DFF - Classic Fashion

Location:

Jordan

Project number:

50821

Business sector:

Manufacturing and Services

Notice type:

Private

Environmental category:

B

Approval date:

28 Jan 2020

Status:

Approved

PSD disclosed:

04 Feb 2020

As per section 1.4.2 (iii) of the Directive on Access to Information: "For Projects approved by Bank management where the Board of Directors has delegated the approval authority, the PSD shall be disclosed at the start of the relevant no-objection notification period to a member country of the Bank in accordance with Article 13 (iii) of the Agreement Establishing the EBRD."

Project Description

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.

Project Objectives

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.

Transition Impact

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

Client Information

CLASSIC FASHION APPAREL INDUSTRY LTD

EBRD Finance Summary

USD 20,000,000.00

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

USD 20,000,000.00

Additionality

Trigger identified: No trigger activated

Sources:

- 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

Sanal Kumar
info@classicfashionapparel.com
+962 273 91369
+962 273 91368
https://classicfashionapparel.com/
Al Hassan Industrial Estate, P.O Box 54, Ramtha, Irbid, Jordan

PSD last updated

04 Feb 2020

Understanding Transition

Further information regarding the EBRD’s approach to measuring transition impact is available here.

Business opportunities

For business opportunities or procurement, contact the client company.

For business opportunities with EBRD (not related to procurement) contact:

Tel: +44 20 7338 7168
Email: projectenquiries@ebrd.com

For state-sector projects, visit EBRD Procurement:

Tel: +44 20 7338 6794
Email: procurement@ebrd.com

General enquiries

Specific enquiries can be made using the EBRD Enquiries form.

Environmental and Social Policy (ESP)

The ESP and the associated Performance Requirements (PRs) set out the ways in which the EBRD implements its commitment to promoting “environmentally sound and sustainable development”.  The ESP and the PRs include specific provisions for clients to comply with the applicable requirements of national laws on public information and consultation as well as to establish a grievance mechanism to receive and facilitate resolution of stakeholders’ concerns and grievances, in particular, about environmental and social performance of the client and the project. Proportionate to the nature and scale of a project’s environmental and social risks and impacts, the EBRD additionally requires its clients to disclose information, as appropriate, about the risks and impacts arising from projects or to undertake meaningful consultation with stakeholders and consider and respond to their feedback.

More information on the EBRD’s practices in this regard is set out in the ESP.

Integrity and Compliance

The EBRD's Office of the Chief Compliance Officer (OCCO) promotes good governance and ensures that the highest standards of integrity are applied to all activities of the Bank in accordance with international best practice. Integrity due diligence is conducted on all Bank clients to ensure that projects do not present unacceptable integrity or reputational risks to the Bank. The Bank believes that identifying and resolving issues at the project assessment approval stages is the most effective means of ensuring the integrity of Bank transactions. OCCO plays a key role in these protective efforts, and also helps to monitor integrity risks in projects post-investment.

OCCO is also responsible for investigating allegations of fraud, corruption and misconduct in EBRD-financed projects. Anyone, both within or outside the Bank, who suspects fraud or corruption should submit a written report to the Chief Compliance Officer by email to compliance@ebrd.com. All matters reported will be handled by OCCO for follow-up. All reports, including anonymous ones, will be reviewed. Reports can be made in any language of the Bank or of the Bank's countries of operation. The information provided must be made in good faith.

Access to Information Policy (AIP)

The AIP sets out how the EBRD discloses information and consults with its stakeholders so as to promote better awareness and understanding of its strategies, policies and operations following its entry into force on 1 January 2020. Please visit the Access to Information Policy page to find out what information is available from the EBRD website.

Specific requests for information can be made using the EBRD Enquiries form.

Project Complaint Mechanism (PCM)

If efforts to address environmental, social or public disclosure concerns with the Client or the Bank are unsuccessful (e.g., through the Client’s Project-level grievance mechanism or through direct engagement with Bank management), individuals and organisations may seek to address their concerns through the EBRD’s accountability mechanism.

The accountability mechanism independently reviews Project issues that are believed to have caused (or to be likely to cause) harm. The purpose of the mechanism is: to support dialogue between Project stakeholders to resolve environmental, social and public disclosure issues; to determine whether the Bank has complied with its Environmental and Social Policy or Project-specific provisions of its Access to Information Policy; and where applicable, to address any existing non-compliance with these policies, while preventing future non-compliance by the Bank.

Please visit our webpage to find out how to submit a complaint through the confidential online form, by email, mail or telephone. We are available to discuss your concerns and answer any questions you may have about the submission or handling of complaints. Complainants’ identities may be kept confidential upon request.

Please note that after the appointment of the new mechanism Head in 2020, the revised Project Accountability Policy and Guidance will come into effect to guide case handling.

 

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