2. This is a category B project according to IFC’s environmental review procedure because specific impacts may result which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines, or design criteria. IFC’s Environment Division’s review of this project consisted of appraising technical and environmental information submitted by Crystal Bank (the Agent Bank) and INGA. The following potential environmental, safety and health impacts of the project were analyzed:

· wood supply source and management
· chemical usage, storage and handling
· air emissions and workplace air quality
· water supply and effluent discharge
· solid and hazardous waste management
· emergency response and fire protection
· employee health and safety, and training.

The information provided about how these potential impacts are addressed by INGA is summarized in the paragraphs that follow. INGA is developing plans to address outstanding issues and to demonstrate that the proposed project will comply with the host country’s applicable laws and regulations and the World Bank Group’s applicable policies and guidelines. The company has appropriate permissions in compliance with national and local laws and regulations for 1st stage of project and will receive permits for each new machine or construction throughout the project. As a result of the IFC loan and the accompanying Technical Assistance program, INGA will develop formal environmental management system addressing compliance, cleaner production and energy efficiency. The company will enhance its EHS department and monitoring plans.

3. Wood Supply, Source and Management. INGA does not process logs directly, however, it acquires logs and has third parties process lumber and veneer on its behalf. The company acquires beech logs from the state-owned logging company Srpske Sume based on yearly contracts. The logs are delivered to Borja and Jadar, for processing, mainly from the division located in Ribnik, area known as one of the best beech wood location in the world. Srpske Sume is professionally organized and managed, working according to annual forest management and reforestation plans. There is no indication that INGA is causing over-harvesting in the region. At present company is purchasing about 15,000 to 20,000 m3 of logs a year.

4. Chemical Usage, Storage and Handling. Chemicals used in production include finishing lacquers and associated solvents, dyes, hardeners, and PU foam components. Hazardous materials are separately stored in a segregated, flammables/explosives storage warehouse, in a manner designed to prevent spills and minimize accidents. The fabric printing process is a heat transfer roller press, with no volatiles or liquids. The furniture coatings operations are typical jet sprays into ventilated, water curtain enclosures. The coatings are stored in barrel lots in an isolated, self-contained, ventilated storage house where housekeeping is adequate. The entire foam processing plant is of English (Viking) technology and was installed in 1983. The chemicals for foam manufacturing include amine, tin oxide silicon oil, toluene diisocyante (TDI) and polyol. The storage facility for these compounds is an above-ground, diked network of wrapped, insulated horizontal tanks. This entire storage area is clean and in good condition. The supplier of components, ARCO Europe, is working with INGA to assure proper use of chemicals. Corrective measures will be taken to meet all applicable standards.

5. Air Emissions and Workplace Air Quality. The potential sources of air emissions at the facility include four (4) multi-fuel boilers used to generate process steam; cutting, milling and sanding operations; furniture finishing processes; and PU foam production. Two of the four boilers are currently in operation. These boilers are permitted by local authorities and burn wood waste only. The company will engage the Ecological Institute in Banja Luka to conduct updated stack emissions analyses. INGA will prepare a plan regarding intentions to install improved controls on boiler stack emissions in order to ensure compliance with World Bank Group guidelines for emissions of particulates, SO2 and NOx,. Particulates from wood cutting, milling and sanding areas are controlled through the use of a dust collection system. This system consists of two Moldow units: one has six cyclones; the other has eight cyclones. These are in good working order with relatively minor leaks. These systems keep the air in the workplace clear of excessive dust and also feed saw dust to boiler silos where it is stored as fuel. Ambient air from the furniture production areas is adequately controlled by building ventilation, recirculation, and air filtration systems. All coatings and finishes are applied by spray-guns in ventilated, water curtain enclosures. INGA will prepare a plan regarding intentions to upgrade the current spraying systems, which will considerably reduce emissions of volatile organic compounds, as well as result in the more efficient use of lacquers and other chemicals. As noted, corrective measures will be taken with respect to PU foam production to ensure that emissions and workplace air quality meet World Bank Group guidelines. With respect to ozone-depleting chemicals, INGA is currently negotiating with an international donor, to receive a grant to upgrade the foam plant to non-CFC, soft foam production. Until such time that this grant is received, the company will produce hard foam only and will not use CFCs.

6. Effluent Discharge. The water for industrial process is supplied from the municipal water supply system. The water is used for water curtains in lacquer facilities, for boiler feed water, potential fire fighting and general washing. INGA generates process effluents from lacquering processes, as well as employee sanitary wastewater and truck washwater. Water in lacquer stations is in closed circulation. Currently, there is no pretreatment of liquid discharge; all wastewater is currently discharged directly to the town’s municipal sewerage system which drains to the local public wastewater treatment plant. INGA has all appropriate permits from statutory authorities to discharge waste effluents to the municipal sewer. INGA will provide the Agent bank with documentation to verify that the municipal sewer flows to a treatment plant and that its plant is meeting requirements. INGA will ensure the Agent Bank, via a report from the municipality, that all process effluents do not need to be collected, and neutralized prior to discharge to the municipal system. If a report calls for pre-treatment, INGA will comply and install such a facility.

7. Solid and Hazardous Waste Management. Solid wastes generated include wood off cuts; veneer and particleboard chips; cardboard and other packaging materials, sludge from water curtains containing overspray; fibers and dust from felt and thermo-wool batting production, and plant trash. The wood waste and other dust particles are collected and transferred through the negative pressure ventilation system to boiler silos to be used as fuel. The small part of general waste remaining is collected and removed by the municipality. The company does not manufacture its own particleboard and therefore does not handle UF resins. There are also no resulting contaminated wood wastes. Spent solvents and automotive waste oils are transferred to recyclers and salvagers, along with scrap steel and other metals from bed spring and furniture manufacturing units. INGA will provide a report describing the disposal of sludge from the water curtains and how the municipality is dealing with this and other materials as part of the solid waste from the site.

8. Emergency Response and Fire Protection. The Fire Prevention System includes a complete series of hydrants around all factory buildings and sprinklers in main factory areas. The system also includes a reservoir of 12 meters depth and 1.8 meters diameter. The reservoir will respond to fill the system within six minutes. The city water is also connected to the system. There are two fire trucks and an office with protective outfits. There is a complete system of CO2 canisters throughout the entire company. All employees receive training in emergency response. The entire system is under the management of a dedicated emergency and fire protection department which regularly inspects and tests the systems. All C02 canisters are labeled with dated municipal inspections.

9. Employee Health and Safety, and Training. The company is addressing all aspects of employee health and safety including workplace hygiene, and general health and safety and training. The Ecological Institute’s recent report noted noise level issues in the steel spring production area, and the INGA has provided sonic panels and ear phones for protection. Fumes from the metal process oils are negligible. The Institute called for an updated Health and Safety Plan which INGA is preparing. In the updated H&S Plan, all equipment that performs cutting and milling operations will have safety guards to protect the operators. INGA has a worker health and safety training plan and program. All staff receives training on the company’s policies and procedures in general safety upon employment. INGA has a medical center on site for regular medical checks as well as emergencies.

10. Crystal Bank, as agent for IFC, will monitor compliance with the relevant environmental, health and safety policies and guidelines during the lifetime of the project. INGA will provide an annual report to Crystal Bank that includes details of environmental and social issues, and Crystal Bank staff will conduct periodic supervision missions to the project. Crystal Bank will provide an annual environmental performance report to IFC covering this project.

11. Based on its review of available information regarding potential environmental and social impacts and proposed mitigation measures, IFC concludes that this proposed project will meet the World Bank Group’s applicable environmental, health and safety policies and guidelines and the applicable requirements of Bosnia-Herzegovina.