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NEGATIVE UNFORESEEN RAMIFICATIONS OF OPERATION OF LOCAL CONTENT LEGISLATION SHOULD BE QUICKLY ADDRESSED

Aug 14, 2022 Consumer Concerns, News

CONSUMER CONCERNS

By Pat Dial

Kaieteur News – When oil was discovered in commercial quantities in Guyana some six years ago, the governmental authorities at the time were very inexperienced as to the workings and milieu of this new industry.  This inexperience resulted in the signing of inequitable contracts with the oil companies.  The successor governmental authorities had become more experienced and knowledgeable but they could not upset the inequitable agreements already made.  All they could try to do was modify the contracts, especially in the areas of Environment and whenever it is possible to have new contracts, as for example in new blocs, common world standards would be achieved.   Areas which had been bypassed or ignored should now be legislated.

One such area was to compel the oil companies to have “local content” in their operations.  Oil companies prefer to employ foreigners and to source all their supplies from abroad and would like to operate like an extraterritorial entity.  For example, in the early days, they imported drinking water despite DDL and Banks DIH producing world class drinking water which was even exported to the Developed Countries.  Hiatuses such as these have been closed by the Local Content legislation and the establishment of a Local Content Secretariat.  Local Content legislation was not only necessary because it allowed locals to share in the prosperity oil engendered but it controlled reckless spending which would ultimately diminish Guyana’s revenues.

The Local Content regime established quotas for the various goods and services used by the companies as against local suppliers. For example, oil machinery which Guyana does not produce or import, oil companies could import 100 percent.  Companies are not permitted to buy or build housing accommodation but must rent and this turns out to be 100 percent supplied by locals.  And various percentages are allocated to various goods and services.  The Local Content regime is meant to be elastic and to change to meet circumstances and the Private Sector must take advantage of this characteristic.

When the 100 percent rental rule was first adumbrated, it was universally welcomed and applauded.  Since then, however, persons involved in the realty and rental business have brought to our attention some unforeseen consequences of it.

They have pointed out that oil companies tend to rent residential accommodation in certain areas at fairly high rentals and when they come into an area, all rentals, even for modest accommodation that once used to be rented at rates within the reach of middle class people have now become burdensome.  This awkward market tendency has also affected persons involved in the realty and rental business and is moving certain areas into becoming exclusive thus working against the integration of Guyanese society which mainstream social and political opinion are striving to achieve.

There is also a widespread rumour that one of the oil companies has embarked upon a large building programme which could be used for housing accommodation and not merely for office space.  The Local Content Secretariat needs to ascertain that there is no infringement of the Law relating to Local Content.

The problem posed should be addressed immediately since such problems become intractable with the effluxion of time.  It may be constructive in addressing the problem if the Secretariat opens a dialogue with the Realty and Rentier professions.

(The views expressed in this article are those of the author and do not necessarily reflect the opinions of this newspaper.)

 

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