Notice

Category B project supported: Classic Fashion, Jordan

Published 10 August 2022

1. Project description

UK Export Finance has agreed to provide support to ASGC UK Ltd (ASGC) in respect of the supply of engineering, procurement and construction (EPC) services to Classic Fashion Apparel Industry LLC (CFAI) for the construction of a garment factory complex in Aqaba, Jordan.

Aqaba is located at the southernmost tip of Jordan and is the country’s only port city on the Red Sea’s Gulf of Aqaba. The proposed garment factory’s primary function will be to produce finished garments using fabrics imported from various countries.

It is anticipated that during the construction period approximately 470 workers will be directly involved. Once in operation, the facility will enable CFAI to provide direct job opportunities to around 3,600 Jordanians and approximately 8,4000 expatriate workers, including Indians, Bangladeshi, Nepali, Syrian, Palestinian, and Sri Lankan. It is anticipated that this Project will also create large-scale indirect employment opportunities for the local population in Aqaba.

The Project includes:

• Construction of state-of-the-art corporate office; warehouses; factories; centralised cutting unit; printing unit; commercial buildings; as well as facilities for workers and staff including accommodation, centralised kitchen, recreation facilities, training centre, clinics etc.

• Operation of the factory complex, including accompanying accommodation facilities etc.

The Project does not include any Associated Facilities.

2. Project sector

The Project is in the civil construction sector.

3. Project sponsors

The Project is being developed by Classic Fashion Apparel Industry LLC.

4. UK exporters

The UK exporter is ASGC UK Ltd.

5. Export Credit Agent Bank

HSBC

6. Amount of UK Export Finance support

The principle value of the support is approximately USD 86 million.

7. OCED common approaches and equator principles

UK Export Finance categorised the Project as Category B i.e. having environmental, social and human rights (ESHR) impacts that are few in number, site-specific, few (if any) of which are irreversible, and for which mitigation measures are more readily available in accordance with the definition in the 2012 (Revised 2016) OECD Common Approaches for Officially Supported Export Credits and Environmental and Social Due Diligence (the “OECD Common Approaches”) and the Equator Principles (2020).

8. Environmental, social and human rights standards

Project related ESHR documentation was reviewed for its alignment against the 2012 International Finance Corporation (IFC) Performance Standards (PS) on Environmental and Social Sustainability and the World Bank Group Environmental, Health and Safety (EHS) Guidelines.

The applicable IFC PS were:

• PS1: Assessment and Management of Environmental and Social Risks and Impacts;
• PS2: Labour and Working Conditions;
• PS3: Resource Efficiency and Pollution Prevention;
• PS4: Community Health, Safety and Security;
• PS6: Biodiversity Conservation and Sustainable Management of Living Natural Resources;
• PS8: Cultural Heritage;

PS5 (Land Acquisition and Involuntary Resettlement) and PS7 (Indigenous Peoples) were not considered relevant.

The applicable World Bank Group EHS Guidelines were:

• General EHS Guidelines (2007).

Other guidance also relevant was:

• IFC/ European Bank of Reconstruction and Development (EBRD) Guidance Note on Worker’s Accommodation: Processes and Standards (2009).

9. Nature of ESHR impacts

The review of potential ESHR risks and impacts took into account the following key impacts, receptors and issues during the construction and operational phases of the Project, including but not limited to:

• construction health and safety;
• workers’ accommodation conditions;
• worker human rights, including in the supply chain;
• resource efficiency and wastewater management; and
• worker engagement and grievance mechanisms.

10. Assessment of ESHR impacts

A review was undertaken in line with the requirements of the OECD Common Approaches and Equator Principles to identify potential ESHR risks and impacts of the Project and how these would be effectively managed.

An Independent Environmental and Social Consultant (IESC), WSP Middle East Limited – Dubai Branch (a WSP Group company), was also appointed by ASGC to undertake a review of the Project.

The review included:

• Desk-based review of project-related documentation, including: Environmental and Social Assessment (ESA); Human Rights Assessment; construction phase Environmental and Social Management Plan (CESMP); ASGC’s human resources policies; CFAI’s environmental management system manual; CFAI’s human resources policies; and Better Work Jordan’s (BWJ) Compliance Assessment reports;

• Visits to Aqaba site and an existing CFAI factory in Irbid; and

• Stakeholder meetings with respective management teams, as well as with representatives of BWJ in Amman.

The results of this review formed the basis for the evaluation of the Project’s alignment with relevant international standards, and recommendations for future compliance and monitoring.

Taking account of the review, the Project was deemed to have potential to cause a number of adverse environmental and social impacts both during construction and operation. However, a proposed suite of controls as part of the Project’s environmental and social management systems should facilitate the management of these impacts.

11. Climate change considerations

UKEF considered the potential direct and indirect green house gas (GHG) emissions of the Project and effects of climate change factors on the Project as part of its ESHR review.

A climate change risk assessment was undertaken as part of the ESA including consideration of physical risks and a quantification of Scope 1 and 2 emissions. The Project is not considered to be a carbon intensive undertaking (such as fossil fuels or petrochemical) and energy efficiency has been integrated into the building design so as to optimise the use of solar panels; however the Project is expected to exceed the 25,000tCO2e per annum threshold for reporting under the OECD Common Approaches and IFC PS during operations. Consequently, the Project will be required to monitor and report its emissions.

The review revealed that the Project design has considered potential physical impacts of climate change such as flooding. A flood risk assessment was carried out as part of the ESA and relevant adaptation measures have been incorporated into the construction design.

Decision

Various actions have been agreed between the Project developer, operator, and parties involved in the financing, which are necessary to ensure the Project’s on-going alignment with international standards. Following agreement of these commitments, it was concluded that the Project should meet the relevant international standards over the Project cycle. UKEF has therefore decided to provide its support in respect of the supply of goods and services by UK exporters to the Project.

A condition of support is that Project will be subject to monitoring and reporting in order to provide satisfaction that the Project is aligned with the relevant international standards throughout the duration of support.

UK Export Finance