sample deliverable wire harness manufacturing site evaluation

Wire Harness Manufacturing Site Evaluation

Sample Deliverable

© 2015 RocSearch. All Rights Reserved.

Sample Only - Disguised and Abridged

CONTENTS

SECTION I: Country/City Evaluation of Manufacturing Site for Aviation Wire Harnesses

I Bulgaria (Varna, Plovdiv)

II India (Bengaluru, Chennai, Pune, Neemrana, Ahmedabad)

III Indonesia (West Java)

IV Mexico (Tijuana, Ciudad Juarez, Monterrey)

V Nicaragua

VI Philippines (Clark Freeport, Subic Bay Freeport Zone)

VII Serbia (Nis City)

VIII South Africa (Johannesburg)

IX USA (Charleston, Mobile)

X Vietnam (Ho Chi Minh City )

SECTION II: Location Level Recommendations for Wire Harness Manufacturing

I Top 5 Countries: Country Level Recommendations

II Top 10 Locations Benchmarking

III Best 3 locations: Location Level Recommendations



Country/City Evaluation of Manufacturing Site for Aviation Wire Harnesses



CONTENTS

I BULGARIA

II INDIA

III INDONESIA � West Java

IV MEXICO

V NICARAGUA

VI PHILIPPINES

VII SERBIA

VIII SOUTH AFRICA

IX UNITED STATES

X VIETNAM


Sample Only - Disguised and Abridged Favourable demographics and geographical advantage make Indonesia an attractive investment destination

Indonesia: Location Map and Key Statistics

Mexico Snapshot: Key Indicators

Size of GDP $868.3 billion (2013)

GDP Growth Rate 5.1% (2014)

Per Capita Income $9,270 pa (2013)

Average Inflation 6.4% (2013)

Avg. Exchange Rate (USD:IDR) 12,562.8

Unemployment Rate 9.16% (2013)

Literacy Rate 92.8% (2011)

Labor Force 120 million

Manufacturing as % of GDP 24% (2013)

FDI $23 billion (FY 2013)

Exports as % of GDP 24% (2013)

Human Development Index 108 out of 187 (2014)

Ease of Doing Business Rank 114 out of 189

Global Competitiveness Rank 38 out of 144

Corruption Index 107 out of 175 (2013)

Logistics Performance Index 53 out 160

Size of GDP $868.3 billion (2013)

� Indonesia is located in South-eastern Asia between the Indian Ocean and Pacific Ocean. It has a strategic location astride major sea lanes and is an archipelago of 17,508 islands.

� Spread across a chain of thousands of islands between Asia and Australia, Indonesia is Southeast Asia's biggest economy.

� Indonesia has a mixed economic system in which the economy includes a variety of private freedom, combined with centralized economic planning and government regulation.

� Indonesia is a member of the Asian Pacific Economic Cooperation (APEC) and Association of Southeast Asian Nations (ASEAN).

Major Advantages Major Disadvantages

� Sound Economy

� Demographical Advantage

� Corruption

� Infrastructure

� Appreciating Currency Note: Currency exchange rate is taken as 1USD = 12,562.8 IDR Source: Knoema, World Bank, West Java Inc, BPS


Sample Only - Disguised and Abridged Indonesia has a stable GDP growth outlook at ~6%; Unemployment rate and CPI are forecasted to hover at 5.5% and 5% respectively

Source: IMF

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

GDP at Constant Prices (Percent Change) Inflation, Average Consumer Prices (Percent Change)

Population (Millions) Unemployment Rate (Percent of Total Labor Force)



Source: Knoema, World Bank, West Java Inc, BPS

Indonesia’s advantage of a growing economy is offset by widespread corruption and infrastructural problems

Advantages

Sound Economy � In 2013, the Economist magazine rated Indonesia as “The World’s

Most Stable Economy in the Last Five Years”

� In 2012, IMF projected Indonesia to be the among the top 3 fastest growing economies among the G20 nations

� According to a Standard Chartered report, nominal per-capita GDP is expected to quadruple by 2020

� In Indonesia’s debt to GDP ratio has steadily declined from 83% in 2001 to less than 26% by the end of 2013, the lowest among ASEAN countries, except Singapore

Demographics � Indonesia is the 4th most populous country in the world with a

population of more than 250 million. The demographic advantage of the country can be gauged by the fact that:

� Over 50% of the population is under 29 years and over 60% under 39 years of age

� High number of educated workforce

� More than 60% of the population is in the working age, providing a dynamic workforce, which is one of the highest in the region

Disadvantages

Corruption � Corruption is widespread in Indonesia with Transparency International

ranking it 107 out 175 countries

� Foreign companies report that red tape and widespread extortion in the process of obtaining licences and permits present a major challenge for doing business in Indonesia.

� Surveyed business executives point to corruption as the most problematic factor for doing business in the country

� It is common for companies to make irregular payments or bribes in connection to imports and exports, public utilities, annual tax payments and the awarding of public contracts and licences.

Infrastructure � Inadequate infrastructure is hampering the growth of the economy

and business investments in the country

� Its infrastructure is ranked 61st out of 148 countries by World Economic Forum (2013-14)

� As per Indonesian Chamber of Commerce and Industry ~17% of a company's total expenditure in Indonesia is absorbed by logistics costs. In peer regional economies this number lies below 10%

� Both land and sea transport costs are on the higher side, with sea transport being more expensive despite Indonesia’s archipelagic geography



West Java (Indonesia)

Key Advantages Key Disadvantages

Ã Sound Economy

Ã Demographical advantage

Ä Corruption

Ä Infrastructure

Ä Appreciating Economy

West Java - Indonesia




West Java has attracted a lot of foreign investments due to its favorable location and government regulations

West Java Region:

� It is divided into 17 regencies and 9 cities.

� The capital city of West Java is Bandung City.

� West Java Province area is one of the most populous region in Indonesia due its location and a number of industries in the region offering employment.

� West Java economic structure in 2011 was dominated by industry sector of processed (41.97%), Trade (22.08%) and agriculture (12.27%)

� In 2013, the five leading geographical locations for foreign direct investment realization were: West Java ($1.8 billion); East Kalimantan ($0.8 billion); Riau ($0.6 billion); Banten ($0.6 billion); and Jakarta ($0.4 billion)

West Java

� In Sep 2011, Nestlé began construction of new a factory in Karawang, West Java, with an investment of USD 200 million

� The plant was built on an area of 28.8 hectares and makes MILO chocolate malt drink, CERELAC baby cereal, and DANCOW milk powder

� In July 2014, Property developer MNC Land announced development of a resort with golf courses in Sukabumi, West Java.

� The company would invest an estimated $2 billion – $3 billion to turn 2,000 hectares of land into four and five-star hotels, villas, a theme park and other supporting infrastructure for the leisure business in around 20 to 30 years

West Java




West Java is showing good economic growth but infrastructural issues need to be addressed

Economic Growth

Transportation

� The transportation infrastructure in West Java is not well developed and is in need of massive investment to make it more attractive to industries in the region.

� The government plans to enlist the services of private sector in order to develop the sector through the PPP model. It has introduced many regulations and floated tenders for new projects

� Many new transportation projects have also been started to develop the region and make it more accessible and amenable to investments. Some of the major new projects include Cilincing-Cibitung Toll Road and Cilamaya Port project

� The govt is also planning to build a new airport (Kertajati International Airport) to ease the burden on Husein Sastranegara Airport. It is scheduled for operation in 2020 and will cost about $ 902 million

� Currently, West Java province has one airport, namely Husein Sastranegara Airport. It also has 2 ports, namely Gebang Port in Cirebon Regency, and Special port of Arjuna in Karawang.

� There are 3 major highways: Province Road (2,199.18 km), Government Road (1,140.69 km) and Regency Road (22,757.61)

� The economy of West Java has been growing close to the national average in the last decade. However, it took a hit after the global financial crisis of 2008

� West Java economic structure in 2011 was dominated by industry sector of processed (41.97%), Trade (22.08%) and agriculture (12.27%)

� The biggest contribution in agriculture was cassava, followed by corn

� The biggest contribution in Trade sector was big trade and retail, followed by restaurant and hotel

4.8%

5.6% 6.0%

6.5% 6.2%

4.2%

6.2% 6.5% 6.3% 6.1%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

West Java GDP Growth Rate, 2003 - 2013




Large number of industrial parks are available in West Java as it is an industrial region

Taxes

Industrial Parks/ Real Estate

� Income tax in Indonesia is progressive. The Indonesian income tax structure is based on a self-assessment system classified as follows:

� State (national) Taxes: (i.e. determined at a national level, although actual collection and/or budgetary allocation might occur at a local level). This type of tax includes income tax, valued added tax, sales tax on luxury goods, stamp tax, property tax (on land and buildings)

� Regional Tax: This type of tax includes entertainment and development tax, motor vehicle tax, household tax, road tax, advertisement tax, and radio and television tax

� Custom and Excise Tax: This type of tax includes export tax, import duty, and special taxes on tobacco, sugar, alcohol and gasoline

� Indonesia has signed agreements (tax treaties) with the 59 countries to avoid incidental double taxation on certain income such as profits, dividends, interests, fees, and royalties,

� Demand for industrial land in Indonesia is around 1000 hectares(ha) per year and about 600 hectares (60%) of the land demand comes from Bekasi, Karawang and West Java region

� Based on HKI (Industrial Park Association) data as of June 2012, the total available industrial land in Indonesia reached 27,320.6 ha.

� According to the regulations, developers can build the industrial area up to 70% of the total available land and the remaining 30% is for the development of infrastructure, and green open spaces

� Total available land for construction purpose is 19,124.4 hectares out of which ~59% has been occupied leaving 7,911 ha of land available for industrial construction

Industrial Parks in West Java (June 2012)

Province Land Number of Buildings

Number of Tenants

DKI Jakarta 1,089 914 527

West Java 13,034 5,582 3,167

North Sumatra 1,403 522 332

Riau Islands 1,663 788 291

Banten 2,790 1,308 1,079

Others 8,744 2,097 1,815

Total 27,320 11,212 7,211



Note: Currency exchange rate is taken as 1USD = 12,562.8 IDR Source: Knoema, World Bank, West Java Inc, BPS

Low labor wages are an added advantage to companies setting up businesses in this region

Rank Province (Least Expensive = Rank 1) Wage in $

1 Jawa Tengah 87.56

2 Yogyakarta 88.22

3 West Java 90.10

4 Jawa Timur 91.54

5 Nusa Tenggara Barat 105.87

31 Sulawesi Utara 171.14

32 Papua 174.56

33 Jakarta 214.92

Labor Wages

� There is no nationwide minimum wage standard in Indonesia and the local governments have the freedom to set their own minimum wage levels.

� The wages in some regions of Indonesia have risen sharply in the last decade raising concerns by industrialists of rising costs

� However, Indonesian law does allow for factories to be excused from paying the minimum wage rates if they can prove that the hikes would hurt them financially

� According to the Ministry of Manpower, 941 firms have already applied for this exemption, yet only 47 applications have been approved

25 29

33 36 36

45 50

53 58

2003 2004 2005 2006 2007 2008 2009 2010 2011

Growth in Minimum Wages in West Java, 2003 - 2011

� The province of West Java updated its minimum wage rate to $90.10 for the year 2015.

� The wage rate is among the lowest in Indonesia where regions such as Jakarta have high minimum wage rates

� However, even within West java, there is wide disparity between different cities in terms of wages as mayors of cities are allowed to set up wages for their cities.

� So some of the cities have very high wages comparable to Jakarta

� The powerful trade unions have led many protests across the country to get the minimum wage rate revised upwards citing high inflation rates and increased cost of living

Minimum Wage per Month by Province (Rank 2015)




High availability of manpower in West Java as it is one of the most populous regions in Indonesia

Workforce/ Available Manpower

� The population of West java increased from 35,729,537 in 2000 to 43,053,732 in 2010 , an increase of 20.50%

� In 2013, of all the districts/cities in West Java, Bogor districts was the most densely populated district, which had a population of 5.2 million people, followed by Bandung district which had 3.4 million people

� In 2013, the number of labor force in West Java was 20.6 million persons. The actively working manpower was 18.7 million or around 90,8%, and the number of unemployed was 1.8 million (9.16%)

� Most of West Java population in 2013 worked in trading, industrial, agriculture, and services sector

Year Population Percent Change

2010 43,053,732 20.50%

2000 35,729,537 -8.87%

1995 39,206,787 10.80%

1990 35,384,352 28.89%

Parameters 2007 2008 2009 2010 2011

Crime Rate (Crimes per 000’ population) 62 65 75 46 80

Human Development Index 70.71 71.12 71.64 72.29 72.73

Literacy Rate - - 95.98% 96.18% 95.96%

Unemployment Rate (August month every Year) 13.08% 12.08% 10.96% 10.33% 9.83%

West Java, Major Parameters (2007 - 2011)



CONTENTS

I BULGARIA

II INDIA

III INDONESIA

IV

MEXICO � Tijuana � Ciudad Juarez � Monterrey

V NICARAGUA

VI PHILIPPINES

VII SERBIA

VIII SOUTH AFRICA

IX UNITED STATES

X VIETNAM


Sample Only - Disguised and Abridged Mexico’s advantage of large skill base and competitive labor costs offset by high corruption levels and poor governance standards

Mexico: Location Map and Key Statistics

Mexico Snapshot: Key Indicators

Size of GDP $1.260 trillion (2013)

GDP Growth Rate 1.07%

Per Capita Income $10,650 pa

Average Inflation 4.08% (2014)

Avg. Exchange Rate USD:MXN) 13.90 (2014)

Unemployment Rate 4.9%

Literacy Rate 93.5% (2012)

Labor Force 53.8 million

Manufacturing as % of GDP 18%

Annual Minimum Worker Wage $1750

FDI $35 billion (2013)

Exports as % of GDP 32%

Human Development Index 71 out of 187



Corruption Index 103 out of 175


� Mexico is the 14th largest economy in the world and the 2nd in Latin America.

� According to Alix Partners, Mexico is the country with the lowest manufacturing cost among emerging economies and is around 25% lower than the United States.

� Mexico has access to two major oceans with 6,385 miles of coastline. It shares a 1,864 mile border with the United States.

� Mexico has around 118 million population, making it the 11th most populated country in the world.


� Competitive labor Costs

� Highly Skilled Human Capital

� Good Infrastructure

� Challenging regulatory environment

� Inadequate infrastructure

� Poor governance standards

Source: World Bank, IMF, Reuters, Bloomberg Reference Exchange Rate: $1= 14.66 MXN


Sample Only - Disguised and Abridged Mexico’s GDP is forecasted to grow at 3.8%; CPI and Unemployment are expected to remain stable at 3% and 4% respectively



2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Source: IMF

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019



Source: PwC, Reuters, Pro-Mexico

Mexico is expected to consolidate its position as a low cost manufacturing hub going forward

Competitive Labor Costs

Highly Skilled Human Capital

Good Infrastructure

6

9

10

11

12

21

36

46

Mexico

Hungary

Taiwan

Brazil

Czech …

Korea

USA

Germany

� Mexico offers significant savings in labor costs compared to other investment choices in the Americas, Europe or Asia.

� Labor costs are one-sixth of those in the United States.

� Within Mexico, labor rates vary widely across states. The average wage for Mexico is $18.43 per day.

� Sinaloa and Yucatán have the lowest wage rates ($13.47 – 13.61 per day) while Distrito Federal has the highest wage rate of $24.61 per day.

� The median age of Mexico’s population is 27 years. By 2035, Mexico will have the second highest percent change in working-age population at 26.4%.

� Mexico is the second country with the largest percentage of employment in industry, after Philippines.

� It has a large pool of skilled labor. Total graduates in engineering, manufacturing and construction was ~110,000, which was c.23% of the total graduates in Mexico.

� It is estimated that during the next two decades Mexico’s population in working age will be more than 80 million and will represent more than 60% of the population.

� Mexico is well connected through 27,000 km of railroads that link the country with United States in the north, Guatemala to the south, the Pacific Ocean to the west and Atlantic Ocean to the east.

� It has 76 operational airports (12 domestic and 64 international), 117 sea ports (49 coastal shipping and 68 international maritime ports), 133,000 km of highways.

� It also shares a 3,000 km border with the United states, making up for low transport costs to this market, with 54 crossing points along the border.

36.5% 26.4%

14.3% 8.7%

3.7%

-2.2% -6.3%

-19.0%

India Mexico Brazil USA UK Spain China Japan

Reference Exchange Rate: $1= 14.66 MXN

3.67 3.40 3.04 2.88 2.60

China Thailand Mexico India Philippines

Compensation in manufacturing per employee (dollar/hour)

Working Age Population (2010 to 2035, % Change)

Quality of Infrastructure Scores in LPI



3.30 3.50

2.80 2.60 3.10

Philippines India South Africa Mexico US

Source: World Bank, Deloitte, Transparency International

Corruption levels and poor governance will pose a hindrance to economic growth

High Corruption Level

Poor Governance Standards

Corruption Perceptions Index

Bribe Payers Index

Mexico 103 26

South Africa 67 15

India 85 19

China 100 27

Brazil 69 14

� Corruption has hampered the growth of the Mexican economy and has deterred foreign investors from doing business in the country.

� Mexico ranks 103 out of 185 economies in the corruption perceptions index.

� This is worse than other emerging nations like China, India and Brazil.

� Mexico also fares poorly on the Bribe payers index, ranking 26 out of 28 economies, only better than China and Russia.

� Government spending in Mexico equates to 27 percent of GDP, and public debt is 43 percent of domestic output.

� In terms of efficiency of government spending, Mexico fares badly, with a score of 2.6 out of 7 on World Bank’s Global Competitiveness Index.

� Other emerging nations such as India, Philippines and South Africa perform better on World Bank Indices.

� Within Mexico, Aguascalientes and Nuevo León are states with an effective and efficient government.

Efficiency of Government Spending



Source: Ernst and Young, Offshore Group,

Mexico has five clusters which aim to develop specialized niches in the Aerospace industry

Tijuana (Baja California)

Key Sectors: Automobiles, Aerospace

Major Mfg Cos: Honeywell, Gulfstream, Lockheed Martin

Long Term Vision: KPO leader for fuselage systems & power plants

Advantages: Proximity to border, Skilled labor

Ciudad Juarez (Chihuahua)


Major Mfg Cos: Cessna, Textron, Honeywell, Beechcraft

Long Term Vision: Hub for high tech and dual-use goods

Advantages: Proximity to border, Large skill base

Guaymas (Sonora)


Major Mfg Cos: Goodrich, Semco, BE Aerospace, Precision Aerospace

Long Term Vision: Leading Turbine Manufacturer

Advantages: Strategic location

Monterrey (Nuevo Leon)


Major Mfg Cos: Honeywell, Rockwell, Collins,

Long Term Vision: Centre of excellence in aeronautical innovation, engineering and manufacturing

Advantages: Strong supply network

Queretaro (Queretaro)


Major Mfg Cos: Bombardier, Safran, Eurocopter, Galnik, GE

Long Term Vision: Hub for complex machining processes and MRO

Advantages: Appropriate infrastructure

Mexico: Shortlisted Locations & Selection Rationale



Tijuana (Baja California)


Ã Aerospace Hub

Ã Skill Base

Ã Proximity to border

Ä High Property Rates

Tijuana (Baja California) - Mexico



Source: Economist, Border Assembly Inc,

Tijuana is a major nearshore, low cost hub for the aerospace sector; it is also the centre for the financial services sector in Mexico

1 1 El Florido Industrial Park

Sub-Market Major Industries

El Florido Industrial Park Engineering Goods, Medical Devices

Valle Bonito Industrial Park Health Care

Connectivity

Highways Federal Highway 1 and Federal Highway 2 end in Tijuana

Nearest Airport Tijuana International Airport. 5th busiest in Mexico in terms of passenger traffic

Nearest Port Ensenada (65 miles), Long Beach (130 miles) and San Pedro(135 miles)

� Tijuana is the largest city in the state of Baja California and is the industrial and financial centre of Mexico. It is also a large manufacturing centre and has become the medical device manufacturing capital of North America.

� Tijuana’s proximity to Southern California, and its large, skilled, diverse and relatively inexpensive workforce make it an attractive city for foreign companies looking to establish extensive industrial parks.

� Large international manufacturing companies such as Hyundai, BMW, Toyota, GE, Ford, Airbus among others have set up maquiladoras, factories that enjoy special tax breaks.

2 Valle Bonito Industrial Park

2

Tijuana (State: Baja California)



Source: UNESCO, ProMexico,

Baja California is hub for component manufacturing for the aerospace sector; labor wages are lower than the national average

Economic Factors

Labor Force and labor Wages

� Baja California has a population of 3.4 million (2.86% of Mexico’s population), 45% of whom are working.

� Literacy rate in the Tijuana is 97.3%, which is higher than the Mexico average of 94%.

� Baja California has the eighth largest manufacturing work force in Mexico at 0.33 million.

� Average worker wages in Baja California was $17.8 per day, which is below the national average of $18.4.

� It is the seventh highest in the country after Distrito Federal, Campeche, Queretaro, Nuevo Leon, Morelos and Mexico.

17.8 16.6 20.9 21.0

15.5

18.4

Baja California Chihuahua Nuevo Leon Queretaro Sonora

Avg. Worker Wages in 2013 per day(in $)

National Average Wage (in $)

� Baja California’s GDP increased by 0.6% from 2006 till 2013, and this was lower than other states like Nuevo Leon (2.9%), Queretaro (4.1%), Sonora (4.0%).

� Baja California is the state with the largest aerospace cluster , which is concentrated in and around Tijuana.

� Baja California’s per capita income, at $8,165.6 (2013), although lower than national average of $10,307, is higher than other aerospace clusters such as Chihuahua ($7,755) and Guaymas ($6,166)

� Manufacturing contributes c.20% to the State GDP. 15,009

15,099

2006 2013

Gross State Domestic Product (GSDP)

Per Capita in USD

0.6%




Source: Pro Mexico, Tijuana Economic Development Corporation,

While Tijuana does not have a port of its own, it is well connected by rail and roads and is close to ports in Ensenada and Los Angeles

Property Market - Land Values and Rental Levels

Infrastructure

� Airport and Railroads: International Airport of Tijuana is the 4th largest airport in Mexico. The railway station is connected by trolley to Tijuana and Mexicali, and is connected to the Mexican National Rail System. There are daily rail services to and from the Port of San Diego and Los Angeles.

� Sea Ports: Tijuana doesn’t have ports. The Port of Ensenada is 72 miles away and the Port of Los Angeles is two hours away.

� Electricity: Electricity is generated through two thermoelectric plants, one in Rosarito and other in La Rosita. A geothermal plant operates in Mexicali. There are 5 high voltage stations and 27 substations with a total of 1169 MVA capacity.

� Water Supply and Sanitation: Portable water supply covers 94% of the total population. Water connections for commercial and industrial use grow at 3% annually. Recycled water is available for heavy industries. Two water treatment plants provide clean water resources for industrial use.

122.75

33.50

68.72 62.07

30.75

29.87

8.21

14.66 12.27 12

Tijuana Juarez Monterrey Queretaro Guaymas

Land Value in ($ per sq metre)

Commercial Space Rent ($ per sq metre)

� Tijuana commands the highest price for land among the aerospace hubs, with an average cost of $122.75.

� It also commands the highest rent for commercial spaces with an average rent of $29.87.

� The most attractive location for PAC in this region is the Aerospace cluster in Tijuana, with over 31 aerospace companies.

� This is less than a two-hour drive to hundreds of aerospace and defence companies in South California.

� Aerospace companies can take advantage of Federal Aviation Administration’s (FAA) 2009 implementation procedures for the US-Mexico Bilateral Aviation Safety Agreement (BASA)


� Tijuana is the busiest border crossing in the world. With over 1.4 million trucks crossing per year, the land port of entry at Otay Mesa is the largest commercial crossing on the border between California and Baja California.

� Two important Mexican federal highways terminate in Tijuana. Federal Highway 1, which runs south till Cabo San Lucas in Baja California and Federal Highway 2 which runs east for about 1,000 kms along the US border.



State Competitiveness Index

Ease of Doing Business Rank Productivity Index

Baja California 10 29 4

Chihuahua 7 20 6

Nuevo Leon 2 15 1

Queretaro 5 17 9

Sonora 15 7 7

Source: Deloitte, Pro Mexico, Baja Insider

Baja California has attracted large FDI volumes mainly because of its strategic location; it also ranks well in terms of productivity

Governance: Taxes, Regulation of Business, Economic Freedom

� The central government levies taxes such as Value Added Tax, Corporate income tax, capital gains tax, branch tax, capital tax, net wealth tax, transfer tax

� The state government levies taxes such as payroll tax and real estate tax.

� Baja California charges VAT at 16%, up from the previous 11%, on all products except food and medicines. This is in line with the VAT charged in the rest of Mexico.

� The state trails most states in Mexico in terms of ease of doing business but fares well on the competitiveness index.

� Baja California ranks fourth in Mexico in terms of productivity.

Free Trade Zones, FDI and Foreign Investors

1,559.10

597.8

956.6 706.6

543.5 802.3

2008 2009 2010 2011 2012 2013

FDI inflow to Baja California ($ million) � Baja California is the fifth highest recipient of FDI in Mexico,

having received 3.6% of the cumulative FDI inflows into the country between 2000 and 2014.

� Majority of the FDI has been concentrated in the region around Tijuana.

� Currently there are 85 industrial parks in Baja California, with 51 of them in Tijuana, 25 in Mexicali, 4 in Ensenada, 3 in Tecate and 2 in Rosarito.

� The state also has two aerospace parks, one each in Mexicali and Ensennada.

� Mexico has free trade agreements with 45 nations. It is one of the most open countries for international trade globally.

� Global firms such as Lockheed Martin, Honeywell, Goodrich, Tyco, Eaton have set up base in Baja California.




Source: Pro Mexico, Tijuana EDC,

The supporting ecosystem is quite mature and business continuity is not a concern in this region

Supporting Ecosystem - Aerospace and other Manufacturing Sectors

� Part of the Baja California aerospace industry cluster, Tijuana has the largest number of operating aerospace firms in Northern Mexico and is also the Mexican city with the largest aerospace industry employment within 400 miles of the US-Mexico border, with more than 7,315 employees as of 2012.

� Tijuana has a large base of 31 existing aerospace companies, and Baja California has around 60 aerospace-related companies.

� There is also a well-developed network of suppliers, who are within 150 miles of Southern California and less than 300 miles away in Arizona.

� Three universities in the city offer aerospace-related educational programs. There are more than 35,000 students enrolled in Tijuana’s universities.

� Tijuana’s universities are gearing up to meet the need for aerospace talent.

5,396 6,243 7,000 7,315

18,708 18,777 17,613 17,762

2006 2007 2010 2012

Tijuana San Diego

Fiscal Incentives

� Temporary exemption of state taxes and duties

� Temporary exemption of Payroll Tax (ISN) for newly created companies and companies that create new jobs

� Exemption of payment of land use permit, construction permit

� Exemption of tax on possession or use of used motor vehicle

� Exemption of duties on potable water and sewer connection

� Reduction on state taxes and duties

� Reduction on duties for the Public Registry of Property and Trade

� Reduction on property tax

� Reduction on real estate acquisition tax

� Reduction on the payment of fees for issuance of construction permits

� Reduction on the payment of fees for connection to the drinking water and sewage system

� Special incentives for technology research and development projects

� Special incentives for projects outside the metropolitan area


Tijuana – San Diego Regional Aerospace-Defence Employment



Ciudad Juarez (Chihuahua)


Ã Skill Base

Ã Low Rentals

Ã Proximity to border

Ä Low Security

Ciudad Juarez (Chihuahua) - Mexico




Juarez forms the mid-point between the east and west of the border, and is the fourth biggest manufacturer centre in North America

1 1 Los Fuentes Industrial Park


Los Fuentes Industrial Park Electronics, Medical Products

Omega Industrial Park Automotive, Electronics, Wire harness

Bermudez Industrial Park Electronics, Medical Products

Rio Bravo Industrial Park Packaging, Automotive, Electronics

Connectivity

Highways Federal Highway 45and Federal Highway 2 end in Tijuana

Nearest Airport Abraham Gonzalez International Airport. 18th busiest in Mexico in terms of passenger traffic

Nearest Port Ensenada (793 miles)

2 Omega Industrial Park

2

3 Bermudez Industrial Park

4 Rio Bravo Industrial Park

3

4

� Ciudad Juarez is located in the northern part of Mexico, in the state of Chihuahua, just south of El Paso, Texas. � Together with the surrounding areas, the cities Ciudad Juarez and El Paso form the cluster “El Paso-Juarez”, the second largest bi-national

metropolitan on the Mexico-US border, after San Diego-Tijuana, with a combined population of 2.7 million people. � There are four international ports of entry connecting Ciudad Juarez and El Paso, making Ciudad Juarez a major point of entry and transportation

into the US for central northern Mexico. � Ciudad Juarez has a growing industrial centre made up of over 300 assembly plants located in and around the city.

Ciudad Juarez (State: Chihuahua)



Source: UNESCO, ProMexico, Index Mundi

Chihuahua has lower labor wages and per capita income than the national average; its literacy rate is higher than the national average

Economic Factors

Labor Force and Labor Wages

� Chihuahua has a population of 3.6 million (3.07% of Mexico’s population), 42% of whom are economically active.

� Literacy rate in the Ciudad Juarez is 97.3%, which is higher than the national average of 94% in Mexico.

� Chihuahua has the sixth largest manufacturing work force in Mexico at 0.39 million.

� Average worker wages in Chihuahua was $16.6 per day, which is below the national average of $18.4.

� It is the second lowest among the aerospace clusters after Sonora.

17.8 16.6 20.9 21.0

15.5

18.4


Avg. Worker Wages in 2013 per day(in $) National Average Wage (in $)

10,720

10,784

2006 2013

Gross State Domestic Product (GSDP) Per Capita in USD

0.6%


� Chihuahua’s GDP increased by 0.6% from 2006 till 2013, and this was lower than other states like Nuevo Leon (2.9%), Queretaro (4.1%), Sonora (4.0%).

� Chihuahua is the state with the second largest aerospace cluster and is skewed in Ciudad Juarez.

� Chihuahua’s per capita income, at $7,755 (2013), although lower than national average of $10,307, is higher than Guaymas ($6,166)

� The Manufacturing sector of Chihuahua, contributes c.20.7% to the state’s GDP.



Source: Pro Mexico,

Rentals in Juarez are the least among the aerospace clusters in Mexico; a number of wire harness manufacturers are present here


Infrastructure

� Roads: Roads in Chihuahua vary from modern toll roads to dirt tracks. Highway from Ciudad Juarez to Chihuahua city has significant traffic and police presence. Road conditions in Ciudad Juarez are poor outside of major thoroughfares. Many roads do not have clearly marked lanes. Highways I-24, I-10 and Panamericana highway connect all points in both Mexico and USA . Paved highways with two or more lanes make up 4,417 miles of road while rural roads sum up to 7,838 miles.

� Airport Services and Railroads: Rail services is provided by Union Pacific, Burlington Santa-Fe and Ferromex. Businesses have access to two international airports in Ciudad Juarez and El Paso.

� Water Supply and Sanitation: It costs $22.50 to connect water per square metre of land up to 250 square metres. Connecting cost of sewage per square metre of land is $22.50, plus an additional charge of $11.1 for every 50 square metres over 250 is incurred. An additional charge of $0.0017 per cubic meter as a tax for water infrastructure maintenance and replacement.

122.75

33.50

68.72 62.07

30.75

29.87

8.21

14.66 12.27 12

0

5

10

15

20

25

30

35




� Ciudad Juarez has a low price for land among the aerospace hubs, with an average cost of $33.50.

� It has the lowest rent for commercial spaces with an average rent of $8.21.

� Chihuahua has over 3 million square feet of aerospace real estate. The total industrial real estate market size is 54.2 million square feet.

� Cesar-Scott Inc, a wire harness and cable assembly manufacturing company is present in the Juarez Industrial Park.

� Omega Industrial Park has a number of firms which are into wire harness manufacturing.





Ease of Doing Business Rank

Productivity Index


Chihuahua 7 20 6

Nuevo Leon 2 15 1

Queretaro 5 17 9

Sonora 15 7 7

Source: Deloitte, Pro Mexico,

Chihuahua was the 2nd highest recipient of FDI; Juarez gets the majority of the FDI in Chihuahua because of its strategic location


� The central government levies taxes such as Value Added Tax (VAT), Corporate income tax, capital gains tax, branch tax, capital tax, net wealth tax, transfer tax, while the state government levies taxes such as payroll tax and real estate tax.

� The state trails most states in Mexico in terms of ease of doing business but fares well on the competitiveness index.

� Chihuahua ranks sixth in Mexico in terms of productivity.


1,481 1,133

1,930

977 745

1,908

5.2

6.3

7.5

4.1 4.1 4.5

2008 2009 2010 2011 2012 2013

FDI inflow to Baja California ($ million)

Baja California share of FDI in Mexico (%)

� Chihuahua was the second highest recipient of FDI in Mexico in 2013 with FDI inflows of $1,893.5 million.

� The state received 4.8% of the cumulative FDI inflows into the country between 2000 and 2014.

� Majority of the FDI has been directed towards the manufacturing sector and 75% of the FDI inflow to Chihuahua was directed to Ciudad Juarez.

� Currently there are 40 industrial zones, parks and corridors in Ciudad Juarez. There are over 390 assembly lines in Ciudad Juarez .

� Mexico has signed free trade agreements with 45 nations, making it one of the most open countries to international trade in the world. Various global firms such as Honeywell, Epson, Lear Corporation, Siemens, Philips have set up base in Ciudad Juarez.




Source: Pro Mexico, CNN,

Juarez has a strong presence in the aerospace cluster but the city’s reputation as a crime haven might impact business

Supporting Ecosystem - Aerospace and Other Manufacturing Sectors

Business Continuity - Labor Disputes, Natural Disasters

� Ciudad Juarez was known for its high crime rate and being the most dangerous city in the world. However, it seems to be shedding that tag and has dropped down to the 37th most dangerous city in the world in 2013.

� Absenteeism in all sectors combined was 1.4% on average in 2011.

� Ciudad has a stable labor environment with more than 15 years without a strike.

320

1,623

2,754 3,622

2,086

797 1

4.4

7.5

9.9

5.7

2

2007 2008 2009 2010 2011 2012

Total Homicides

Homicides per day

Fiscal Incentives




� Exemption of duties for the public registry of property and trade


� Exemption of tax on possession or use of used motor vehicle



� Reduction on property transfer tax and property tax





� Chihuahua is the most important aerospace cluster in Mexico. It is the only aerospace cluster with four OEMs.

� The cluster contains 31 aerospace certified suppliers. It employs over 8,300 direct labor force .

� Chihuahua also has the academia to support the aerospace cluster with six universities offering aerospace engineering degrees.

� It also has a high technology training centre with tailored programs for manufacturing processes. It also has an advanced materials research centre.

� 3,000 engineers and 1,500 technicians graduate on average every year.



Monterrey (Nuevo Leon)


Ã Skill Base

Ã Excellent education infrastructure

Ã Advanced manufacturing capabilities

Ä High Labor Cost

Monterrey (Nuevo Leon) - Mexico




Monterrey plans on becoming the centre of excellence in aeronautical innovation, engineering and manufacturing

1 Monterrey Technology Park


Monterrey Technology Park Engineering goods

Millimex Industrial Park Engineering goods

Connectivity

Highways Well connected to rest of Mexico by Panamerican Highway, Carretera Interoceanica, Highways 40, 45 and 57

Nearest Airport General Mariano Escobedo International Airport (15 miles), 4th busiest airport in Mexico in terms of passenger traffic;

Nearest Port Port Isabel Port, Texas (182 miles)

2 Millimex Industrial Park

� Monterrey is the capital and largest city of Nuevo Leon, and has the third largest metropolitan area in Mexico. � It is the second wealthiest city in Mexico and the ninth in Latin America with a GDP PPP of $130.7 billion in 2012. It is considered a global city,

cosmopolitan and competitive. It is an important industrial and business centre and is home to a range of companies including CEMEX, Mercedes Benz, BMW, Sony, Toyota and Boeing among others.

1 2

Monterrey (State: Nuevo Leon)



Source: UNESCO, ProMexico, Index Mundi

Labor wages are higher than the national average in Nuevo Leon; it has the second highest number of Engineering graduates in Mexico

Economic Factors

Labor Force and labor Wages

� Nuevo Leon has a population of 4.96 million (4.18% of Mexico’s population), 46.3% of whom are economically active.

� Nuevo Leon has the second highest number of graduates in Mexico in the field of Engineering, Manufacturing and Construction.

� Nuevo Leon has the fourth largest manufacturing work force in Mexico at 0.52 million.

� Manufacturing sector in Nuevo Leon has the seventh highest labor productivity in Mexico at $101,159 per employee.

� Average worker wages in Nuevo Leon was $20.9 per day, which is above the national average of $18.4. It is the second highest among the aerospace clusters after Queretaro.

17.8 16.6 20.9 21.0

15.5

18.4


Avg. Worker Wages in 2013 per day(in $)

National Average Wage (in $)

� Nuevo Leon’s GDP increased by 2.9% from 2006 till 2013, and this was lower than other states like Queretaro (4.1%) and Sonora (4.0%).

� Nuevo Leon had the third highest GDP contribution in 2013 in Mexico at 7.14% of national GDP.

� Nuevo Leone’s per capita income, at $20,972.2 (2013), is almost double the national average of $10,307.

� Manufacturing contributes c.24.6% to the State GDP. 87,435

89,971

2006 2013

Gross State Domestic Product (GSDP)

Per Capita in USD

2.9%




Source: Pro Mexico,

Property prices are relatively high in Monterrey; it has the second highest rental among aerospace clusters, elsewhere in Mexico


Infrastructure

� Roads: Monterrey is connected to the USA border, sea and inland Mexico through different roads such as the Panamerican Highway, Carretera Interoeanica, highway 40, 45 and 57.

122.75

33.50

68.72 62.07

30.75

29.87

8.21

14.66 12.27 12




� Monterey has a higher price for land among the aerospace hubs, with an average cost of $68.72.

� However, this is lower than the land value in Tijuana.

� Monterey has the second highest rent for commercial spaces among the aerospace clusters with an average rent of $14.66.


� Airport Services and Railroads: The city is served by 2 international airports: Monterrey International Airport and Del Norte International Airport. Monterrey also has a rapid transit system called Metrorrey. Nuevo Leon has 1,092 kms of railways.



Source: Deloitte, Pro Mexico,

Nuevo Leon has been the second highest recipient of cumulative FDI in Mexico since 2000 because of its competitiveness and productivity


� The central government levies taxes such as Value Added Tax (VAT), Corporate income tax, capital gains tax, branch tax, capital tax, net wealth tax, transfer tax

� While the state government levies taxes such as payroll tax and real estate tax.

� Nuevo Leon does extremely well on the competitiveness index with a rank of 2 and fares relatively better on the ease of doing business with a rank of 15.

� Nuevo Leon ranks first in terms of productivity in Mexico.



Ease of Doing Business Rank

Productivity Index


Chihuahua 7 20 6

Nuevo Leon 2 15 1

Queretaro 5 17 9

Sonora 15 7 7

1,973 1,128

5,382

1,419 1,009

457

4.2 6.3

20.8

6.0 5.6

1.1

2008 2009 2010 2011 2012 2013

FDI inflow to Nuevo Leon ($ million)

Nuevo Leon share of FDI in Mexico (%)

� However, the state received 8.9% of the cumulative FDI inflows into the country between 2000 and 2014, the second highest for the country after Distrito Federal.

� Majority of the FDI has been directed towards the manufacturing sector followed by the construction industry, and the electrical and water supply sector.

� Currently there are over 120 industrial parks in Nuevo Leon, with 50 industrial parks in Monterrey across five industrial areas.

� Mexico has signed free trade agreements with 45 nations, making it one of the most open countries to international trade in the world.

� Various firms such as MD Helicopters, Pratt & Whitney, DeCrane Aerospace, Caterpillar, Delphi, John Deere, Philips and Siemens among others have set up base in Monterrey.




Source: Pro Mexico, Monterrey Technology Park, Overseas Security Advisory Council (OSAC)

Monterrey has a good ecosystem to support manufacturing with many multinational firms establishing their man here

Supporting Ecosystem - Aerospace and other Manufacturing Sectors


� Monterrey is prone to flash floods during hurricane season. The city is still rebuilding from Hurricane Alex that struck in 2010 and caused tremendous damage to roads around Monterrey.

Fiscal Incentives




� Exemption of duties for the public registry of property and trade


� Exemption of duties on potable water and sewer connection



� Reduction on real estate appraisal costs

� Reduction on fees related with the revision of plans

� Reduction on property transfer tax and property tax



� Reduction on the payment of fees for connection to the drinking water and sewage system



� Nuevo Leon is the fifth largest aerospace cluster in Mexico.

� Fortune voted Monterrey as the best Latin-American City to do business.

� Monterrey also has the academic institutions to support the industry with 26 universities offering various degrees.

� Among them, two of the most important in Mexico and Latin America: Tecnologico de Monterrey (ITESM) and Universidad Autonoma de Nuevo Leon (UANL) are located here.

� Nuevo Leon has manufacturing plants across various industries.

� It has manufacturing facilities for industries such as automotive, appliances, aerospace and metal work.

� The state has advanced manufacturing capabilities and a strong supply network.

� It has the capability to host highly specialized sectors such as aeronautics.



CONTENTS

I BULGARIA

II INDIA

III INDONESIA

IV MEXICO

V NICARAGUA

VI PHILIPPINES � Clark Freeport � Subic Bay Freeport Zone

VII SERBIA

VIII SOUTH AFRICA

IX UNITED STATES

X VIETNAM


Sample Only - Disguised and Abridged Philippines’ advantages of cheap labor and skilled work force offset by natural disaster risk and regulatory challenges

Philippines: Location Map and Key Statistics

Philippines Snapshot: Key Indicators

Size of GDP $272.1 billion(2013)



Average Inflation 4.9%

Avg. Exchange Rate (USD:INR) 44.68 (2014)


Literacy Rate 95.6%



Annual Minimum Worker Wage $1,515

FDI $3.6 billion (2013)







� Located in South East Asia, Philippines is one of the more dynamic markets in the global economy.

� The country’s 92.23 million population represents a huge but relatively under-penetrated market and this has attracted major international companies to enter the Filipino market.

� It is strategically located and is a gateway for international shipping and air lanes suited for European and American businesses.

� The country is expected to become the 16th largest economy by 2050.


� Low wage rates

� Skilled Work force

� Business Friendly Economy

� Challenging Regulatory Environment

� Natural Disaster Risk

� Inadequate Infrastructure

Source: World Bank, IMF Reference Exchange Rate: 1 USD = 44.6 PHP


Sample Only - Disguised and Abridged Philippines’ GDP is forecasted to grow rate of 6%; Unemployment and CPI would remain at ~6.5% and 3.5% respective



2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Source: IMF

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019



Clark Freeport (Central Luzon)


Ã Good Connectivity

Ã Skill Base

Ã English Speaking Population

Ä Low Security

Ä Natural Disaster Risk

Clark Freeport (Central Luzon) - Philippines



Source: CDC, PEZA

Clark Freeport Zone is well connected to other regions by expressways, an international airport and a port

Connectivity

Highways Accessible by land through North Luzon Expressway and Subic-Clark-Tarlac Expressway

Nearest Airport Clark International Airport

Nearest Port Subic seaport (78 km)

� Located near Angeles City, Pampanga in Central Luzon, Clark Freeport Zone is a redevelopment of the former Clark Air Base, a former US Air Force Base in the Philippines.

� Almost the size of Singapore, Clark occupies over 33,000 hectares of land, of which the main zone is 4,400 hectares.

� Clark Development Corporation is responsible for managing and operating 2,200 hectares of Clark Freeport Zone.

� The region has over 400 foreign and domestic investors.

� Major manufacturing firms include Texas Instruments, Rolls-Royce, L&T International Group Philippines among others.

� The availability of a large pool of skilled and English speaking manpower has been a key factor in attracting foreign companies to Clark Freeport Zone

Korea 5 Hours

Taiwan 2 Hours

Hong Kong 2 Hours

Macau 2 Hours

Thailand 5 Hours

Malaysia 4 Hours

Singapore 4 Hours

Dubai 12 Hours

Clark Freeport Zone

Key Sectors: Automotive, Semiconductor

Major Mfg Cos: Texas Instruments, Rolls-Royce, L&T International Group Philippines

Advantages: Good connectivity to major Asian destinations, modern facilities, tax benefits, skilled workforce

Clark Freeport Zone (Region: Central Luzon)



Source: Secondary Research, ADB, IMF

Economic Growth

� Philippines’ GDP grew at a CAGR of 5% between 2008 and 2013, which was marginally lower than that of other Asian nations – China (9%), India (7%), Bangladesh (6%).

� Philippines managed to achieve 7.2% growth in 2013 despite global uncertainties and natural calamities

� Philippines’ GDP per capita income, at $2,791 (2013-14) although higher than India’s value of $1,509, is considerably lower than that of other East Asian countries Malaysia ($10,457), China ($6,959) and Thailand ($5,676)

� Manufacturing contributes c.20% to the GDP and it grew by 7.2% in the third quarter of 2014. It is expected that manufacturing will contribute 30% of the GDP in the next 5 years

1,918 1,851 2,155

2,379

2,612 2,791 4.2%

1.2%

7.6%

3.7%

6.8% 7.2%

2008 2009 2010 2011 2012 2013

GDP per capita in USD

GDP % Change

Cost of Doing Business

Clark Freeport Zone Registration of Enterprises

Application/Processing fee

Certification and Tax Exemption (CRTE) P2,000.00

Registration Certificate (RC) P2,000.00

Pre-Opening Permit P500.00

Processing and Issuance of Environmental Compliance Certificate (DENR) P5,500.00

� Wages in the Philippines are usually less than a fifth of those in the United States and housing costs are also 50% lower when compared to the US rates.

� Foreign companies that outsource business processes and programming to the Philippines estimate 30-40% business cost savings.

� These costs go down further when the foreign nationals set up base in one of the eco zones, such as Clark Freeport, where they are entitled to various fiscal and non fiscal incentives, such as income tax holiday, duty free import of raw materials.

Cost of doing business is very low and the country has seen sustained growth despite natural calamities



Source: Clark Freeport Zone Investor Guide,

Clark Freeport Zone is connected to two major toll road highways; it sources electricity directly from the Luzon grid


Infrastructure

� Road: Clark Freeport Zone has a wide network of roads and is also located at interchange of two major toll roads – NLEX and SCTEX, both having direct ramp access into and out of the park.

� Electricity: Clark’s power supply is sourced directly from the Luzon Grid through San Miguel Energy Corporation via the National Grid Corporation of the Philippines (NGCP) connected at 69KV level in Mexico Pampanga’s Grid substation with the capacity of 80MW, and a Mexico-Clark line with capacity of 230KV. The average rate for industrial establishments is PHP 7.7233/kWh

� Water Supply and Sanitation: Clark has a well-maintained water infrastructure system, which is being provided Clark Water Corporation. Presently, the Waste Water Treatment plant with a production capacity of 27 MLD, is processing only 18 MLD, and is capable of handling future requirement. As of 2014, the water supply average in the Freeport zone was 32 million litres per day.

� Property rates in the Philippines varies according to region. In the Clark Freeport zone, lease rates for industrial, ICT, commercial and tourism industries starts at a minimum of $0.65 per square meter per month for land or open space, while it starts at a minimum of $2.00 per square meter per month for buildings, depending on the condition of the structure.

� Rental schemes for industrial projects is straight lease only or monthly minimum guaranteed lease for land and buildings.

� Dealing with construction permits now easier since requirement to obtain health certificate has been eliminated. It takes five days on average to obtain site clearance from the City Planning and Development Office that a builder must possess to apply for construction permits. Zoning permit is mandatory

Clark Freeport Zone Lease Rates

Land/Open Space Min $0.65 per square meter per month

Building Min $2.00 per square meter per month

Escalation Fixed for first three years with 10% compounded increase on fourth year and every three years thereafter

Clark Freeport Zone Rental Scheme

Industrial Projects Straight lease only or Monthly Minimum Guaranteed Lease (MGL) for land and building

Reference Exchange Rate: $1= 44.6 PHP

� Clark Freeport Zone has modern infrastructure facilities, and is well connected by road, air and sea.

� Companies with a presence in Clark Freeport Zone have access to 2,500-hectare modern aviation complex, modern telecommunication facilities, power and water supply, waste management system, vast road network among others.



Source: Clark Freeport Zone Investor Guide,

Governance has improved over the years and the government wants to attract more foreign investors

Governance: Taxes, Visa Requirements

� Taxation on businesses is levied upon by both national and local government.

� The national government imposes taxes such as VAT, 12% for import and 0% for export. Other taxes that are levied include, Excise Tax, Overseas Communication tax and Documentary Stamp Tax.

� However, in the Clark Freeport Zone (and other Freeport Zones) companies can avail a special tax rate of 5% based on Gross Income Earned (Gross Sales less allowable deductions) provided that 70% of the gross income earned was generated from foreign sources (through exports).

� Local business tax is levied upon manufacturers, wholesalers distributors, dealers and contractors. Local government also levies other taxes such as real estate tax and community tax.

� Visa requirements for certain categories of foreigners such as foreign stockholders, investors, representatives of investment houses and land developers have been liberalized to encourage foreign participation.


1.34

2.06

1.07

2.01

3.22

3.66

2008 2009 2010 2011 2012 2013

Net FDI inflow to Philippines (USD billion) � Net FDI inflows rose to $3.9 billion in 2013 from $3.2 billion in 2012.

Net inflows were recorded across all components of FDI and it rose by 20%.

� Currently there are 17 Agro-industrial Economic Zone, 197 IT Parks and centers, 66 Manufacturing Economic Zone, 2 Medical Tourism Zone and 12 Tourism Economic Zone.

� There are over 400 foreign and domestic investors in the Clark Freeport zone alone, with major manufacturing firms such as Texas Instruments, L&T and Rolls Royce.


Governance: Taxes, Visa Requirements

Fiscal Incentives Non Fiscal Incentives

� Preferential tax rate of 5% based on Gross Income. Provided 70% products are exported.

� Exemption from taxes/ duties on imported spare parts

� Exemption from wharf dues and export tax, duty, impost and fees

� Reduced rates on Capital Equipment, spare parts and accessories

� Additional deductions from taxable income

� Employment of foreign nationals

� Free movement of finished goods within the zone as a separate customs territory

� Research and development is allowable as deduction for Manufacturing



Subic Bay Freeport Zone (Central Luzon)


Ã Good Connectivity

Ã English Speaking Population

Ã Large Skill Base

Ä Higher lease

Subic Bay Freeport Zone (Central Luzon) - Mexico



Source: SBMA

Subic Bay Freeport Zone is well connected to other regions by expressways, an international airport and a port

Connectivity

Highways Accessible by land through North Luzon Expressway and Subic-Clark-Tarlac Expressway

Nearest Airport Subic Bay International Airport

Nearest Port Subic seaport

� Subic Bay Freeport Zone (SBFZ) is the first free port of the Philippines. SBFZ is 110 kilometres from Manila and covers 67,000 hectares.

� Located in the Central Luzon region, it straddles portions of city of Olongapo and the town of Subic in the Zambales province as well as the towns of Hermosa and Morong in the Bataan province.

� Investors have access to the region’s wide manpower pool of 3.5 million, which is the third largest in the country.

� It is managed and administrated by the Subic Bay Metropolitan Authority (SBMA).

� As of 2009, SBMA registered 1,115 companies with $6 billion investments that generated over 87,000 jobs.

Tokyo 5 Days

Seoul 4.5 Days

Hong Kong 2 Days

Ho Chi Minh

3 Days

Bangkok 4 Days

Singapore 4.5 Days

Subic Bay Freeport Zone

Key Sectors: Education, ICT, Logistics, Manufacturing

Major Mfg Cos: SMK Electronics, Koryo Subic Inc

Advantages: Good connectivity to major Asian destinations, modern facilities, tax benefits, skilled workforce, No labor unrest, Own Law enforcement department

Subic Bay Freeport Zone (Region: Central Luzon)



Source: Clark Subic Marketing

Subic Bay has good road infrastructure; recent upgrades to the port has increased its container handling capacity by six times

Infrastructure

� Road: A significant advantage of Subic is the extensive public transportation and road infrastructure. The Freeport has bus services connecting almost all the key points and a vast, well-maintained road network that links the major areas within the Zone.

� Port: A port development project valued at $215 million has been completed and includes many facilities. A new Cubi-Point based container port has also been completed. The upgrade and repair has increased the handling capacity of containers within the port six-fold.

� Electricity: Subic Bay Freeport is currently dependent on Subic Enerzone to provide 116 megawatts of electricity. A large coal-fired plant embraces the latest in green, clean-coal technology. Electricity costs around PHP 5.56/kWh

� Water Supply and Sanitation: Subic Water and Sewerage Company Inc is responsible for steady supply of portable water and sewerage services. Water capacity amounts to 33,000 cubic metres daily at a cost to the consumer of PHP 23.13 per cubic meter.


� To lease industrial land in the Subic Bay Industrial Park will cost investors $55 per square meter for properties measuring less than 2 hectares. For land surpassing 2 hectares, investors will have to shell out $50 per square meter.

� In the Subic Techno-Park, leased industrial land costs $75-80 per square meter but the lease only covers 50 years.

� Industrial land for lease in the Subic Bay Freeport is priced at $0.50-4.00 per square meter.

� In the Central Business District, leasing office space amounts to $3.50-10 per square meter. On the other hand, leasing factory space in the Subic Bay Freeport is tagged at $2-20 per square meter.

� Leasing in Subic Bay is higher than Clark Freeport Zone

Subic Bay Lease Rates

Industrial Land (Industrial Park)

$55 per square meter

Size < 2 hectares

$50 per square meter

Size > 2 hectares

Industrial Land (Techno Park) $75-80 per square meter

Only for 50 years

Industrial Land (Freeport) $0.50 – 4 per square meter

Office Space (Central Business District) $3.50 – 10 per square meter


� Subic Bay Freeport Zone has modern infrastructure facilities, and is well connected by road, air and sea.

� Companies with a presence in Subic Bay Freeport Zone have access to modern telecommunication facilities, power and water supply, waste management system, vast road network among others.



Source: SBMA

Number of approved projects in Subic Bay has been on the rise; the metropolitan authority assists investors in scouting for labor


3,628

1,818

539 261

102 41

249

1167

29 55 10 49

Korea Philippines China Taiwan India Japan

Committed Investment (USD Million)

No Of Projects � South Korea is the biggest investor in the Subic Bay with committed investments of $3,628 million and 249 projects.

� China has investment commitments of $539 million and 29 projects. In 2012, the number of approved projects numbered 351 with committed investments of $70 million.

� 100% FDI is allowed in Philippines and as a result, many multinational companies have their presence in Subic Bay Freeport zone.



� Subic Bay Metropolitan Authority (SBMA) assists investors in scouting labor requirements via their labor Center.

� They secure and maintain industrial peace within the Freeport and have had no record of labor unrest or strikes in their 20-year long history.

� Subic Bay Freeport also has its own security system in place. It is enclosed by a Freeport-wide perimeter fence and has its own 900-strong Law Enforcement Department, operational 24*7.

� Subic Bay opens to the South China Sea while the western part of its harbor faces the Zamales mountain range, making it naturally sheltered from typhoons.

Advantages

Fiscal Incentives Non Fiscal Incentives

� Preferential tax rate of 5% based on Gross Income. Provided 70% products are exported.

� Exemption from taxes/ duties on imported spare parts

� Exemption from wharf dues and export tax, duty, impost and fees

� Reduced rates on Capital Equipment, spare parts and accessories

� Additional deductions from taxable income

� Employment of foreign nationals

� Free movement of finished goods within the zone as a separate customs territory

� Research and development is allowable as deduction for Manufacturing



CONTENTS

I BULGARIA

II INDIA

III INDONESIA

IV MEXICO

V NICARAGUA

VI PHILIPPINES

VII SERBIA

VIII SOUTH AFRICA � Johannesburg

IX UNITED STATES

X VIETNAM



Source: World Bank, PwC

South Africa’s competitiveness has been impacted by widespread labor disputes and high worker wages

South Africa: Location Map and Key Statistics

South Africa Snapshot: Key Indicators

Size of GDP $0.351 trillion (2013)



Average Inflation 3.3%

Avg. Exchange Rate USD:ZAR) 10.83 (2014)


Literacy Rate 94%



Average Monthly Worker Wage $1,448 (2011)

FDI $8.1 billion (FY 2013)







Reference Exchange Rate: $1= 11 ZAR

� Located in the southern part of the African continent, South Africa is Africa’s second largest economy. It is the most developed economy in Africa and the gateway to the rest of the continent.

� In spite of the sustained economic development, income variations are large within the country and the unemployment rate is very high at 25%.

� South Africa, and especially Johannesburg, has a stable and mature business environment based on a well developed financial industry.

� However, escalating labor costs and perennial labor disputes have taken the sheen off the country as a preferred manufacturing destination.


� Mature Business and Regulatory Environment

� Efficient Logistics Infrastructure

� Growing Aerospace Industry

� Labor Disputes

� High labor Costs

� Weak Economic Performance and Outlook


Sample Only - Disguised and Abridged South Africa witnessed a drop in GDP growth rate in 2014 to 1.4%, but is forecasted to recover to ~2.7%



2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Source: IMF

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019



Source: World Economic Forum, World Bank, PwC, Deloitte, SABC

Favorable regulations & efficient logistics infrastructure are key advantages; South Africa also has many aircraft component makers

Mature Business and Regulatory Environment

Efficient Logistics Infrastructure

� South Africa has a well developed business and regulatory environment, encompassing robust corporate governance standards, effective legal system and well developed financial markets.

� Johannesburg, on account of being the commercial capital of South Africa and due to its proximity to the administrative capital of Pretoria (60 km away), is well served on the parameters mentioned above.

� The country’s securities exchange, Johannesburg Stock Exchange, is the largest in Africa.

� South Africa has high quality logistics infrastructure, comprising an efficient transportation system and streamlined customs clearance procedures which is not only the best in the region but is also more superior than other competing low cost manufacturing destinations.

� A key advantage for South Africa is its high quality transportation infrastructure which received a boost through sustained investments during the 2010 FIFA World Cup.

� Johannesburg and Gauteng are at a slight disadvantage given that they are located more than 500 km away from the nearest port at Durban.

Judicial Independence

Availability of Financial Services

Ease of doing Business

Brazil 76 33 120

Russia 109 71 62

India 50 83 142

China 60 63 90

S. Africa 24 6 43

Scores (1 = Worst; 5 = Best)

Logistics Performance Index Rank

Customs Infrastructure Logistics Competence

Philippines 57 3.00 2.60 2.93

India 54 2.72 2.88 3.03

Vietnam 48 2.81 3.11 3.09

Mexico 50 2.69 3.04 3.12

S. Africa 34 3.11 3.20 3.62

Growing Aerospace Industry

� The aerospace industry in South Africa is quite well developed with major domestic firms such as Denel and Aerosud being key players in the military and civil aircraft manufacturing sectors respectively.

� Although aircraft exports form a miniscule part of the country’s exports (0.36%), export value has steadily increased in the last six years barring 2013.

� Component manufacturer Aerosud is a major supplier to Airbus and recently won a large contract from Airbus. Other major aircraft component manufacturers include Denel Aerostructures and Paramount Group.

209.3 215.5

334.9 386.1

436.7

346.4

2008 2009 2010 2011 2012 2013

Aircraft Exports in $million



Source: Bloomberg, IB Times, IMF

Labor disputes, escalating wages and weak economic conditions have eroded South Africa’s investment attractiveness

Labor Disputes

High labor Costs

Weak Domestic Economy (GDP Growth Rate)

� Frequent and widespread labor disputes and strikes have adversely impacted the manufacturing sector in South Africa and significantly eroded its competitiveness as a global manufacturing hub.

� Most of the disputes in recent times have revolved around demands for wage hikes. As per World Bank, income disparities in the country are the widest globally, with executives earning 300 times the salary of workers.

� The most recent strike by the Union of Metalworkers in July 2014 cost the South African economy $28 million a day in lost output and forced auto major General Motors to temporarily close down its South African unit.

� Labor costs in South Africa have increased significantly in the last decade, following a series of labor unrests in both agricultural and industrial sectors.

� Average monthly salary in South Africa has grown at 8.9% annually over the last four years.

� Productivity levels are also low with the ratio of minimum wage to value added being almost three times the average for other BRICS countries

� South Africa’s economy has been on the decline for the past four years following the Global Financial Crisis.

� GDP growth averaged 2.77% between 2010 and 2013, the weakest among BRICS economies. The IMF has lowered its forecast for the South African economy from 1.7% to 1.4% in 2014 and 2.3% from 2.7% in 2015.

� The weak economic environment has dampened consumer confidence, thereby impacting demand and consequently manufacturing output has remained stagnant.

� Inadequate supply of utilities such as electricity and water are some of the other challenges that have disrupted production. %

4%

8%

12%

2010 2011 2012 2013

Brazil Russia India China South Africa

57 51

74 67

99 114

2008 2009 2010 2011 2012 2013

948 1056

132

523

1448

Brazil Russia India China South Africa

Average Wage per Month, 2011 (USD)

Number of Labor Disputes



Johannesburg (Gauteng Province)


Ã Commercial Hub

Ã High Quality Infrastructure

Ã Manufacturing Hub

Ä Labor Disputes

Ä High Worker Wages

Ä High Property Prices

Johannesburg (Gauteng Province) – South Africa



Source: City of Johannesburg Website, KPMG

Barring ports, Johannesburg is well served by road and air transport infrastructure

1 Sandton


Sandton Financial and professional services

East Rand Industrial Goods

Midrand IT, telecommunications

Rosslyn Automobile

Connectivity

Highways M1 and M2 motorways

Nearest Airport

Johannesburg International Airport (Busiest airport in south Africa handling 18.8 million passengers in FY 2013-14)

Nearest Port Port of Durban (588 km), Port Elizabeth (1,080 km)

1

� Johannesburg is the capital of the Gauteng Province of South Africa and the economic capital of the country, accounting for 17% of South Africa’s GDP and 48% of Gauteng’s economic output.

� The city hosts the South African headquarters of major global corporations such as MacDonald's, Zurich Re, Nokia, Toyota and Coca-Cola. 74% of South African companies have their headquarters based in the city.

� While the commercial and business (office) areas are located in the Northern part of the city, the heavy industrial and manufacturing zones are located in the South and East.

2

2

3

4

East Rand

Midrand

Rosslyn

4

3

Johannesburg (Province: Gauteng)



Source: South African Statistical Association, Statistics South Africa

Johannesburg and the larger Gauteng Province are the economic engines of South Africa

Economic Growth

Labor Force and Wages

� Johannesburg is the most populated city in South Africa with a population of 4.43 million as per Census 2011. The city has 2.26 million economically active people with unemployment rate at 25%.

� GP is the most populated province in South Africa at 12.3 million (23.7% of South Africa’s population). Gauteng also has the highest workforce of 6.4 million (Jul-Sep 2014), followed by KwaZulu-Natal which has a 3.2 million workforce.

� The manufacturing sector in South Africa employed 1.13 million people (13% of total employed people) as on September 2014, a decrease of 2.5% since September 2010. Average monthly wages in the manufacturing sector is $1,311 (August 2014) . Manufacturing sector wages have grown at a CAGR of 8.1% since 2010.


83,501 82,362

85,198

88,317

90,791

93,138 4.0%

-1.4%

3.4%

3.7%

2.8% 2.6%

2008 2009 2010 2011 2012 2013

Gross Domestic Product per Region (GDPR) at constant prices in USD million

Growth Rate (%)

� Gauteng Province’s (GP) Real GDP grew by 2.6% YoY in 2013, outperforming the overall South African economy which grew by 2.2% in real terms during the same period. Of the nine provinces in South Africa, economic activity is concentrated in three - Gauteng, Kwazulu-Natal and Western Cape, which collectively contribute more than 60% to the country’s Gross Value Added (GVA).

� Manufacturing is an important sector in Gauteng Province, accounting for 13.5% of the province’s GDP, after Financial Services (22.8%), Government Services (17.0%) and Wholesale (14.2%). GP is the largest contributor to South Africa’s manufacturing output accounting for 40.8% in 2013.

� GP also has the highest annual household income per capita ($14,202) in South Africa, significantly higher than the national average of $9,382. The corresponding number of Johannesburg is much higher at $c.16,600 per annum.

Jan/10 Jan/11 Jan/12 Jan/13 Jan/14

Average Monthly earnings (USD)

Annual Growth



Source: JLL, Joburg City Website

Rosslyn, on the outskirts of Pretoria, is a major automotive hub; Johannesburg is well connected by road and rail


Infrastructure

� Road: There are 9,247km of roads in Johannesburg implying an average road density of 5.6 km per sq km. City authorities have planned investments worth $182 million to repair major highways and arterial roads. Public transport system in the city is inadequate usually leading to major traffic congestions

� Rail Network: Johannesburg is well connected by rail to all the main cities and ports. The city is also served by the Gautrain which is Africa’s first high speed train.

� Electricity: Gauteng gets the maximum share of electricity supply by Electricity Supply Commission (ESCOM). The total electric supply in 2014 was 54,729 GWh in 2014 which is 27.79% of the total power delivered by ESCOM


Q4 2013 Q1 2014 Q2 2014 Q3 2014

Land Value in (USD per sq ft)

Rent (USD per sq ft per month)

� Average monthly rentals in the Johannesburg industrial property market have increased by 5.2% YoY to reach $0.52 psf per month.

� Highest average industrial rents in India ranges between $0.40 – $0.45 psf per month.

� The overall industrial property is stagnant on account of the weak macroeconomic environment in South Africa, characterised by poor growth outlook and weak consumer sentiment and demand

� Rosslyn, on the outskirts of Pretoria, 77 km from Johannesburg is a major manufacturing hub with global majors such as Nissan and BMW.

� The Automotive Supplier Park, a cluster of automotive manufacturers is also located in Rosslyn. Denel Aerostructures, a major local aerospace manufacturer is based in the Ekurhuleni Aerotropolis in the Gauteng Province

� The city of Johannesburg is spread across 1,644 sq km with an average population density of 2,694 persons per sq km.

� The city’s infrastructure is quite well developed on account of it being the commercial capital of the country, and its proximity to Pretoria, the administrative capital.



Source: Western Cape Destination Marketing, Investment and Trade Promotion Agency, Deloitte

Favorable regulatory regime has attracted large volumes of investments from the USA and UK



� Gauteng Province is the most attractive destination for FDI in the African continent. The region led with 11.3% share of the total number of FDI projects during 2007-13 in Africa.

� Given that the services industry is the driving force of the regional economy, most of the FDI deals in Gauteng have happened in the TMT, business services and financial services sectors.

� USA, UK, Germany and India were the top foreign investors in South Africa between 2003 and 2013 cumulatively investing $19.46 billion.

� Within South Africa, Johannesburg has been the most attractive destination accounting for 31.14% (by number of projects) and 12.23% (by value) of FDI into the country between 2003 and 2013.


� Central government taxes are income tax, value added tax (VAT), corporation tax and fuel duty. Provincial government’s primarily levies municipality taxes.

� VAT in South Africa is set at 14%. The corporate tax rate is 28% in the country.

� The South African government offers an R&D incentive which is a deduction to the tune of 150% of the expenses incurred with respect to the invention.

� Besides this, a special depreciation allowance is allowed on plant and machinery.

� A rebate or drawback of customs duties is offered on imported goods, raw materials and components used in manufacturing or processing of goods for export.

2008 2009 2010 2011 2012 2013

FDI Capex (USD million) No. of Projects

Countries Corruption Perception

Index 2014 (Rank out of 175)

Global Competitiveness Index

2012-13 (Rank out of 142)

Judicial Independence 2011-12

(Rank out of 142)

Brazil 69 48 71

Russia 136 67 123

India 85 59 51

China 100 29 63

South Africa 67 52 35



Source: Department labor: Republic of South Africa, Annual Industrial Action Report 2012 and 2013, Joburg Website, IOL News

Auto and aircraft manufacturing are two of the biggest skill-based manufacturing sectors; Labor disputes have disrupted operations

Supporting Ecosystem - Automotive and other Manufacturing Sectors



33

12 15

42

15 13

97

61

44

Gauteng Western Cape KwaZulu-Natal

2011 2012 2013 � The labor situation has been deteriorating in Guateng Province. The number of work stoppages/strikes increased from 33 in 2011 to 97 in 2013.

� Guateng lost $55.4 million in revenues in 2011 due to labor disputes which rose to $253.7 million in 2013.

� 220,000 metal workers in South Africa went on a 4-week strike in August 2014, that disrupted the assembly lines of Toyota, General Motors and Ford.

� Ford, consequently had to cancel a components contract with SKF, the largest bearings manufacturer in the world. Ford’s regional head also went on record to voice his concerns on the labor situation and that it would negatively impact the company’s future investment in the country

� South Africa has a well developed automotive and aerospace manufacturing industry.

� Denel Aerostructures, a major domestic manufacturer has a plant at the Ekurhuleni Aerotropolis in the Gauteng Province.

� Global majors such as BMW, Ford, Nissan are also based in GP. Besides these, General Motors, Volkswagen and Toyota also have manufacturing facilities in other provinces of the country.

� Due to severe labor issues, South Africa’s exports of aircrafts and automotive have declined in the last few years.

215.5 334.9 386.1 436.7 346.4

3,515.5

4,598.9 4,719.2

4,004.5 3,679.9

2009 2010 2011 2012 2013

Export of Aircraft and Spacecraft Export of Motor Vehicles



Manufacturing Industry

Infrastructure

Source: Statistics SA, KZN Top Business, SEDA, SAWEB, CNN

Gauteng KwaZulu-Natal Western Cape Eastern Cape

Share in South Africa’s GDP 33.8% 16.0% 13.7% 7.7%

Mfg. as % of Provincial GDP 13.5% 15.8% 11.8% 12.2%

Contribution to South Africa’s Mfg. output 39.3% 21.4% 15.9% 7.2%

No. of automotive companies 164 82 84 20

Major Foreign Automotive Cos. BMW, Nissan, Ford

Toyota, Volvo, Denso NA

Mercedes, Volkswagen,

Ford, GM

� While Gauteng is the economic engine of South Africa, automotive hubs have developed in the provinces of KwaZulu-Natal (KZN) and Eastern Cape.

� The automotive manufacturing industry in KZN is primarily concentrated in the eThekwini Municipality and employs 20,000 people.

� In the Eastern Cape province, the auto sector employs 40,000 and is based in Port Elizabeth and East London.

Gauteng leads in terms of economic activity and has good infrastructure; KZN and Eastern Cape are other auto hubs

Gauteng KwaZulu-Natal Western Cape Eastern Cape

No. of airports 4 1 1 3

No. of ports 0 2 2 2

Length of highways (km) 5,344 21,186 16,300 32,218

Road Density (km per 100 sq km) 31.42 23.00 12.60 19.00

Share of total electricity generated 28% 19% 11% 4%

Per capita electricity supply (MWh) 4.2 3.5 3.5 1.2

� Gauteng has a slight location disadvantage on account of being a landlocked province.

� The nearest port (Port of Durban) is more than 500 km away which adds to the freight cost when importing products through the maritime route.

� The province tops in terms of other parameters though (road, electricity).



Labor Market

Social Indicators

Source: Western Cape Destination Marketing, Investment and Trade Promotion Agency, Deloitte

Gauteng KwaZulu-Natal

Western Cape

Eastern Cape

Annual Average Household Income (USD) 14,202 7,550 13,042 5,868

Literacy Rate 97.8% 90.9% 97.8% 90.5%

% of households with access to piped or tap water 95.9% 86.2% 98.7% 80.5%

% of people having internet access 54.0% 32.3% 54.4% 30.2%

Gauteng KwaZulu-Natal

Western Cape

Eastern Cape

Size of labor Force (million) 9.36 6.62 4.20 4.08

Manufacturing labor Force 642,000 343,000 276,000 130,000

Unemployment Rate 29.6% 40.8% 25.5% 43.0%

� Gauteng accounts for 37% of the manufacturing workforce in South Africa.

� KZN and Eastern Cape have very high levels of unemployment.

Gauteng also has the largest workforce in the country; Western Cape leads on social parameters

� Barring household income, Western Cape outperforms Gauteng on most social development parameters



Location Level Recommendations for Wire Harness Manufacturing Site



CONTENTS

I. Top 5 Countries: Country Level Recommendations

II. Top 10 Location Benchmarking

III. Best 3 Locations: Location Level Recommendations



US

Mexico

Serbia

Nicaragua

Bulgaria

South Africa

India

Philippines

Vietnam

Indonesia

Setting Up a New Business

Getting Electricity Connection

Philippines

Nicaragua

Mexico

US

Indonesia

India

Vietnam

Bulgaria

Serbia

South Africa

The top 5 countries rank high in terms of ease doing business; time taken for completing administrative procedures are on the lower side

South Africa

US

Mexico

Philippines

Bulgaria

Vietnam

India

Nicaragua

Indonesia

Serbia

Getting a Construction Permit

Registering a Property

Bulgaria

US

South Africa

Indonesia

Philippines

India

Serbia

Vietnam

Nicaragua

Mexico

Time Required For (In Days): Ease of Doing Business Ranking

I. Ease of Operation

India

Nicaragua

Indonesia

Philippines

Serbia

Vietnam

South Africa

Mexico

Bulgaria

US



South Africa

Bulgaria

US

Vietnam

Serbia

India

Philippines

Mexico

Indonesia

Nicaragua

Setting Up a New Business (% of income per capita)

Getting an Electricity Connection (% of income per capita)

US

Philippines

Bulgaria

Mexico

Indonesia

Serbia

India

South Africa

Nicaragua

Vietnam

Among the top 5 countries, Bulgaria and the US rank high in terms of efficiency and cost of operation

Vietnam

South Africa

US

Philippines

Nicaragua

Indonesia

Bulgaria

Mexico

Serbia

India

Completing Construction Permit Procedures (% of warehouse value)

Registering a Property (% of property value)

Vietnam

US

Serbia

Bulgaria

Philippines

Nicaragua

Mexico

South Africa

India

Indonesia

II. Efficiency of Operation

Cost Incurred In:

Mexico

US

Bulgaria

Serbia

South Africa

Indonesia

Vietnam

India

Philippines

Nicaragua

III. Cost of Operation

Ratio of Minimum Wage to Value Added per Worker

Lower ratio indicates more value addition per unit wage


Sample Only - Disguised and Abridged Based on the sum total of 65 individual sub parameter scores for each country, the best 5 countries are shown below

Overall Rankings Based on 15 Key Parameters

64.64

60.98

58.55

58.45

57.26

56.77

55.67

54.78

53.03

50.83

US

Bulgaria

South Africa

Indonesia

Philippines

Mexico

Vietnam

Serbia

India

Nicaragua

Impact of Each Parameter on Final Scores Best 5 Locations Based on Net Scores



CONTENTS


II. Top 10 Location Benchmarking i. Macroeconomic Situation

ii. Labor Market Efficiency

iii. Natural Disaster Risk

iv. Depth of Value Chain

v. Taxation and Crime

vi. Corruption

vii. Political Stability & Overall Infrastructure




Labor Market Efficiency

Clark Freeport and Subic Bay lead in labor market efficiency; Varna and Mobile lag due to higher labor wage and lower GDP growth rate

Macroeconomic Situation Overall Scores

Overall Scores

20%

15%

15% 8%

12%

8%

5% 7%

10%

Minimum Labor Wage

Labor Availability

Cooperation in labor-employer relations Presence of unionized labor

English Language Proficiency

Premium for night work

Paid annual leaves

Severance pay for redundancy dismissal Flexibility of hiring & firing

30%

20% 25%

25%

Literacy Rate

Population Growth Rate

GDP Growth Rate

Currency Volatility



Location Proximity

Varna’s geographic location allows it to be closer to most of PAC’s customers, while Clark Freeport is near most of PAC’s suppliers

Depth of Value Chain Overall Scores

Overall Scores

50% 50% Proximity to Suppliers

Proximity to Customers

50% 50% Presence of Wire Harness Manufacturers

Presence of Aerospace Sector



Crime & Corruption

Infrastructure and government stability is the best in Mobile; Clark Freeport lags on both these parameters

Overall Scores

5%

15%

10%

20% 15%

10%

25% Connectivity to Airports

Connectivity to Sea Ports

Connectivity to Rail Road



CONTENTS


II. Benchmarking Top 10 Locations




Impact of Key Parameters on Overall Location Level Score

The top 6 parameters majorly impact the overall score of a location; consequently the top 3 locations do well in each of the 6 parameters


Overall Quality of Infrastructure

Tax

Natural Disaster Risk

Location Proximity

Crime & Corruption

Depth of Value Chain

Macroeconomic Parameters

Trade Zones

Political Stability

Warehouse, Production & Office Facilities

49%

66%

74%

Mobile

Charleston Clark Freeport



Key Reasons Behind the Most Attractive Locations

While Mobile and Charleston perform well across all parameters; the Clark Freeport Zone scores well as a low cost destination

MOBILE CHARLESTON CLARK FREEPORT

Mobile & Charleston rank among the top 2 destinations due to the following key reasons:

1) Presence of a well established aerospace sector that consists of not just the world’s largest aircraft manufacturers but also some of the world’s leading aerospace component manufacturers

2) Robust infrastructure that includes good connectivity to sea ports and major highways and a reliable power supply.

3) Relatively lower crime rates and relatively much lesser corruption

4) Attractive tax incentives if manufacturing and value addition is done inside an FTZ and the products are meant for overseas markets

5) Also, both these locations are close to PAC’s major North American clients

6) The one area in which both Mobile and Charleston, do not fair very well is labor market efficiency. This is mainly on account of the higher minimum wage in the US compared to the other locations in this benchmarking exercise

Clark Freeport ranks as the 3rd most attractive location due to the following key reasons:

1) The Clark Freeport Zone has proximity to PAC’s suppliers

2) It is forecasted to have a relatively higher GDP growth rate in the next fiscal

3) Both in terms of its tax structure and law & order situation, the Clark Freeport zone come across as a moderately attractive zone.

4) While Philippines has a fairly high natural disaster risk, but Clark is in a relatively safer zone.



Mobile Clark Freeport Charleston Johannesburg Varna Subic Bay Tijuana Plovdiv Ciudad Juarez Monterrey

top three locations

Analysis suggests that Mobile and Clark Freeport are two equally attractive locations, closely followed by Charleston

1 2 3



Ranking of Top 3 Cities on Attractiveness Analysis

Mobile and Clark Freeport are among the 2 best locations; Charleston is a close third

Charleston has a robust infrastructure and is already a major manufacturing hub for the global aerospace industry. Some of the leading players in this area include Boeing, Lockheed Martin, GE Aviation, BAE Systems, GKN Aerospace and others. Apart from being well connected to the highway network, Charleston also an international airport and a sea port.

Summary Analysis

Mobile in Alabama largely benefits from lower rate of crime and corruption, stable political environment and superiority of infrastructure. It is the factors of relatively high priced labor, lack of strong taxation incentives and relative exposure to issues of floods and tornados that has allowed other global cities to outscore it on the overall ranking. What also works in its favor is the rebound in the macro-economic environment in the US.

Clark Freeport is an emerging and developing hub which makes its current infrastructure not comparable to that of its peers i.e. Varna and Mobile. However, its labor market efficiency and outlook for robust economic growth is unmatchable by any other country in the list. The city has also come a long way since the 1991 volcano eruption and today has very low risk of natural disaster.

Location Mobile Charleston Clark Freeport


Macroeconomic Parameters

Location Proximity

Depth of Value Chain

Trade Zones

Warehouse, Production & Office Facilities

Natural Disaster Risk

Tax

Crime & Corruption

Political Stability

Overall Quality of Infrastructure

Executive Summary (1/2)



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