By promoting the right infrastructure development a country might attract capital from foreign firms looking to move the production of goods and services overseas. For Morocco, developing sites for foreign companies to conduct their operations overseas is part of a wider movement across francophone North Africa.
As countries like Algeria, Morocco, and Tunisia diversify their means to attract foreign capital by encouraging the growth of market-based competition, they are increasingly aware of their valuable position denoted by a common language, which unites them with Europe as well as their close proximity to the continent. While European firms look to stay competitive on international markets, many are choosing to delegate their business processes overseas.
Further slides in the US Dollar are making dollar-denominated economies more competitive on international markets as the factors of production are relatively cheaper against the more expensive euro and other currencies not pegged to the greenback. A continued fall in the dollar will likely serve as an impetus for European firms to ‘offshore’ a portion of their business to North Africa to cut costs and remain competitive.
Morocco develops its offshore industry
For Morocco, developing infrastructure to host offshoring sites is part of the wider 2005 Emergence Plan aimed at deriving the economic benefits from a burgeoning offshoring industry. Through developing a successful offshore industry, the kingdom calculates that more capital and workforce in the country will increase gross domestic product (GDP) by $12.3 billion while at the same time creating nearly 440,000 jobs and slashing its trade deficit in half.
One such offshoring site the kingdom developed is Casablanca’s NearShore Park, which opened its doors at the end of 2007 and currently hosts such companies as BNP Paribas, Dell, and Tata Consulting for a total occupancy rate of 100% within its 57,000 square meters. Other parts of the park are also being constructed and businesses continue to fill them up at the park’s price of $12 per square meter, taxes included.
According to NearShore Park’s management “we do not have a [single] local standard. We are working with our customers on the final version of the product.” Confident in the industry’s future in Morocco, another 200,000 square meters are planned over the next two years while an additional 350,000 square meters are set for construction through 2011. Atos Origin, Novedia Group, and Novative already expressed interest in the park as an offshore location for future operations.
Moroccan officials are trying to use Casablanca’s strengths to the city’s advantage, which have currently placed the economic capital in the “top 5 most popular offshore destinations in the world, according to a study conducted on 37 foreign cities,” said Mohamed Lasry, CEO of NearShore Park. Other contenders for Europe’s offshore operations include Prague, Czech Republic, and Sofia, Bulgaria, where low manufacturing costs, coupled with policies aimed at harnessing foreign direct investment (FDI) encourage the development of industry for many Western European firms looking to cut costs.
To compete with others, including the very popular Asian outsourcing hubs in India, Southeast Asia and China, Morocco is still preparing its workforce to match the same number and degree of talents in their pool of human resources, including training engineers and other experts in information and communication technology.
According to Mohamed Kabbah, Governor of Casablanca, the NearShore Park “is an incentive for getting Moroccan engineers abroad to come and work in Morocco.” The NearShore Park is also associating itself with institutions of tertiary learning, including universities and vocational schools to harness the talent still left in Morocco as “Morocco is fighting for its place in the knowledge economy,” according to Kabbah.
The advantages to a firm situating itself in the NearShore Park include office facilities held up to international standards as well as a private telecom loop run by Maroc Telecom within the park, at prices cheaper than those offered to consumers elsewhere. Public transport plans to offer connections are in the works and NearShore’s chief operating officer Joseph Hoffman promises no less than five bus lines through the park with a bus coming every two minutes.
Casablanca is not alone
While Casablanca might be aiming to become the biggest, it is certainly not the only Moroccan spot for Europe’s offshoring industry. The country’s political capital Rabat has begun its own Technopolis with a first phase completion date of June 2008 and a $58 million price tag. The remaining construction will hopefully be completed by 2015 for a cost of $500 million. The Technopolis aims to attract talent to serve as an arena for software support.
With the aim to build its technology industry as one driver of human capital development, Rabat has welcomed ST Microelectronics who installed a microchip design research and development (R&D) site for 180 engineers at a price of $13.6 million. With a focus on hardware design, clients include the American giant Texas Instruments.
The challenges of Morocco succeeding in attracting international firms is partly based on exogenous market factors, including currency movements, but the country’s success is also largely on par with Morocco’s own challenges of developing human capital. The country will continue its efforts to develop an economic environment favorable to industry and competitive against regional rivals such as Algeria and Tunisia who have thrown their hat in the race and are pursuing their own plans to create hubs for service sectors and R&D.
