Co-sourcing in the Mediterranean: a response to the crisis?

On 6 December 2012, Ipemed partnered with Jeune Afrique and La Tribune to organize a major debate on the theme of co-sourcing.
The debate gave numerous business leaders and institutional representatives an opportunity to share their experience and give concrete meaning to the concept of co-sourcing.

What is co-sourcing?
For Jean-Louis Guigou, the co-sourcing model is “both simple and complicated”, whereas “offshoring entails departure and closing, co-sourcing involves opening a complementary establishment without closing the initial one.” According to El Mouhoub Mouhoud, the notion of horizontal offshoring refers to companies that access markets through foreign direct investment. In the face of this strategy, compartmentalized markets in the Maghreb are not in a good position. Vertical offshoring involves breaking up the value chain into different locations. Various parts of the production process are relocated and the final product is brought back to Europe for consumption. This system corresponds to “off-shoring through sub-contracting”, which does not allow the South to move up the value chain and destroys jobs in the North. The co-production model implies a change in the nature of contracts and a long-term vision. Co-sourcing is a way of “charting out ways for better productive integration between the South and the EU” and sharing added value.
Tarik Sijilmassi, Chairman of the Board at Crédit Agricole Morocco, reckoned that these distinctions are essential because we need to move beyond using “outrageous semantics”, whereby “uncontrolled” offshoring is associated with “mercenary” firms and strategies. Countering this opinion, Philippe de Fontaine Vive, Vice-President of the European Investment Bank, was not “convinced by co-sourcing”. He considered that it would be “better to move towards co-production to avoid the offshoring debate, uncontrolled or otherwise.”
Co-production is essential for Nassim Kerdjoudj, Vice-President of the Algerian Business Leaders Forum, who made an appeal for a “productive economy” in Algeria, an idea also taken up by Arnaud Montebourg, French Minister for Industrial Renewal, who maintained that, “All countries want to produce. That doesn’t mean being obsessed with productivism. It’s mainly about sovereignty and freedom. A country that consumes goods manufactured by others loses its freedom, because its standard of living depends on the prices set by others […] What is a coproduction pact? It means telling ourselves that if we are to produce and be free, we need to unite, because if we do it together we can be stronger.»

Fostering complementary North-South capacities
The crises affecting both sides of the Mediterranean can give rise to opportunities. Europe and SEMCs are at a historic point: while Europe needs to find levers for growth, SEMCs, and in particular the Maghreb countries, want to move away from a sub-contractor position to “play a part in these knowledge services” (El Mouhoub Mouhoud), and take advantage of the “third industrial revolution, combining renewable energy with computerization” (Jean-Louis Guigou) for which SEMCs have genuine assets (Charles Ifrah). The complementary economic capacities of countries on both sides have been emphasized again and again.
Yet Rachid Sekak, Managing Director of HSBC Algeria, said that cooperation between the two sides of the Mediterranean was not so obvious, and compared the “Euromed dialogue” to The Myth of Sisyphus by Albert Camus.

Business leaders share their experience
Xavier Beulin, Chairman of the Sofiprotéol group, insisted on the acuteness of the food issue (more than agriculture) and highlighted the synergy and complementary capacities between Europe, the Mediterranean, and West Africa. Youssef Rouissi, Deputy Managing Director and Head of Global Corporate & Investment Banking at Attijariwafa Bank, described his experience of successful South-South co-sourcing. In the early 2000s, the group expanded its critical size on the Moroccan market. It sought new growth engines in sub-Saharan Africa, where it purchased 10 banks. The Group not only accompanies North African operators who want to set up in the South but, in an unprecedented step, it now accompanies European operators whose financial levers have shrunk because they can no longer turn to their traditional banks (which have moved out of the region). The Group therefore plays a “pivotal role in accelerating the movement for co-sourcing business from North to South.”
An example of North-South co-sourcing was described by Youssef Chraibi, Director of Outsourcia, a Moroccan SME specializing in offshoring created in 2003 and recently set up in France. Co-sourcing works well in this case because it involves “being able to offer better expertise in the best location” to companies that associate offshore treatment with lower-quality service.

What are the conditions for success?
Discussing these new development models involves installing a relationship of trust between stakeholders on both sides of the Mediterranean. Mohamed Fessi, Managing Partner of Grant Thorton Tunisie, made an appeal to politicians: “Will we be able to move towards this process if SEMCs don’t change their governance system?” Denis Simmoneau, Director of European and International relations at GDF Suez, insisted on respecting the rule of law, which he said was indispensible, and gave the counter-example of Egypt, which nevertheless has other conditions for successful co-sourcing. Radhi Meddeb added “the security of people, institutional stability and the existence of clear, credible and consensual road map policies” to the list, before the “right to private property, the fight against corruption, etc.”.
In addition, for Rachid Sekak, “Without a common perspective, there will be no political volition.” Europe and SEMCs must “move away from a commercial export rationale and take on a production rationale.” Pouria Amirshahi, the French MP representing nationals living abroad, considered that a political project must accompany the regional integration movement through economics. He made an appeal for setting up an “economic and cultural passport for French-speakers, which could be Mediterranean,” and, along with Elisabeth Guigou, President of the Foreign Affairs Committee at the French National Assembly, called for the creation of a Mediterranean Erasmus.

What role for Europe?
For Martin Schulz, President of the European Parliament, “Cooperation in the Mediterranean is an opportunity for both sides, and we have a duty not to miss it”. He added that regional integration can only be understood through stronger cooperation between the EU and the countries of the Maghreb. In the opinion of Mohamed Fessi, Europe has a historical responsibility to countries in the southern Mediterranean. Philippe de Fontaine Vive asked the EU to review the way it devises European mandates. With a reminder of the role played by InfraMed, the only financial instrument that supports coproduction, he said that financial instruments needed development. According to Élisabeth Guigou, “The Arab Spring made Europe aware that it had been too slow to focus concrete action and funding on its neighbours in the South.”

From bilateral to regional
Europe has a major role to play in regional construction. Martin Schulz gave a reminder that “We need to move from a bilateral approach to a regional one”. The economist Jean-Louis Levet pointed to the transfer of power from the West to Asia and the dilemma that goes with it: “We either get watered down in the global economy or we try to cooperate.” For Arnaud Montebourg: “The Asian axis is rising. We can measure to what point the centre of gravity of production sites is moving away from Europe.  North Africa has considerable potential but is either pillaged or abandoned, and doesn’t enjoy the relationship of cooperation that we could build.” Jean-Louis Chaussade added that, “The Mediterranean is the headway of Africa. Africa is the great continent of the 21st century. […] After Asia, it’s Africa that we should be working with”.