Country_Report_on_Somalia(Final) - 110 W Cameron Ave Chapel Hill NC 27516 December 2 2008 Doug Elvers Philip Morris International Chief Executive

110 W. Cameron Ave. Chapel Hill, NC 27516 December 2, 2008 Doug Elvers Philip Morris International Chief Executive Officer 120 Park Avenue New York, NY 10017 Dear Mr. Elvers: Thank you for giving me the opportunity to review the feasibility of locating a manufacturing facility in Somalia. Per your request, I have attached a memo outlining the major hurdles, risks, and benefits of constructing a new facility in Somalia. I strongly recommend Philip Morris International does not choose Somalia as the site of any sort of investment. There are many difficulties associated with locating a factory in Somalia. The country is largely lawless resulting from a civil war that began in 1991. Currently there are several different groups claiming to be the government of Somalia, making it difficult to know whom to work with and what might be the future of the country. Importing supplies and exporting products will also face a good bit of difficulty due to the high rate of piracy in the region. This year alone pirates have successfully hijacked over 27 ships off the coast of Somalia. If we successfully built and supplied a facility in Somalia, it would be difficult to find a qualified labor pool. Use of expatriates would be very costly and difficult due to a US Travel Warning to not enter the country. The local populace is one of the least educated in the entire world and thereby would not be able to work the machinery in our plants. Given the instability of the region, piracy, and poor labor pool, I believe there are many other locations that would serve better than Somalia. While Somalia does have a good geographic location for exporting to India and the Middle East, the costs of locating in Somalia are too high. Thank you for reviewing my report, pleas feel free to contact me via email at [email protected] if you have any further questions. Sincerely, John T. Lilly

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To: Doug Elvers, Chief Executive Officer From: John T. Lilly, Site Examiner Date: December 2, 2008 Subject: Manufacturing Facility in Somalia Executive Summary The examination of locating a manufacturing facility in Somalia to supply the Middle East and Indian markets shows that Somalia is not a suitable location for a plant. While the location geographically is a good one due to its easy access to shipping lanes, the other factors prove poor enough to remove Somalia from discussion as a new manufacturing plant. The country has been in turmoil since a civil war beginning in 1991 (Quarterly Country Report, 3). The education levels in Somalia are even poorer than those found in other surrounding African countries (Country Profile, 14). There is currently very little industrial activity in Somalia as the key economic activity is raising livestock (Little, 21). This will present a problem for Philip Morris International because it means the country lacks the infrastructure to support a large manufacturing operation.