Discard ‘cut and paste’ Local Content Bill

Dec 02, 2021 News

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…get independent firms to set targets – Professor

 “…we recommend a consortium of three consulting firm, with no ties whatsoever to the Govt., to evaluate the present capabilities and high priority needs for local personnel and local sourcing,” Professor Haar

Kaieteur News – Guyana needs to immediately discard, ‘cut and paste’ model of its Local Content Bill that has set out requirements and targets, some of which were derived excessively from that of the government of Ghana.

“This does not work all that well, I don’t think either Ghana’s or Nigeria’s Local Content Policies (LCP) are the precise model to follow.” These were among the recommendations recently had by Executive Director for Latin American and Caribbean, Department of International Business, College of Business and the University of Miami, Professor Jerry Haar.
Independent Assessment
He was at the time discussing the findings of a recent report, regarding Guyana’s proposed Local Content Policy bill and concomitant capacity in relation to the demands—current and projected.
Professor Haar, was at the time a guest on an online panel discussion, which included renowned Guyanese Professor, Terrence Blackman, under the rubric, ‘Strategic Considerations for Local Content Requirements in Guyana’s Oil Sector.”

According to Professing Haar, his team was concerned that the targets set out by the Guyana government are, “derived excessively from that of the government of Ghana.”
This he said, “does not work all that well, I don’t think either Ghana’s or Nigeria LCP are the precise model to follow.” To this end, he was adamant, “…any model developed has to be based on Guyanese reality, they are the ones to do this but again the assessment needs to be done by an independent party.”
He qualified his position by postulating, “…if there were a cricket match between Trinidad and Guyana for example, I would not like the referee [sic]—(umpire)—from either country, but from Iceland.” According to Professor Haar, the government and the private sector should instead be working closely, to assist local firms in meeting the technical requirements for oil services and equipment.

In providing his team’s recommendations for the Guyana Government, Professor Haar said definitely, “I believe the Government of Guyana should discard the current percent target level in the local content bill 2021.”
He suggested alternatively, that achievable local content targets need to be derived from an independent source, “let me emphasize that, independent source.”
As such, he said, “we recommend a consortium of three consulting firm, with no ties whatsoever to the government, to evaluate the present capabilities and high priority needs for local personnel and local sourcing and employ not a ten year time horizon but a five year time horizon.”
He noted too that when it comes to the successful implementation of any Local Content laws, this must also be accompanied with, “rigid anti-corruption policies. You have no idea, and I worked all over the Americas. Anti corruption polices, their implementation are essential. They send the right sign not just to the foreign investor but more importantly the local investment community as well.”
Negatives
Breaking down, the assessment of Guyana’s proposals when it comes to LCP and legal protections, Professor Haar observed, there are some of positives, and pointed to preferred access and opportunities for Guyanese and an emphasis on governance.

He noted too, that for successful policy implementation, an engagement of the Guyanese Diaspora community is vitality important.
Conversely, he said, “we also identified a number of negatives” and to this end, described Guyana’s LCP proposal as, a “mixed bag.”
Professor Haar expounded saying, “first, there is an extensive and rigid compendium of local content targets that are questionable in their derivation and exceedingly difficult to attain.”
He said, “in essence, we believe that these targets in LCP, they are a blue print on how to keep away foreign investors.”

According to Professor Haar, while “one can have very noble policy pronouncements—and who can quibble with those—when you see what is required, and I have been through those, extensively, there are big questions that pop up.”

Speaking on further threats to Guyana’s local content success, Professor Haar not only lamented the infrastructural and other deficiencies but also highlighted the shortcomings of the country’s business environment as flagged by the World Bank. “The business climate is essential,” he implored and continued, “regardless of what one thinks of the World Bank’s Doing Business Reports, doing business did cite that Guyana ranks 134 among 190 countries. That’s nothing to brag about.”

To this end, he elucidated that in Guyana, it takes 208 days for a construction permit, according to the Doing Business study, 82 days to get electricity and 46 days to register a property
“Overlay on top of that, problems in the country with crime, bureaucracy, red tape, and the infrastructure challenges and you can see this is a daunting task to be able to move economic development forward and tying this into oil growth,” said Professor Haar. Conceding that Guyana certainly has a fairly decent level of educated people, he cautioned there is a caveat.
Black Gold
He explained saying that “many that could be attracted to the oil sector are (presently) working in transport, agro-processing and construction. So the question, is there going to be enough human capital to address the needs, not just of the oil sector but across the board?”
To this end he suggests, “a multi-sectoral approach to move the entire diversified nation forward.”
Professor Haar, used the occasion to remind that since the end of the 2008 financial crisis, there have been over 145 new Local Content requirements put in place worldwide, “which one can argue pose many, many challenges, especially for the private sector.”
According to Professor Haar, this also obtained “for the public sector as well,” and reminded that, “as they are shaping these policies, they need to implement them correctly and be able to monitor the results.”
Adamant Guyana is aware of the opportunities that oil will bring, Professor Haar cautioned that while “this black gold is a blessing” and is fabulous, Guyana must also be aware of the challenges as well.
The Professor to this end noted that, “we see oil on an upward trajectory but there will be a fall off in demand by 2040, most studies show, and these oil revenues will not be enough to cover the budget deficits, so diversification is essential.”
To this end he pointed out, that “in short hand, oil cannot be a one trick pony for Guyana. For the sake of the nation it needs to focus heavily on that, but diversify at the same time.”
As such, he used the occasion to remind that oil producers, such as Saudi Arabia and the United Arab Emirates (UAE) are (already) diversifying their economy rapidly.
Adumbrating the goals of the government and the foreign companies need not be incompatible; Professor Haar urged “all parties need to embrace the three CCCs, Communicate, Cooperate and Collaborate.”
In terms of building capacity locally, which he deemed vitally important, Professor Haar’s report has since recommended that a SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis of the national economy be conducted.”
This, in order to identify the human capital needs and competitive capabilities of all sectors, again, not just oil, “and truthfully I doubt that you will find any oil company that would disagree with that.”
Funding Available
Both government and oil companies, he said, “should increase the short and long term education and training opportunities both in country and abroad” and lamented, “unfortunately at the higher education or the tertiary level the top career choices of young people, I found, did not include management. That’s ranked number five, and engineering which is ranked number 10.”
According to Professor, Haar, the nation needs managers and engineers and emphasis should be placed on that. The services sector, he said, can be developed to serve the needs of the extractive industries but also for others including IT, services, graphics design and business processing outsourcing. To this end, he posited government expanding investment in infrastructure, roadways, broadband, port facilities along with public services.
“This is necessary for the government to assure in a transparent, efficient and effective manner that these infrastructural concerns are addressed. Are there resources? Absolutely not just locally. You have the IMF, the World Bank the UN agencies, there is no reason that this cannot be ramped up and implemented.”

 

 

 

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