PRC: Le Gaga Holdings Limited Greenhouse Agricultural Development Project

Environmental Compliance Audit Report

Project Number: 47335-001 June 2018

Prepared by Le Gaga Holdings Limited for the Asian Development Bank

This environmental compliance audit report is a document of the borrower. The views expressed herein do not necessary represent those of ADB’s Board of Directors, Management, or staff, and may be preliminary in nature. Your attention is directed to the “Terms of Use” section of this website.

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgements as to the legal or other status of any territory or area.

Environmental Compliance Audit Report

Le Gaga Holdings Limited

May 2018

http://www.legaga.com.hk

ABBREVIATIONS ADB - Asian Development Bank AESPR Annual Environmental and Social Performance Report CNY - Chinese Yuan EIA - Environmental Impact Assessment EIF - Environmental Impact Form EPB - Environmental Protection Bureau ESDD - Environmental and Social Due Diligence ESMS - Environmental and Social Management System ESU - Environmental and Social Unit IEE - Initial Environmental Examination PB - Production Base

WEIGHTS AND MEASURES kg - kilogram km - kilometer m2 - square meter m3 - cubic meter mu - Chinese land measuring unit (1 hector = 15 mu) ha - hectare (10,000 m2)

Table of Contents

I. Introduction ...... 1 II. Applicable Legal, Administrative Framework and Standards ...... 3 1. ADB’s Safeguard Requirements ...... 3 2. National Legal, Administrative Framework and Standards ...... 3 III. Scope of Review and Methodology ...... 4 IV. Compliance and liability ...... 5 1. Subproject 1 Huidong PB ...... 5 2. Subproject 2 Zhangpu PB ...... 10 3. Subproject 3 Huian PB ...... 14 4. Subproject 4 Huating PB ...... 18 5. Subproject 5 Fuqing PB ...... 23 V. Conclusion and Recommendation ...... 28

iii

I. INTRODUCTION

A loan up to $ 140 million to Le Gaga Holdings Limited (Le Gaga) for the Greenhouse Agricultural Development Project (PRC) was approved by ADB in 2015 to support Le Gaga in establishing and expanding a series of modern greenhouse operations in Guangdong and Fujian provinces.

Five subprojects of Le Gaga, namely Huidong, Zhangpu, Huian, Huating and Fuqing (see Figure 1) converted the existing greenhouse area from traditional soil-based agriculture to modern soilless cultivation or construction of greenhouse and irrigation facilities using ADB loan. The conversion process mainly includes placing cultural bags and modifying the irrigation systems.

Guangdong Province

Note: PB=production base Figure 1: Location of the Five Subprojects

The basic information of these five subprojects are summarized in Table 1. The major facilities include greenhouses, pumping system, offices, warehouse, access roads and accommodation facilities. The production process is consisting of breeding, cultivation and harvest. The major products are pimiento, tomato, pepper and eggplant. The cultivation conversion

This environmental compliance audit was conducted in compliance with the ESMS of Le Gaga that subprojects involving existing facilities or under construction or with land leasing in anticipation of the ADB financing for the subproject, Le Gaga will undertake an environment and/or social compliance audit, including on-site assessment, to identify past or present concerns related to impacts on environment, involuntary resettlement, and indigenous people. The objective of this environmental compliance audit is to determine whether actions were in accordance with ADB’s Safeguard Policy Statement (2009) and safeguard requirement 1: Environment and to identify and plan appropriate measures to address outstanding compliance issues.

Table 1: General information of Five Subprojects No. Subproject Branch Location Operated Arable Major activities Name Company since land (mu) 1 Huidong Linong Huidong 2005 3001.69 Conversion to Agriculture county, soilless Technology Guangdong cultivation (Huizhou) model Co. Ltd 2 Zhangpu Land V. Zhangpu 2008 2236.80 Conversion to Agriculture county, soilless Technology Fujian cultivation (zhangzhou) model Co. Ltd 3 Huian Liyuan Huian 2011 1317.03 Conversion to Agriculture county, soilless Technology Quanzhou cultivation (Quanzhou) City, Fujian model Co. Ltd 4 Huating Putian Land Putian City, 2014 961 Construct V. Group Co. Fujian soilless ltd cultivation model 5 Fuqing Linong Jiangjing 2011 1802.68 Conversion to Agriculture town, soilless Technology Fuqing City cultivation (Fuqing) Co. model Ltd

II. APPLICABLE LEGAL, ADMINISTRATIVE FRAMEWORK AND STANDARDS

This section discusses the ADB requirements and national and local legal framework that guided the assessment of the potential Project impacts.

1. ADB’s Safeguard Requirements

Safeguard Requirements (SR) 1 outlines the requirements that borrowers/clients are required to meet when delivering environmental safeguards for projects supported by ADB. Environment Safeguards are triggered if a project is likely to have potential environmental risks and impacts. The purpose of the Environment Safeguards is to ensure the environmental soundness and sustainability of projects, and to support the integration of environmental considerations into the project decision-making process.

The SR 1 covers requirements on the following aspects:

• Environmental assessment • Environmental planning and management • Information disclosure • Consultation and participation • Grievance redress mechanism (GRM) • Monitoring and reporting • Unanticipated environmental impacts • Biodiversity conservation and sustainable natural resources management • Pollution prevention and abatement • Health and safety • Physical cultural resources

2. National Legal, Administrative Framework and Standards

The major laws that established the PRC legal and administrative framework for environmental and natural resource management include, among others, the • Environmental Protection Law (2015 Amendment); • Environmental Impact Assessment Law (2016 Amendment); • Administration on EIA Registration Form (2017); • Water Law (2016 Amendment); • Regulations on Construction Project Environmental Protection Management (2017 Amendment); • Water Pollution Prevention and Control Law (2017 Amendment); • Air Pollution Prevention and Control Law (2000); • Solid Waste Pollution Prevention and Control Law (2016 Amendment); • Soil Erosion Control Law (2010 Amendment); • Marine Environment Protection Law (2000); • Law of Protection of Wild Fauna (2004); • Administration Law (1999); • Energy Conservation Law (2008); and • Guideline of Environmental Protection Categories of Construction Projects

According to the 2008 version of the EIA categorization guideline, an environmental impact form (EIF) is required for agricultural production base project if not involve sensitive areas. This guideline was amended in 2015. According to the new EIA categorization criteria, the agricultural production base sector is classified into 3

Category B if involves sensitive areas. If not, the applicable category is C, which requiring to register on EPB’s registration system for information.

In addition, the company is subject to the governance of a broad range of agricultural laws, regulations and technical guidelines to ensure appropriate use of agricultural materials, such as farm chemicals, seeds, fertilizers, that may affect the health of human beings or animals, including but not limited to: • Law of the People's Republic of China on Agriculture (2013 Amendment); • Agricultural Product Quality Safety Law (2006) • Regulation on Pesticide Administration (2017 Amendment) • Safe Use of Pesticides (1982); • Guideline for Safety Application of Pesticides (GB/T 8321.5-2006) • Technical Guideline on Application of Pesticides for Environmental Safety (HJ 556-2010); • Banned and restricted pesticide list (Ministry of Agriculture, 2002 (No. 199), updated in 2017); and • Technical Guideline on Environmental Safety Application of Chemical Fertilizer (HJ 555-2010).

The Regulation on Pesticide Administration (2017 Amendment) provides that: • Article 33 The use of pesticide shall follow the rules for preventing pesticide poison, the mixture and application of pesticides shall be conducted correctly and a good job shall be done in disposing of wastes and in safety and protection work so as to avoid environmental pollution and poisoning accidents. • Article 34 The use of pesticide shall conform to the relevant State provisions on safe and rational use of pesticides, and the application of pesticides shall follow the specified dosage, frequency of application, methods of application and withholding period to avoid polluting agricultural and sideline products. Extremely and highly toxic pesticides shall not be used for the prevention and control of insects harmful to public health nor on vegetables, melons, fruits, tea and Chinese medicinal herbs. • Article 35 Care must be taken in applying pesticides in order to protect the environment, beneficial organisms and rare species. It is strictly prohibited to use pesticides to poison fish, shrimps, birds and animals.

III. SCOPE OF REVIEW AND METHODOLOGY

The following documents were reviewed by the E&S general manager with support from the appointed external environmental consultant: • Simplified Environmental Impact Assessment Report and EPB approval for Huidong Production Base (2014); • Simplified Environmental Impact Assessment Report and EPB approval for Zhangpu production Base (2014); • Simplified Environmental Impact Assessment Report and EPB approval for Huian production Base (2014); • Simplified Environmental Impact Assessment Report and EPB approval for Huating production Base (2014); • Simplified Environmental Impact Assessment Report and EPB approval for Fuqing production Base (2014); • Sample pesticide and fertilizer procurement contract; • Le Gaga’s internal production control documents, including pesticide usage and management procedure, pesticide warehouse management procedure,

field management system, quality control system, vegetable production tracking system.

Site inspections were conducted by the E&S manager of each subproject under the guidance of E&S general manager during May 2018.

IV. COMPLIANCE AND LIABILITY

The following summarized the issues in terms of environment and compliance status with applicable ADB environmental safeguard requirements and national laws, regulations, and standards.

1. Subproject 1 Huidong PB

Huidong County is a county of southeastern Guangdong Province. The county is responsible for the administration of one subdistrict and 13 towns. Huidong PB operates two farms, i.e. Duozhu Farm in Sansheng Village of Duozhu Town and Pingshan Farm in Dabu Village of Pinshan Subdistrict. Duozhu Farm with an arable area of 1241.69 mu has been in operation since 2008. Pingshan Farm with an arable area of 1751.8 mu was built in 2005. The PB manager, Ms. Ma Dan was appointed as E&S manager overseeing environmental management of Duozhu Farm and Pingshan Farm.

Pingshan Farm Duozhu Farm Figure Huidong-1: Layout of Huidong Production Base

EIA status. • Duozhu Farm: the EIF was approved by Huidong County EPB in 2010; • Pingshan Farm (1751.8 mu): there has been no EIF development for Pingshan Farm since its development in 2005 but the local EPB (Huidong County EPB) issued an official environmental clearance letter to certificate that Pingshan Farm has been operated in line with the relevant environmental requirements in 2015.

Environmental setting and sensitive receptors. • Duozhu Farm: The farm is surrounded by farmland operated by local villagers and some litchi trees in the north side. • Pingshan Farm: The historical land use type is farmland. A small river goes around in the west side of the site. The residential area of Dabu Village is about 500 m to the east boundary of the farm. Water consumption. The irrigation water is sourced from runoff from the hills nearby. Huidong production base can save about 441,248 m3 comparing with traditional 5

cultivation model1.

Wastewater Treatment. The feed water is recycled within the irrigation system without discharge. The domestic sewage is stored in the septic tanks then used as fertilizer. The cultural bags are shed by the greenhouse. Storm water is collected by sewer and drainage to the channel around the greenhouse. Therefore, the runoff will not contain significant nutrients.

Solid waste Disposal. The municipal solid waste is transported by local sanitation agency regularly. The residual leaves and rotten fruits are reused as fertilizer.

The service life of the plastic shed film normally is 3 years as reported by the PB manager. It is estimated roughly that 125 tons waste films are generated. The demolished plastic shed film of the greenhouse and fertilizer bags are recycled by special collectors.

The waste pesticide containers are hazardous waste, which are disposed by licensed hazardous waste treatment center or returned to the suppliers.

Fertilizer Application. A stock solution consisting of a single fertilizer, or several compatible fertilizers, dissolved in water is supplied to the vegetables by in-line drip irrigation to ensure precise delivery of water and fertilizer to crop. Electronic conductivity (EC) and pH are monitored on line to control the concentration of nutrients. The pretreated coco-coir is used as substrate. In such a closed system, leached nutrient feed water is mostly contained within the greenhouse facility and is not lost to surface water or groundwater.

Fertilizer Storage. Fertilizer is stored in a dedicated locked warehouse. The floor was paved. Fire extinguisher is in place.

Figure Huidong-2: Fertilizer warehouse

Application of Pesticide and herbicide. Hormone is used to trap the pest in the field to reduce the usage of pesticides. The plastic film was laid to suppress weed growth. Otherwise, weeds are pulled out manually.

1 According to the Guangdong Water Use Quota (DB 44/T 1461-2014), traditional cultivation of vegetables consume 210 m3 water per mu. Based on Le Gaga’s experience, soilless cultivation can save 70% water consumption comparing with traditional cultivation model. 6

Figure Huidong-3: Weed suppression film

The review of the pesticide application records of 2017 provided by the E&S manager confirmed that the pesticides used by Huidong PB are neither in the list of banned or eliminated pesticide list promulgated by Ministry of Agriculture nor Annex III chemicals2.

Huidong PB has trained a specialized team composed by 10 workers to be responsible for pesticide application. The maximum daily working hours are 6 hours. It was reported by the farm manager that PPEs (clothing, hats, masks and shoes) are provided to the workers. However, during this compliance audit, only protective coats were observed.

2 Published on http://www.pic.int/TheConvention/Chemicals/AnnexIIIChemicals/tabid/1132/language/en- US/Default.aspx. The chemicals listed in Annex III include pesticides and industrial chemicals that have been banned or severely restricted for health or environmental reasons by two or more Parties and which the Conference of the Parties has decided to subject to the PIC procedure. There are a total of 50 chemicals listed in Annex III, 34 are pesticides (including 3 severely hazardous pesticide formulations) and 15 industrial chemicals, and 1 chemical in both the pesticide and industrial chemical categories.

Figure Huidong-4: PPE on site

Pesticide Storage. The pesticides are stored in their original, labeled containers and placed on shelves on a dedicated locked warehouse. The floor was paved to help minimize contamination in case of spillage events. Fire extinguisher is in place. The material safety data sheet (MSDS) is in place in the warehouse.

Figure Huidong-5: Pesticide warehouse condition

A pesticide storage and application procedure is in place, covering: • Structural requirements to keep pesticides in good condition and fire and theft proof; • Role of warehouse keeper; • Storage requirements; • Usage of pesticide; • Disposal of the empty pesticide containers.

Figure Huidong-6: Pesticide application and management protoco

Environmental Monitoring and Reporting. As no specific requirements on environmental monitoring in the approved EIF, impact monitoring is deemed as not mandatory for the project considering the nature of the project under PRC regulations.

GRM. A GRM was established with the ESMS in 2015 and disclosed to the villagers.

Figure Huidong-7: GRM disclosure on village information board

The Huidong PB E&S manager confirmed that there was no environmental complaints received since operation.

Stakeholder Consultation. There are no mandatory requirements on public consultation and stakeholder engagement on agricultural farming project (PRC category B) in the process of EIF development.

It was reported by the PB E&S manager that the EIF has been disclosed on local EPB’s website twice. This was the normal practices in PRC. The EPB usually discloses the environmental document on its website when it started the reviewing process. The second disclosure is before the final approval. However, the EIF for Duozhu Farm was approved about 8 years ago, there were no records on the public consultation conducted but the approved EIF was accessible in EPB upon public’s request.

Project information disclosure has been disclosed to the villagers and other stakeholders during land leasing process. The E&S manager confirmed no concerns or complaints on aspects of environment received during the consultation.

2. Subproject 2 Zhangpu PB

Zhangpu County is a county of Zhangzhou City in far southern Fujian Province. Zhangpu PB operates two farms, i.e. Changxing Farm and Panlong & Xiangya Farm. The PB manager, Ms. Zhangyingying was appointed as E&S manager overseeing environmental management of Changxing Farm and Panlong & Xiangya Farm.

Changxing Farm Panlong&Xiangya Farm Figure Zhangpu-1: Layout of Zhangpu Production Base

EIA status. • Xiangya & Panlong Farm: the EIF was approved by Zhangpu County EPB in 2014. • The original EIF for Changxing Farm was approved by Zhangpu County EPB on June 2008. Since the size of the land area expanded from 300 mu to 1200 mu, the updated EIF was approved in 2014.

Environmental setting and sensitive receptors. • Changxing Farm: The north, west and south sides were farmland operated by local villagers. Changxing stream is 150 m in the west side. The nearest residential houses are about 10 m from the east boundary. • Panlong & Xiangya Farm: The historical land use type is farmland. The Panlong part and Xiang part are separated by the county road and a small river.

Water consumption. The irrigation water is sourced from river water nearby. Zhangpu production base can save about 422,755 m3 comparing with traditional cultivation model3.

Solid waste Disposal. The municipal solid waste is transported by local sanitation agency regularly. The residual leaves and rotten fruits are reused as fertilizer.

3 According to the Fujian Water Use Quota (DB 35/T772-2013), traditional cultivation of vegetables consume 210 m3 water per mu. Based on Le Gaga’s experience, soilless cultivation can save 70% water consumption comparing with traditional cultivation model. 10

The service life of the plastic shed film normally is 3 years as reported by the PB manager. It is estimated roughly that 93 tons waste films are generated. The demolished plastic shed film of the greenhouse and fertilizer bags are recycled by special collectors.

The waste pesticide containers are hazardous waste, which are disposed by licensed hazardous waste treatment center or returned to the suppliers.

Fertilizer Storage. Fertilizer is stored in a dedicated locked warehouse. The floor was paved. Fire extinguisher is in place.

The review of the pesticide application records of 2017 provided by the E&S manager confirmed that the pesticides used by Zhangpu PB are neither in the list of banned or eliminated pesticide list promulgated by Ministry of Agriculture nor Annex III chemicals.

Zhangpu PB has trained a specialized team composed by 10 workers to be responsible for pesticide application. The maximum daily working hours are 6 hours. It was reported by the farm manager that PPEs (clothing, hats, masks and shoes) are provided to the workers.

Figure Zhangpu-2: PPE on site

Figure Zhangpu-3: Pesticide warehouse condition

Figure Zhangpu-4: Pesticide application and management protocol

GRM. A GRM was established with the ESMS in 2015 and disclosed to the villagers.

Figure Zhangpu-5: GRM disclosure on village information board

The Zhangpu PB E&S manager confirmed that there was no environmental complaints received since operation.

Stakeholder Consultation. There are no mandatory requirements on public consultation and stakeholder engagement on agricultural farming project (PRC category B) in the process of EIF development.

It was reported by the PB E&S manager that the EIF has been disclosed on local EPB’s website twice. This was the normal practices in PRC. The EPB usually discloses the environmental document on its website when it started the reviewing process. The second disclosure is before the final approval. However, the EIFs were approved about 4 years ago, there were no records on the public consultation conducted but the approved EIF was accessible in EPB upon public’s request.

Project information has been disclosed to the villagers and other stakeholders during land leasing consultation process. The E&S manager confirmed no concerns or complaints on aspects of environment received during the consultation.

Figure Zhangpu-6: Stakeholder consultation

3. Subproject 3 Huian PB

Huian Production Base is located in Fengqi Village and Wushan Village of Wangchuan Town, Huian County. Huian County is a county under the jurisdiction of Quanzhou City. The PB manager, Ms. Zhuang Yuexia was appointed as E&S manager overseeing environmental management.

Figure Huian-1: Layout of Huian Production Base

EIA status. The EIF for Huian PB was approved by Huian County EPB in 2015;

Environmental setting and sensitive receptors. The south side is farmland separated by a small river. Huian county wastewater treatment plant is in the south side. The residential areas are in the west side and north side separated by roads.

Water consumption. The irrigation water is sourced from river water nearby. Huian production base can save about 248,918 m3 comparing with traditional cultivation model4.

Solid waste Disposal. The municipal solid waste is transported by local sanitation agency regularly. The residual leaves and rotten fruits are reused as fertilizer.

The service life of the plastic shed film normally is 3 years as reported by the PB manager. It is estimated roughly that 54 tons waste films are generated. The demolished plastic shed film of the greenhouse and fertilizer bags are recycled by special collectors.

The waste pesticide containers are hazardous waste, which are disposed by licensed hazardous waste treatment center or returned to the suppliers.

4 According to the Fujian Water Use Quota (DB 35/T772-2013), traditional cultivation of vegetables consume 210 m3 water per mu. Based on Le Gaga’s experience, soilless cultivation can save 70% water consumption comparing with traditional cultivation model. 14

conductivity (EC) and pH are monitored on line to control the concentration of nutrients. The pretreated coco-coir is used as substrate. In such a closed system, leached nutrient feed water is mostly contained within the greenhouse facility and is not lost to surface water or groundwater.

Fertilizer Storage. Fertilizer is stored in a dedicated locked warehouse. The floor was paved. Fire extinguisher is in place.

The review of the pesticide application records of 2017 provided by the E&S manager confirmed that the pesticides used by Huian PB are neither in the list of banned or eliminated pesticide list promulgated by Ministry of Agriculture nor Annex III chemicals.

Huian PB has trained a specialized team composed by 6 workers to be responsible for pesticide application. The maximum daily working hours are 6 hours. It was reported by the farm manager that PPEs (clothing, hats, masks and shoes) are provided to the workers.

Figure Huian-2: PPE on site

Figure Huian-3: Pesticide warehouse condition of Huian PB

Figure Huian-4: Pesticide application and management protocol

GRM. A GRM was established with the ESMS in 2015 and disclosed to the villagers.

Figure Huian-5: GRM disclosure on village information board

The Huian PB E&S manager confirmed that there was no environmental complaints received since operation.

Stakeholder Consultation. There are no mandatory requirements on public consultation and stakeholder engagement on agricultural farming project (PRC category B) in the process of EIF development.

It was reported by the PB E&S manager that the EIF has been disclosed on local EPB’s website twice. This was the normal practices in PRC. The EPB usually discloses the environmental document on its website when it started the reviewing process. The second disclosure is before the final approval. However, the EIF for Huian PB was approved about 3 years ago, there were no records on the public consultation conducted but the approved EIF was accessible in EPB upon public’s request.

Figure Huian-6: Introduction to the village visitors

4. Subproject 4 Huating PB

Huating PB is located in the Yuantou Village, Huating Town of Chengxiang District, Putian City, Fujian Province. The PB manager, Mr. Yang Chunfei was appointed as E&S manager overseeing environmental management of Huating PB.

Figure Huating-1: Layout of Huating Production Base

EIA status. The EIF for Huating PB was approved by Chengxiang District EPB in 2014.

Environmental setting and sensitive receptors. The farm is surrounded by hills in three sides. The nearest residential area is about 50 m to the north boundary.

Water consumption. The irrigation water is sourced from river water nearby. Huating production base can save about 181.629 m3 comparing with traditional cultivation model5.

Solid waste Disposal. The municipal solid waste is transported by local sanitation agency regularly. The residual leaves and rotten fruits are reused as fertilizer.

The service life of the plastic shed film normally is 3 years as reported by the PB manager. It is estimated roughly that 40 tons waste films are generated. The demolished plastic shed film of the greenhouse and fertilizer bags are recycled by special collectors.

The waste pesticide containers are hazardous waste, which are disposed by licensed hazardous waste treatment center or returned to the suppliers.

5 According to the Fujian Water Use Quota (DB 35/T772-2013), traditional cultivation of vegetables consume 210 m3 water per mu. Based on Le Gaga’s experience, soilless cultivation can save 70% water consumption comparing with traditional cultivation model. 18

Figure Huating-2: Bin for waste pesticide container

Figure Huating-3: Integrated fertilizer-water irrigation system

Fertilizer Storage. Fertilizer is stored in a dedicated locked warehouse. The floor was paved. Fire extinguisher is in place.

Figure Huating-4: Fertilizer storage warehouse

The review of the pesticide application records of 2017 provided by the E&S manager confirmed that the pesticides used by Huating PB are neither in the list of banned or eliminated pesticide list promulgated by Ministry of Agriculture nor Annex III chemicals.

Huating PB has trained a specialized team composed by 5 workers to be responsible for pesticide application. The maximum daily working hours are 6 hours. It was reported by the farm manager that PPEs (clothing, hats, masks and shoes) are provided to the workers.

Figure Huating-5: PPE on site of Huiddong PB

Figure Huating-6: Pesticide stored

Figure Huating-7: Pesticide application and management protocol of Huating PB

GRM. A GRM was established with the ESMS in 2015 and disclosed to the villagers.

Figure Huating-8: GRM disclosure on village information board

The Huating PB E&S manager confirmed that there was no environmental complaints received since operation.

Stakeholder Consultation. There are no mandatory requirements on public consultation and stakeholder engagement on agricultural farming project (PRC category B) in the process of EIF development.

It was reported by the PB E&S manager that the EIF has been disclosed on local EPB’s website twice.

Figure Huating-9: Information disclosure during EIF development

Figure Huating-10: Stakeholder consultation

5. Subproject 5 Fuqing PB

Fuqing PB is located in Jiangjing Town, Fuqing City, Fujian Province. It was developed in 2011. The PB manager, Mr. Wu Yifei was appointed as E&S manager overseeing environmental management.

Figure Fuqing-1: Layout of Fuqing Production Base

EIA status. The EIF for Fuqing PB was approved by Fuqing City EPB in 2014.

Environmental setting and sensitive receptors. Fuqing PB is close to the residential houses in the east side. A county road separates the PB into north part and south part. A small river flows through the farm in the central.

Water consumption. The irrigation water is sourced from river water nearby. Fuqing production base can save about 340,706 m3 comparing with traditional cultivation model6.

Solid waste Disposal. The municipal solid waste is transported by local sanitation agency regularly. The residual leaves and rotten fruits are reused as fertilizer.

The service life of the plastic shed film normally is 3 years as reported by the PB manager. It is estimated roughly that 75 tons waste films are generated. The demolished plastic shed film of the greenhouse and fertilizer bags are recycled by special collectors.

The waste pesticide containers are hazardous waste, which are disposed by licensed hazardous waste treatment center or returned to the suppliers.

6 According to the Fujian Water Use Quota (DB 35/T772-2013), traditional cultivation of vegetables consume 210 m3 water per mu. Based on Le Gaga’s experience, soilless cultivation can save 70% water consumption comparing with traditional cultivation model. 23

Figure Fuqing-2: Bin for waste pesticide container

Fertilizer Storage. Fertilizer is stored in a dedicated locked warehouse. The floor was paved. Fire extinguisher is in place.

Figure Fuqing-3: Fertilizer storage warehouse

Figure Fuqing-4: Weed suppression film

The review of the pesticide application records of 2017 provided by the E&S manager confirmed that the pesticides used by these five subprojects are neither in the list of banned or eliminated pesticide list promulgated by Ministry of Agriculture nor Annex III chemicals7.

Fuqing PB has trained a specialized team composed by 8 workers to be responsible for pesticide application. The maximum daily working hours are 6 hours. It was reported by the farm manager that PPEs (clothing, hats, masks and shoes) are provided to the workers.

Figure Fuqing-5: PPE on site of Fuqing PB

7 Published on http://www.pic.int/TheConvention/Chemicals/AnnexIIIChemicals/tabid/1132/language/en- US/Default.aspx. The chemicals listed in Annex III include pesticides and industrial chemicals that have been banned or severely restricted for health or environmental reasons by two or more Parties and which the Conference of the Parties has decided to subject to the PIC procedure. There are a total of 50 chemicals listed in Annex III, 34 are pesticides (including 3 severely hazardous pesticide formulations) and 15 industrial chemicals, and 1 chemical in both the pesticide and industrial chemical categories.

Figure Fuqing-6: Pesticide warehouse condition of Fuqing PB

GRM. A GRM was established with the ESMS in 2015 and disclosed to the villagers.

Figure Fuqing-7: GRM disclosure on village information board

The Fuqing PB E&S manager confirmed that there was no environmental complaints received since operation.

Stakeholder Consultation. There are no mandatory requirements on public consultation and stakeholder engagement on agricultural farming project (PRC category B) in the process of EIF development.

It was reported by the PB E&S manager that the EIF has been disclosed on local EPB’s website twice. This was the normal practices in PRC. The EPB usually discloses the environmental document on its website when it started the reviewing process. The second disclosure is before the final approval. However, the EIF was approved about 4 years ago, there were no records on the public consultation conducted but the approved EIF was accessible in EPB upon public’s request.

Figure Fuqing-8: Introduction to visitors

V. CONCLUSION AND RECOMMENDATION

The production bases have adopted advanced cropping practices. Low toxicity pesticides were used to minimize adverse environmental impacts. The corporate has developed and implemented complete field management procedures, including pesticide and fertilizer procurement, application and storage procedures, which are useful to control environmental risks.

Table 2 presents a list of action required to be undertaken by the subproject to ensure closure of the gaps identified in the Table 2 and improve their environmental management performance in line with ADB’s environmental safeguard requirements and national legislative requirements.

Table 2: Corrective Action Plan with Proposed Timeline ADB SR 1: Applicable Gaps Recommendations Timeline Environment Subproject • Environmental All of five All of these five subprojects have history Organize training for the project 2018/12/31 Assessment subprojects of non-compliance that been operated companies to improve awareness of for several years without EIFs. This non- applicable environmental laws and compliance was identified during the regulations. ESDD conducted in 2014. Since then, Le Gaga has taken corrective measures and received the approvals from local EPBs. • Environmental Pingshan Although Pingshan Farm has been As the nature of Pingshan Farm is very 2018/7/15 Planning and Farm of operated without any environmental similar with Duozhu Farm, it is Management Huidong PB penalties, there is no formal EMP recommended the E&S manager of because no EIF for Pingshan Farm. Huidong to develop an EMP referring to Duozhu EIF to guide its daily operation. • Stakeholder Huidong, No records showed public consultation The requirement on Information 2018/12/31 Consultation Fuqing, was conducted during the process of Disclosure, Consultation and Participation Zhangpu, EIF development except for Huating. were covered by the ESMS of Le Gaga Huian, established in 2015. Huating PB E&S manager reported stakeholder consultations were organized during the The PB E&S manager shall document the land leasing process. Environmental consultation process and results and aspects were also mentioned to the maintain the documentations. The stakeholders but lack of documentation. consultations conducted shall be reported in the AESPR.

The AESPR and the compliance audit report will be disclosed on ADB website. • Monitoring and Huidong, As no specific requirements on Refer to the Compliance and Monitoring 2018/12/31 Reporting Fuqing, environmental monitoring in the scheme defined in the ESMS. The

Zhangpu, approved EIF, impact monitoring is environmental and social performance will Huian, deemed as not mandatory for the project be evaluated on an annual basis. The E&S Huating considering the nature of the project general manager will prepare an annual under PRC regulations. environmental and social performance report (AESPR). • Occupational Huidong It was reported by the farm manager that Provide full set of protective equipment, 2018/7/15 Health and PPEs are provided to the workers. including clothing, masks, hats etc. to the Safety However, during this compliance audit, workers involved in pesticide application. only protective coats were observed.