TOKYO -- Sumitomo Corp. is setting up Morocco to be an alternative manufacturing hub in the post-Brexit world.
The trading house will broker industrial park space for a company linked to Morocco's government, it said Friday, with the aim of luring Japanese manufacturers exporting to Europe.
Tanger Med Special Agency enlisted Sumitomo to sell five industrial parks, spanning 13 sq. km, near the northern port city of Tangier, across the Strait of Gibraltar from Spain. The two companies will consider a joint venture to create more such parks in the North African country.
Automobile and aircraft makers are rapidly expanding their presence in Morocco as the country works to become an export base into Europe, not unlike Mexico to the U.S. Under a deal that took effect in 2000, Morocco and the EU enjoy largely tariff-free trade, aside from certain agricultural products.
Tanger Med and Sumitomo aim to attract manufacturers operating in Britain that are hunting for a new export base into the European Union as the U.K.'s drawn-out divorce from Brussels threatens to disrupt trade.
Britain stands to lose tariff exemptions should it exit the EU without agreeing on terms, likely incurring a 10% levy on automobiles exported to the continent. Even should Brexit go smoothly, the U.K. would need to forge a new trade agreement with the continent after a transitional period through the end of 2020.
Goods shipped by sea from Tangier can reach destinations in the EU within a week. Tangier's main port is expected to reach an annual shipping container capacity of about 9 million 20-foot equivalent units in 2020 -- the largest of any African or Mediterranean port, and with lower labor costs than in eastern Europe.
The Tanger Med deal marks Sumitomo's entry into African industrial parks.
The Japanese company operates such parks in six Asian countries including Vietnam, Myanmar and India, and handles sales in four, including Thailand and Cambodia. Sumitomo also helps companies that set up in the parks procure raw materials and handle logistics.
Japanese enterprises such as Sumitomo Wiring Systems made a push into Morocco early last decade for wiring harnesses and other auto parts, but few new companies have made inroads since then.
However, construction has begun on a spate of new factories, with the count of Japanese businesses in the country tripling from a decade earlier to around 60.
Mitsui Mining & Smelting aims to begin producing door lock parts at a newly built Moroccan factory in January 2020, and automotive interior parts maker Kasai Kogyo looks to open a plant for mass production three months later. Fellow auto parts producer Jtekt plans to start churning out electric power steering systems there that October.
Morocco is becoming a hub for European automakers.
France's Renault produces a combined 400,000 vehicles yearly at facilities in Tangier and Casablanca. Groupe PSA started production in June at a factory in the city of Kenitra that carries an annual capacity of 100,000 vehicles, with plans to double that by 2023. Chinese electric vehicle king BYD also plans to make such cars in Morocco.
In recent years, companies like U.S. aerospace giant Boeing have started producing aircraft parts in Morocco as well. Last year, the country's manufacturing exports grew by nearly 50% from 2015 to 100.5 billion Moroccan dirham ($10.3 billion).
Foreign direct investment in Morocco is on the rise, with Japan's investment in the country soaring to 17.8 billion yen ($163 million) in 2018 from less than 1 billion yen the previous year.
Morocco also is drawing attention as a base for exporting to other African countries and North American markets across the Atlantic. With few natural resources besides phosphate, the country has moved quickly to secure free trade deals. An agreement with the U.S. took effect in 2006, and it has pacts with over 50 markets in all.