Scana Leshan

completed

- 3 - International Finance CorporationA Member of the World Bank GroupInternational Finance CorporationA Member of the World Bank GroupProject Name CHINA-Scana LeshanRegion ASIASector Iron and SteelProject No. 0070711. Scana Leshan (Scana) is a joint venture between Scana Industrier asa, an experienced Norwegian owner and operator of steel enterprises, and Leshan Metakkurgical Machinery and Roll Works, a state-owned enterprise in Leshan Municipality, Sichuan Province, China. This project involves privatization, restructuring and renovation of a metallurgical enterprise mainly producing iron and steel rolls (for use by iron and steel rolling mills) and miscellaneous machinery for the steel and mining industry. The project further involves separation of the production related assets from the former social obligations of the state owned enterprise.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. The project further has a number of special issues in relation to the social impact of privatizing the factory and separating productive from non-productive activities. The review of this project consisted of information submitted by the project sponsors and the technical appraisal and site review completed by IFC''s Technical and Environment Department staff. The following potential environmental, health and safety impacts of this project were analyzed:· air emissions;· liquid effluent contamination;· solid waste management;· monitoring of existing site conditions;· employees health and safety;· agreement on social issues and mitigation measures;· compensation for retired personnel;· compensation for employees near retirement age; and· reemployment assistance.Information provided on how these potential impacts would be addressed in the Scana project is summarized in the paragraphs that follow.3. The project will result in significant reduction of air emissions by installation of extraction and filtering equipment. Air emissions will further be reduced by phasing out of an open hearth furnace and installation of electrical heating for the heat treatment furnaces. These upgradings will be implemented within a three year period.4. A drainage contamination survey will be carried out. Based on the findings of the study a corrective action plan will be prepared and implemented. The corrective action plan will bring the effluents in full compliance with local requirements and World Bank guidelines.5. A new solid waste management plan, in line with an independent consultant’s recommendation is under development. The new plan will be implemented as part of the project.6. Ground water and noise monitoring is under preparation and a management plan will be implemented immediately after the Joint Venture takeover.7. Employees exposed to high noise levels will be subject to obligatory use of hearing protective gear. Employees working in areas with high noise levels will further have yearly hearing loss monitoring. A procedure for monitoring of dust in work places will be implemented according to recommendations from DNV (Det Norske Veritas). Personal protective equipment like hard hats, safety goggles, hard-toe shoes, etc. will be available and obligatory for use in relevant areas.8. An Agreement on Social Issues for mitigating and managing the adverse effects of the restructuring has been negotiated between the Sponsors and the local authorities. The main mitigation measures to be taken to implement the Agreement are given in the following paragraphs:9. Retired staff and staff on leave status will continue to receive the same level of benefits and conditions.10. Laid off employees who are within 10 years of legal retirement age as of 31 December 1997 or who have worked with the factory for 30 continuous years will be eligible for the benefits and conditions of staff on leave status until they qualify for retirement benefits. During the period from lay off to retirement, they will also be eligible for assistance from a Reemployment Service Station. 11. Other laid off employees will receive assistance during a transition period from the Reemployment Service Station. Assistance would include a monthly basic living payment for a maximum period of two years, a lump sum settlement fee for persons who wish to set up a business or find employment on their own, provision of information on employment opportunities in the area, assistance to secure employment in local companies and service industries and training courses in both technical and job finding skills. 12. Leshan Works will continue to provide social services for its employees, retirees and families, as well as for the Joint Venture’s employees and families through commercial contracts with the Joint Venture. Services will include schools, medical facilities and subsidized accommodation.13. IFC will ensure ongoing compliance with World Bank environmental, health and safety policies and guidelines during the life of the project by evaluating monitoring reports submitted annually to IFC by Scana Leshan and by conducting periodic supervision.14. Based on its review of available information regarding potential environmental impacts and proposed mitigation measures, IFC concludes that Scana Leshan’s proposed project will meet World Bank environmental, health and safety policies and guidelines, and host country requirements.P:\CTEEU\SCANA.ERSOctober 10, 1997 11:13 AM