N. Africa Region Emerges as Global Industrial Base

The Mediterranean Sea, the Sahara Desert, oil and the movie “Casablanca.”

These are what people usually think of when it comes to the Maghreb, which refers to four countries in North Africa along the shore of the Mediterranean.

The region is attracting attention as a global factory. Equipped with cheap and quality labor, the Maghreb is rapidly emerging as an alternative industrial base due to its proximity to Europe, as Eastern Europe is reeling from the global economic crisis.

The Maghreb refers to four North African countries -- Morocco, Algeria, Tunisia and Libya – and its name means “the place where the sun sets” in Arabic.

The German news magazine Der Spiegel said the sun of manufacturing is rising on the land of the sunset, as a number of high-tech industrial plants for items such as cars, aviation, electronics and telecommunications have been built there. The region has attracted 30 billion U.S. dollars in investment over the last five years.

French automaker Renault, which has a factory in Casablanca, Morocco, is also building an auto assembly plant in the ancient Moroccan port of Tangier that will create some 6,000 jobs.

U.S. and European aircraft makers are also rushing to the region. Airbus plans to build a plant in El Mghira in northern Tunisia at a cost of 76 million dollars. U.S. aircraft giant Boeing is operating a joint venture in Casablanca, while French aerospace group Safran has six plants in the Maghreb.

Sumitomo Electric of Japan is seeking to relocate its production facilities in Eastern Europe to Tangier and Bou Salem, Tunisia. In addition, many other Western companies are eyeing the region for developing resources and building infrastructure, new cities and tourist attractions.

The Maghreb’s popularity is rising with the decline of Eastern Europe as a low-cost production base. Eastern Europe’s wages have risen since its entry into the European Union and several Eastern European countries are also on the verge of bankruptcy amid the global financial crisis.

The Maghreb is less vulnerable to the crisis due to the meager opening of its financial market. Investment in the region fell just five percent, whereas Eastern Europe saw a sharp decline in new investment.

What makes the Maghreb more attractive is the region’s cheap but high quality labor. Renault pays an average of 671 dollars in wages to its employees at its plant in Romania. In the Maghreb, the cost ranges from 195 to 325 dollars.

In particular, Tunisia boasts the best human resources in Africa thanks to its bold investment in public education. The World Economic Forum ranked the country’s math and science education the seventh best in the world.

Another advantage is the region’s proximity to Europe, reducing logistics costs. The Maghreb is located just 130,000 kilometers away from Spain across the Strait of Gibraltar.

The downsides are the region’s old infrastructure and vulnerability to terrorist attacks, as the area belongs to the Arab world.

Despite this, James Moreau, head of Citigroup’s North African operations, said the Maghreb is a reasonable choice for companies wishing to relocate their production bases or build new ones.

redfoot@donga.com