ENVIRONMENTAL AND SOCIAL MANAGEMENT FRAMEWORK (ESMF)

Transcription

1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Lao People s Democratic Republic Peace Independence Democracy Unity Prosperity LAO PDR - SMALL AND MEDIUM ENTERPRISE ACCESS TO FINANCE PROJECT (P131201) ENVIRONMENTAL AND SOCIAL MANAGEMENT FRAMEWORK (ESMF) Final Version March 11, 2014 IPP708 REV 1

2 PREFACE This Environmental and Social Management Framework (ESMF or Framework) is prepared in accordance with the International Finance Corporation (IFC) Policy on E&S Sustainability (SP) and the World Bank Safeguard Policies. The ESMF lays out the environment and social risk assessment requirements for each transaction seeking financing under the Small and Medium Enterprises Access to Finance Project (SMEAFP) in Lao PDR, actions to mitigate risks and potential negative impacts on local people and environment where transactions are deemed eligible for project financing, and the institutional arrangements to execute the ESMF during project implementation. The Project is assessed as EA category Financial Intermediary (FI). It is anticipated that most transactions will be category B or C. Category A transactions are not foreseen because of the type of activities and the limited size and capacity of Financial Intermediaries and Banks. In the unlikely case that the results of project screening or assessment determine that a transaction to be supported under the project is a Category A, the FI will contact IFC or the World Bank to determine whether such a transaction is eligible based upon significance of potential impacts, risks and the capacity of the counterpart. The Department of Small and Medium Enterprise Promotion (DOSMEP) and the National Implementation Unit (NIU) of the Department of Planning and Cooperation (DOPC) of the Ministry of Industry and Commerce (MOIC), the Participating Financial Intermediaries (PFIs) and Small and Medium Enterprises (SMEs) will have responsibilities to ensure that the provisions of the ESMF are followed and complied with during implementation. This Environmental and Social Management Framework (ESMF or Framework) will be implemented through an Operational Manual that will specify how the International Finance Corporation (IFC) SP and the World Bank safeguards policies may be applied to meet both requirements while being responsive to the Private Sector which will be the main counter-parts of the project. This document is considered a living document and could be modified and revised in line with the changing the type of the project activities. When situations make it appropriate that ESMF be revised, IFC and the World Bank will be consulted prior to its revision and any changes or revisions to the ESMF shall require IFC and World Bank approval. 2

3 Table of Contents 1 Introduction Background Project Components Legal and Institutional Framework Potential Environment and Social Impacts of the Project Objectives of Environmental and Social Screening and Assessment of Proposed Transactions Implementation Arrangements : Environmental and Social Screening Process of Transactions/sub-projects Loan Application Screening and Categorization of environmental and social risk Principles and Methods of Screening for Risk Review Principles and Methods of Categorization List of Transactions that are not Eligible for Financing Environmental and Social Review and Assessment Environmental and Social Review and Assessment for Category C Transactions Environmental and Social Review and Assessment for Category B Transactions Transactions with Civil Works Transactions where Ethnic Minorities are present in the Project area Technical Assistance and Safeguard Capacity Building : Monitoring and Supervision Monitoring and Supervision of the Portfolio by the Financial Institution/PFIs Financial Intermediary Reporting Grievance Mechanisms Public Consultation and Dissemination Process for ESMF...27 Annex A: Environmental and Social Management System (ESMS) Annex B: Environmental, Health & Safety Guidelines Annex C: IFC Performance Standards and World Bank Safeguard Policies Annex D: Environmental Legislation and Institution in Lao PDR Annex E. Simplified Environmental Code of Practice (ECOP) Annex F: Safeguard Screening and EMP Content Annex G. List of Projects Requiring EIA and IEE (in Lao) Annex H: Ethnic Groups Planning Framework

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5 Abbreviations and Acronyms BFL BOL CITES DESIA DOSMEP DOPC EIA EHSGs EGDP EGPF EMP EMMP ESMF ESMS FI GOL IDA IEE IFC LOC MONRE MOIC PAD PFI NIU POPs PS RSF SME SMMP SMEAF SPI TA US$ WB WBG Bank Franco Lao Bank of Lao Convention on International Trade in Endangered Species of Wild Fauna and Flora Department of Environment and Social Impact Assessment Department of Small and Medium Enterprises Promotion Department of Planning and Cooperation Environment Impact Assessment Environmental, Health, and Safety Guidelines Ethnic Group Development Plan Ethnical Group Planning Framework Environmental Management Plan Environment and Monitoring Plan Environment and Social Management Framework Environment and Social Management System Financial Institution Government of Lao PDR International Development Association Initial Environmental Evaluation International Finance Cooperation Line of Credit Ministry of Natural Resources and Environment Ministry of Industry and Commerce Project appraisal document Participating Financial Intermediary National Implementation Unit Persistent Organic Pollutants Performance Standards Risk Sharing Facility Small and medium enterprise Social Management and Monitoring Plan Small and Medium Enterprise Access to Finance Summary of Proposed Investment Technical Assistance United State Dollar World Bank World Bank Group 5

6 1 Introduction 1.1 Background 1. The Government of Lao PDR (GOL) has requested the World Bank Group, specifically the International Development Association (IDA or World Bank) and the International Finance Corporation (IFC), to support its efforts to remove the bottlenecks that constrain access to finance by small- and medium scale enterprises (SMEs) through the Small and Medium Enterprises Access to Finance (SMEAF) Project in Lao PDR (or the Project). The Project development objective is to address the lack of long-term funding sources for banks to support long-term credit to SMEs. The Project will support the growth of privately-owned small and medium enterprises by increasing the supply of long-term finance provided by commercial banks and by strengthening the capability of the Department of Small and Medium Enterprises Promotion (DOSMEP) of the Ministry of Industry and Commerce (MOIC) to formulate and implement public policies that promote access to finance for SMEs. 2. Given that the specific transactions will only be identified during implementation, an Environmental and Social Management Framework (ESMF) was developed to ensure that these transactions and project activities are properly assessed for and will not create adverse impacts on local environment and local communities. The ESMF includes (a) environmental and social screening of transactions, including a list of transactions which will not be funded under the Project because the impacts of these transactions outweigh their costs and benefits; (b) clarification on environmental assessment categorization of proposed transactions (c) environmental and social review and assessment process; (d) general impacts and relevant mitigation measures (e) subproject monitoring, supervision, and grievance redress mechanisms., and (f) public consultation and dissemination process. 1.2 Project Components 3. The proposed Project is composed of three components: 1) Line of credit to commercial banks to support SME lending (IDA $12 million) 2) Risk sharing facility for SME finance (IDA $3 million, IFC $12 million, and participating financial institutions $15 million) 3) Technical Assistance (IDA $5 million) Components 1 and 3 will be fully funded by IDA and implemented by the Department of Small and Medium Enterprise Promotion (DOSMEP) of Laos and the PFIs. Component 2 will be executed by IFC on behalf of DOSMEP. IFC will only support and participate in Component 2 of this operation. 6

7 Component 1: Line of credit to commercial banks to support SME loans (IDA US$12 million): 4. To alleviate the lack of long term sources of funding that prevents banks from providing long term credit (more than 3 years) to SMEs, DOSMEP will administer $12 million dollars from this operation. With these resources, DOSMEP will provide long-term sources of funding to participating financial intermediary/commercial banks so that they can then extend long term credit also in local currency to SMEs in the private sector. SMEs will thus be able to carry out long term capital investments, such as acquisition of machines and equipment, construction or expansion of warehouses, modernization of transportation and communications equipment, and any other investments in fixed assets that increases their business operations and enhances their productivity (See Box 1 of potentially eligible transactions/activities). In principle, SMEs will be able to borrow from commercial banks, provided that their proposed transactions are not included in the list of ineligible activities under the Project (section 2.5. of the ESMF). Component 2. Risk-sharing facility 5. DOSMEP plans to set up a Risk Sharing Facility (RSF) to provide a partial credit guarantee to local PFIs to support SME finance in Laos. It is a RSF with an underlying portfolio consisting of eligible SME loans originated by two PFIs of the project. The total lending amount to be partially covered by the facility is expected to reach USD 30 million (where IDA covers USD 3 million, IFC covers USD 12 million, and participating banks cover the remaining USD 15 million). 6. PFIs will originate the loans, in accordance with the loan eligibility criteria approved by IFC and IDA, and will take credit decisions on and administer/service the loans. At this time, it is expected that one private bank will join the RSF (Bank Franco Laos) once the project is implemented. The IFC will serve as the agent to manage the RSF and will share relevant information with DOSMEP. Moreover, IFC and DOSMEP will jointly monitor and evaluate the performance of the risk-sharing facility. Component 3: Technical Assistance (US$ 5 million) 7. This component will provide technical assistance to DOSMEP, participating commercial banks, and SMEs. Moreover, it will assist DOSMEP and participating banks to comply with the IFC SP and the World Bank Operational Policies. 8. Under Components 1 and 2, the LoC and RSF are open to all commercial banks and financial institutions that meet the eligibility criteria, provided that they have interest in the LoC s and/or RSF s objectives and agree to screening, assessing and addressing environmental and social risks of transactions in accordance with this Environment and Social Management Framework (ESMF or Framework) and other relevant Project documents. It is anticipated that 6 commercial banks will participate in the LoC and that 2 commercial banks in the RSF. To be able to participate in either of the schemes, PFIs will have to demonstrate to be financially-sound 7

8 and well administered 1. The maximum foreseen amount a single SME will be able to borrow will be the equivalent of $50,000 dollars for small firms and $200,000 dollars for medium-sized firms Technical Assistance (TA): Financing support will be provided to (i) PFI to manage SME loans in a sustainable manner; (ii) beneficiary SMEs on business administration, financial management and other relevant skills for their business development; and (iii) DOSMEP and key agencies on SME policy implementation. The TA will also include the capacity development of PFIs, beneficiary SMEs and DOSMEP on policies, procedures and principles under this ESMF. Budget is earmarked under the project for the safeguard capacity development of key stakeholders under the project. 1.3 Legal and Institutional Framework 10. In Lao PDR, there is no specific legislation specifically covering the SME sector SMEs are covered by the laws applicable to all commercial entities, and are required to follow the same environmental and social requirements. The Environmental Protection Law (revised in 2012) requires effective management and control of pollution, waste, and toxic substance from various sources and key agencies such of the Pollution Control Department (PCD) and the Environmental Quality Promotion (DEQP) of the Ministry of Natural Resources and Environment (MONRE) are tasked to manage and facilitate achievement of this objective. The Environmental Protection Law also requires all development projects that potentially cause environmental and social impacts to undertake an Initial Environmental Examination (IEE) and Environmental Impact Assessment (EIA) as relevant (see Annex D) and the Department of Environmental and Social Impact Assessment (DESIA) of MONRE is responsible for review, approval and compliance monitoring of EIA while the provincial MONRE (PONRE) is responsible for those related to IEE projects 3. The project developers are also required to deploy appropriate project design, mitigation measures and monitoring plan and resources to address possible impacts. Guidelines for Public Involvement in ESIA were also approved in February The Ministry of Industry and Commerce (MOIC) will be responsible to ensure that industries and SMEs under it supervision are in compliance with the EPL and other related GOL regulations. Details on environmental legislation in Lao PDR are provided in Annex D. 11. On social safeguards, the Compensation and Resettlement (CAR) Decree (2005) requires that developers compensate for loss of land and other assets at replacement cost and a technical guideline to support the implementation of the Decree has also been developed. The CAR Decree is being reviewed by DESIA in the context of the revised EPL (2012). There are 49 ethnic groups under four linguistic groups that meet the eligibility criteria of the OP 4.10 as 1 In particular, banks will have to comply with the following four conditions: (a) Disclose and make available to the public their audited financial statements for the past three years; (b) report a non-performing loan ratio below 4% during the past 3 years, (c) report compliance with the minimum capital adequacy ratio of BOL for the past three years, and (d) demonstrate profitability for the past 3 years through positive returns on assets and equity. 2 As defined by the GOL regulations 3 According to MONRE regulations on EIA and IEE issued on 17 December

9 indigenous peoples. Constitutionally, Laos is recognized as a multi-ethnic society, and Article Eight of the 1991 Constitution states, All ethnic groups have the right to preserve their own traditions and culture, and those of the Nation. Discrimination between ethnic groups is forbidden. National guidelines for consultation with the ethnic groups were developed that provide detailed steps that should be taken when consulting ethnic groups for policy issues or development projects. 12. For more details on the applicable national legal and institutional framework, please consult Annex D of the ESMF. 13. For this Project, both the IFC Sustainability Policy and the World Bank Safeguards policies apply. For IFC Performance Standards to be fully applied the SME activities must be project based and/or related to corporate expansion covered by a 36 month loan with a 10 million overall investment which may be the case for medium sized companies. If not, only the Performance Standards PS 1 Social and Environmental Management Systems, PS 2 on Labor and Working Conditions and the World Bank Group Environmental Health and Safety Guidelines. 14. Guidance on the specific application and combined use of these policies will be provided in the Operational Manual. It is anticipated that for the majority of the loans IFC PS1 on Social and Environment Management Systems and PS2 on labor and Working Conditions and World Bank OP 4.01 on Environment Assessment and the WBG EHS Guidelines will apply. In some cases, the World Bank policies OP 4.36 on Forestry, OP 4.04 Natural Habitats and Op 4.10 Indigenous Peoples may also apply and in some cases where IFC Performances Standards apply as indicated in paragraph 13 for medium sized companies PS 6 on Biodiverdity Conservation and Sustainable NRM and PS7 on Indigenous Peoples may apply. 15. Therefore the following IFC Performance Standards and World Bank Safeguard policies may potentially apply and be considered in the ESMF in cases specifically indicated in the Operational Manual: Social and Environmental Management Systems PS 1. IFC Performance Standard 1 establishes the importance of (i) integrated assessment to identify the environmental and social impacts, risks, and opportunities of projects; (ii) effective community engagement through disclosure of project-related information and consultation with local communities on matters that directly affect them; and (iii) the management of environmental and social performance throughout the life of the project. PFIs participating in the RSF, in coordination with other responsible government agencies and third parties as appropriate, will conduct a process of environmental and social assessment, and establish and maintain an ESMS appropriate to the nature and scale of the project and commensurate with the level of its environmental and social risks and impacts. The ESMS will incorporate the following elements: (i) policy; (ii) identification of risks and impacts; (iii) management programs; (iv) organizational capacity and competency; (v) emergency preparedness and response; (vi) stakeholder engagement; and (vii) monitoring and review. 9

10 Labor and Working Conditions PS 2. IFC Performance Standard 2 recognizes that the pursuit of economic growth through employment creation and income generation should be accompanied by protection of the fundamental rights of workers. For any business, the workforce is a valuable asset, and a sound worker-management relationship is a key ingredient in the sustainability of a company. Failure to establish and foster a sound worker-management relationship can undermine worker commitment and retention, and can jeopardize a project. Conversely, through a constructive worker-management relationship, and by treating the workers fairly and providing them with safe and healthy working conditions, they may create tangible benefits, such as enhancement of the efficiency and productivity of their operations. The applicability of this Performance Standard is established during the environmental and social risks and impacts identification process. The implementation of the actions necessary to meet the requirements of this Performance Standard is managed through the client s Environmental and Social Management System (ESMS), the elements of which are outlined in Performance Standard 1. The scope of application of this Performance Standard depends on the type of employment relationship between client and the worker. It applies to workers directly engaged by the client (direct workers), workers engaged through third parties to perform work related to core business processes of the project for a substantial duration (contracted workers), as well as workers engaged by the client s primary suppliers (supply chain workers).4 Biodiversity Conservation and Sustainable NRM PS 6. IFC Performance Standard 6 recognizes that protecting and conserving biodiversity, maintaining ecosystem services, and sustainably managing living natural resources are fundamental to sustainable development. The applicability of this Performance Standard is established during the environmental and social risks and impacts identification process. The implementation of the actions necessary to meet the requirements of this Performance Standard is managed through the client s Environmental and Social Management System (ESMS) Indigenous Peoples PS 7. IFC Performance Standard 7 recognizes that Indigenous Peoples, as social groups with identities that are distinct from mainstream groups in national societies, are often among the most marginalized and vulnerable segments of the population. In many cases, their economic, social, and legal status limits their capacity to defend their rights to, and interests in, lands and natural and cultural resources, and may restrict their ability to participate in and benefit from development. Indigenous Peoples are particularly vulnerable if their lands and resources are transformed, encroached upon, or significantly degraded. Their languages, cultures, religions, spiritual beliefs, and institutions may also come under threat. As a consequence, Indigenous Peoples may be more vulnerable to the adverse impacts associated with project development than non-indigenous communities. This vulnerability may include loss of identity, culture, and natural resource-based livelihoods, as well as exposure to impoverishment and diseases. Private sector projects can create opportunities for Indigenous Peoples to participate in, and benefit from project-related activities that may help them fulfill their aspiration for economic and social development. Furthermore, Indigenous Peoples may play a role in sustainable development by promoting and managing activities and enterprises as partners in development. Government often plays a central role in the management of Indigenous Peoples issues, and clients should collaborate with the responsible authorities in managing the risks and impacts of their activities. The applicability of this Performance Standard is established during the environmental and social risks and impacts identification process. The implementation of the 10

11 actions necessary to meet the requirements of this Performance Standard is managed through the client s Environmental and Social Management System. Environmental Assessment OP/BP Beneficiary SMEs of line of credit (Component 1) and Risk Sharing Facility (Component 2) are expected to engage in diverse types of activities, some of which may have some negative environmental and/or social impacts and risks. The exact location, nature, scale and scope of environmental and social impacts can only be known during implementation when PFIs receive applications from eligible SMEs. Given the nature and size of credit to be provided to each SME however, the potential negative impacts are likely to be minor, localized, and reversible and can be mitigated with simple measures and environmental good practice. Natural Habitats OP/BP The project activities are not envisaged to create significant negative impacts on natural habitats. Nevertheless, there could be transactions that may impact on natural habitats. Transactions that will have adverse impacts or will cause significant degradation of critical natural habitats will not be supported in line with the policy. Transactions that will cause adverse impacts or degradation of non-critical natural habitats may be supported provided that the benefits of the transaction outweigh the negative impacts and that measures are devised and implemented to address negative impacts. Forests OP/BP The project will not support transactions that may significantly affect or degrade critical natural forests. However, production and distribution of construction materials is one of the eligible activities under the project, which will likely involve wood/lumber production. Indigenous Peoples OP/BP While the project will only finance transactions that take place within urban areas defined as cities and towns of more than 10,000 people, some transactions may entail sourcing of materials from areas that have the presence of indigenous peoples (e.g., production and distribution of construction materials) or some transactions may involve IP businesses. 1.4 Potential Environment and Social Impacts of the Project 16. The Project will provide support to eligible SMEs to carry out small scale commercial transactions through LOC and RSF. The exact location, nature, scale and scope of the potential impacts can only be known during implementation. However, as shown in Box 1, it is anticipated that the majority of transactions will be in the services or light manufacturing sectors and occur in or near urban areas where PFIs have branches. Beneficiary SMEs are expected to engage in diverse types of activities, some of which may have negative environmental and/or social impacts and risks. However, these negative impacts are likely to be minor, localized, and reversible and can be mitigated through proper environment and social screening, application of simple measures and environmental good practices, especially given the nature and size of the transactions and the limited funding to be made available to respective SMEs is small ($20,000-40,000). Also, land acquisition will not occur because the maturity of SME loans to be made available under the project will not be more than 8 years and is too short to finance land purchase 11

12 which normally requires a longer maturity period over years. Environmental and/or social risks associated with them can therefore be readily identified and addressed through mitigation measures. 17. Minor, reversible and site-specific environment and social impacts may occur that require commensurate assessment and management, including civil works impacts in areas/lands owned by the SMEs such as air and water quality deterioration, noise, occupational health and safety, solid waste generation and disposal. Other transactions may require sourcing of raw materials from forests or natural habitats, e.g., production and distribution of construction materials, or maybe in areas with indigenous peoples. It is expected that most of the beneficiary SMEs will not have adequate capacity in managing even minor environmental or social impacts. This ESMF is therefore developed to ensure that such impacts are identified, avoided, minimized and adequately mitigated. ESMF also includes the list of those transactions that are not eligible for project support (Section 2.5). PFIs will be required to screen transactions with SMEs for environment and social impacts and integrate into their lending program the requirements of environmentally and socially sound and sustainable development in line with this ESMF. 1.5 Objectives of Environmental and Social Screening and Assessment of Proposed Transactions 18. The objectives of screening are to: (i) screen each transaction for eligibility; (ii) assess environment and social issues; (iii) determine applicable E&S requirements; (iv) assign environment category of the transaction based on risks and potential impacts; and, (v) put forward specific instrument/plan for each transaction, if needed, to address environment and social impacts. Specific environmental and social assessment process will be carried out for all transactions proposed for funding under the project through the following main steps: Screening: If the proposed activity is likely to cause environmental or social impacts, what are the likely consequences of these impacts? Scoping: What are the main issues for assessment? What is the project s geographic area of influence? At what stage of activity are the impacts likely to occur? Are there directly affected people or local communities that may be impacted by the project and whose views and concerns therefore should be considered in project design and implementation? Assessment and development of mitigation measures: Analyze the scope and nature of the impacts, the need for permits, public perceptions of the impacts, and develop measures to avoid or mitigate those impacts as well as mechanisms to monitor how well the risks are being managed. Consultation and disclosure: Share information on the project and its expected impacts with directly affected people, local communities, or other stakeholders; and seek their views and concerns about project design and implementation. 12

13 19. It is anticipated that most transactions will be category B or C. Category A transactions are not foreseen because of the type of activities and the limited size and capacity of Financial Intermediaries and Banks. In the unlikely case that the results of project screening or assessment determine that a transaction to be supported under the project is a Category A, the FI will contact IFC or the World Bank to determine whether such a transaction is eligible based upon significance of potential impacts, risks and the capacity of the counterpart. 20. Depending on the nature of the transaction and the associated environmental and social risks, a range of instruments (e.g., Initial Environmental Evaluation [IEE], Environmental Management Plan [EMP], Environmental Code of Practice [ECOP], Check Lists, etc.) can be used to assess and mitigate the risks and impacts. First, companies should follow what is required by national law before any determination is made whether additional instruments are needed. For example, existing operations with moderate risks or impacts that require new/revised investments may best be assessed with an environmental audit of the operations in addition to other requirement such as preparation of a simple EMP and/or ECoP. In some circumstances, the EMP or ECoP may be no more complex than a list of good practices in managing and/or treatment of liquid and solid wastes and/or toxic substance. If such transactions are to be supported, an EMP will be developed in line with this ESMF (Section 3.2). 21. Regarding ethnic minorities, although most of the transactions are expected to take place in urban areas defined as cities and town more than 10,000 peoples, some transactions may involve sourcing of materials from areas where ethnic groups are present and/or involve ethnic groups businesses. Screening will be carried out by SME loan applicants to identify if ethnic groups are present in the zone of influence of the proposed transactions and if it is the case, free, prior and informed consultation (or consent if applicable) will be carried out with the affected ethnic groups to ascertain their broad community support to the proposed transactions. The results will be compiled in a simplified Social Assessment (SA) following this ESMF and will be the basis to develop, if needed, a simplified Ethnic Group Development Plan which may take the form of a table. 22. Transactions that are likely to have significant adverse impacts that requires a full EIA will not be eligible for financing from the Project due to longer preparation time for the EA, the lack of capacity of the SME to manage these type of environmental and social impacts and the costs involved, which would outweigh the benefits. 1.6 Implementation Arrangements Component 1 and The Department of Small and Medium Enterprise Promotion (DOSMEP) will be the implementing agency for Components 1 (Line of Credit) and 3 (Technical Assistance). DOSMEP is under the Ministry of Industry and Commerce (MOIC) and will take on an overall responsibility for project implementation, including implementation of this ESMF. It will be supported by the National Implementation Unit (NIP) which is also under MOIC. Although the day to day implementation of ESMF is delegated to PFIs and the roles of DOSMEP will 13

14 primarily be on compliance monitoring and reporting to the World Bank Group, DOSMEP assumes an overall responsibility under the project to ensure that PFIs and SMEs implement the ESMF. In doing so, DOSMEP will work closely with the relevant agencies under the Ministry of Natural Resources and Environment (MoNRE). An Environment Consultant will be hired by DOSMEP to assist in its safeguards work. 24. Participating Financing Intermediaries (PFIs) will administer/on lend the line of credit to SMEs to finance their eligible transactions. As such, PFIs will be responsible for screening individual transaction for eligibility under the project against eligibility criteria, including the list of ineligible activities; screening of transactions to determine environment and social issues and impacts, categories, policies triggered and the transaction-specific instruments and measures that need to be put in place by the SMEs to manage these impacts. PFIs will also monitor implementation of the measures committed by the SMEs and regularly report compliance to DOSMEP and the World Bank. Specifically, the PFIs will: Comply with the List of Ineligible Activities under the Project (Section 2.5). This list includes activities prohibited by international environmental agreements or where the World Bank Group considers financing inappropriate because of the significance of associated environmental and social risks that outweigh the benefits. Take measures as deemed necessary including site visits if necessary to validate that the SME loan applicant has appropriately identified in its loan application (Section 2.1) the environmental and social risks and measures needed to manage them in project implementation. Monitor compliance of SME beneficiaries in line with this ESMF and the related action plans developed (e.g. EMP, ECoP, EMDP). Develop, and maintain, grievance redress mechanisms as provided in this ESMF to ensure that those with grievances to the transactions supported under the project have avenues for redress. Submit to the NIU and DOSMEP periodic reports on the implementation of the ESMF. The NIU and DOSMEP will report to IFC or the World Bank Team Leaders (to be agreed within World Bank Group) as part of the project progress report. Within five business days of becoming aware, notify the World Bank Group Team Leaders of any significant social, labor, health and safety, security or environmental incident, accident, issue, or circumstance with respect to any financing activities covered by the LOC and the RSF. Ensure that the proposed activity covered by the loan complies with all national environmental legislation and regulations. If an applicant states that the necessary permits or licenses have not yet been issued, PFIs will advise the applicant to obtain 14

15 the licenses and permits before loans can be approved. During supervision, NIU and DOSMEP will ensure that all the transactions for SME comply with government regulations. Ensure that where applicable all project affected people are aware of the respective investments and were consulted before approval of the investment. Disclosure of respective instruments (environmental audit, EMP, IEE, etc) should be done in local language before the loan is approved. 25. Small and Medium Enterprises (SMEs) will be responsible for ensuring that their transactions meet the eligibility criteria, manage environment and social impacts through the preparation and implementation of measures, including consultations and disclosures of specific safeguard instruments, e.g., IEE or EMP, EMDP. 26. IFC and/or World Bank will provide implementation support to the project through regular supervision and follow up works, monitor the implementation of the ESMF. The IFC and/or World Bank Team will include qualified Environment and Social Development Specialists, who will also assist in the capacity building of DOSMEP and the PFIs. The IFC and/or World Bank will require that the first year transactions will be reviewed prior to implementation, from a safeguards perspective, until such time that capacity is built at DOSMEP and the PFIs. Component International Finance Corporation (IFC) will administer the Risk Sharing Facility (Component 2) on behalf of DOSMEP. IFC will assume the overall responsibility for ensuring that Bank Franco Lao (BFL) has implemented an Action Plan and Environmental and Social Management System (ESMS) in accordance with the IFC Sustainability Policy. 28. Bank Franco Lao will ensure that the ESMF, its agreed action plans, including establishing an ESMS, are established, strengthened and implemented in compliance with the IFC Sustainability Policy and applicable World Bank Safeguard Policies. The ESMS describes key features such as: social and environment policies and procedures; current organization structure and staffing for managing environmental and social risk; skills and competencies in social and environmental areas; training and awareness of the institution s investment, legal, and credit officers on the organization s ESMS; reporting systems to managers; and performance monitoring procedures. This Framework is a tool for staff 4 of the PFI to accompany other guidance tools for risk management that have been developed and implemented by the institution or its corporate parent. PFIs will also monitor implementation of the measures committed by the SMEs and regularly report compliance to DOSMEP and the World Bank. 4 Including any expert consultants that may be hired or retained by the financial institution/pfi to fully implement the procedures outlined in this document 15

16 29. DOSMEP, most PFIs in the line of credit (Component 1), and eligible SMEs do not have knowledge or experience in environmental and social standards or basic knowledge on waste management and pollution control (water, air, noise), and will receive technical assistance and training under the project. The technical assistance will provide training to support the implementation of the ESMF and ESMS as well as develop practical guidelines for waste management and pollution control for the target type of SMEs that may have impacts on the local environmental and local people. The technical assistance will also be extended to build capacity of key agencies in MOIC and MONRE to address waste management and pollution issues from SMEs including forging effective coordination and cooperation among key agencies both at central and provincial levels. 30. Key MONRE agencies at national level include PCD (responsible for issuance of environmental control regulations and standards, DEQP (responsible for promotion of clean technology and secretariat to the National Environmental Committee), and the Natural Resources and Environment Research Institute (NREI) responsible for monitoring compliance with emission and ambient standards. At provincial and district level, provincial and district offices (PONRE and DONRE) are responsible for overseeing and monitoring of SMEs activities related to waste management and pollution control, including approval of an initial environmental evaluation (IEE). Capacity of these agencies and province, districts is also limited. Box 1. Implementation arrangement of the project DOSMEP with support of NIU (monitor/report ESMF implementaiton) LOC (DOSMEP with support of NIU) RSF (IFC/PFIs) TA (DOSMEP/NIU) PFIs (Prepare ESMS and monitor mitigation actions) PFIs (Prepare ESMS and monitor mitigation actions) DOSMEP with support of NIU prepare TOR for TA and supervise TA implementation) SMEs (implement mitigation actions) SMEs (implement mitigation actions) MONRE (PCD, DEQP, PONRE) (assits SMEs) 16

17 2: Environmental and Social Screening Process of Transactions/subprojects 2.1 Loan Application 31. The transaction must satisfy national, IFC, and World Bank environmental and social requirements as well as this ESMF. The SME applicant for a loan will present to PFIs a brief description of the transaction and what the applicant considers are likely to be environmental or social risks and issues of concern with respect to the transaction (see form in Annex F). This information will be used by PFIs in the initial screening and categorization process. 2.2 Screening and Categorization of environmental and social risk 32. The PFI will categorize the environmental and social risk of each proposed transaction (i.e., the activity which is the subject of the loan application) in accordance with the ESMF. The choice of categorization will have the following implications (see more details in Section 2.4): Category A transaction: These are transactions that are likely to have significant adverse environmental and social impacts that are sensitive, diverse or unprecedented, or transactions whose impacts affect an area broader than the sites or facilities subject to physical works. It is highly unlikely that Category A transactions will be proposed by eligible SMEs. Also, the cost and time associated with assessing such impacts and developing mitigation measures will likely exceed the benefits of the small size of loans ($20,000-40,000) that will be made available to SMEs under the project. In the unlikely case that the results of project screening or assessment determine that a transaction to be supported under the project is a Category A, the FI will contact IFC or the World Bank to determine whether such a transaction is eligible based upon significance of potential impacts, risks and the capacity of the counterpart Category B transaction: The transaction may have environmental or social risks that are less adverse and more limited than category A level, their impacts are site-specific and largely reversible, which could be readily identified and reliably mitigated through recognized good practices including those described in World Bank Group Environmental, Health and Safety Guidelines (EHSGs). PFIs will verify that: (1) supported activities comply with applicable national environmental and social laws and regulations, and applicable IFC E&S requirements and World Bank safeguard policies; (2) appropriate environmental permits are obtained prior to lending; and (3) investments do not contravene the List of Ineligible Activities presented in Section 17

18 2.5 of this Framework. Section 2.4 provides the characteristics of transactions that typically trigger Category B categorization. Category C transaction: The transaction is likely to have minimal, low-risk or no environmental or social risks associated with it. No further environmental and social assessment work is required after screening, but there is need to verify compliance with national regulations and relevant permit requirements as well as to monitor implementation of transactions ; any environmental and/ or social impacts that may occur will be addressed as per this ESMF. Category C transactions are expected to be the bulk of SME activities given the limited size of the loans and eligibility criteria especially in the services sector such as light equipment leasing activities, provision of temporary personnel or office support such as data processing, or trade and export/import services. Transactions not eligible for financing under the Project: Besides transactions Ok Owith significant adverse impacts, some transactions are not allowed under the Project for financing because of higher costs and time associated with preparation of impact assessment and development of mitigation measures, and given the limited capacity of PFIs in managing such impacts in line with IFC Performance Standards and World Bank safeguard policies. The list of these transactions is provided in Section 2.5,and include those transactions typically prohibited by international environmental agreements or where the World Bank Group considers direct financing inappropriate because of the significance of associated environmental and social risks. It also includes: Transactions that will require the acquisition of private land or physical relocation of households; Activities based on or directly linked to land/ natural resource based productions such as food productions and processing, and other transactions of which the scale of impact exceeds the cost and time to address them given the scale of project benefits and the capacity of project stakeholders. Activities involving child labor and activities involving forced labor; Industrial-scale activities involving significant conversion or degradation of natural and/or critical habitats and/ or any activities in legally protected or internationally recognized areas; Industrial-scale activities involving production, harvesting, or trade in wood or other forestry products from plantation and natural forests other than from legal and sustainable origin; Industrial-scale activities involving harvesting of wild fish populations or other aquatic species other than from legal and sustainable origin; 18

19 Activities, including relocation, that have adverse impacts on the lands, natural resources, or critical cultural heritage subject to traditional ownership or under customary use by Indigenous Peoples; Activities involving significant alteration, damage, or removal of any critical cultural heritage. 2.3 Principles and Methods of Screening for Risk Review 33. Screening is the first step in the environmental assessment process, which will assign the transaction in question to one of the three categories (, B or C). This categorization will decide the nature of further environmental and social assessment and identify transactions to be excluded at an early stage to avoid or reduce significant adverse impacts and save costly and time-consuming procedures and analysis. The significance of impacts may be described in different ways. The simplest approach is the presence or absence of impacts and qualification of degree of impact as minimal, moderate, significant, or highly significant. In assessing degree of impact or risk, it is appropriate to take into consideration type, scale, location, timing, and sensitivity of the impact. A key factor to consider is whether the impact is reversible, and if so, the rate of recovery. 2.4 Principles and Methods of Categorization Category B Transactions 34. Transactions that may have some environmental or social risks that are less adverse and more limited than category A level, site-specific and largely reversible, and readily addressed through mitigation measures are normally classified as Category B. The following characteristics fro example indicate a likely Category B transaction. Labor and working conditions are unlikely to include harmful child labor, involuntary or compulsory labor, or significant occupational health and safety issues; Those transactions that will not cause adverse impacts on non critical natural habitat or non critical natural forests including the production and distribution of wood/ lumber. Most small-scale in-situ rehabilitation or repair of infrastructure such as rural health clinics, rural water supply and sanitation, small schools, etc. Category C Transactions 35. Transactions that do not have the characteristics described above as characteristics of Category A and B transactions and are perceived to have minimal or no adverse environmental or social impacts are classified as Category C, and no further environmental or social assessment work needs to be done after initial screening and categorization. PFIs are nonetheless required to 19

20 verify compliance with national regulations/ permit requirements, to monitor the implementation of such transactions and address any environmental and/ or social that arises as per this ESMF. Examples of Category C transactions include purchase and supply of goods and services and capacity building. 2.5 List of Transactions that are not Eligible for Financing 36. Following transactions are not eligible for financing given the significant adverse impacts that will likely require more resources to mitigate than the scale of benefit and the limited capacity of PFIs in managing impacts in line with the IFC SP and World Bank safeguard policies> All financial intermediaries (FIs) must apply the following exclusions: Production or trade in any product or activity deemed illegal under host country laws or regulations or international conventions and agreements, or subject to international bans, such as pharmaceuticals, pesticides/herbicides, ozone depleting substances, PCB s, wildlife or products regulated under CITES. Production or trade in weapons and munitions Production or trade in alcoholic beverages (excluding beer and wine) Production or trade in tobacco¹. Gambling, casinos and equivalent enterprises¹. Production or trade in radioactive materials. This does not apply to the purchase of medical equipment, quality control (measurement) equipment and any equipment where IFC considers the radioactive source to be trivial and/or adequately shielded. Production or trade in unbonded asbestos fibers. This does not apply to purchase and use of bonded asbestos cement sheeting where the asbestos content is less than 20%. Drift net fishing in the marine environment using nets in excess of 2.5 km. in length. Production or activities involving harmful or exploitative forms of forced labor 1 /harmful child labor 1. Commercial logging operations for use in primary tropical moist forest Production or trade in wood or other forestry products other than from sustainably managed forests. Production or trade in unbonded asbestos fibers or use of asbestos-containing materials. Transactions involving major construction and civil works that would cause significant adverse impact and require a full EIA report according to the national EIA regulation (Annex D) and in line with the IFC Performances Standards and WB 20

21 safeguard policies (e.g., category A), which would be beyond the capacity of the SMEs to manage. Transactions involving logging or those that that would significantly degrade or convert forest, critical natural habitats. However, transactions that may cause adverse impacts or degradation of non-critical natural habitats may be supported provided that the benefits of the subproject outweigh the negative impacts including the cost to devise and implement specific measures to mitigate them. Production and distribution of construction materials is one of the eligible activities provided that wood/lumber production are sourced legally and further due diligence of the sources will be pursued as part of processing and approval of the transaction. Transactions that will require acquisition of private land or displacement of people from their livelihoods. 3 Environmental and Social Review and Assessment 3.1 Environmental and Social Review and Assessment for Category C Transactions 37. If the likely environmental and social risks and impacts are determined through the screening process to be very low or negligible, the transaction is a Category C and no further environmental review and assessment is required. However results of the safeguard screening should be attached to the transaction documents. Also, PFIs should ensure that the transaction meets the national requirements including permitting and monitor implementation of such transactions to address any environmental and/ or social impacts that may result. 3.2 Environmental and Social Review and Assessment for Category B Transactions 38. For Category B transactions, the environmental and social risks and impacts are perceived to be manageable, site specific, reversible and with established remedial and good practice measures as described in the appropriate WBG Environmental Health and Safety Guidelines. 39. If the activity is one that is subject to preparation of an IEE report under Lao PDR legislation, the PFI may proceed to process the loan application, but will not disburse the loan until the IEE is reviewed and approved by the IFC and/or World Bank (as agreed with applicant) and the applicant provides a notice of approval from the GOL agencies responsible for review and approval of the IEE (see Annex D). 40. An environmental and social impact audit may be carried out on proposed transactions as well as on existing facilities which focuses on two elements: (a) compliance of existing facilities and operations with relevant environmental (including occupational health and safety) and social laws, regulations, and applicable IFC and World Bank policies requirements (Section 1.3); and 21

22 (b) the nature and extent of environmental and/or social impacts, including contamination to soils, groundwater, and structures, as a result of past/ on-going activities and proposed transactions. The scope and depth of the audit or review should be commensurate to potential impacts and type of transactions. 41. A corrective Action Plan will be developed if the environmental and social impact audit or review finds that negative but manageable impacts may occur as a result of continuing implementation of on-going activities or new implementation of proposed transactions. The Action Plan may call for preparation and implementation of an EIA, an IEE, an Environmental Management Plan (EMP) or Environmental Code of Practice (ECoP), as relevant, to address the impacts that are identified based on the audit. The Action Plan should also include measures to inform potentially affected people of the nature of transactions, potential impacts, mitigations measures and grievance mechanisms. The Action Plan should be attached to the loan proposal and the assessment and verification for compliance with the proposed actions, the ESMS of relevant PFIs, and this ESMF is a condition of loan/transaction approval. Annex F provides sample for EMP content and form for screening. 42. It is recognized that SMEs may have limited capacity for assessing environmental and social risks or carrying out necessary studies, such as environmental and/or social impact audits or reviews. In such cases, flexibility will be applied and efforts will be made to find the best and sustainable instruments and procedures for the transaction in question. In accordance with its ESMS, PFIs will ensure that the environmental and social risks and impacts have been adequately identified and appropriately managed in a manner commensurate to the risk review as well as ccorrective Action Plan, which if developed, in line with ESMS, is a condition of loan approval. In some instances, PFIs may opt to arrange for an appropriate environmental review on its own behalf using outside expertise. At minimum, for all Category B transactions, PFIs will prepare for the record a brief summary report or memorandum identifying sources of information and relevant facts and findings that allow a determination that the transaction is consistent with applicable environmental and social requirements. 43. In the event that the applicant has already prepared an IEE in accordance with Lao PDR regulations and processes, the IFC or World Bank as agreed and the PFI must review the report and make a determination whether: it is adequate and accurate in identification of environmental and social impacts; that appropriate measures have been identified to avoid, minimize, or mitigate those impacts; that the applicant has the commitment and the capability to manage the impacts as proposed. Moreover, PFIs will assure itself that the records show that timely and appropriate consultation with directly affected people, local communities, and interested stakeholders has taken place on the findings and recommendations of the IEE before loan approval. In Lao PDR a guideline for public involvement in the EIA process and a guideline on consultation with ethnic groups have been developed and they should be applied (see Annex D). These guidelines should be complemented by the IFC or WB disclosure policy requirements. 44. It is expected that most PFIs do not have capacity to manage environmental or social impacts.. The IFC and World Bank will retain rights to prior review the results of environmental and social screening, audits and ccorrective Action Plans, if developed, until PFIs are considered to have developed adequate capacity to review them independently. Once PFIs are evaluated by 22

23 the environment and social specialists to have developed sufficient capacity, the IFC or World Bank will review randomly selected environmental and social audits or reviews and ccorrective Action Plans on a post review basis. 3.3 Transactions Requiring Land Acquisition or Change in Land Use 45. The subproject involving physical relocation of households or land acquisition is not eligible (Section 2.5). PFIs will verify that the transactions proposed for financing will be carried out within the land to which applicants have legal tiles and no competing claims or legacy exists. PFIs will file the result of verification for record and review by the IFC or the World Bank before loan approval. 3.4 Transactions with Civil Works 46. Transactions involving major civil works that have adverse impacts will not be eligible for Project support as their costs may outweigh the benefits and capacity of the SME to handle impacts may not be available and/or adequate. Transactions involving minor works and repairs may be supported. To mitigate the potential negative impacts of small-scale civil works, a simplified environmental code of practice (ECOP) including a clause on chance finds has been prepared (Annex E). The financial institution will ensure that all the subprojects involving small-scale civil works will incorporate the ECOP into the civil works contract and that the contractor performance is monitored by the subproject owner and the results/including any complaints from local communities are included the subproject progress report. 3.5 Transactions where Ethnic Minorities are present in the Project area 47. The PFIs will carry out screening, as part of the loan application process, to determine whether ethnic minorities are present in the project area. If ethnic groups are found to be present in the area of influence of proposed transactions, the FI will conduct free, prior and informed consultations with representatives of affected ethnic groups ). Consultations will be carried out with ethnic groups without regard to the nature or scale of negative impacts, if ethnic groups are present in the transactions area of influence. It is to be noted that the area of influence of respective transactions may go beyond the immediate geographical boundaries of the transactions and affect other areas through value chains. 48. The result of consultations will be reflected in the loan applications, which should include a simple Ethnic Group Development Plan. If the consultations find that the proposed transactions will cause significant negative impacts on ethnic groups or that ethnic groups do not provide broad community support even with the mitigations measures proposed by SMEs, such transactions will not be supported under the project. PFIs as part of loan appraisal and due diligence visit areas where transactions will be carried out and verify that consultations are carried out adequately, and the results are incorporated in the loan applications. 23

24 49. Details of procedures to be followed with ethnic groups are provided in the Ethnic Group Planning Framework (EGPF) that is attached to this ESMF (Annex H). The PFI will develop the ESMS (Annex A) which will provide detailed steps to be followed at the portfolio level by respective PFIs. DOSMEP will monitor the implementation of ESMS and report the compliance performance to the World Bank Group, and seeks for guidance if any gaps are found to exist. 3.5 Technical Assistance and Safeguard Capacity Building (a) Existing Capacity of Key Institutions 50. Discussion with key MONRE agencies (PCD, DEQP, and NERI) suggested that they are aware of potential impacts of SMEs and willing to work closely with MOIC to assist the SMEs to improve their environmental practices. It is considered that improving environmental practices of SMEs will be more effective through promotion of knowledge and awareness on good practices related to the application of appropriate technology and waste management and there are many good examples within the country as well as in neighboring countries such as Thailand that could be applied. However, technical assistance and financial support will be necessary for capacity building both at agency and SME levels. Some activities have been initiated but all of them are at preliminary stage and need additional assistance. PCD prepared some technical guidance on ways to handle ozone depleting substances (ODS) chemical, solid wastes, and toxic chemicals while NERI is building its capacity to conduct laboratory analysis for water samples and building similar capacity at provincial level 5. DEQP is promoting knowledge on waste management at local level while the Environment Protection Fund (EPF) 6, with assistance from WB through the Lao Environmental and Social (LENS) project 7, begin to build capacity of key unit at local level. Moreover, recognizing the need for financial support for SME, EPF also begins to provide small loan to small investor on a pilot basis. 51. Discussions with DOSMEP suggested that although they have limited knowledge and capacity on f appropriate technology and good environmental and social practices, they have a unit responsible for promotion of SMEs activities. 52. To facilitate effective implementation of the ESMF and capacity building of key agencies and SMEs the technical assistance to be provided to DOSMEP ($0.5 million) will be designed to ensure that training and capacity building will be provided to (a) DOSMEP/NIU on the ESMF and screening and monitoring, (b) PFI on ESMS and subprojects appraisal and monitoring, and (c) DOSMEP and MONRE agencies on development of guidelines and/or appropriate technology/practices for key SMEs. Details will be prepared through close discussion among key agencies during implementation. 5 With technical assistance from Government of Finland 6 The EPF has been established since 2005 to promote conservation and environmental management 7 The first phase focus in Bolikhamxay, Khammouane, and Savannakhet and the second phase is under preparation 24

25 4 : Monitoring and Supervision 4.1 Monitoring and Supervision of the Portfolio by the Financial Institution/PFIs 53. For all Category B transactions in the portfolio, PFIs will implement and monitor the management of environmental and social impacts in a manner consistent with this ESMF and PFI s ESMS, including the development and implementation of Corrective Action Plans, EMP/ ECOP and EGDP. The first year transactions will be prior reviewed by the IFC and/or World Bankas agreed or until such time that capacity is built within the PFIs. For Category C transactions (e.g., TA activities), PFIs will carry out random check to verify absence of impacts and compliance with national legislation including permitting. 54. In addition, PFIs will screen for any negative media/ NGO coverage/ reports on environmental and social aspects of its portfolio clients on a monthly basis, and retain records of all findings. 55. PFIs agree to make its monitoring and supervision reports available on a business confidential basis to WB counterparts upon request. 4.2 Financial Intermediary Reporting 56. PFIs will prepare an annual report for the IFC and/or World Bank as agreed on environmental and social performance of the portfolio as follows: Listing of all transactions approved during the reporting period, listing environmental category (B or C) and the name and location of SME receiving the loan; For Category B subprojects approved during the reporting period, a copy of the summary report including environmental and social assessment process findings or memorandum; A brief listing of anticipated Category B subprojects that are being processed or with a pending loan application; A brief summary regarding how this Framework and/or the participating financial institution s ESMS has been implemented in transactions covered by the LOC and the RSF, including any material changes (e.g., to staffing, procedure); and Details of any negative media/ngo coverage and reports on portfolio clients regarding environmental and social aspects that have come to the attention of the financial institution and are deemed to produce reputational or credit risk to the 25

26 participating financial institutions, including the World Bank Group participation in the LOC and/or the RSF. 4.3 Grievance Mechanisms 57. SME beneficiaries, in loan applications, will clearly describe the mechanisms through which people who may be affected by transactions can inform PFIs of their concerns or grievances. PFIs will also develop, and describe in ESMS, mechanisms through which their branch offices receive and address concerns or grievances. If local communities or directly affected stakeholders approach the financial institution with reasonable and responsible claims that an activity by an SME funded by a loan from the financial institution as part of the LOC and/or the RSF has caused harm to them, their livelihoods, or their environment, PFIs will work with beneficiary SME to try to address the concerns in a reasonable and responsible manner. PFIs will report as soon as possible such complaints to the IFC/WB. In addition, PFis shall inform the aggrieved parties that if efforts by the borrower (SME) to resolve the issue are unsatisfactory, the aggrieved parties have the right to bring their complaints to staff in the country IFC or World Bank offices, at the address below: IFC Office Address: 90 Phonexay Road; P.O. Box 9690; Vientiane, Lao PDR Web: Telephone: Fax: The World Bank Office, Vientiane, Lao PDR Address: Patouxay, Nehru Road Telephone: (856-21) Ext 6228 Facsimile: (856-21)

27 5 Public Consultation and Dissemination Process for ESMF 58. DOSMEP conducted a public consultation on the ESMF at the Lao Plaza Hotel in Vientiane on March The workshop was attended by 30 people, including representatives from the following organizations: Bank of Lao Ministry of Finance Ministry of Planning and Investment Ministry of Natural Resources and Environment National Implementation Unit of the Ministry of Industry and Commerce Lao Development Bank Agriculture Promotion Bank ACLEDA Bank SME s Young Entrepreneurs Association Coffee Producers Association DOSMEP 59. The ESMF will be translated into Lao language and both Lao and English versions of the ESMF will be made available in DOSMEP website and also made available for public access at WB and IFC Office in Vientiane. 27

28 Annex A: Environmental and Social Management System (ESMS) 1.1. In order to effectively use this Framework 8 as guidance to staff for managing environmental and social risk, each PFI shall develop its own internal Environmental and Social Management System (ESMS). In addition to a policy outlining the commitment to meet the requirements of this Framework and other standards the institution may wish to follow, the ESMS shall describe key features including: social and environment policies and procedures; organization structure and staffing for managing environmental and social risk; skills and competencies in social and environmental areas; training and awareness of the institution s investment, legal, and credit officers on the organization s ESMS; reporting systems to managers; performance monitoring procedures and grievance mechanisms. The ESMS will also include supporting tools such as checklists, templates and guidance notes to assist the loan/credit officers and other relevant staff to assess and manage environmental and social risks To be in line with the World Bank safeguard policy on indigenous peoples (OP4.10) the ESMS will also identify a plan to encourage ethnic groups to benefit from the Project and ensure that the SMEs transactions will not adversely affected them. During the preparation of the ESMS a quick social assessment will be carried out to determine (a) if ethnic groups are present in the Project areas and (b) if yes, identify opportunity for the ethnic groups to benefit from the Project and/or likely to be adversely affected by the subprojects. The policy and assessment will be carried out in line with the Ethnic Group Planning Framework developed for the Project (Annex H) Upon application by a commercial bank or financial institution to participate in the LOC and/or the RSF, environmental and social specialists from IFC and WB will engage with the institution and convey WB and IFC s social and environmental requirements as required in this Framework. The applying institution will be responsible for developing the ESMS and integrating it into the institution s lending operations to screen loan applications and mange environmental and social risks in a manner consistent with this Framework. Once the ESMS is developed, the applying institution will send it to IFC and WB for review. A satisfactory ESMS, approved by the applying institution s own management and accepted by IFC and WB, will be a condition of effectiveness for the LOC and/or RSF agreement between the World Bank and PFIs. 8 Environmental and Social Management Framework (ESMF) for the Lao PDR-SME Access to Finance project (P131201) 28

29 Annex B: Environmental, Health & Safety Guidelines 1. As of August 2010, the World Bank Group has produced 64 Environmental, Health & Safety Guidelines (EHSGs) for various industrial sectors, as well as General Environmental, Health & Safety Guidelines which covers a wide range of issues and is applicable to all industrial in addition to the sector-specific guidelines. The full set of Industry Sector EHSGs and the General EHSGs can be most readily accessed on IFC s website: ( 2. The IFC website is also the location where updates of the EHSGs will be posted, as new examples of good practice are identified, or as new guidelines are prepared. These EHSGs are also part of the Equator Principles. As required by the Equator Principles, the most recent version of the respective applicable guidelines should be used in the screening and review of new transactions. 3. For most investments in the services industry, the General Environmental, Health & Safety Guideline is most likely the only applicable EHSG. However, for some investments possible under the Risk Sharing Facility, there are specific industry sector guidelines that also would apply in addition to the General EHSG. A few examples of some of these are: Tourism and Hospitality Development Telecommunications Mammalian Livestock Production Poultry Production Plantation Crop Production Annual Crop Production Aquaculture Fish Processing Meat Processing Poultry Processing Food and Beverage Processing. 4. It should be noted that these Industry Sector EHSGs and the General EHSG are intended to identify recognized good practice, particularly in the absence of comparable national or local legislation. Moreover, they are designed to cover a wide range of topics, especially in the case of the General EHSG, some or many of which specific topics may not be relevant or applicable to the project enterprise seeking a loan under the LOC and/or the RSF. The EHSGs will be used by the financial institution as useful tools in the screening and review process to determine whether environmental and social risks associated with the project enterprise have been appropriately identified and managed. 29

30 Annex C: IFC Performance Standards and World Bank Safeguard Policies 1. The IFC has produced eight Performance Standards which cover a wide range of The eight Performance Standards are also considered part of the Equator Principles. The eight Performance Standards can be most readily accessed on IFC s website, and are listed below: ( Performance Standard 1: Social and Environmental Management Systems Performance Standard 2: Labor and Working Conditions Performance Standard 3: Pollution Prevention and Abatement Performance Standard 4: Community Health, Safety and Security Performance Standard 5: Land Acquisition and Involuntary Resettlement Performance Standard 6: Biodiversity Conservation and Sustainable Natural Resources Management Performance Standard 7: Indigenous Peoples Performance Standard 8: Cultural Heritage 2. The World Bank has ten Safeguard Policies (Operational Policies [OPs]) that in most environmental and social matters are similar in coverage to the IFC Performance Standards: OP 4.01: Environmental Assessment OP 4.04: Natural Habitats OP 4.09: Pest Management OP 4.10: Indigenous Peoples OP 4.11: Physical Cultural Resources OP 4.12: Involuntary Resettlement OP 4.36: Forests OP 4.37: Safety of Dams OP 7.50: Projects on International Waterways OP 7.60: Projects in Disputed Areas. 3. Of these 10 policies, only OP4.01, OP 4.04, OP4.36, and OP4.10 apply to this Project. Annexes D-G provide background on the national environmental regulations and Project specific environmental requirements while Annex H provides requirements with respect to ethnic groups. 4. These policies can be found on the World Bank website: ( 5. In the context of this Project, any Category A transactions or projects, as defined by World Bank or those subject to EIA requirement according to government EIA regulations, are considered ineligible, application of IFC performance standard is unlikely. For the Category B transactions that are envisioned to becovered under the LOC and the RSF, it is expected that screening and determination of consistency with relevant government requirements (i.e. for IEE as a maximum) and good environmental and social practices will be applied. However, there may be differences between the GOL requirements related to EIA process and/or other related decrees and/or regulations, consultation with IFC E&S specialists is highly recommended. 30

31 Annex D: Environmental Legislation and Institution in Lao PDR Note: This summary is provided for information purposes only, and is not necessarily an exhaustive nor a World Bank Group approved list of all relevant environmental legislation and institution framework. Natural Resources and Environmental 1. In Lao PDR, the National Constitution (1st edition 1991 and 2nd 2003) gives clear policy on the environment, including biodiversity 9. Key laws, decrees, and regulations related to natural resources and environment are as follows: The Environment Protection Law (1999, revised in 2013); the Environmental Impact Assessment Decree (EIA 2010, being revised); The Water and Water Resources Law (1996, being revised); The Forestry Law (1996, revised 2007); The Decree (164/PM in 1993) on National Biodiversity Conservation Areas (NBCAs); The Aquatic Animal and Wildlife Law (2007); The Land Law (amended 2003, being revised); The Law on Preservation of Cultural, Historical, and Natural Heritage (June 20, 1997) The Agriculture Law; The Law on Industrial Manufacturing (1999); The Electricity Law (1997, amended 2012); The Mining Law (1997), amended 2012); The Road Law (1997, 1999); the Agriculture Law (1999); The Urban Planning Law (1999); and The Law on Hygiene, Decease prevention and Health Promotion (2001). Decree on the Environment Protection Fund (2005); Decree on Compensation and Resettlement of People Affected by Development Projects (2005); 2. There are also related sectors policy and strategy related to natural resources and environment and the key ones are: The Forestry Strategy to the year 2020 The National Biodiversity Strategy 2020 and Action Plan 2010 The National Policy on Environment and Social Sustainability of the Hydropower Sector in Lao PDR (2005) The Policy on Water and Water Resources The Water Sector Strategy and Action Plan 3. The overall management of natural resources and environment is under the responsibility of the Ministry of Natural Resources and Environment (MONRE) which was created in mid Under MONRE there are 17 departments, offices, and research centers responsible for subsector management (environment and social impacts assessment, water, land, forest resources conservation, minerals, hydrometeorology, pollution control, natural disaster and climate change, river basins etc.) 4. At the provincial and district levels 10, there are corresponding provincial/city environment departments. These local departments have the responsibility of enforcing the natural resources 9 As stated in Article 17: All organizations and citizens must protect the environment and natural resources: land, underground, forests, fauna, water sources and atmosphere. 10 Including Vientiane Capital 31

32 and environmental legislation under MONRE responsibility. However, the daily operation functions of these departments would normally be under the direct management of the provincial authorities. Environmental Impact Assessment Decree 5. The Environmental Protection Law was enacted in 1999 and amended in The 1999 law required all development projects to prepare an environmental impacts assessment (EIA) and secure approval of an Environmental Compliance Certificate (ECC) before construction and/or operation of development activities and an EIA regulation was promulgated in To strengthen effectiveness of the EIA process in light of rapid development in the country, the EIA decree was promulgated in 2010 and the revision of the EPL was completed in early However in light of MONRE operation, many laws, decree, and regulations, including those related to the EIA decree are being reviewed and revised. During the preparation of this project (2013), two MONRE ministerial orders were issued on 17 December 2013 on the EIA process and the IEE process. MONRE is responsible for the administration and monitoring of the EIA process, issuance of the ECC, and its compliance while the provincial MONRE offices (PONREs) is responsible for administration of the IEE process including the ECC issuance and monitoring of the IEE process. The EIA regulation requires EIA study for the following type of projects: Energy Sector; Agriculture and Forestry Sector; Industrial Sector; Infrastructure Sector; and Mining Sector. Details on the MONRE regulations and list of project requiring EIA or IEE is available in Lao language (see Annex G). Preparation of an environmental management plan (EMP) or an environmental management and monitoring plan (EMMP) is required. Table of content for the EMP should be in line with the guideline for preparation of the IEE issued by MONRE. 7. To guide the impacts assessment and preparation of IEE and/or EIA report, there are a number of technical guidelines prepared by MONRE and other agencies with assistance of many development partners. Efforts have been made to develop and apply standard documents for environment and social obligations (SESO) and standard Environmental Compliance Certificate (ECC) to clarify/enhance commitment of the project owners in the private sector. Some of these guidelines will have to be revised in the near future in line with the current organization structure and the effectiveness of the revised decrees and regulations. However, most of these regulations and guidelines are designed to address large projects and the key ones include: The EIA guidelines (October 2012, English) 11 The IEE guidelines (2013) Guideline on public involvement (2012, Lao and English) Guideline on consultation with ethnic group 12 Manual for Monitoring of ESMMP of EIA Project in Lao PDR 13 Guidelines on Protection Forest Management Planning Supported by the Ministry For Foreign Affairs of Government of Finland through the Environmental Management Support Programme (EMSP). 12 This is developed by the Lao Front for National Construction in Joint UNEP and UNDP Poverty Environment Initiative, Environmental Management Support Programme (EMSP), ESIA Component Lao PDR 14 Technical Assistance Provided by the Government of Japan Grant Aid through the Forest Preservation Programme, February

33 Pollution Control Decree (draft) 8. MONRE is drafting a Pollution Control Decree to be used for management of pollution from various sources. According to the draft, the decree defines types, areas, and nature of pollution control from point sources and non-point sources as well as from emergency situations, including environmental standards (effluent and ambient). The project developments will be required to obtain the pollution control permit as described in the ministerial regulations which will be established by MONRE. Scope will include toxic/hazardous chemical and wastes (including radioactive). There are also draft Environment Ambient Standard (2009) and draft Pollution Emission Standards (2009). The Pollution Control Department (PCD) of MONRE and the respective unit at the provincial and district levels will be responsible for overseeing the implementation and monitoring of the decree. The Department of Environmental Quality Promotion (DEQP) is promoting green, clean technology and well as good environmental control and management practices while the Natural Resources and Environment Research Institute (NERI) provides services on water analysis. However, effective application of regulations and promotion activities and services remains a major challenge given limited capacity of key agencies and lack of human and financial resources. 9. Under MOIC, the Department of Industry and Handicraft is responsible for ensuring compliance with emission standards. However, in line with the current institutional reform in the natural resources and environmental sector, roles and responsibility of central agencies and provinces as well as between MONRE and MOIC are being discussed. Agriculture chemicals 10. In Lao PDR, Ministry of Agriculture and Forestry (MAF) is responsible for control and management and agriculture chemical uses. With the support of JICA and FAO, MAF has produced in March 2000 the Regulation number 0886/MAF and recently updated in June 11, 2010 (regulation number 2860/MAF) on Pest Management in Lao PDR based on the WHO recommended Classification of Pesticide by Hazard and Guideline to Classification In January 2010, MAF begin to register the companies who import pesticides, fertilizers and seeds into Lao PDR. Registered pesticide has been adjusted in May 2010 based on the new regulation. The Department Agriculture under MAF is mandated to oversight all the usage of pesticide. Protection of forests, wildlife, and biodiversity 11. The Protection Forest Decree (2010) aims to ensure effective and sustainable management and protection of forest area designated as Protection Forest according to the Forestry Law. The decree define the principles, procedures, and management measures on protection, conservation, development, and sustainable use for protection forests and its land including criteria for designating protection forest and the need for engagement with local communities and collection of revenue from hydropower projects. There are regulations on Management of the National Biodiversity Conservation Areas (NBCAs) and Aquatic and Wild Animals (June 7, 2001). Effort has been made to promulgate a decree on Protection Areas 15 and the final draft has been submitted for Government approval. The law assigns the responsibility to MAF, however, after 15 This is include the area referred to as the National Biodiversity Conservation Area or NBCA 33

34 the establishment of MONRE, the responsibility has been transferred to the Department of Forest Resources Management (DFRM) of MONRE and the respective unit at the provincial and district levels will be responsible for overseeing the implementation and monitoring of the decree implementation. 12. Protection of animals and wildlife is under the responsibility of the Department of Agriculture (DOA), the Department of Forest (DOF), and the Department of Wildlife Control (DOFI) of Ministry of Agriculture and Forest (MAF) and the respective unit at the provincial and district levels will be responsible for overseeing the implementation and monitoring of the laws and regulations. International Conventions 13. Lao PDR is a signatory member of many international conventions related to environment, forestry, and biodiversity conservation and the key one include: The Convention Concerning the Protection of the World Cultural and Natural Heritage (WHC), 1972; the Montreal Protocol on Substances that Deplete the Ozone Layer, 1987; the UN Framework Convention on Climate Change (UNFCC), 1992; the UN Convention to Combat Desertification (CCD, 1994; the UN Convention on Biological Diversity (CBD) 1996; the Agreement on the Co-operation for the Sustainable Development of the Mekong River (1995); the Stockholm Convention on Persistence Organic Pollutants (POPs) 2002; the Convention on Illegal Trade in Endangered Species of Wild Fauna and Flora (CITES) in 2003; the Convention on Wetlands of International Importance Especially as Waterfowl Habitat (Ramsar Convention). 14. Laos is one of the member countries of the ASEAN Wildlife Enforcement Network WEN), formally launched in 2005, and in the Lao Wildlife Enforcement Network was launched in May Through ASEAN WEN and Lao WEN, the government has been coordinating within the region, and particularly with Viet Nam on wildlife trade control cooperation. There are also decrees and regulations include Decree on the Control of Import, Export and Use of Ozone Depleting Substances (2004); Regulation on Control of Import, Export and Consumption of Ozone Depleting Substances (2004). Key agencies include those of MONRE, MAF, or MOIC. 34

35 Annex E. Simplified Environmental Code of Practice (ECOP) 1. The requirements in this annex will be incorporated into all contracts related to civil works. It comprises 2 parts: (1) good housekeeping involves proper storage, use, cleanup, and disposal of the various materials used during construction for human and environmental safety and (2) a standard clause for chance find procedures. Part (1) Good housekeeping practices: 2. DO: - Limited working hour during the day time, especially in residential areas, and control driving speed; - Minimize earth excavation and appropriate disposal of spoil; - Minimize opening of new borrow pits and ensure proper closure; - Minimize traffic congestion, dust and noise generation; - Proper maintenance of construction equipment and vehicles; - Provide appropriate safety sign (day and night) and closely inform local residents; - Avoid spill of used oil and other toxic materials, including safe transportation and storage; - Ensure access to clean water and latrines by workers and provide mosquito net; - Avoid social/cultural conflict between workers and local population; and - Apply good housekeeping in the construction and/or storage sites to ensure safety of workers and peoples (Gather up and remove debris to keep the work site orderly and safe; Plan and implement adequate disposal of scrap, waste and surplus materials; Keep the work area and all equipment tidy. Designate areas for waste materials and provide containers; Keep stairways, passageways and ladders free of material, supplies and obstructions; Secure loose or light material that is stores on roofs or open floors; Keep materials at least 2m (5ft) from openings, roof edges, excavations or trenches; Remove or bend over nails protruding from lumber; Keep hoses, power cords, welding leads, etc from laying in heavily traveled walkways or areas; Ensure structural openings are covered/protected adequately; Provide the appropriate fire extinguishers for the materials found on-site. Keep fire extinguisher stations clear and accessible; etc.) 3. DO NOT: - Do not permit rubbish to fall freely from any locations of the project and/or access by animals (dogs, cats, pigs, etc.). Use appropriate containers. - Do not throw tools or other materials. 35

36 - Do not raise or lower any tool or equipment by its own cable or supply hose. - Use grounding straps equipped with clamps on containers to prevent static electricity buildup. - Do not allow hunting of animals by workers in protected areas. 4. SPECIAL NOTE ON FLAMMABLE/EXPLOSIVE MATERIALS: - Store flammable or explosive materials such as gasoline, oil and cleaning agents apart from other materials. - Keep flammable and explosive materials in proper containers with contents clearly marked. - Dispose of greasy, oily rags and other flammable materials in approved containers. - Store full barrels in an upright position. - Store empty barrels separately. - Post signs prohibiting smoking, open flames and other ignition sources in areas where flammable and explosive materials are stored or used. - Store and chain all compressed gas cylinders in an upright position. - Mark empty cylinders and store them separately from full or partially full cylinders. - Ventilate all storage areas properly. - Ensure that all electric fixtures and switches are explosion proof where flammable materials are stored. Part (2) The chance find procedures: - If the Contractor discovers archeological sites, historical sites, remains and objects, including graveyards and/or individual graves during excavation or construction, the Contractor shall: - Stop the construction activities in the area of the chance find; - Delineate the discovered site or area; - Secure the site to prevent any damage or loss of removable objects. In cases of removable antiquities or sensitive remains, a night guard shall be arranged until the responsible local authorities or the National Culture Administration take over; - Notify the supervisory Project Environmental Officer and Project Engineer who in turn will notify the responsible local authorities and the Culture Department of Province immediately (within 24 hours or less); - Responsible local authorities and the Culture Department of Province would be in charge of protecting and preserving the site before deciding on subsequent appropriate procedures. This 36

37 would require a preliminary evaluation of the findings to be performed by the archeologists of National Culture Administration. The significance and importance of the findings should be assessed according to the various criteria relevant to cultural heritage; those include the aesthetic, historic, scientific or research, social and economic values; - Decisions on how to handle the finding shall be taken by the responsible authorities and Culture Department of Province. This could include changes in the layout (such as when finding an irremovable remain of cultural or archeological importance) conservation, preservation, restoration and salvage; - Implementation for the authority decision concerning the management of the finding shall be communicated in writing by relevant local authorities; and - Construction work could resume only after permission is given from the responsible local authorities or Culture Department of Province concerning safeguard of the heritage. 37

38 Annex F: Safeguard Screening and EMP Content 1. This annex clarifies schematic process for safeguard screening and forms (F1 and F2) and sample EMP content (F3). F1 Schematic Safeguard Review Process Identification and Initial Screening for Excluded and Cat A Transaction (by PFI) Pass: Proceed with Preparation of Sub-projects details. Fail: Discard the Application PFI assess the potential Sub-Projects for potential risks and impacts and E&S requirements (ESMF/ESMS) Smaller subprojects with no or limited potential E&S issues Larger subprojects with identified E&S issues and/or require IEE approval: PFI fill out E&S Assessment Checklist with support of the NIU/DOSMEP staff consultant SME prepare mitigation measures and submitted to PFI Does the subproject have significant E&S risks and impacts PFI appraise the transaction including safeguard measures and if acceptable sign the loan agreement. If not assist the SME to improve it plan No: Proceed with preparation of Subproject application Yes: prepare an EMP/IEE or mitigation measures PFI record the E&S implementation progress and included it in project progress report to be submit to WBG for clearance Attach E&S Assessment Checklist, and/or related E&S Documents to Subproject Agreement Sub-project Implementation and E&S Compliance Monitoring 38

39 F2. E&S Assessment Form (sample) Name of project and subproject Number. Local Number. Subproject E&S Assessment Form A (form #) with no impacts Applicant: Proposal name: Proposal number: Loan type: LOC RSF I certified that this subproject does not involve land acquisition, ethnic group, or civil works, and therefore does not require neither safeguard measures nor ESMF clearance Amount requested: Date: Screen by:.. Remarks: Provide more details on the nature of the subproject General Instructions: This checklist is to be completed to support the verification of a Subprojects Application. It is to be attached to the Subproject Agreement that is to be prepared and submitted to the Department of SME Promotion and/or the National Implementing Unit (NIU). Subproject E&S Assessment Form B (form #) with limited impacts Applicant: Proposal name: Proposal number: Loan type: LOC RSF Amount requested: Screened by: E&S Applicable Requirements: Mitigation Plan Required No Mitigation Required No ESMF Clearance Date: 39

40 PFI recommendations for proposal improvement before submitting to DOSMEP/NIU for review: Remarks: General Instructions: This checklist is to be completed to support the verification of a Subproject Application. It is to be attached to the Subproject Agreement that is to be prepared and submitted to the NIU/DOSTEP. This checklist focuses on Environmental and Social issues and concerns to ensure that social dimensions are adequately considered in subproject evaluation. The purpose is to identify its feasibility and potential environmental and social impacts of the subproject activities. If applicable please use the remarks section to discuss any suggested mitigation measures. This form is to be used by the PFI to screen for project category and potential environmental and social issues of a sub project, determine the instruments to be prepared for the sub project Subproject Name Subproject Location Subproject Proponent Subproject Type/Sector Estimated Investment Start/Completion Date Questions Is the proposed project likely to have minimal or no adverse environmental impacts? Please provide brief justification: Is the proposed project impacts limited, site specific and readily mitigated with known mitigation measures? Please provide brief justification: Answer yes no If Yes Category C Category B Document s requireme nt if Yes No action needed beyond screening Limited ESIA or ESMP Will the project involve the conversion or degradation of non-critical natural habitats? Please provide brief justification: PS 6 / OP 4.04 Addressed in ESIA 40

41 Are there any ethnic minority communities present in the project area? PS 7/ OP 4.10 Simplified EMDP Will the project have the potential to have impacts on the health and quality of forests or the rights and welfare of people and their level of dependence upon or interaction with forests; or aims to bring about changes in the management, protection or utilization of natural forests or plantations? PS 6/ OP4.36 Addressed in ESIA The sub project is classified as a Category project, and the following safeguards instruments will be prepared: SCREENING QUESTIONS No Unkno wn Yes MITIGATION MEASURES REQUIRED? A. NEGATIVE LIST REVIEW: If Yes, proposal must be rejected Land acquisition funded by the proposed If Yes, proposal must be rejected. If subproject? 16 Unknown, additional information is Involuntary resettlement? * required before proposal can be considered. Do the proposed activities or budget include any of the Project negative list (see Section 2.5 of the ESMF) : B. ENVIRONMENTAL TRIGGERS: DOES THE SUB-PROJECT INVOLVE ALTERATIONS OR CONSTRUCTION IN AREAS ADJACENT TO OR WITHIN ANY OF THE FOLLOWING ENVIRONMENTALLY SENSITIVE AREAS? Protected Area, Wildlife Reserve, Buffer Zone, or other conservation area If Yes, proposal must be rejected. If Unknown, additional information is required before proposal can be considered. Mitigation: must comply with local regulations; EIA is required. If unknown, additional information is required before proposal can be considered. DOCUMENTATION REQUIRED. 41

42 SCREENING QUESTIONS No Unkno wn Yes Wetland Other: C. POTENTIAL ENVIRONMENTAL IMPACTS WILL THE SUBPROJECT CAUSE: Impairment of downstream water quality and therefore, impairment of downstream beneficial uses of water? Noise or dust from construction equipment? MITIGATION MEASURES REQUIRED? Mitigation: must comply with local regulations. EMP is required. If unknown, additional information is required before proposal can be considered. DOCUMENTATION REQUIRED. Are there risks of soil erosion? Are there any pollution and/or public health risks Other: D. REQUIRED E&S DOCUMENTS: Simple Environmental Management Plan (EMP)? Full Environmental Assessment (IEE)? Other?. E. OTHER REMARKS: F. CONCLUSIONS/RECOMMENDATIONS: G. SIGNING OFF: PROPONENT DOSTE/NIU COORDINATOR: 42

43 SCREENING QUESTIONS No Unkno wn Yes MITIGATION MEASURES REQUIRED? NAME:. POSITION:.. DATE:.. NAME:.. POSITION:.... DATE:.. COMPLIANCE TO NATIONAL LAW AND REGULATIONS AND ACCIDENTS/INCIDENCES (to be added to questionnaire above in same format). Has the site / company had any environmental incidents in the last 2 years that require notification to the regulator? Has the site /company been issued with, in the last 2 years, any violation of environmental permits, licences or improvement notices by the regulator? Has the site/company has all the relevant permits/approval from government authorities and key environmental operating permits, for example Consent to Operate and Hazardous Waste Authorization if applicable? Has the site/company had any health and safety incidents or accidents, including fatalities, in the last 2 years (e.g. oil spills, fires) involving death or multiple serious injuries and/or significant environmental damage? YES NO QUESTIONS ON THE APPLICATION OF PS 1 AND PS2 (To be included as part of list or a different list). PS 1: Assessment and Management of Environmental and Social Risks and Impacts Policy Does the company have an overarching Policy (statement) defining the environmental and social objectives and principles guiding the company s E&S performance? Is this Policy backed by the top management of the company? Does this Policy specify who within the company is responsible for Policy implementation? Was this Policy communicated to all employs of the company? Identification of Risks and Impacts 43

44 Does the company have a system/procedure to screen, identify, analyze, and access the potential risks and impacts related to its business activities/projects? Is an emergency preparedness and response system and integrated part of the company s risk management system? Has the company conducted Environmental and Social Impact Assessment (green field projects) or any other type of E&S assessments (limited or focused E&S assessments, E&S audits) for the project financed? Organizational Capacity and Competency Has the company designated specific in-house personnel, including management representative, with clear lines of responsibility and authority for E&S issues? Do the delegated personnel possess the knowledge, skills, and experience to implement the E&S policy and to follow established procedures? Has the company allocated resources to support its E&S functions? Has the company allocated resources to support capacity building of relevant staff on E&S issues? Does the company have relevant training programs in place for the E&S personnel? Does the company outsource E&S functions to a qualified third party(ies)? Monitoring and Review Does the company have procedures in place to track and evaluate E&S performance of its operations? Is appropriate environmental and social performance information periodically reported internally to senior management, investors and stakeholders (as relevant)? Does the company have a procedure to evaluate and record results of its monitoring activities? Stakeholder Engagement Does the company have a mechanism for identify its stakeholders (affected communities and other interested stakeholders in the company s activities)? Has the company developed and implemented a Stakeholder Engagement Plan that is scaled to the project risks and impacts and development stage? In case company s activities have negative impacts on local communities does the company established a community engagement process for affected communities? Does the process of informed consultation and participation took place (when applicable)? External Communications and Grievance Mechanism Does the company have a procedure to receive and process communications from external stakeholders? Does the company have a grievance mechanism a procedure for receiving, addressing, and recording/documenting complaints and communication from affected communities? 44

45 Does the grievance mechanism ensure that the confidentiality of a person rising the complain is protected? Does the company ensure that the grievance mechanism is easily accessible, understandable and its availability was communicated to affected communities? PS 2: Labor and Working Conditions Human Resources Policy and Management Does the company have an HR policy that is consistent with requirements of the national law and PS2 requirements? Is this Policy clearly understandable and easily accessible to all employees? Does the company have policies and procedures for managing and monitoring the performance of third party employers in terms of labor and working conditions? Has the company established a grievance mechanism for workers to review and address employee complaints? Has the company ensured that contracted workers by third parties, if any, also have access to the grievance mechanism? Is there a person responsible to review complaints and follow up on them in a timely and transparent manner? Working Conditions and Terms of Engagement Has the company documented and communicated in understandable way working conditions and terms of employment to all workers directly contracted (including information on working hours, rest days, overtime procedures, wages, frequency of payments and sick and maternity leave, vacations)? Are the terms and working conditions in accordance with any collective agreement (if applicable)? Does the company identify migrant workers and ensure that the migrant workers are engaged on substantially equivalent terms and conditions to non-migrant workers? Does the company provide accommodation to its workers? If so, does the company put in place and implement policies on the quality and management of the accommodation and provision of basic services? Worker s Organization Does the company allow workers to form and join workers organizations and bargain collectively? Non-Discrimination and Equal Opportunity Does the company have documented transparent procedures to ensure that employment decisions are not made on the basis of personal characteristics unrelated to job requirements? 45

46 Does the company have any preferential employment policies in place? Retrenchment Does the company anticipate retrenchment of a significant number of employees? If yes, has the company assessed any alternatives to retrenchment? If there are no viable alternatives, is there a retrenchment plan in place? If retrenchment has taken place, have workers received notice of dismissal and relevant severance payments mandated by law and collective agreements in a timely manner? Protecting the Work Force Does the company ensure child or forced labor, including trafficked persons, is not used in its operations, including through contractors or in the primary supply chain? Does the company check the age of all employees? Does the company ensure that young workers (under the age of 18) are not employed in dangerous work and regularly monitor their health, working conditions, and hours of work? Occupational Health and Safety Does the company provide its workers with a safe and healthy work environment? Where applicable does the company provide workers with and mandating that workers use personal protective equipment (PPE)? Has the company established and implemented occupational health and safety procedures in line with good international industry practices to prevent accidents, injury, and disease? Does the company track and report on rates of injury, occupational diseases, lost days, and absenteeism and number of work-related fatalities? Does the company have training programs in place for workers on occupational health and safety? Does the company have a fire, life and safety plan? Supply Chain Where there is a high risk of significant safety issues related to supply chain workers, has the company requested its primary supply chain to introduce corrective measures to address lifethreatening situations? Where remedy is not possible, does the company have a plan to shift the primary supply chain? 46

47 F3. EMP Content (sample) Executive summary 1. Introduction - provide brief but concise information on objective of the EMP and its connection with the ESMF of the Project and/or ESMS of the PFI. 2. Policy, regulations, and institutional frameworks 2.1 GOV s regulations - provide brief description of GOV regulations related to IEE and standards applied for the subproject 2.2 ESMF requirements 3. Project description provide description of the subproject including location maps showing location in the project area as well as details at the subproject level. This is to provide reader who is not familiar with the area to understand the issue clearer. 4. Environmental background provide key information on the environmental background of the subproject as well as its connection with the project area, including maps (if possible). Focus should be given to identify area/community that may be affected by the subproject. 5. Potential impacts and mitigation measures provide results of the safeguard screening following the criteria in the ESMF, identify potential impacts (positive and negative) and mitigation measures; the impacts should be described for preconstruction, construction, and operation phases; using a matrix format could help understanding connection between the impacts and mitigation better. 6. Actions to be carried out under the subproject explain the mitigation measures and agencies responsible for the implementation during preconstruction, construction, and operation stages of the subproject, including incorporating ECOP (annex E) into the subproject involving civil works. 7. Implementation arrangement explain responsible agencies (including their capacity to carry out the activities identified in the EMP and the need for training), implementation schedule, cost estimate, and how the EMP will be integrated into the subproject, including state explicitly that the ECOP will be included in the bidding documents of contractors. 8. Consultation and information disclosure provide summary on consultation activities and stakeholders on the EMP at subproject level (This can be combined with RAP) and concerns raised and responses. Locations and dates of EMP to be disclosed should be provided (see guidelines below). 47

48 Annex G. List of Projects Requiring EIA and IEE (in Lao) 48

49 49

50 50

51 51

52 52

53 53

54 54

55 55

56 56

57 57

58 58

59 59

60 60