The World Bank Integrated Mobility Project (P173782) Public Disclosure Authorized

For Official Use Only

Public Disclosure Authorized Concept Environmental and Social Review Summary Concept Stage (ESRS Concept Stage)

Date Prepared/Updated: 03/10/2021 | Report No: ESRSC01883 Public Disclosure Public Public Disclosure Authorized Public Disclosure Authorized

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BASIC INFORMATION

A. Basic Project Data

Country Region Project ID Parent Project ID (if any)

Georgia EUROPE AND CENTRAL ASIA P173782

Project Name Kakheti Integrated Mobility Project

Practice Area (Lead) Financing Instrument Estimated Appraisal Date Estimated Board Date

Transport Investment Project 7/7/2021 9/29/2021 Financing For Official Use Only Borrower(s) Implementing Agency(ies)

Ministry of Finance Ministry of Development and Regional Infrastructure

Proposed Development Objective The Project Development Objective (PDO) is to improve connectivity along the -Badiauri section of the - Bakurtsikhe- highway and logistics efficiency in with private sector participation.

Financing (in USD Million) Amount Public Disclosure Public Total Project Cost 125.00

B. Is the project being prepared in a Situation of Urgent Need of Assistance or Capacity Constraints, as per Bank IPF Policy, para. 12? No

C. Summary Description of Proposed Project [including overview of Country, Sectoral & Institutional Contexts and Relationship to CPF] The project aims to provide easy access for the mobility of goods and people between the East and West parts of the country whilst assisting the development of logistics related infrastructure that will attract increased businesses and value addition within Georgia. With these initiatives, the project aims to assist the private sector engagements in the Logistics sector, contributing to the competitiveness of the Trans Caucus Transport Corridor, which will allow Georgia to benefit from stronger regional integration. The measures adopted to address the logistics supply chain for agriculture will also help Kakheti reduce losses in agriculture produce and increase its export potential whilst providing an opportunity to address gender disparity. Most importantly, it will stimulate COVID-19 recovery by

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creating jobs within the development of the highway, construction and operation of the logistics facilities as well as providing connectivity to access jobs.

The project will contribute specifically to focus area 1 (Enhance Inclusive Growth and Competitiveness) in the CPF as it aims at increasing economic participation through (a) improving connectivity and integration by continuing to develop selected infrastructure and improving the flow of goods and people along key corridors and crossing points, and (b) contributing to a more diversified rural economy with the potential to increase employment and incomes for underserved groups, such as women, young people and minority groups.

For Official Use Only D. Environmental and Social Overview D.1. Detailed project location(s) and salient physical characteristics relevant to the E&S assessment [geographic, environmental, social] Georgia is located in the South Caucasus and is one of the Black Sea riparian nation-states. It borders with Armenia, , Russian Federation and Turkey and comprises the following administrative units: capital city of Tbilisi, Autonomous Republic of , Autonomous Republic of Abkhazeti, and nine regions - , , Kakheti, -Mtianeti, Samtskhe-Javakheti, , , Samegrelo-Zemo , and Racha-Lechkhumi and Kvemo Svaneti. The project will be implemented in two locations: Component 1 entails construction of a highway section in the Kakheti region in Eastern Georgia; Component 2 supports the design and construction of a logistics center which is likely to be located in Kumisi, Kvemo Kartli region, close to the capital city of Tbilisi.

The proposed project comprises four components: Component 1. Mobility Improvement on the Eastern Corridor will support the construction of a 17 km Sagarejo-Badiauri section (Lot 3 out of 5 along the proposed Tbilisi-Sagarejo- Public Disclosure Public Bakurtsikhe corridor), as well as the creation or improvement of local market infrastructure adjacent to the highway. Component 2. Development of an Integrated Logistics Center (ILC) with Private Sector Participation will provide technical assistance for the structuring of a public-private partnership (PPP) transaction towards establishment of the ILC (sub-component 2.1); and financing of public infrastructure in the development of the ILC (sub-component 2.2). Component 3. Institutional Strengthening and Implementation Support will enhance capacity of the Roads Department (RD) and the Ministry of Economy and Sustainable Development (MOESD) for the implementation of components 1 and 2.

The Kakheti region has unique traditions in grape production and wine-making. Around 73 percent of the country’s vineyards and grape production is concentrated in this region and it is home to 14 out of the 18 wine sorts produced in Georgia. Kakheti has a low level of urbanization. Approximately 80 percent of the region’s population lives in villages, the majority of whom depend on subsistence farming. Thirty-eight percent of Georgia’s agricultural land is in the Kakheti region with arable lands and pastures. It is also a leading region in the growing of cereals and livestock. Kakheti is important from cultural heritage and tourism perspective as well, with historical towns, wineries, and mountain hiking further to the north-east in the Tusheti National Park. Due to all the above reasons, the sustainable development of the Kakheti region is a high priority for the country. The Kakheti region has a total area of 11,375 sq km, and population of 310,100 people - slightly less than a tenth of the country's population. At 13.5 percent, its unemployment rate is slightly lower than the national average of 17.6 percent. Local population has increasingly

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engaged in tourism-related economic activities such as handicrafts, guesthouses, and wineries outside subsistence- based agriculture. The region is predominantly populated by ethnic Georgians, however, the eastern parts also concentrate some Azerbaijani minority. Descendants of distinct cultural groups - Pshavs, Tush, Ossetians, etc. also reside in Kakheti mainly in its high mountainous northern parts.

The Kumisi municipality, where the construction of ILC under PPP arrangement is considered, is only 25 km away from Tbilisi, and administratively belongs to the Kvemo Kartli region of Georgia. The proposed site is located outside residential settlements, in proximity to three rural communities. D. 2. Borrower’s Institutional Capacity Component 1 of the project will be implemented by the RD - an agency subordinate to the Ministry of Regional Development and Infrastructure. Component 2 will be implemented by the Ministry of Economy and Sustainable Development (MOESD), Transport and Logistics Policy Development Department. Component 3 will provide technical assistance and capacity building to both RD and MOESD. For Official Use Only The RD is well-experienced in implementing projects financed by the World Bank and other international financing institutions (IFIs). RD has an Environmental and Social (E&S) Department which employs one Environmental and one Social specialist assigned to work exclusively on the World Bank-financed projects. Other E&S specialists are assigned to projects undertaken with the State budget funding or those supported by other external financiers. Additionally, the E&S Department employs a resettlement and land acquisition team with a field presence. RD's record on E&S performance has varied between moderately satisfactory and satisfactory. Overall, in the past two years, RD has made substantial progress in enhancing its capacity on grievance redress management, and is progressing towards the integration of health and safety considerations in its practices. Still, the RD team will require additional capacity by strengthening - both in terms of additional staff and in training for existing staff - to meet the requirements of the ESF. Specifically, RD's team would need to be enhanced with labor, health, and safety expertise and stakeholder engagement or community liaison expertise. Public Disclosure Public MOESD has relatively modest experience with the ESF requirements of the World Bank. The two ongoing World Bank- financed projects under MOESD are managed by its subordinate agencies, within which specialized project implementation teams have been recruited with an E&S expertise. A project implementing team within MOESD would need to be designated for the purposes of implementing Component 2 activities. This team should include environmental, health and safety, social and resettlement expertise. It is likely that the capacity of the MOESD project implementation team will have to be enhanced by bringing in consultants with relevant qualifications.

II. SCREENING OF POTENTIAL ENVIRONMENTAL AND SOCIAL (ES) RISKS AND IMPACTS

A. Environmental and Social Risk Classification (ESRC) Substantial

Environmental Risk Rating Substantial Component 1 will have an environmental footprint caused by construction of a four-lane highway section along a new alignment. Related risks include vegetation clearing, large-scale earth works, generation of excess material and other construction waste, river crossings, dust and noise, vibration, extraction of natural construction materials, transportation of construction materials and waste and operation of work camps. Negative impacts may include pollution of air, soil, surface water and ground water; damage to habitats and disturbance of fauna; erosion of slopes

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and triggering of landslides; improper handling of chance finds; nuisance to local communities; worksite and road accidents; spread of disease among workers and communities residing along the highway. These impacts may be effectively mitigated through making smart adjustments in the detailed design of the highway, applying good construction practice and observing consistency with the relevant ESSs. However, poor on-site management of construction waste, delayed formal arrangements for the final disposal of excess material, weakness of national system of control over environmental impacts of sand/gravel mining operations, weak enforcement of worksite safety rules are quite typical challenges for infrastructure projects in Georgia, amplifying some of the described risks. Knowing that large areas in Kakheti region are used for agriculture, especially - for grape growing, potential impact of highway construction and operation on the quality of crops grown in plots adjacent to the highway corridor should be carefully examined. Because communities within the project impact zone may reveal high sensitivity to this matter, correct information about expected impacts on cultivated land plots should be communicated to stakeholders in an organized manner and discussed upfront. Construction of the highway will require permanent de-listing of land strips from the State Forest Fund and removal of forest cover from this land to free up space for the highway corridor, and For Official Use Only this will have tangible residual impacts on the landscape. While the highway will improve connectivity and facilitate tourist flow to Kakheti region - a well established and still developing touristic destination - in certain locations, residual aesthetic impacts of highway construction may negatively influence visitor experience. Therefore, visual impacts should be modeled, sensitive segments of highway identified, and possible adjustments made in detailed designs to minimize these impacts. No major infrastructural investments, other than construction of highway and ancillary infrastructure, are anticipated along the highway corridor. More information on possible cumulative impacts of highway and other prospective investments in the same area will be provided in ESIA report. Cumulative impacts of constructing all 5 lots of the highway will be examined as well.

RD is well experienced in undertaking road construction in consistency with environmental policies of the Bank and other IFIs and has a satisfactory track record in environmental management, OHS being a relative weakness.

Public Disclosure Public Risks associated with the provision of public infrastructure for ILC under component 2 are less certain, because the location of this infrastructure and its main elements are subject to confirmation by appraisal, while many of its technical parameters will be defined and designed during the project implementation. Still, generic types of component 2 risks are predictable and within the range of moderate to substantial. MOESD has limited experience in E&S management and requires capacity enhancement.

Overall, project environmental risks are significant, diverse and multiple; with high likelihood of materialization. Therefore, the project’s environmental risks are rated as substantial. However, application of mitigation measures commonly used in the construction of similar infrastructure, would effectively address these impacts. Social Risk Rating Substantial Component 1 of the project will support highway construction which is likely to entail substantial land acquisition and possibly some physical resettlement. A gap analysis between Georgian national legislation and the World Bank ESF has indicated some shortcomings with regard to land and asset valuations which are essential to ensure that affected persons are not worse off as a result of the project. Livelihood restoration measures and practices, and community benefit sharing programs, have not been applied in prior infrastructure projects in Georgia. Given the importance of land-based activities such as agriculture including possible presence of perennial crops such as vineyards and orchards in the project area, livelihood restoration and benefit sharing measures would be important for the success of this project to ensure that it delivers positive benefits to the local population in addition to strengthening the value

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addition of transport and logistics for the country. The presence of ethnic minorities and distinct cultural groups in the project region, some of whom may not have proficiency in the , as well as the variety of potentially affected stakeholders including micro, small, and medium enterprises, agricultural and tourism businesses, among others, would require expert management of communications and stakeholder engagement. The scope of civil works implies medium to high labor influx, including migrant workers, both foreign and from other parts of Georgia. As such, RD and civil work contractors need to put in place strong community health and safety, and sexual exploitation and abuse and sexual harassment (SEA/SH) measures. Labor and occupational health and safety (OHS) risks are also likely to be substantial during the construction phase of the project, with additional risks related to COVID-19 safety. Georgia's national legislation and enforcement capacity on labor and OHS issues is quickly progressing. Still, extensive efforts will be required on the part of RD and civil work contractors to establish strong labor, working conditions, an OHS practices on site. Currently, RD lacks in-house expertise in labor and OHS, and stakeholder engagement. It has no prior experience with ESF.

For Official Use Only Risks associated with the provision of public infrastructure for a logistics center based on PPP arrangements under Component 2 are less certain, because the location of this infrastructure and its main elements are subject to confirmation by appraisal, while many of its technical parameters will be defined and designed during the project implementation. Social risks may involve, among others, impacts on private land or assets, labor conditions and occupational health and safety, and community health and safety. MOESD has limited experience in E&S management under the Bank-financed operations and requires capacity enhancement.

Due to the above reasons, the overall social risk is assessed as Substantial.

B. Environment and Social Standards (ESSs) that Apply to the Activities Being Considered

B.1. General Assessment

Public Disclosure Public ESS1 Assessment and Management of Environmental and Social Risks and Impacts Overview of the relevance of the Standard for the Project: The main E&S risks of the project are related to Component 1, specifically, to the construction of a highway section between Sagarejo and Badiauri. Component 2 activities in support of ILC also raise some E&S concerns related to the provision of public infrastructure financed by the project as well as regarding E&S performance under the overall PPP arrangement for the ILC construction and operation. Technical assistance from the project, that involves preparation of technical parameters for future civil works, will integrate E&S screening consistent with the project's ESF instruments.

Due to the large scale of civil works and potential land acquisition, the project may disproportionately impact vulnerable and disadvantaged groups. It is also likely that such groups may not be able to benefit equitably from project activities. Potential vulnerable and disadvantaged groups include poor, unemployed, subsistence farmers, elderly, youth and women, ethnic minorities, persons with disabilities, among other. A social assessment during project preparation will be needed to assess the risk of social and economic exclusion and recommend measures to be integrated into the project design to prevent such risks and expand benefits for local population, with special focus on groups identified as vulnerable and disadvantaged.

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The project will employ direct and contracted workers, and will involve primary suppliers. The relevance of primary suppliers will be determined by Appraisal. ESS2 risks may include risk of discrimination; non-transparent practices in hiring and firing of workers; low awareness among workers of the terms and conditions of labor, especially for migrant workers and other vulnerable workers; inadequate OHS; poor living conditions at workers' camps, including deficiencies in the arrangements for the prevention and management of COVID-19 outbreaks; and/or ineffective grievance mechanisms for employment-related concerns. RD will prepare a LMP for the project to ensure that the labor rights, and health and safety of all project workers are protected in accordance with national law and ESS2. For Component 2, LMP will be integrated in the ESMF. Direct workers will involve RD and MOESD staff and consultants. MOESD staff (civil servants), will adhere to national labor legislation and be subject to selected provisions of the LMP such as the prohibition of forced and child labor.

Preliminary Environmental Assessment of the entire highway corridor was carried out in 2018 under one of the Bank- financed transport projects. It provided detailed baseline information and pointed out all sensitive E&S receptors For Official Use Only along the highway alignment. Later, EIB provided funding for an in-depth ESIA, which continues till present as the detailed designs of individual sections of the highway gradually shape up. Finalized site-specific ESIA reports will be available before Appraisal. The Bank team reviewed ToR for site-specific ESIAs and provided detailed comments on the areas where ESIA coverage must be extended to achieve material consistency with the ESF requirements. RD will finalize ESIA report which includes highway section intended for the Bank-financed project intervention according the Bank comments. Among other aspects, ESIA will cover expected cumulative impacts of the highway construction including impacts of this project in relation to other projects. Preliminary analysis suggests that conversion of small but multiple plots of the State Forest Fund is likely to have the biggest cumulative impact that has to be duly mitigated and/or compensated. The ESIA report will incorporate relevant measures to ensure safety of civil works, such as good housekeeping at construction sites and workers' camps; minimization, on-site management and disposal of various types of waste; traffic management; protection of communities' health and safety, SEA/SH prevention, management of security personnel, application of COVID-19 safety arrangements along with other

Public Disclosure Public measures for ensuring decent labor and working conditions consistent with LMP. Pollution control; prevention of the excessive damage to vegetation, habitats and wildlife; erosion control and timely reinstatement of the affected landscapes will be required to minimize the project's environmental footprint. The ESIA report will include description of E&S impacts associated with handling of existing small roadside vending points through the replacement of sub-standard random stalls with a decent light infrastructure for organized marketplaces to be designed and placed based on community preferences.

Highway construction will require works in trans-boundary waterways to arrange river crossings over the small rivers draining to the Caspian sea in the territory of Azerbaijan. However, because project interventions are expected to cause neither qualitative nor quantitative changes in the water flow measurable in downstream Azerbaijan, communication to the riparian countries may not be necessary. The ESIA is expected to provide additional evidence in support of this opinion.

For Component 1, in addition to ESIA, RD will prepare a Resettlement Action Plan (RAP) consistent with ESS5, Labor Management Procedures (LMP) consistent with ESS2, and a Stakeholder Engagement Plan (SEP) consistent with ESS10 and ensure that these instruments are approved by the Bank, disclosed and consulted prior to project Appraisal. The LMP will highlight key gaps between national legislation and ESS2 and gap-filling measures to be adopted by the project. It will describe the key labor risks, terms and conditions of labor, and OHS requirements to be

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adopted under the project. The SEP will describe all information disclosure and stakeholder engagement activities under the project. The SEP will identify and assess potential project affected stakeholders and other interested parties and propose a plan for their systematic engagement in the course for the project. The SEP will be prepared in a participatory manner, i.e., it will include direct feedback from communities in the project area and integrate their preferences on the format of engagement throughout project preparation. The SEP will propose differentiated measures for engaging with potentially vulnerable and disadvantaged groups to ensure that they are able to receive information and their feedback is taken into account. These may include, for example, tailored consultations with women, preparing information materials in minority languages as needed, providing additional support to affected groups for accessing the project grievance mechanism, among others. The SEP will outline the roles and responsibilities for information disclosure and engagement across the project implementing entities, and will include a budget for SEP implementation which will be reflected in the procurement plan of the project.

For the purposes of Component 2, MOESD will prepare and disclose by Appraisal an Environmental and Social For Official Use Only Management Framework (ESMF), a Resettlement Policy Framework (RPF), and a Stakeholder Engagement Plan (SEP) to guide E&S screening and risk management for any civil works that may be financed under the project, as well as to establish the overall E&S requirements to be introduced in the PPP transaction. Detailed site-specific instruments, such as ESMPs and RAPs (if applicable) will be prepared once the public infrastructural elements are defined and designed at a later stage of the project cycle. The ESMF, RPF, and SEP will be prepared, consulted upon, cleared by the Bank and disclosed by Appraisal.

Grievance mechanisms (GM) accessible for all project-affected parties and interested citizens will be established and maintained by RD and MOESD to accept and address any project-related grievances. The GMs will be described in the SEPs and referenced in all other ESF instruments. RD and MOESD will ensure that the GMs will be sensitized to address SEA/SH related grievances.

Public Disclosure Public Areas where “Use of Borrower Framework” is being considered: The use of Borrower Framework is not being considered for the whole or any part of the project.

ESS10 Stakeholder Engagement and Information Disclosure RD and MOESD will each prepare a SEP for Component 1 and 2, respectively, which will identify prospective project affected parties (PAPs) and other interested parties (OIPs), and will outline measures for engagement with stakeholders throughout the life of the project. The SEPs will be prepared in a participatory manner, i.e., based on a series of preliminary interactions and consultations with project stakeholders including workshops, surveys, interviews and focus group discussions with relevant government authorities, private sector stakeholders, farmers, local authorities and service providers, and diverse populations from the project area including in urban and rural communities, youth, middle aged, and elderly groups, men and women, and representatives from different ethnic groups, among others.

The SEPs will specify the institutional roles and responsibilities, timeline, and budget for conducting the stakeholder engagement throughout the project. RD and MOESD may engage consultants or NGOs in the tasks related to the preparation and implementation of SEP such as community consultations, participatory needs assessment and prioritization of activities, e.g., training, to be provided under the Project.

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Key stakeholders are expected to include affected people and communities, as well as all residents of the project area; central and local government authorities and service provider institutions; farmers, and private sector companies - including MSMEs and larger enterprises; potential civil works contractors and suppliers; NGOs and community-based organizations; among others.

B.2. Specific Risks and Impacts

A brief description of the potential environmental and social risks and impacts relevant to the Project. ESS2 Labor and Working Conditions This ESS is relevant to the project. The project will involve direct workers (RD and MOESD project implementation teams), contracted workers engaged in civil works, as well as consultants engaged in technical assistance services, For Official Use Only provision of training, etc. Primary suppliers may be involved I the project; this will be confirmed during preparation. Engagement of community workers is not expected under this project. At this stage, it is not possible to determine the number of direct and contracted workers to be involved in project implementation. It is anticipated that over 200 workers may be involved in the project, including direct and contracted workers (skilled and unskilled personnel employed by the civil works contractors and sub-contractors, supervision consultants, consultancy companies and/or NGOs).

Labor rights and occupational health and safety in Georgia are undergoing reforms aimed to strengthen legislation, as well as the mandate and capacity for enforcement under the Labor Inspectorate. Over the past three years, new amendments were introduced specifically to strengthen the enforcement of the Labor Safety Law, and to progressively introduce enforcement measures of the Labor Code and the Labor safety Law via the Labor Inspection Department under the Ministry of IDPs from Occupied Territories, Labor, Health, and Social Affairs (MoILHSA). As of

Public Disclosure Public March 2018, Georgia introduced some mechanisms of OHS inspection. As of January 2021, the mandate of the Labor Inspection department was expanded further to also cover non-OHS Labor Code provisions. At present, the national Labor Code includes provisions on non-discrimination, freedom of association, minimum employment age, OHS and dispute resolution; however, some gaps with ESS2 exist. The national Labor Code does not mandate establishment of grievance mechanisms by employers. Having a code of conduct to prevent SEA/SH risks at the workplace is also not mandatory. Other gaps between ESS2 and national law include lack of clarity of national legislation on risk assessments to be employed when hiring workers under 18, on limits of overtime work, among others. The project LMPswill describe the terms and conditions for the project to be followed in order to bridge these gaps.

For Component 1, RD will prepare LMP, which will be anchored in national legislation and will also highlight relevant gaps with national legislation and gap filling measures to be applied in the project. It will include, among others, the requirement for contractors to: provide written contracts with clear terms and conditions of labor to all employees; refrain from child or forced labor in their operations; establish limits on overtime work; adopt and enforce a code of conduct for all employees which prohibits SEA/SH behaviors among personnel; provide safe working conditions and, where relevant, safe living conditions for their employees; provide OHS training to their personnel; enforce compliance with OHS practices; adhere to strict requirements for prevention of COVID-19 and other transmittable diseases among the workforce and for management of such risks should contamination occur, among other provisions of the LMP; and cause sub-contractors to adhere to the same requirements. The technical supervisor of

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works will be required to oversee closely adherence to the LMP. For Component 2 activities LMP provisions will be integrated in the ESMF to be prepared by MOESD by Appraisal.

The LMPs for both components will include the requirement for project implementing entities and all contractors to establish a functioning grievance mechanism for their employees. This mechanism should provide for safe and confidential redressal of workplace concerns preferably managed by a qualified HR professional. Workers will be made aware of this mechanism and its features. The GM will include sensitive and confidential protocols for receiving and addressing SEA/SH concerns.

The project LMP principles will be integrated in the procurement process for all contractors. While tendering of civil works, bidders will be required to commit to the development of contractor's LMP and contractor's ESMP, including traffic management, community health and safety, among other plans, as well as to submit an Environment, Social, Health and Safety (ESHS) Code of Conduct prepared in line with Environment, Health and Safety Guidelines of the For Official Use Only World Bank Group. Contractors engaged in the civil works will develop Occupational Health and Safety Plans which will include procedures on incident investigation and reporting. Contractors will be contractually required to monitor and enforce safety plans as well as to cause their sub-contractors to adhere to the requirements of the LMP.

ESS3 Resource Efficiency and Pollution Prevention and Management This ESS is relevant to the project. Construction works on the highway will generate a variety of waste, including considerable volume of excess material as well as organic waste from vegetation clearing, hazardous waste from servicing of construction vehicles and machinery, household waste from workers' camps and likely medical waste from the application of measures for the prevention / management of COVID-19 outbreaks. Detailed arrangements for waste minimization, separation and management will be required from works contractor(s) and adherence to

Public Disclosure Public these arrangements overseen by the employer through the construction supervision consultant. Special effort will be required to ensure that formal permits/agreement on the temporary storage and final disposal of excess material and other waste are provided on time. Other sources of environmental pollution include noise, dust, exhaust from construction machinery, liquid discharge from workers' camps and machinery servicing units. At the operation phase, automobile traffic emissions, dust, vibration, noise, storm water runoff from carriageway, litter and waste from possible road accidents involving dry and liquid cargo vehicles will be likely sources of pollution. Noise pollution nearby the settlements and possible impacts of automobile emissions on the quality of agriculture produce in the highway segments cutting through vineyards and other crop fields will require modeling, consideration in the detailed designs and application of tailored mitigation measures. Highway design will also be informed by already manifested impacts of climate change as well as future climate projections. The known impacts include increased occurrence of extreme weather events, such as hailstorms, heavy rainfall, rapid flooding from rivers originating in high mountainous areas, intense erosion and sedimentation of river beds, etc. Climate resilient design solutions will be applied to decrease likelihood and severity of damage to the highway infrastructure and to increase its durability.

Works for the construction of highway will require considerable amount of natural construction materials like earth, stone, gravel and sand. According to the national legislation, material extraction is subject to licensing and this rule is well-enforced. However, environmental aspects of extraction have weak coverage in the national regulatory system, both in terms of legislative shortfalls and oversight capacity. Gravel extraction from watercourses is a regular practice

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and mine reinstatement is not duly practiced. Therefore, ESCP and employer's ESMP will highlight requirements for environmentally sound extraction of natural construction materials and close monitoring of contractors' performance during material sourcing will be undertaken. If project contractors do not extract material on their own but rather purchase it from the market, RD will be required applying due diligence to screening of primary suppliers.

ESS4 Community Health and Safety This ESS is relevant to the project. Given that the project will support major infrastructure works, it entails risks on the health and safety of communities. These may include traffic disruption, waste, noise, dust, vibration, as well as impacts arising from labor influx. These impacts will be mitigated via measures to be included in the project ESIA and ESMF reports, contractors' ESMPs and environmental health and safety management plans. The ESHS management plans to be completed by contractors will be described in all bidding documents. Finalized ESHS management plans will be reviewed by qualified staff of technical supervisors and employer. Thus, RD will ensure that detailed measures For Official Use Only are in place for community health and safety as well as that the adequate experts and budget are allocated by contractors to manage implementation of these plans, provide on-site monitoring, regular reporting, and undertake immediate remedial actions in the event of any incidents.

The project is assessed as having low SEA/SH risk mostly due to the country context which has relatively advanced legislation and institutional mechanisms for the prevention and mitigation of GBV. Still, given that labor influx, including from migrant workers, is expected under the project and the project will cover urban as well as rural areas, strong SEA/SH prevention and mitigation measures should be put in place. These include a Code of Conduct for all project workers, grievance mechanism sensitized to receiving and addressing SEA/SH grievances, training for workers and awareness raising for communities on the CoC and SEA/SH measures introduced in the project. RD will designate a gender (SEA/SH) focal point to oversee implementation of SEA/SH related measures.

Public Disclosure Public As the project is likely to involve a high number of workers - skilled and unskilled - as well as potential camps for workers, contractors will strictly adhere to sanitary guidelines established by the Government of Georgia and aligned with WHO requirements to prevent and manage risks of disease, especially in the context of COVID-19. COVID-19 prevention and mitigation plans will be prepared by all contractors and approved by RD and technical supervisor, monitored on a weekly basis, and monthly reports submitted to RD.

Security personnel may be recruited by civil work contractors. Prior to hiring security personnel contractors will be required to conduct screening to ensure no prior history of abuse. All security personnel recruited on site will have to undergo training on the adequate use of force. All contractors will be required to assess the risks from damages to the community arising from security personnel and include prevention measures in the training of such personnel.

ESS5 Land Acquisition, Restrictions on Land Use and Involuntary Resettlement Component 1 of the project is expected to entail land acquisition, economic displacement, and possibly physical displacement associated with the construction of highway sections in Kakheti region. RD will prepare a RAP in line with ESS5 by project Appraisal to guide the land acquisition and resettlement process, including a census of affected persons, entitlements, and process for delivery of compensations. No civil works shall start before satisfactory completion of the RAP implementation as verified by RAP Completion Report approved by the World Bank. In

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addition to compensation for lost assets at replacement value the RAP will describe livelihoods restoration measures specifically for affected households whose livelihoods are land-based, those losing perennial crops that may be difficult to reestablish, vulnerable and disadvantaged persons, among others. The RAP will also describe the measures undertaken during project design stage to avoid and minimize resettlement impacts.

Component 2 is not expected to entail resettlement impacts. It is likely that the general location of the Logistics Center will be identified and can be screened prior to Appraisal. However, the exact location of investments within that site to be financed under the project, will not be identified by Appraisal. The detailed design for these investments is expected to be prepared during project implementation. Therefore, MOESD will prepare an RPF by project Appraisal consistent with ESS5 to guide the management of potential resettlement impacts that may be identified in the course of project implementation.

For Official Use Only ESS6 Biodiversity Conservation and Sustainable Management of Living Natural Resources This ESS is relevant to the project. Construction of the highway section along the new alignment will create an additional environmental footprint. Parts of the highway will pass through the natural areas which are not built up or cultivated. Several protected areas are located in the vicinity of the highway corridor, although not in the direct impact zone. Report from the Preliminary Environmental Assessment carries detailed information about all natural protected areas along the entire highway corridor. Ongoing ESIA studies potential impacts of highway construction and operation on these projected areas. Based on the nature of habitats and species targeted for conservation in these projected areas, they will not experience measurable impacts from the highway. Final ESIA report is expected to confirm that no adverse impact on designated projected areas is likely. Administrations of protected areas will be consulted on the ESIA findings.

The ESIA report will also carefully examine potential impacts of the highway on wildlife outside the designated

Public Disclosure Public protected areas. It will provide full information on the types of habitats falling into the project impact zone. More specifically, ESIA will define the type and extent of impacts on the transformed and natural habitats, identify presence of critical habitats in the project’s area of influence and, if found, assess whether critical habitats may come under impact of highway construction and/or operation and identify any possible impacts on critical habitats. Respective mitigation measures will be worked out and applied at the construction and operation phases. A need for producing a self-standing Biodiversity Management Plan will be considered and decision taken by appraisal.

It is known upfront that construction of the highway will require de-listing of land from the State Forest Fund and clearing vegetation, including tree extraction, in these locations. ESIA report will provide detailed information on the type of vegetation in State Forest Fund plots earmarked for de-listing, especially as the Fund lands greatly differ by quality of forest cover and even by its presence within boundaries of individual plots. Defining and duly implementing adequate mitigation measures will be important to minimize the residual impacts on forests and on the aesthetics of the affected landscape.

ESS7 Indigenous Peoples/Sub-Saharan African Historically Underserved Traditional Local Communities This standard is not relevant as no indigenous groups are known to reside in Georgia.

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ESS8 Cultural Heritage This standard considered relevant at Concept stage as the detailed ESIA report and site-specific ESMPs carrying specific information on the cultural heritage within the project sites are not yet available. If E&S assessments during project preparation indicate that no impacts on tangible or intangible cultural heritage may be expected, the relevance of this standard will be re-assessed at Appraisal stage. Chance find procedures will be incorporated in the ESIA report and ESMF, and the borrower will commit to adhere to these procedures in the ESCP.

ESS9 Financial Intermediaries This standard is not relevant. The project will not involve financial intermediaries.

C. Legal Operational Policies that Apply For Official Use Only OP 7.50 Projects on International Waterways Yes

OP 7.60 Projects in Disputed Areas No

III. WORLD BANK ENVIRONMENTAL AND SOCIAL DUE DILIGENCE

A. Is a common approach being considered? No Financing Partners There are no co-financing partners. Under Component 2, the privately-financed parts of the ILC will represent facilities

Public Disclosure Public associated with the project.

Component 1: The World-Bank financed highway section is Lot 3 (out of 5) of the planned Tbilisi-Sagarejo-Bakurtsikhe corridor. Lots 1 and 2 are expected to be financed by the Government of Georgia contemporaneously with Lot 3. However, Lots 1 and 2 are to be financed and constructed by the Government based on current and expected traffic volumes on the existing S5 road. The expected traffic that would divert from S5 to Lots 1 and 2 of the new highway is projected to primarily traverse these two lots and, therefore, construction of Lots 1 and 2 does not depend on construction of Lot 3. Construction of Lot 3 will, however, depend on the construction of Lots 1 and 2. A Feasibility Study undertaken for the upgrading of Tbilisi-Sagarejo-Bakurtsikhe road (August 2018) indicates that each of the Lots 1, 2, and 3 is individually economically viable and meets the Government’s required economic internal rate of return of 8% as well as the Bank’s threshold economic viability requirement of 6%. Furthermore, in the event of Lot 3 not being financed by the Bank (or not being constructed), the Government would still construct Lots 1 and 2. In the event of Lot 3 not being constructed, the traffic on the new Lots 1 and 2 would be diverted back to the existing S5 road through interchanges that are being designed, in the same manner that traffic from Lot 3, when built, will be diverted until (and if) Lots 4 and 5 come on line. On this basis, Lots 1 and 2 are not considered Associated Facilities to Lot 3 under the ESF principles.

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The Government of Georgia does not intend to commence procurement of lots 4 and 5 for the foreseeable future, given that the present S5 road has not reached the necessary level of traffic in this portion of the network to justify these investments, coupled with the constraints in fiscal space faced by the government.

The Bakurtsikhe – section, to be financed by ADB, has been included in the overall planning carried out for the area connecting Bakurtsikhe and , the capital of Kakheti region. The present diversion of traffic from Bakurtsikhe towards Telavi demonstrates this well. Therefore, this section does not qualify as an Associated Facility to Lot 3.

Component 2 will support civil works under the PPP model for the creation of the ILC. Construction of privately financed facilities will be an associated facility for the project investment into public infrastructural elements. In this case, MOESD will be responsible for tracking E&S performance of privately financed construction and apply due diligence to ensuring its material consistency with the ESF requirements. For Official Use Only

B. Proposed Measures, Actions and Timing (Borrower’s commitments) Actions to be completed prior to Bank Board Approval: 1) Component 1, actions by RD: - Preparation, disclosure, and consultation on the ESIA report, RAP, LMP and SEP for the project-financed highway section, by Appraisal;

2) Component 2, actions by MOESD: - Preparation, disclosure, and consultation on the ESMF, RPF, and SEP for the PPP transaction and any related civil works to be financed under the project, by Appraisal;

Public Disclosure Public 3) RD, MOESD, and World Bank to agree on Environmental and Social Commitment Plan (ESCP) - to be drafted by Appraisal and amended, if needed, at Negotiations. Possible issues to be addressed in the Borrower Environmental and Social Commitment Plan (ESCP): - Organizational structure within RD and MOESD, including, at minimum, one Environmental, one Social, one Labor, Health, and Safety, and one Community Liaison / Stakeholder Engagement specialist within each agency (these may be designated staff or consultants); - Implementation, regular monitoring and reporting on all ESF instruments; - Requirement to integrate ESHS commitments in line with the project ESF instruments in all civil works contracts; - Establishment and maintenance of Project GM, sensitized to receiving SEA/SH grievances. - Training and capacity-building requirements for project implementation teams and contractors for both components.

C. Timing Tentative target date for preparing the Appraisal Stage ESRS 30-Jun-2021

IV. CONTACT POINTS

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World Bank Contact: Amali Rajapaksa Title: Senior Transport Specialist

Telephone No: 5252+276 / 995-322-2296276 Email: [email protected]

Contact: Luis C. Blancas Mendivil Title: Senior Transport Specialist

Telephone No: +1-202-473-8094 Email: [email protected]

Borrower/Client/Recipient Borrower: Ministry of Finance

Implementing Agency(ies) For Official Use Only Implementing Agency: Ministry of Development and Regional Infrastructure

V. FOR MORE INFORMATION CONTACT The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 473-1000 Web: http://www.worldbank.org/projects

VI. APPROVAL

Public Disclosure Public Task Team Leader(s): Amali Rajapaksa, Luis C. Blancas Mendivil

Practice Manager (ENR/Social) Varalakshmi Vemuru Recommended on 08-Mar-2021 at 05:44:56 GMT-05:00

Safeguards Advisor ESSA Agnes I. Kiss (SAESSA) Cleared on 10-Mar-2021 at 18:41:57 GMT-05:00

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