comparison of locations

8/9/2019 Comparison of Locations

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hil Ester CorporationADDURU | BACAY | GONZALES | LORA | PUNO | TIBRE

Criteria for Plant

Location

San Carlos Ecozone (SCE)

Negros Occidental

Mactan Export Processing

Zone (MEPZ)

Cebu

First Philippine Industrial

Park (FPIP)

Batangas

Discussion

1.

Transportationfacilities

available

Mode of transportation is by

road. Nearest source of

ethanol will be the San Carlos

Bioenergy Inc. located on the

same ecozone.

Ports are available fortransportation by sea.

Offers wide concrete roadsystem.

Availability of transportation

facilities makes transportation

of materials to and from plant

more convenient. All locations

have good transportation

facilities.

2. Accessibility tothe targetmarket

Distance between San Carlos

City and Manila is 698.4

kilometers. Travelling by sea

will take 15 hours.

Distance from Mactan to

Manila is 851.2 kilometers.

Will take 18 hours of travel

Bataan, compared to Cebu

and Negros, is closer to

Manila and other part of

Luzon where targetconsumers may be found.

Some of the target industries

are located in Luzon. SCE is

nearer to Manila by

approximately 150 km.However, majority of the client

industries are located in within

Cebu City making MEPZ more

advantageous.

3. Water Sourcequality andquantity There are eight major rivers in

the city.

It has water potable

waterlines with 400-cubic

meter water tank and non-

potable waterlines with 800-cubic meter water tank.

It has a centralized

distribution system backed

up by standby generators.

SCE has more sources of

water which is an advantage

to a manufacturing plant.

4.

Specialbusinessincentives

An enterprise that is registered to PEZA is entitled to special business incentives as

follows:

Income Tax Holiday (ITH) for 4 years to a maximum of 8 years


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After the lapse of ITH, exemption from national and local taxes; in lieu thereof, special5% tax rate on Gross Income

Exemption from duties and taxes on imported capital equipment, spare parts, materialsand supplies.

Tax credit for import substitution

Exemption from wharfage dues, export tax impost or fees

Tax credit on domestic capital equipment

Tax and duty-free importation of breeding stocks and genetic materials

Tax credit on domestic breeding stocks and genetic materials

Additional deduction for training expenses (labor and management)

Permanent resident status for foreign investors and immediate members of theirfamilies

Employment of foreign nationals

Additional deduction for labor expense (50 % of wages corresponding to increment innumber of direct labor subject to certain conditions)

Simplified import –export procedures

All locations are registered in

Philippine Economic Zone

Authority.

5.

Climaticconditions

There are basically two

pronounced seasons in

the area, the wet and dry

season. The average

temperature is 32 oC.

The average temperature in Cebu is

28°C.

It experiences two types of

seasons: dry from

November to April and wet

for the rest of the year.

The production of ethyl

acetate requires moderate to

low temperature due to its low

flash point and volatility.

Therefore, climatic condition

in Cebu City is more

favorable.

6.

Utilities cost and

availability

The cost of electricity in

Negros Occidental is

10.9125 pesos per

kilowatt-hour as

supplied by Northern

Negros Electric

Corporation (NONECO).

The cost of electricity in Lapu-lapu

City, Cebu is 9.0239 pesos per

kilowatt-hour as supplied by Mactan

Electric Company (MECO). The

leading water distributor in Cebu is

the Metropolitan Cebu Water

The cost of electricity in

Batangas as supplied by

Batangas II Electric

Cooperative Incorporated is

9.4693 php. The minimum

water rate as supplied by

Batangas Water Supply

Electricity is cheaper in Cebu

than the other two locations.

This can directly affect the

cost of utilities thus increasing

profit.

http://en.wikipedia.org/wiki/Cebuhttp://en.wikipedia.org/wiki/Cebu


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Sipalay Water District

distributes water to the

city charging 27.90

pesos per cubic meter.

District. Water rate costs 15.23

pesos per cubic meter.

System costs 18.70 pesos

per cubic meter.

7. WasteTreatmentfacility

A centralized waste

water treatment facilitiesis provided by the San

Carlos Ecozone.

Mactan Export Proccessing Zone

has a sewage system of wastewatertreatment plant with treatment

capacity of 400 cubic meters per

day.

FPIP has a centralized

sewerage collection andtreatment facility for the

secondary treatment of

industrial and domestic

waste.

All has good built-in waste

reatment facility. In addition, All locations are adjacent or

near to bodies of water.

Therefore, disposal of treated

wastewater will be easier.

8. Constructioncost

Cost for industrial land in

San Carlos Ecozone is 9

pesos per square meter.

Industrial land at the Mactan Export

Processing Zone is available at 8.50

pesos per square meter.

The cost of land in Batangas

is 12 php per square meter.

The greater the construction

cost, the bigger investment

will be required. In this case,

construction in Cebu City is

cheaper than the other two

locations.

9. Operating labor

The updated daily

miminum wage rate in

Region VI to where

Negros Occidental is

contained within is 287

Php

The mandated minimum wage in

Region 7 under Class A is 340 Php

for non-agricultural sectors.

The most recent minimum

wage for Region IV-A is

335.50 pesos.

All has good supply of

manpower. The cost of labor

in Cebu City, however, is

comparably higher than in

Negros. This is

disadvantageous as it mayreduce the income of the

company.


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10. Taxes The Local Government Code of 1991 allocated the taxing powers among local government

units to prevent double and multiple taxation. If the land is used for commercial and industrial

purposes, an assessment level amounting to 50% is applied.Same tax rates are applied.

11.

Expansionpossibilities

San Carlos Ecozone is a

212-hectare property.7

Mactan Export Processing Zone is a

119.37-hectare property.

First Industrial Park is a

331.85 hectare property

therefore providing enoughspace for future expansion.

Future expansions are

possible provided by the

spacious area.

Summary:

Comparing the three locations, Mactan Export Processing Zone offers lower power rates than San Carlos Ecozone and First Philippine Industrial Park, however,

the cost of labor is way bigger in Mactan than the other two locations. Considering the distance from Manila where some of the target markets are located, Negros is

nearer and therefore can reach Luzon the shortest time. An Ethyl Acetate plant should be located in a place with good climate condition which is provided by all of the

locations proposed. What makes Mactan Export Processing Zone outstanding is that it has lower average temperature, therefore reducing the risk of having possibleexplosion of the product due to its low flash point. Taking the proximity of the source of ethanol, SCE is more advantageous than MEPS and FPIP because it is nearer

to San Carlos Bioenergy and other Ethanol plant like Roxol Bioenergy Corp. and Canlaon Alco Green Inc. The cost of utilities such as water and electricity are cheapest

in Cebu City. This is advantageous as is may reduce the cost of production thus increasing the profit. Considering these comparisons, Mactan Export Processing Zone

is the best location for Phil-Ester Corporarion.

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