Provision of a senior loan of up to USD20.0 million to finance the construction of Classic Fashion's new garment production factory in the Al Aqaba special economic zone.
The project will have a significant impact on the borrower's production capacity, production cycle, operational and resource efficiencies as well as on the employment and training of local community workers and refugees.
ETI score: null
ETI Score = 76
Primary quality Inclusive: The project will create formal job opportunities and deliver training to an outstanding number of Syrian refugees in Jordan. The project will also support the company to strengthen its capacity in managing vulnerable workers, especially with regard to gender and disabilities.
Secondary quality Integrated: The project supports the exports by a local player in a new market beyond its existing export markets
CLASSIC FASHION APPAREL INDUSTRY LTD
EBRD Finance Summary
A USD 20mn (c. EUR 18mn equivalent) senior loan to CFAI with a 6 year tenor to finance the company's expansion with the development of a new production facility.
Total Project Cost
Trigger identified: No trigger activated
- Financing Structure: EBRD offers a tenor, which is above the market average and is necessary to structure the project
- Standard setting: Client seeks EBRD expertise over energy and resource efficiency
- Standard-setting: Client seeks/makes use of EBRD expertise on higher inclusion and gender standards and/or equal opportunities action plans.
Environmental and Social Summary
Categorised B (2014 ESP). The initial environmental and social (E&S) due diligence covered new laundry and textile cutting lines located within the Company's existing industrial footprint in El Hassan estate, as well as its corporate E&S management provisions and performance of existing operations. Late changes to the use of proceeds, specifically the new garment production facilities in Al Aqaba, were subject to limited desktop review by ESD. A site-specific E&S assessment still needs to be carried out. However, given the findings of the due diligence, the Company's commitment to the Bank's E&S requirements and the expected location of the new garment production facilities within an existing industrial zone, E&S risks and impacts are anticipated to be readily identified and appropriately addressed. The key risks associated with the Project remain largely related to the overall operations of Classic Fashion, notably employment terms and working conditions of migrant workers, gender-based violence and harassment (GBVH) risks, as well as waste and wastewater management, and these risks are addressed in an ESAP. In order to assess site-specific risks and impacts associated with the new production facilities, an independent consultant will need to be retained to complete the due diligence of the new site and update the ESAP accordingly prior to signing.
The appraisal for the initially defined use of proceeds and location was carried out partly in-house through review of existing E&S documentation and ILO Better Work Jordan (BWJ) audits. This was complemented by the review of independent E&S due diligence carried out on behalf of DEG, and the recommendations of a gender-based violence expert working on behalf of IFC. ESD's assessment was further informed by the Jordan garment sector labour assessment carried out for the EBRD by an independent labour expert during 2018, which included a high-level assessment of Classic Fashion policies and safeguards in relation to labour issues. The resulting ESAP was developed in collaboration with DEG and IFC and will be updated jointly following additional E&S assessment.
The initial due diligence concluded that the Company has a clear structure for managing its human resources, worker welfare and social compliance, but was generally lacking in its environmental and occupational health and safety management capacity. Classic Fashion is pro-active and forward thinking in terms of managing labour issues and BWJ audits have tended to raise fewer non-compliances over time. A number of additional issues related to migrant worker discrimination, working hours, grievance mechanism procedures, as well as worker accommodation, were identified and corrective measures included in the ESAP. The Company has demonstrated that it is continuously improving its HR systems and processes and has already addressed a number of the proposed corrective measures during the appraisal phase.
Concerning risks of sexual harassment and abuse, the Company has responded to past challenges with a range of initiatives designed to reduce the risks of poor practices. It has a Supervisor training programme including BWJ training focusing on rights and responsibilities regarding sexual harassment. Additional measures have been included in the ESAP to further improve management of GBVH risks, including through policy development, training and communication, as well as support for women's equal opportunities.
There are multiple channels for hearing and solving grievances including the Welfare Development team, trained as part of the Personal Advancement and Career Enhancement (PACE) programme, who are tasked with advising and problem solving for workers, dormitory floor leaders, the HR department, safety committees, and the Performance Improvement Committee (PICC). However, some workers did not know about formal grievance mechanisms, did not feel that these were adequate for solving their issues or felt that raising complaints would adversely affect their employment. Updated grievance procedures are therefore required as per the ESAP.
In view of improving the Company's capacity and management of environmental and health and safety risks, the ESAP also includes measures to (i) recruit an HSE manager and develop a HSE training programme; (ii) develop an integrated environmental and social management system applicable to Company operations as well as construction activities undertaken by Classic Builders; (iii) enhance existing emergency response plans as well as life and fire safety plans; and (iv) review the structural integrity of existing plants and dormitories. Further, the Company is required to undertake a water sustainability study considering country water stress and improve their solid waste and wastewater management practices.
The ESAP will be updated jointly with IFC and DEG following additional E&S assessment and due diligence and will need to be agreed prior to signing. Independent E&S monitoring is required for this Project and this will be jointly managed by EBRD, IFC and DEG.
Technical Cooperation and Grant Financing
TC of EUR 57,700 Technical assistance under E2C2 GET Project Preparation and Implementation Framework - Solar feasibility study and resource efficiency audit on factories at El Hassan Industrial Estate (TCRS 10695)
Company Contact Information
+962 273 91369
+962 273 91368
Al Hassan Industrial Estate, P.O Box 54, Ramtha, Irbid, Jordan
PSD last updated
04 Feb 2020
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