Environmental Compliance Audit Report Project Number: 47335-001 June 2018 PRC: Le Gaga Holdings Limited Greenhouse Agricultural Development Project 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 i 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) ii 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. N 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. 1 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 2 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