Overseas outsourcing may have pricked a nerve among Western workers who fret about rising unemployment rates and the loss of jobs to foreign shores, but it has also helped drive economic growth into the double digits in countries like India and China. Emerging market economies like Morocco, identifying an opportunity to finally use “free trade” to their advantage, are making investment in outsourcing a pillar of economic development, hoping to pry a share of the sizable market away from the BRIC countries (Brazil, Russia, India and China).
Outsourcing to foreign countries allows companies to substantially reduce costs by paying less for qualified labor and in some cases receiving government subsidies. Pioneered by UK- and US-based businesses in the early 1990s, the practice of outsourcing is growing among French and Spanish-speaking markets, particularly in France, Spain, Belgium and Switzerland. As companies in Spanish and French-speaking countries keep increasing demand for outsourcing locations, Morocco is stepping up to the plate with investment in infrastructure and special zones to house outsourcing operations with a strong-willed bid to become the leading destination for Western European companies looking to outsource.
Morocco already has three natural advantages that make it a highly competitive outsourcing location for Western Europe: an inexpensive multilingual workforce, a modern liberalized telecoms sector, and a geographical and cultural proximity to Europe. The country also has dangerously high unemployment, prolific urban slums and a large group of unemployed graduates who regularly protest in front of the parliament in Rabat. A period of proven success hosting call centers showed the country could capably adapt to Western companies’ outsourcing needs, and Morocco seized on the opportunity to integrate outsourcing into its socio-economic development strategy.
The development of four outsourcing zones at Fes, Marrakech, Casablanca and Tetouan is generating a considerable buzz in the kingdom, raising hopes for economic growth and a viable way to absorb the growing numbers of jobless graduates. Although Morocco’s outsourcing sector is still at an early stage, a strong kickoff has gained it recognition as an up-and-comer on the international scene. In its 2008 year-end survey of the top 30 most suitable countries for outsourcing services, industry tracker Gartner dropped Northern Ireland, Sri Lanka, Turkey and Uruguay from the list and added Morocco, Egypt, Panama and Thailand.
The launch of the four zones, which will host business process outsourcing and information technology outsourcing (BPO and ITO), plays a key role in the implementation of the country’s “Emergence Program.” Engineered for the Moroccan government by the firm McKinsey, the Emergence Program outlines an overhaul of the country’s industrial sector over a 10-year horizon (2003-2013). As the country becomes a more attractive outsourcing destination, analysts predict rising levels of foreign investment and a boom in job creation. The strategy is expected to contribute $1.7 billion to the country’s GDP by 2013, and to create an estimated 91,000 new direct jobs and thousands more indirect jobs.
Positioned for success
Issam Belmaaza began working for Business Support Services (B2S) in 2005, providing technical support to clients of French Internet service providers Orange and SFR. After a five-week training session, he was hired at a $442 monthly salary. He has since been promoted, now earning $932 per month managing a team of recruiters. He works 8-hour shifts, five days a week, and is enrolled in a part-time Master’s program for management and human resources. He likes his job and his co-workers, and unlike some call center workers, who change from “Mohammed” to “Marc” during working hours, he does not lie about his name or strive to make his accent less pronounced.
His story is an uplifting look at what could be the future of the Moroccan workforce, should the execution of the Emergence Program go as planned. One of Morocco’s most serious problems is the growing number of jobless graduates. Reports indicate that Morocco will have to create as many as 400,000 jobs per year for the next 10 years to prevent mass unemployment. Mr. Belmaaza and others like him who find upward mobility in BPO or ITO will help the country’s middle class grow and narrow the gaping divide between rich and poor.
Furthermore, as outsourcing evolves from low-level manufacturing jobs to higher-level back office functions like accounting and IT development, workers will learn skills that carry over to local businesses. While Morocco’s outsourcing market has until recently been focused on call centers, new infrastructural investments will allow for expansion into banking, insurance, telecommunications and IT development. Knowledge process outsourcing (KPO) could also be in the future.
Special zones
The first outsourcing center to launch was Casanearshore, managed by the leading institutional investor CDG Group, which opened in 2007 as a park for BPO and ITO. The park, which represents an investment of $314 million, is spread out over 53 hectares. Upon completion of its three construction phases, it will consist of 40 buildings offering 250,000 square meters of office space. Currently, most of the companies with operations at the site are in the IT domain, although officials are implementing measures to attract more back-office functions. Tata consultancy services, Teuchos Groupe Safran and Ubisoft are among the businesses that have outsourced operations to the park, while BNP Paribas has set up two specialized IT companies on the premises: Mediha Informatique and BDSL.
High investor interest in Casanearshore has built anticipation for other outsourcing zones, in particular, the TangierMed outsourcing zone, run by the TangierMed Special Agency (TMSA). In Morocco, project management can be subject to lengthy delays and unforeseen constraints, but the TMSA’s efficient management of the TangierMed ports and free trade zones has won the agency widespread approval and confidence. On January 7, at a ceremony presided over by King Mohamed VI, the TMSA signed a convention to extend the TangierMed industrial platform to 5,000 hectares, including a 90-hectare site near Tetouan for outsourcing, scheduled to open in 2011. “We know that the outsourcing that will work in the North region will be the one that is destined to Spanish-speaking clients, so basically we will target companies in Spain in financial services and banking and so on,” said Youssef Bencheqroun, CEO of Activity and Real Estate Zones at the TMSA. The northern region of Morocco, including Tangiers at just 14 miles from Spain, is well positioned to tap into the neighboring Spanish market for outsourcing services.
One of the more useful legacies of the colonial period, when Spain controlled the northern territory of Morocco, was the spread of second and third languages throughout the country. Today, in addition to Arabic, most people in north Morocco speak fluent Spanish, while most of central and south Morocco speaks fluent French. Outsourcing zones are coordinating location with linguistic proficiency. While the centrally located Casanearshore has made its mark on the French speaking markets, the opening of the TangierMed outsourcing zone in the north is expected to provide great opportunities to Spanish businesses, which have traveled as far as Latin America to outsource functions. Tangiershore will be the first site to offer Spanish companies a cost-effective Spanish-speaking workforce at a trifling geographic distance.
“We’ve had some contact on a one-to-one basis with some companies, and it looks like there will be a very strong interest,” said Bencheqroun. “I understand that the Spanish companies are already doing outsourcing with Latin America, but the advantage we would have is that, while outsourcing is fine, one day or another, people have to meet with each other and when that is in Latin America it’s a lot more difficult.”
Human resources & fiscal incentives
Infrastructural investments and the creation of special zones are essential in attracting outsourcing activity to Morocco. But the key to remaining competitive with other countries like Romania and Tunisia is training and building the potential of human resources. Prime Minister Abbas El Fassi, calling Morocco a “magnet” for companies interested in outsourcing, said that the sector was “at the heart of our interests, because it is bursting with development potential, due to the high demand which will come from European countries over the next 10 years,” local press reported. To prepare for this demand, a large-scale employee-training program is being implemented to ensure a ready supply of skilled workers. The state-funded initiative will train 22,000 graduates in 12 various fields.
The business-friendly Moroccan administration is helping to fuel investment by enticing companies with incentives, such as flexibility with the country’s work code and simplification of bureaucratic processes. Companies set up in the offshore zones will also benefit from exemption from corporate tax for the first five years and a limiting of the income tax for employees. As demand for outsourcing rises, competition among countries for offshore investment is stepping up, but Morocco looks well positioned to make good on its geographic advantages and human capital, complemented by extensive infrastructure and government support.
Outsourcing is bursting with potential, due to high demand expected from europe in the next 10 years
