Low barriers to high value

To improve its attractiveness in the offshoring sector, Morocco has introduced valuable incentives and developed infrastructure to accommodate technology-intensive companies. Foreign investors have started flocking.

No, offshoring in Morocco is not a high-speed boat race. It refers to a set of three key activities that European and North American companies are sub-contracting out to specialist firms in Morocco, including IT outsourcing, call centers and telemarketing.

Moroccan programmers and engineers develop solutions to European software problems for CapGemini. Specialists respond to customer service or other back office tasks for WebHelp out of Casablanca call centers. And telemarketers handle outbound sales and marketing campaigns for companies such as Teleperformance.

The Moroccan government seems to have hit the jackpot when it selected offshoring as one of the seven key development areas within its national industrial pact. Along with aeronautics, automotive and other sectors, offshoring is showing good results. No wonder the World Bank has chosen Morocco as the “best global reformer in 2011”.

And because of the low cost of its workforce and the combined financial incentives on offer, Morocco has a strong competitive advantage for offshoring operating costs. By comparison, costs between Morocco and southern Europe for certain financial services are revealing with a differential in the cost of labor of up to 50%.

Offshoring, considered as a high value-added niche, has already substantially contributed to Morocco’s development. It is the most advanced of selected priority areas, with well-defined and attractive incentives (see page 18 and 19) and is backed by good training programs that provide skilled human resources.

The Ministry of Industry, Trade and New Technologies has overseen the establishment of twin dedicated offshoring zones. These two platforms, called Casa Nearshore and Technopolis, are fully operational and already host over 70 companies.

Next on plan are Fes Shore, Tetouan Shore and Oujda Shore, named after the cities where they are located. Construction is well-advanced and the first office spaces will be ready before the end of 2012.

Morocco’s offshoring efforts are bearing fruit. In terms of numbers, the Ministry points to an export turnover of $820 million in 2011 and confirms that the target employment of 100,000 new jobs by 2015 is already halfway achieved.

As for development prospects, “they are positive with 100,000 jobs created and the expectation of about $2.3 billion in offshoring revenues attained in 2015,” explains a Ministry spokesperson. That means 70,000 new jobs over the next three or four years and a fourfold increase in revenues generated.

International confidence

Morocco’s appeal can no longer be hidden and is becoming well known to foreign companies in search of cost-effective and nearby solutions. “Nearly a hundred international companies have placed their confidence in the sector by installing branches in Moroccan offshoring parks,” explains Abderrafie Hanouf, CEO of MedZ Sourcing, a subsidiary of Caisse de Depot et de Gestion Development.

Morocco’s efforts in developing and promoting its offshoring zones have paid off. The country is now one of the world’s most sought-after destinations in the field. Proof thereof comes from A.T. Kearney’s 2011 Global Services Location Index, in which Morocco appears in the top 30 most attractive countries.

A.T. Kearney ranks attractiveness based on three criteria: the banking and financial structure, the business environment, and the quality of labor available. Also playing a role for Morocco’s attractiveness is the geographic proximity, which is a factor that weighs financially. Proximity to headquarters enables companies such as IT applications maintenance or call centers to save on management travel costs, and thus increase profitability.

Low costs and high incentives

For companies offshoring in Morocco, geographical proximity is certainly one factor of appeal. But this is not all. Morocco has other aces up its offshoring sleeve which means the country can boast of a unique package to interested foreign companies.

Morocco offers a pool of qualified human resources and the nearshore zones all have incentives and subsidies to assist companies with training efforts on ongoing education.

Morocco also offers an attractive incentive framework centered around a personal income tax rate capped at 20%. As for housing, it is diversified and in line with best international standards, including dedicated integrated industrial platforms with cabled, airconditioned and guarded offices.

“Our cumulative investment over the next five years will reach one billion dollars, aiming to develop and manage competitive offshoring zones, offering client companies efficient services and infrastructure,” says Mr. Hanouf of MedZ Sourcing. ●

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For more information:
National Pact for Industrial Emergence 2009-2015
MedZ Sourcing
Ministry of Industry, Trade and New Technologies