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Op-Ed: Local Content Policy, Law must protect Guyanese from abuse in partnerships
By Kiana Wilburg
Kaieteur News – Outside of the fiscal benefits offered in the 2016 Stabroek Block Production Sharing Agreement (PSA), one of the sure ways Guyana can retain more value from its resources is in getting local content right.
But thinking we can do this on our own, without the right experts to guide us, without proper oversight, and in the absence of strategic and mutually beneficial partnerships, is what will hinder the realization of our national goals and aspirations.
Last week, in the first installment of our local content series, we noted that the population is simply too small to truly maximize and capture the benefits of the rapidly developing sector. The International Organisation on Migration (IOM) as referenced last week, categorically stated in its latest report that Guyana will need approximately 160,000 workers to successfully ride the growing economic tide. If we are to gather all of the unemployed, underemployed and discouraged workers, the potential supply of labour would be only 63,500 the medium-term. This tells us clearly that we need to tap into our Diaspora resources.
In the meantime, strategic partnerships with regional and international investors and stakeholders will be key to helping us garner the skills and technology transfer that is needed in accessing opportunities in the oil sector.
While I acknowledge that partnerships will be critical to our overall development in the industry, it is imperative that we are cautious about the pitfalls of partnerships in the oil and gas sector. There is a plethora of research which indicates that joint ventures can be meaningful and they can be vessels of corruption.
One global watchdog that has studied this matter is Transparency International. In one of its analytical pieces, it was noted that some companies which seek to defraud the local content system of a country, may only seek a local partner to use as “fronts.”
In this case, Transparency International explained that foreign companies may pay locals in the host country to participate in bidding processes, but only for the sake of appearances since the services are then implemented by the international company, as the local partner does not have the capacity. In Angola, Transparency International found cases where such partnerships seek to hide information on the ownership and shareholding structure of these companies.
It was further noted that in cases where countries do not properly define what constitutes a local or indigenous company, clever companies can create partnerships merely on paper to circumvent local content requirements. Also benefitting from such a loophole it said, are foreign companies which simply have a registered office in a host country and not required to disclose their beneficial owner, are therefore able to potentially bid for contracts. Without requirements to disclose beneficial owners, Transparency International warned that partnerships can easily rob a nation of true skills and technology transfer.
In an effort to guard against such abuses, the global watchdog said nations can adopt several mechanisms which include penalties for local content fraud, the establishment of independent oversight bodies, and ensure oil companies have clear procurement rules regarding partnerships that provide evidence of compliance with parameters of National Local Content Policy and Law, ensure the submission of Reports which show proof of how the local partner is included in the management of the company and in the administration of contracts won.
Ultimately, Guyana needs to have clear-cut rules in its Local Content Policy and Law that are foolproof, rules that prevent locals from being used as vessels of corruption and as mere window dressing. One waits to see if the Government will be proactive in this regard.
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