance cannot be used for developments in Zaisan or any other part of the SPA. When the zoning issue is resolved, MCS-P will abide by that determination (and by any other determination for other parts of the SPA). Beyond those where construction permits have already been granted, MCS-P will not seek permission for any projects within the Limited Use Zone until its legal status is resolved and clarified. IFC will also collaborate with MCS, the World Bank and other stakeholders in order to identify additional actions that MCS-P can undertake to uphold the PS6 requirements summarized above. The environmental and social assessment of any future developments undertaken by MCS-P will screen against PS6, with a clear determination of which specific requirements apply. In such cases, action plans, with related budgets, will be developed to support implementation. See PS1 for further details.
PS8: Cultural Heritage
The cultural heritage aspects of the Bogd Khan SPA are discussed in PS6.
Article 6 of the Law on Cultural Heritage specifies that the relevant Governor shall maintain the list of cultural heritage located in his/her jurisdiction, with each provincial list then maintained centrally by the Ministry of Education, Culture and Science. As part of the E&S assessment for any development utilizing IFC finance, the list should be consulted to ensure that the development will not adversely impact any listed heritage. No current projects impact listed property. See PS1 for further details.
