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This Environmental Review Summary is prepared and distributed in advance of the IFC Board of Directors' consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC's activities, and this document should not be construed as presuming the outcome of the Board decision.
Any documentation which is attached to this Environmental Review Summary has been prepared by the sponsor and authorization has been given for public release. IFC has reviewed this documentation and considers that it is of adequate quality to be released to the public but does not endorse the content.
Environmental Review Summary
Project number 10233
Project nameWings Oil Palm
SectorPalm Vegetable Oil
DepartmentGbl Ind, Manufact, Agribus & Services
Environmental categoryB
Date ERS disclosedMay 18, 2001
Previous EventsInvested: December 20, 2002
Signed: October 16, 2002
Approved: April 30, 2002

Project description
This project involves the further development of an existing palm oil plantation in South Kalimantan, Indonesia. PT Gawi Makmur Kalimantan and PT Damit Mitra Sekawan have rights to 20,000 gross ha of land, of which they have planted 10,300 ha with oil palms between 1996-1999.

The project has two main components: the agricultural component involves (i) planting an additional 4,500 ha of oil palms; (ii) maintaining about 6,000 ha of the already planted area to maturity; and (iii) purchasing agricultural equipment. At project completion, the plantation will cover 14,700 ha, all of which will be in production. The industrial component involves building two palm oil extraction plants with an installed capacity of 60 tonnes Fresh Fruit Bunches (FFB) per hour and 45 tonnes FFB per hour, respectively. Total crude palm oil (CPO) output is expected to reach 85,400 tonnes in ten years.

Construction for the first mill is underway to process the plantation production and those of neighboring small independent producers without processing facilities. Numbers of local small-holders are expected to rise when this facility becomes available to process their FFBs. Crude palm oil will be sold to the local refining industry, exported, and/or sold to the Sponsors if and when they construct a refinery.

Environmental Category B disclosure requirements
IFC requires that this document is made available internally through the InfoShop and to the locally affected community no less than 30 days prior to project consideration by the IFC Board of Directors.

The Summary of Project Information (SPI) provides details of where the full EIA has been made available to the locally affected community. The SPI must be sent to InfoShop no less than 30 days prior to project consideration by the IFC Board of Directors.

To view the Summary of Project Information(SPI) for this project, click here

Environmental and social issues
This is a Category B project, according to IFC’s Procedure for Environmental and Social Review of Projects because a limited number of specific environmental and social impacts may result which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria. The review of this project consisted of appraising technical and environmental/social information submitted by the project sponsor and field evaluation by Environment Division staff. The following potential environmental, health and safety and social impacts of the project were analyzed:
- history of plantation development, land use and acquisition;
- compliance with forestry and natural habitat policies;
- potential impacts on natural habitats, including biodiversity issues;
- agrochemical use and Integrated Pest Management;
- air emissions from processing activities, waste water treatment and disposal;
- solid waste handling and management;
- hazardous material use and management;
- employment practices and labor contracts (including training and employee accommodation provision);
- public consultation and relationships with local communities; and
- general worker health and safety.

Proposed mitigation for environmental and social issues
The sponsor has presented plans to address these impacts to ensure that the proposed project will, upon implementation of the specific measures agreed, comply with applicable host country laws and regulations and World Bank/IFC requirements. The information about how these potential impacts will be addressed by the sponsor/project is summarized in the paragraphs that follow.

The original tropical moist forests in this area of the southern coastal plain of South Kalimantan have been extensively logged and subject to burning and agricultural use for many years. The company's plantation includes three estates (Jorong, Pasir Putih and Satui) in this region. The area currently being developed for oil palms contains only heavily degraded secondary and scrub forest, along with extensive areas of Imperator grass (alang-alang), and conversion of this land is in compliance with IFC’s Forest Policy. On the hills far to the north of the plantations, there are some remnant secondary forests, part of which are included in a large nature reserve surrounding Riam Kanan reservoir. There is no critical natural habitat remaining on the concessions, and no environmentally-sensitive areas in the immediate vicinity. The company leaves a 100 m wide buffer strip on each side of any rivers, and 50 m adjacent to smaller streams, and these areas have dense but low forest which provide habitat for wild pigs, forest deer and macaques. Currently, 10300 ha of the total plantation area has been planted to oil palms. The balance of the plantation consists of grassland, scrub vegetation and heavily degraded secondary forest, which is unlikely to recover to primary forest conditions given the pressure for conversion to agriculture in this area.

Concessions for oil palm development in this area were assigned by the Indonesian central government. The company received a concession and followed Indonesian law in identifying and compensating claimants prior to receiving a land-use permit (HGU). At that time, there were some small areas which were in use by local villagers as agricultural land. Most claims were under traditional law. Compensation for these areas was negotiated with the villagers and the local village chiefs. Where people chose not to receive compensation, the land was removed from the land use permit and not integrated into the plantation. The ability to refuse compensation indicates that the sellers had to be willing. The company is now faced with additional claims that appeared after the granting of the HGU. The company has developed a procedure for dealing with these post-HGU claims to land, and these have been dealt with through local community leaders, including religious leaders, to reach agreement on those claims that appear legitimate and reasonable. Where an issue arises over the post-HGU claim and the company cannot reach an agreement with the claimant, the company hands the case over to the local authorities for arbitration and a decision, but continues negotiations through informal leaders to seek alternative settlements.

Land preparation for planting involves mechanical cutting and windrowing of vegetation, and the company has a strict policy against burning. In the recent past, some of the windrows have reportedly been burned by villagers to produce charcoal, and the company is modifying its windrowing techniques and working with local communities to eliminate this practice. The company has a guard system and fire response teams which respond to any fire reports.

Pesticide use on the plantation includes systemic and contact herbicides, as well as anticoagulants for rodent control, which are typically used for oil palms. Storage is adequate but improvements in training and handling are needed and the company will be required to develop a formal training plan and written procedures.

The project includes the construction of two new crude palm oil mills. These are being designed to minimize emissions and environmental impacts. The boilers will be fired with biomass from the fruit processing, and will be fitted with automated controls on the combustion process. The company has committed that air emissions will meet IFC guidelines. Handling of fuels for diesel generators also requires improvement, and the company is planning to construct new facilities for fuel storage and handling which will prevent spills. Handling of fuels for diesel generators also requires improvement, and the company is planning to construct new facilities for fuel storage and handling which will prevent spills.

Process wastewater will be subject to full physical and biological treatment, and treatment sludge will be used as fertilizer on the plantation. The treated wastewater will be used for irrigation on the plantation. Other organic wastes including empty bunches are used as mulch around the oil palms.

The mill will incorporate standard and usual health and safety measures and will be constructed to fully comply with the IFC guidelines for this sector. Noise control will be fitted on the steam sterilizers.

The majority of the workforce is drawn from local communities. These villages reflect the predominant ethnic groups in the area: Banjars, Javanese and Balinese. The latter two groups were brought in under the transmigrant programs of the 1970s and 80s, but this area has a long history of integration between local Banjars and people from Java and Sulawesi. Much of the integration has come through a common adherence to Islam and Islamic, as opposed to traditional, law. The kind of inter-ethnic conflicts seen in West and Central Kalimantan are unlikely in this area.

Worker housing on the plantation is adequate in quality, although some of the older housing needs to be upgraded to improve sanitary standards. The company has committed to ensuring that these upgrades will be done. The company has built mosques for the workers in a nearby village as well as on the plantation, and is planning to have a clinic for its workers on each estate. The company has indicated that it plans to design and implement a community development program which will provide the basis for a long term, consistent and predictable relationship with the local communities. Children living on the plantation are bussed to schools in local communities, and children are not allowed to accompany their parents while working on the plantation.

The company will be required to: develop and implement a formal training plan and procedures for handling pesticides; improve diesel fuel handling facilities; and improve sanitary facilities in older worker housing. Appropriate conditions will be added to the investment agreement to this effect. In addition to IFC's standard clauses regarding environmental and social compliance, the company will be required to report annually on any social issues and on incidences of fires on the plantation and their efforts to control these.

Accordingly, IFC concludes that the proposed project will meet the applicable IFC environmental and social policies and the environmental, health and safety guidelines upon successful implementation of the agreed mitigation measures.

Monitoring and compliance
IFC will evaluate the project's compliance with the applicable environmental and social requirements during the lifetime of the project by reviewing the annual monitoring reports (AMRs) prepared for the project covering ongoing performance of project-specific environmental, health and safety and social activities as reflected in the results of periodic and quantitative sampling and measuring programs. Periodic site supervision visits will also be conducted.

Environmental and Social Documentation
This ERS contains the full environmental and social documentation prepared for the project.

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