PROJECT DESCRIPTION MCS Group, the leading Mongolian business group and a long standing IFC client on several investments; MMC, Mongolia's largest listed mining company and an affiliate of MCS; and Shunkhlai - another prominent Mongolian business group ("Sponsors") are jointly building an international class general hospital (Mongolia's first) in the capital, Ulaanbaatar. The hospital will contain 90 inpatient beds, an outpatient facility, and a pharmacy (the "Project"). The Project began construction in July 2010 and at the time of IFC visit in July 2013, was nearly 70% complete, with building structure almost completed and internal fit out work underway. The hospital opening is expected in November 2013.For this Project, Vamed - a specialized international medical services consultancy firm - is providing medical equipment procurement, installation and commissioning services. Samsung has been providing technical services to assist in the construction phase (including providing clinical staff, training, and implementing a Health Information System (HIS), and a partnership agreement with Korea University Medical Center (one of the leading university hospitals in Korea) has been entered into. This partnership entails mutual cooperation between the various medical departments of the two institutions, with training, staff support and remote diagnosis being provided from Korea. OVERVIEW OF IFC'S SCOPE OF REVIEW IFC's review of this investment consisted of appraising technical, environmental, health and safety (EHS) related information of The Intermed Hospital ("Intermed" or the "Company") and MCS Group ("MCS") including EHS policies and standard operating procedures (SOPs) developed by MCS at corporate level as well as those being developed by Intermed for the proposed project; environmental impact assessment (EIA) report, regulatory permits; design specifications and drawings for the proposed hospital; EHS related permits and reports; site safety monitoring data, HR policies; infection control policies and procedures etc.One of the project sponsors - MCS - is an existing IFC client and thus has been subject to IFC's environmental and social (E&S) supervision for a number of years; and has been performing satisfactorily. MCS is proactive on its E&S reporting requirements to IFC and has made good progress in the past year on implementation of the agreed E&S action plan (ESAP). Information thus collected over the past years was also used in this due diligence.Moreover, the appraisal included visits to the construction site of the new Intermed Hospital, and to the biomedical waste management facility of the licensed contractor in Ulaanbaatar, Mongolia. The appraisal also included discussions with Company's senior management in corporate headquarters in Ulaanbaatar and with the project's technical consultants Samsung C&T Corporation - Engineering & Construction Group ("Samsung") in Seoul. IDENTIFIED APPLICABLE PERFORMANCE STANDARDS** While all Performance Standards are applicable to this investment, IFC's environmental and social due diligence indicates that the investment will have impacts which must be managed in a manner consistent with the following Performance Standards.PS 1 - Assessment and Management of Environmental and Social Risks and ImpactsPS 2 - Labor and working conditionsPS 3 - Resource Efficiency and Pollution PreventionPS 4 - Community Health, Safety and SecurityIf IFC's investment proceeds, IFC will periodically review the the project's ongoing compliance with the Performance Standards ENVIRONMENTAL AND SOCIAL CATEGORIZATION AND RATIONALE Key risks and issues related to this project include: Intermed's corporate capacity, monitoring and performance to date (in project design and construction phase) in terms of environmental, health and safety and social management; hospital design plans and the use of an internationally recognized life and fire safety code for such; emergency preparedness and response planning; efficiency of raw material, water and energy use in hospital operations; pollution control, solid and biomedical waste management and disposal; labor and working conditions including infection control procedures; and management of contractors and suppliers (during construction and operational phases).The Project is under construction in downtown urban areas of Ulaanbaatar. The Hospital is being built on 0.75 hectare of land that was previously owned by APU Company, which is a subsidiary of Shunkhlai - one of the Sponsors of this Project. Prior to the purchase by APU, this government-owned land was vacant and neither had any previous community occupants nor was it used for any livelihood purposes.Accordingly, the findings of the Project review indicate that there are no impacts related to Land Acquisition and Involuntary Settlement (PS5), Biodiversity Conservation and Natural Resources Management (PS6), Indigenous Peoples (PS7) or Cultural Heritage (PS8).The Project has a limited number of potentially adverse environmental and social impacts, which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines, or design criteria. On this basis, this project is therefore classified as a Category B project according to IFC's Policy on Environmental and Social Sustainability. **Information on IFC's Policy and Performance Standards on Environmental and Social Sustainability can be found at www.ifc.org/sustainability ENVIRONMENTAL AND SOCIAL MITIGATION MEASURES IFC's appraisal considered the environmental and social management planning process and documentation for the project and gaps, if any, between these and IFC's requirements. Where necessary, corrective measures, intended to close these gaps within a reasonable period of time, are summarized in the paragraphs that follow and (if applicable) in an agreed Environmental and Social Action Plan (ESAP). Through the implementation of these measures, the project is expected to be designed and operated in accordance with Performance Standards objectives. PS 1: ASSESSMENT AND MANAGEMENT OF ENVIRONMENTAL AND SOCIAL RISKS AND IMPACTS - Environmental & Social Assessment:For the proposed Project, a formal EIA study was carried out in 2011 by consultants certified by the Ministry of Nature, Environment and Tourism of Mongolia. The EIA report has identified the E&S impacts of the project during construction and operational phase and suggests several mitigation measures, including a monitoring plan.The Company has obtained all the applicable regulatory permits from the relevant authorities to build the hospital and complies with the applicable mitigation measures required by the permit conditions. Intermed will procure additional necessary environmental approvals prior to commencement of the operations of its new hospital.- Management Systems:For this greenfield hospital Project, Intermed plans to get Mongolian hospital accreditation in 2015 and JCI accreditation in 2016. Since both quality (ISO9001) and environmental (ISO14001) management systems are partially covered by aforementioned accreditation processes, the Intermed hospital will consider ISO 9001 in 2016 and ISO 14001 certifications after 2017.Intermed however, has started developing several policies and SOPs (such as fire safety management policy, industrial safety management guidelines, waste management policy, etc.) in line with the requirements of these various standards and these will be progressively rolled out as the hospital is opened and ramped up in coming years.As a condition of IFC's new investment, Intermed will establish an overarching sustainability policy defining its objectives and principles that will guide the Company to achieve sound EHS performance - including compliance with the applicable local laws and regulations and the IFC Performance Standards.The MCS Group is also updating its Health and Safety Policy to incorporate environmental component.- Organization:Intermed, as a subsidiary of MCS Group, implements EHS programs under the supervision from the MCS Group Risk Management Division. This division manages implementation of EHS policy throughout subsidiary companies approved by the MCS Group Audit & Risk Management Committee which report to MCS Group Executive Board.A high level "Quality and Safety committee" oversees the development of SOPs, and after putting SOPs in place it also monitors the implementation of SOPs.At operational level, Intermed will have an Occupational Health and Safety Sub-Committee (OHSC) headed by the Head of Facilities Management Department, who directly reports to MCS Group Risk Management Division with a dotted reporting line to the hospital management. The OHSC is a sub-committee of the Hospital Human Resource Committee, which directly reports to the CEO. OHSC is responsible for identifying EHS risks for hospital employees as well as patients and visitors, developing risk mitigation strategies, providing group and personal trainings and for monitoring implementation process.The Facilities Manager is responsible forday-to-day implementation of EHS related activities, including waste management. The Facilities Manager joins several sub-committees (including one on Legionella and one on waste management).The hospital will have a designated doctor for health care of hospital employees. Moreover, OHSC will closely work with Infection Control Committee as employee infection prevention and control policies are implemented by the infection control team.Currently, the Chief Planning Officer is responsible for all aspects related to the construction of the hospital - including site safety and compliance with labor issues.- Monitoring & Reporting:As part of the EIA report a monitoring plan has been proposed, which the Company will implement once the Project becomes operational.The Company will also review the applicable WBG EHS guidelines and modify as needed its EHS monitoring procedures to include all the parameters in those guidelines.-External Communications and Grievance Mechanisms:A former Buddhist temple, converted to a museum since the 1930s, is located next to the Project site. Before construction started the Project team consulted with this museum and the Center for Traditional Medicine to seek their views and support for the Project.For the operational phase, Intermed will develop an SOP for receiving and registering external grievances and feedback from the public and to provide responses.Intermed's public relations and marketing unit of the Customer Services Department will be in-charge for communicating public information, including annual reporting on environmental and social issues, in accordance with Hospital Information Security and Disclosure Policy.The unit has currently two full-time staff (to be increased in 2014), responsible for implementing community engagement programs such as: collaboration program with Khan-Uul district health center and local family group doctors (teaching, service referral, second opinion, technical support etc.); Saturday professional conferences for local health professionals; Open days for local community members, and free training programs; Mobile team services programs at local schools, colleges and targeted social programs and activities for low income/vulnerable patients (proposed from 2016). PS 2: LABOR AND WORKING CONDITIONS Intermed Hospital will have 260 employees once the hospital is fully operational, which will include up to a maximum of 10 expatriates. All employees will be regular employees with some working part-time and about 10 consultant doctors working on contractual basis.- Human Resources (HR) Policy, ManagementFormal and documented HR policies and procedures are in place, in line with the IFC's PS2 requirements and Mongolian national labor laws. Intermed developed its HR policies by adapting the MCS Group HR policies to the proposed Project. Draft policies were sent back to MCS Group's corporate HR department for approval and also to make sure they are consistent with group policy and labor laws.The Human Resource Committee headed by the HR manager (Head of Administrative Department) is responsible for implementing the following HR policies and guidelines, which are being updated: Employee recruiting and selection policy; Employee onboarding policy; Employee work etiquette policy; Employee degree and ranking policy; Employee salary policy; Employee benefit policy; Employee training and development policy; Employee performance evaluation policy; Employee incentive policy; Employee contract termination policy; etc.All employees will have social insurance as per Mongolian law; and if major retrenchment is needed, labor law has stipulations on retrenchment procedures.Operationally, the HR manager of Intermed will report to MCS Group HR function, and also to CEO of Intermed for day to day operational issues.- Freedom of Association, Grievance MechanismAs a policy, Company encourages trade union activity, collective bargaining and transparency, whereby all HR policies and guidelines are available online for staff.As part of its HR policies, a documented grievance mechanism is available for all the employees to raise any concerns. Various channels for raising the employee grievances include: Managers open door policy, internal e-mail/ communication system (for online grievances through intranet), Suggestion boxes and Face-to-face communication room (for HR staff).- Training and Human Resources DevelopmentBeing a service organization in its early stages of inception, training, capacity building and professional development of its staff are an important aspect of the Company's HR management. A documented policy and structured program for training and staff development is in place, which also covers elements related of infection control and EHS.Under the partnership agreement with Korea University Medical Center Intermed plans to train its staff with international best practices and thus build local capacity.- Contractors /Construction SafetyThe main contractor for the Project is MCS Property LLC ("MCSP") - a group Company of MCS - which has been managing over 150 sub-contractor companies for this Project.MCSP only works with contractors and sub-contractors which are legally registered entities and keeps records of each sub-contractors' workers joining and leaving the site. As per the Mongolian labor law, each worker has an ID registration number from the labor bureau and only these registered workers are allowed on-site, thus preventing any possibility of employing child or forced labor. Mongolian law requires that the Company must pay 11% contribution towards social insurance scheme which includes accident insurance in case workers become injured at work.MCSP ensures safety and welfare of workers by reflecting roles and responsibilities in its contract agreement and controlling its implementation. The MCSP OHS engineers implement daily supervision, guidance and control not only for site workers but also for all site visitors. This inspection is done for the entire site against a pre-defined checklist - looking at all work stations including those identified as high-risk areas.Sub-contractor workers take safety instruction including evacuation procedures and emergency plan prior to start awarded works. All Contractors take all safety precautions during the execution of awarded work and are required to maintain the site in safe condition at all times.Before starting the work, Contractors are required to take work permit from site engineer, who checks all of safety and working area preparations before issuing the work permit.Intermed's construction management team makes following inspections periodically: Daily safety inspection by OHS engineers; Bi-weekly safety inspection by Project manager with OHS Engineers and quarterly Organizational safety inspections by MCSP and half yearly inspections by MCS Group.As a result of rigorous safety management, there were no lost time accidents (LTAs) the past 2 years at the construction site - according to MCS Group OHS database, while Total man hours worked during Jan - July 2013 were about 65,000.There is no labor accommodation provided by the Company or MCSP, as the workers are mostly local and make their own accommodation arrangements. PS 3: RESOURCE EFFICIENCY AND POLLUTION PREVENTION - Resource Efficiency:The Intermed Hospital Committee is developing its "Green policy" to support Mongolian Government's Green Economy policies. However, the Company's management team has already started implementation of the energy/water/material conservation efforts, which include: Purchasing environment-friendly construction materials (most materials are imported from Europe of which several had eco-label); use of Energy saving lights, electrical appliances and heating/conditioning systems and water saving tapes and sanitary fixtures with sensors. No equipment or materials containing chlorofluorocarbons (CFCs), halons or mercury will be used in hospital.A Building Management System (BMS) is being implemented in the Intermed hospital for online monitoring and management of environmental conditions, lighting and power consumption, and to provide an integrated platform for fire and security system, CCTV and other building systems. This will not only reduce operational costs, but is expected to greatly enhance the Project's operational as well as resources efficiency.- Energy Supply and Emissions:Electricity, sourced from the national grid, will be used for lighting, ventilation, elevators, boilers, medical equipment and limited air conditioning requirement during non-winter months. As a backup for emergency use, small capacity diesel-fired generators are provided.The Project will deploy an electrical boiler for generating hot water for hospital use and hence there will be no air emissions, except for those from the diesel generators which will be used only occasionally in case of power failure.Energy for space heating is provided from October to May by the central utility company's district heating systems. For this there is a fixed charge per unit volume of building space that is being heated.- GHG Emissions:GHG emissions from the Project are due to energy consumption and leakage from refrigeration systems. The Project's Scope 1 and 2 GHG footprint is estimated at 5,000 tonnes CO2eq / year. Actual records will be used to review amounts of tons CO2 equivalent per year that will be emitted from the Project once it becomes operational.- Water Supply and Wastewater Management:Cold and hot water shall be sourced from municipal supplies. The usage is monitored and monthly payments are made according to the use.As described by the EIA report, the hospital will generate two types of wastewater: sanitary and medical wastewater.The sanitary effluent will be discharged to municipal sewage system, as required by the environmental permit. The Intermed Hospital has been designed to serve patients with non-infectious diseases. As per the local rules, all infectious cases are kept in isolation and are sent to National Center for Communicable Disease (NCCD). Liquid wastes from isolation rooms will be treated by disinfectants before being sent to sewage system. Disinfection of infectious liquid wastes and neutralization laboratory reagents will be strictly regulated by the Disinfection and Sterilization Guideline (Order No 165, Ministry of Health of Mongolia, 2010).During the construction phase, wastewater from construction site is discharged directly to city sewer through connected sewerage system.For the medical wastewater, Intermed will have temporary medical wastewater storage rooms on site. Containers will be provided by the Element LLC, the only licensed biomedical waste management contractor in Ulaanbaatar certified from Ministry of Health and Ministry of Environment of Mongolia, to collect the wastewater from each section of the hospital (e.g. operating theaters; labs; etc.). The licensed contractor will regularly collect the containers to their treatment facility outside Ulaanbaatar.- Solid and Bio-hazardous Waste Management:According to the EIA report, Intermed will produce 3 types of solid wastes: construction waste (during construction); medical; and general/sanitary wastes (during operations). Three types of waste storage rooms have been provided on site: kitchen food wastes, other general waste and medical waste.MCSP will be responsible for handling/managing construction wastes and disposing of through authorized district waste management company. MCSP will also be required to segregate and recycle construction waste as much as possible. A team of 6 persons cleans the construction site once per day and wastes are thus collected and segregated into 3 types: wood, metal and general wastes. The licensed waste management contractor sends the general waste to Ulaanbaatar dumpsite, while metal and wood are sold to third parties and scrapyards. General/sanitary wastes will also be collected by the same contractor.Intermed's estimated hospital medical dry/solid waste volume is about 10 ton per year. Intermed hospital does not produce radioactive waste.Both liquid and solid bio-hazardous wastes (including human tissue, body fluids, laboratory specimens and reagents, drugs, used consumables etc.) shall be segregated and stored according to the standard operating procedures and guidelines for infection control, and sent to the medical waste processing company Element LLC. This company provides the hospital with special containers designed for solid and liquid medicals wastes and transports wastes according to contracted schedule.Medical wastes will be sorted/stored on site by Intermed and Element LLC will be commissioned to collect medical wastes at least 3 times a week from Intermed. Element LLC will dispose of the waste collected from Intermed (and all other hospitals) as follows: infectious waste by autoclaving, body parts by incineration, and other waste such as drugs, reagents etc. by encapsulating it in concrete before disposing them of in a landfill outside Ulaanbaatar.Intermed is currently in the process of negotiating with ELEMENT on contract terms for bio-hazardous waste management and as part of ESAP: (i) shall ask Element LLC to provide regulatory permits demonstrating its regulatory compliance, (ii) shall put in place a mechanism to annually review and audit Element LLC's operations against a requirement checklist to ensure that they are meeting Intermed requirements on waste handling and disposal and (iii) require Element LLC to provide a complete chain of custody documentation (signed off at various check points) during day to day waste handling/disposal. PS 4: COMMUNITY HEALTH, SAFETY AND SECURITY - Fire SafetyIntermed has developed standard requirements for fire safety systems design and operation which build upon the stringent requirements of JCI (where applicable) and local and NFPA (National Fire Prevention Association, USA) fire safety code. Fire detection, alarm and firefighting infrastructure has been designed, in accordance with local and international fire safety regulations and include compartmentation, fire extinguishers, hydrants etc. SOP has been developed for safe evacuation of patients in case of fire. Regular training and fire/ evacuation drills are conducted to maintain the system.For the new hospital being developed under the Project, Intermed will confirm that all the LFS-related aspects of design are consistent with an internationally recognized fire and life safety code guidelines, as required under the life and fire safety section of the WBG EHS General Guidelines.Following construction, a fire safety professional shall inspect the newly constructed buildings. Intermed will submit to IFC certifications from this professional that each facility is designed, constructed, and operated in full compliance with local building codes, local fire department regulations, and all LFS aspects of the previously approved Architectural Brief.- Community Exposure to Disease:Intermed has a strong program relating to patience safety, aligned with the requirements of the JCI, which includes control of nosocomial infections. Intermed has in place comprehensive engineering and administrative controls such as proper ventilation systems, architectural segregation, decontamination practices, and controls on water, food and waste, among other preventive and corrective measures.On the basis of the above information, and by implementing the Environmental and Social Action Plan it is expected that the Project will be operated in compliance with IFC's Performance Standard objectives.

ACCOUNTABILITY MECHANISM OF IFC The Compliance Advisor Ombudsman (CAO) is the independent complaint mechanism and fact-finding body for people who believe they are likely to be, or have been, adversely affected by an IFC or MIGA- financed project. If you submit a complaint to the CAO, they may assist you in resolving a dispute with the company and/or investigate to assess whether the IFC is following its own policies and procedures for preventing harm to people or the environment. If you want to submit a complaint electronically, you can email the CAO at CAO@worldbankgroup.org. You can learn more about the CAO and how to file a complaint at http://www.cao-ombudsman.org/