Weak local content policy leaves openings for political interference

Aug 25, 2017 News

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Political interference and discretionary power are two of the major reasons why Local Content Policies around the world are not as effective as they should be. But even in the draft stage, Guyana’s Policy leaves this issue unattended. In fact, there is not a single measure mentioned in the draft so as to insulate the sector from this issue.
Further, the challenges and effects of political interference and discretionary powers in the oil and gas sector have been supported and proven in various dissertations by anti-corruption watchdog, Transparency International.
According to the body, the discretion often enjoyed by public officials responsible for implementing local content policies, combined with a lack of transparency, opens the door for uneven implementation and enforcement of local content rules.
Transparency International in this regard, cited Kazakhstan, where international oil companies have complained that local content implementation is “uneven, irregular, and non-transparent, particularly at local levels of government.” This was even reported by the US Department of State in 2013.
Transparency International found that companies in the country have also complained of the indiscriminate use of sanctions for non-compliance with local content requirements. Additionally, it was noted that discretion is also enjoyed by public officials to decide the circumstances in which local content rules do not apply.
This is the case in Nigeria. In this regard, the international body pointed out that the Minister for Petroleum Resources can decide to waive the obligations for a given firm or project under Nigeria’s 2010 Content Development Act.
Transparency International indicated that such discretion may provide incentives for corruption, particularly if the criteria for evaluating waiver applications are not made public, or are not applied in an objective or transparent manner.
In addition, the anticorruption body said that political interference in the application and enforcement of the law is also problematic in the majority of these countries, where the Executive branch of government exercises huge influence over other government branches and agencies as well as state-owned enterprises.
In Mozambique, for instance, the national oil company ENH plays a key role in defining the country’s local content strategy. Nevertheless, the company reportedly suffers from political interference and its senior executives are closely connected to the political and business elite, opening space for these groups to extract rents in the sector

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 don’t 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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