Poor local content provisions can lead to corruption, conflict

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A study on local content provisions in developing countries has made a nexus between poorly drafted or implemented local content policies, laws and regulations and the emergence of corruption and conflict resulting in little benefit to the country from the natural resource.

The findings of the study are contained in the article, ‘Are Local Content Requirements in Developing Petroleum Sectors Sustainable? – Managing Expectations while Aligning Sustainable Principles with Regulatory Policy by B.C. Asiago and M. Kapesa Wasunna. The article, which OilNOW got a hold of in advance, will be published soon in the Oil and Gas Energy Law Journal.

The article said that where these regulations and laws are poorly drafted (as often is the case in several developing countries); they become detrimental and ineffective in achieving policy objectives. “Instead the laws and regulation impose unnecessary legal burdens on businesses, which consequently impact on a country’s revenue flows and employment objectives,” the article said.

It asserts that Local Content in Nigeria and Angola pursue “a disadvantageous route” to the economic fabric of these countries and are fairly ineffective in achieving their overall objectives. The article said that instead, the Angolan and Nigeria Local Content rules impose unnecessary legal burdens on governments and businesses in the sector.

“Overall, there is a disappointing development performance for Nigeria and Angola economies and this issue remains topical among policymakers and academics. Presently, these countries have failed to leverage their natural resource wealth to build strong and stable states with sustained long-term economic growth. For these countries, resource wealth has instead become associated with high poverty rates, weak state institutions, corruption and conflict,” the article said.

The Government of Guyana through the Ministry of Business is in the process of finalizing a draft local content policy for Guyana’s emerging oil and gas sector. The Private Sector and other stakeholders have been advocating for local content provisions to be enshrined in legislation with quotas for employment and the provision of goods and services. There is a concern that mere months before first oil arrives, the local content policy has not yet been finalized.

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