Is the next stop for outsourcing Cambodia or Rwanda?

The Middle East seems to be the next hot destiny for companies to near/offshore too. In a report from AT Kearny indicates that Bulgaria is still relatively ok (from ninth down to 13th place) as a destination to near/offshore too, but that other Eastern European countries lost quiet a bit of ground. The Czech Republic, for example, has fallen to 32nd place from 16th, Hungary to 37th place from 24th and Slovakia to 40th from 12th. According to the report are Asia, the Middle East and North Africa yielding ground, while China, India and Malaysia are the countries to beat.

Within North Africa is Egypt one of the front runners when it comes to attracting companies to establish a centre/captive with TCS being one of the more recent companies investing in that North African country. The main reasons giving by TCS is that Egypt allows for 10-15 % lower costs than India and access to a large pool with skilled professionals. Also nearby Jordan is doing well and another of the upcoming countries is Vietnam.

But which area will be the next ‘place to be’ after the potential in North Africa and the classic Asian outsource destinations has been tapped? Middle and Southern Africa (with the exception of South Africa), is still largely unexplored outsource destinations. This is however already slowly changing as I heard that some Indian (and Chinese?) companies are starting to offshore work related to textile/clothes fabrication to Africa is labour prices in India are on the rise. So one of my personal questions is whether certain African countries will become the new hotspots in a few years or that Asian countries like Burma/Myanmar and Cambodia will be the future winners.

When I was in Cambodia half a year ago I encountered a country which was very busy to put its gruesome history behind and busy with rebuilding. The English of the people I talked with was good enough to have a normal conversation and I expect the average level to increase further during the coming years. This is due to families sending their young children to English lessons after formal school hours (the government does not include English in the standard curriculum). This development and more children getting access to education fuels hope that more foreign investments will come into the country. One of the factors holding back the further economic development however is a corrupt one-party government system which channels most of the economic benefits to a very small group of people. But despite this I see the signs of a middle class which can help stabilising the system and maybe work as a catalyst for more democracy.

I wish I could say the same for most African countries, but somehow I am much more sober about that continent developing compared to late-comers from Asia. The drive and passion the average Asian demonstrates in developing its own economic situation keeps amazing me, even after spending more than a year in Malaysia, Singapore and India.

Political system/stability, safety/corruption, work ethics and the (language) skills of the people are to me the most important enablers for a country to be attractive as an outsource destination. Of course is a decent infrastructure (e.g. transportation, legal/government) also required, but building roads is easier to implement than educating a generation of children. You can find a more elaborate list of criteria to evaluate a country on here and more on individual countries here.

Some other questions I have are more ethical in nature. Will companies from India and China look at the countries with questionable regimes the same way as Westerners do, and how do these views reflect on their subcontracting strategies? And if for example Chinese companies invest in Burma/Myanmar or Zimbabwe, will European companies still want to do business with those vendors? And how can national government ensure that its national companies have no (in)direct relationship with a blacklisted country when sourcing and supply chains become so complex due to all the sub-contracting?
I do not have an answer yet to all the questions above, but the tension between ethics and commercial interest is sure to become more prominent with a growing Chinese economy that utilises different concepts of ‘good’ and ‘bad’ than the typical Western government/companies use.

Why the title on top of this post? Both Cambodia and Rwanda have written a terrible chapter in their recent history books, and had to start building their country almost from scratch after loosing or traumatising a substantial part of their population. I wonder however which of the two will be showing the double digit growth figures on their GDP the coming decade. If I would have to make a bet, it would be Cambodia.