Procurement fraud not catered for in Draft Local Content Policy

Aug 23, 2017 News

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Guyana’s procurement systems have been constantly criticized for loopholes which have allowed for the leakage of billions of dollars in revenue. As Guyana prepares to join the oil industry, the need for procurement systems to be strengthened will be greater.
This is especially as it pertains to the Local Content Policy. This Policy seeks to ensure that locals are trained and employed by ExxonMobil, as well as to ensure that local supplies are used.
However, in an overview of Guyana’s draft Local Content Policy, critics have noticed that not a single measure was mentioned in an effort to prevent or guard against the abuse of procurement systems.
The failure of nations to guard against this has been highlighted over the years by Transparency International.
According to the global watchdog, procurement processes are usually assessed as one of the areas in the public administration most prone to corruption, and this is no different in the implementation of local content rules.
The body said that opaque procurement procedures, restricted use of competitive bidding procedures, and the great amount of money available for local companies, encourage and facilitate corruption in the application of local content rules.
In addition, Transparency International asserted that the fact that the industrial and service sectors are not yet fully developed, or capable of delivering the required services in the field, limits competition and creates further opportunities for corruption throughout the procurement process.
In this regard, Transparency International said that in many countries, a government body is responsible for keeping a list of potential local suppliers. In the case of Kazakhstan, for example, the National Agency for Development of the Local Content is responsible for maintaining a database of Kazakh firms located across the country, including the services these entities offer in the oil and gas sector. Transparency International said that there is a risk that local companies may bribe or offer kickbacks to public officials to be included in such lists.
Furthermore, the anti-corruption body said that limited competition and unclear mechanisms in the public process also facilitate the formation of cartel and bidding rigging among local companies, which in turn can lead to higher prices and delays in the delivery of products and services.
Moreover, in many cases, the international entity said that there are no clear criteria for selecting the winner, and the lack of transparency throughout the application and decision-making process facilitates decisions that favour a certain individual or group, rather than supporting technology and knowledge transfer and building local industry capacity.
In Nigeria, for example, Transparency International said that a bidding round for oil licensing seemed to have benefited a Nigerian senator, who chaired a parliamentary committee with direct oversight authority over the upstream oil sector, creating doubts about the fairness and integrity of the country’s bidding processes.

DRAFT POLICY
According to the draft, the Local Content Policy framework seeks to address, the suite of opportunities that may arise and the approaches to be taken in selecting and developing opportunities related to enhancing the capabilities of Guyanese nationals and businesses.
The Policy articulates that this will be done through training, development and employment initiatives (Capacity Development), ensuring availability of ownership participation for qualified Guyanese equity interest (Ownership Value), supplier development provisions for goods and services by locals to support sector operations (Local Content) and well-tailored social contributions for greater impact and benefits (Societal Benefits).
It also describes what will be done to ensure that the activities in the petroleum sector are conducted in a manner that transparently secures the maximum benefit for the people of Guyana, while recognizing the limitations of the country, and holding all actors accountable to the present and future generations of Guyanese, who are the owners of the nation’s petroleum resources.
Additionally, the draft policy recognizes that the petroleum resources of Guyana belong to all its citizens, and represent an asset of significant intrinsic value, which once removed, diminishes the wealth of the nation, unless there is transformation in value from resources below the ground to improved quality of life above it for current and future generations of Guyanese.
The draft says, “Guyana will approach the development of its petroleum resources, people and businesses in a pragmatic, transparent and accountable manner. This will be conditioned by existing circumstances and an analytical approach to understanding the resource, the activities it engenders and our input capabilities. We shall pursue strategic opportunities for local capacity development and participation that give us the maximum possible benefit now and in the future.”
The Policy also states that Guyanese will participate in a manner that gives preferred access and opportunities to improve and enhance the country’s capabilities so that it can become internationally competitive and in the end, the country will progressively provide a greater amount of future services.
Capacity development, to enable more value retention, will be treated as an investment, rather than a cost, the policy outlines.

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