Joining the local content discourse

Feb 24, 2021 Letters

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DEAR EDITOR

The most interesting discuss now in the media and with social groups is “Local Content.” An understanding of the concept seems to be evading the architects of the policy and multinational corporations, whose adherence is required. Local content is about the wealth of a nation, its development and corporate social responsibility. It is about striking a level of collaboration between poor and developing resource rich countries and multinational corporations to remove the stigma of neo-colonialist attitudes, resource rich curse and the need to usher in an era of sustainable development thus creating a win-win situation for all stakeholders where people, planet-the environment and profit dwell in harmony, creating the triple bottom line.
The fundamental principles and critical imperatives of local content must be: preservation of the local environment, where industrial activities are occurring, creating a model of sustainable viable economic development for generational growth and preservation. In Guyana’s case the policy is 20 percent of the extractive industry operating budget. The critical imperative is to ensure the local environment remains pristine, mitigation strategies are implemented to fight climate change such as a gradual transition to renewable energy with the local population playing a major role it the oversight of a sustainable future. Those who are in industries which are disruptive to the environment must take measures for reforestation and restoration of the environment while following a carbon neutral strategy. This can be done by purchasing carbon credits and/or building renewable assets to offset carbon extraction.
Local content is about mobilization of capital and resources for transformative development. This, the mobilization of money, is the most competitive mobilization and distribution of capital for the extractive industries development by and for local stakeholders. To subvert this policy is the subversion of a country’s economic development. Local content has a monetary value; at a minimum, it is 20 percent of Guyana’s extractive industry’s GDP paid for by the people. In some cases, a fund is paid such as cost oil, taxes are forgiven or deferred and/or resources are transferred to multinational corporations so that they can exploit the local factors of production, including human resources to develop their product with great rewards and profitability. Local content rightfully demands reciprocal development of the local economy and society. It is more like a government and multinational corporations entering a public private partnership, where a government give capital to the private industry with the hopes that the dividends are human capital development, i.e., the transfer of knowledge and skills to create a sustainable industrial and technological base.
Local content is the actual re-injection of 20 percent of the actual government refundable and non-refundable production cost annually to multinational corporations. It is the physical re-transfer of this money into the economy via local businesses by multinational corporation. This is monetarily quantitative. The failure to meet the requirement in one year must require a rollover of the deficit to the next year. This has a fundamental effect on the economy as regards to monetary circulation policy i.e., it is requesting as a policy 20 percent of the annual productive capacity must be reinvested into the local economy. This sum is quantitative. It is 20 percent of the industrial activity of a multinational corporation activity in a country. This quantity of money can determine whether or not a country becomes developed or suffers from resource curse disease. Thus, for any corporation not to support local content, fundamentally they are not interested in the development of the exploited resource, local economy and the country. The core issue is supply of money in the economy, limit it, the economy will contract and development will be stagnated and the nation will be subverted. Allowing 20 percent year-over-year growth ensures a dynamism in the economy that growth is inevitable. Therefore, the first principle of local content is to ensure 20 percent adherence by each company injected into the economy annually. This is a quantitative sum which based on the production cost of every company file for taxes. The critical imperative here is 20 percent of the annual business expense must reflect it was spent on local small and medium size enterprises and local human capital development and maintaining and developing the pristine local environment.
Local content is about the development of local small enterprises (SBE) and medium business enterprises (MBE). This requires a collaborative business friendly relationship between multinational companies and the SBE and MBE. The practice of exhaustive registration requirements which aims more at limiting acceptance must be prohibited. The minimum of business information to validate a local business is registered should be the requirement. Due diligence should be completed during the award of a contract. Audited Financial records of the SBE and MBS must not be a requirement. The only purpose of this is to screen and discard applicants.
Affiliate transactions (transactions or work being performed by multinational business affiliates and subsidiaries) must never be accepted as a business mode. This limits the development of local business and limits the circulation of money into the local economy. It creates a viable business model for the multinational subsidiary with non-competitive practices. Ultimately the local industry will suffer and the economy will contract due to a massive outflow of capital. Similarly, local companies must not be restricted from participation in procurement because the multinational has a global contract with a multinational technology partner. These partnerships allow local companies to benefit by joining the global partnership to serve their local market. This mechanism ensures countries only pay the cost for production in their own local market. Otherwise, multinational corporation bill local countries for global product not used within the local market, thus creating a financial windfall for themselves at the expense of multiple local market. This hidden business transaction is not good for transparency. The critical imperative here is local content is not about exclusion of local participation by leveraging exhaustive registration process to limit acceptance, affiliate transaction, global contracts will multinational corporations in technologies to exclude local businesses. These contracts must include means of integrating local business as an associate partner to gain the synergies of such contact and the creation of a level competitive playing field.
In conclusion local content is not about creating a neo-colonist agenda or environment, the transfer of wealth from developing nations to the capitols of multinational corporate HQ by implementing associate transactions to gain height returns for their subsidiaries at the expense of developing local industries. It is also not about creating an exhaustive registration process to exclude local entrepreneurs. It is not about tax avoidance and shelters to maximize production cost returns or cost oil and return on investment. It is not about exploiting and owning the land, capital and human resources as factors of production.
Local content is about creating a comparative advantage so that local business participation can be maximized. It is full self-actualization of the local economy and peoples, preservation of the local environment, creation of a viable sustainable local economy by injection and sustaining a viable money circulation in the economy, the transfer of skills and knowledge for the development of a sustainable industrial and technological base. The development of SBE and MBE. It is about the triple bottom line, environment, people and profits. It is about creating a win-win situation for everyone. It is about the development competitive local business environment and maintenance of morale.

Sincerely,
Colin Westmoreland

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