The project sponsor is the Wings Group, which is a well established private Indonesian conglomerate. Their core business is in soap and detergents.

The total project cost is estimated at $35 million. The proposed IFC investments include up to a $19 million A Loan to PT KAS for IFC’s own account.

15.0 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	15.0
Equity

* These investment figures are indicative

Gresik, Surabaya, East Java Province. The plant occupies a portion of a larger industrial site of 75 ha located in north Gresik in a developing industrial area.

The project is expected to have the following development impacts:

- generate new employment, primarily of women;
- increase produce purchased from local farmers, as PT KAS buys locally produced fresh produce for the seasonings in their instant noodles;
- increase income tax revenues paid to the government of Indonesia; and
- increase in consumer surplus through increased competition in a food staple product consumed by the poor.

IFC’s expected development contribution may include:

- providing long-term local currency financing;
- assistance in helping the company comply with IFC’s Environmental & Social Performance standards, and
- supporting and improving productivity of local farmers through a technical assistance program.

This is a Category B project according to IFC’s Procedure for Environmental and Social Review of Projects. Environmental, social, health and safety issues which may be associated with this type of project, and which were reviewed during appraisal, included: management systems for environmental, health and safety (EHS), and life and fire safety issues; compliance with local and WB/IFC requirements for air emissions, wastewater discharges, indoor air quality, noise and waste management; energy, water and other material use and efficiency; labour issues and community engagement.

PT Karunia Alam Segar (PT KAS or the company), an existing IFC client, is one of the operating companies in the Wings Group. It produces instant noodles in Surabaya. Due to high demand, the company is seeking capital to increase its noodle production capacity. All expansion activities are occurring within the company’s existing property so no new land acquisition is required. The existing plant in Surabaya has been appraised as part of IFC’s first and second investments in the company’s instant noodle operations and visited by IFC’s Environmental and Social Specialists as part of regular supervision visits in 2004 and 2006. This current Project has been appraised against IFC’s Social and Environmental Performance Standards.

All staff receive written information on the company’s human resources policies, compensation and benefits, sick leave and holiday allocation, insurance, etc. A workers’ union has been established and operates in accordance with local laws. The company does not discriminate against union members and it has also established a variety of parallel mechanisms for engaging staff. PT KAS is very attentive to worker needs and make significant efforts to ensure a pleasant working environment is maintained. The company communicates with local government and community representatives on a regular basis, implements a number of philanthropic programs to benefit local communities, and has established a mechanism for receiving and addressing grievances.

EHS and fire safety training is conducted internally every four months on matters ranging from fire safety equipment operation to safe machine operations and heavy lifting to food hygiene. An automatic fire detection and suppression system has been installed that includes thermal detection and centralized chemical sprinkler systems in the seasoning frying areas for noodle production.

The company has demonstrated progress against previous Environmental Action Plans for the project and the Corrective Action Plan for the project includes requirements for PT KAS to certify its operations to ISO 22000 within a reasonable time frame. The company is also monitoring its air emissions from the on-site incinerator and will implement any necessary actions to meet local and WB/IFC requirements if needed.

The project is expected to generate a number of benefits: jobs, business for local suppliers, increase in the supply of gas, and revenues to governments. Taxes paid to the government by PAE will likely remain sizeable, with a significant portion paid to provincial governments. On balance, given the prevailing governance situation in Argentina, the risk to these benefits is considered low, and IFC believes that this is an investment that it should make. At a national level, the World Bank Group’s current program in Argentina has governance as a key component. In addition, both the provinces of Santa Cruz and Chubut adhere to the 2004 “Ley de Responsabilidad Fiscal”, meant to promote fiscal discipline at the provincial level. The Chubut province also discloses its fiscal revenues and expenditures monthly on its website.