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The Synergy of Local Content Development

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The need and essence of local content development in oil manufacturing industries has gained enough importance in the recent times. Regardless of the regulatory landscape, operating environment or the best intentions of involved parties, truly successful content outcomes can only be driven by the best practice and cooperation and aligned intent of some key factors. These are: the government, the company, society groups and donors including international financial institutions.

All these sectors have their own goals and stakeholders with a set and defined system of interactions and of course the outcomes related to it. Local content strategies have the potential to be more successful if they are backed by sector-specific legal frameworks guaranteeing their measurement, implementation and monitoring.

The role of Government

The relationship between central and provincial government and how they regulate and allocate their revenues and royalties to sub national level is a key factor in continuous improvement and deciding the role of content strategy. Their respective powers, law making capacity and role in establishing and monitoring agreements with resource companies can determine their contribution to local economic development outcomes. One common role, however, is creating a business-enabling environment through positive policy frameworks, building national and local capacity, strengthening institutions and investing in industry development, as well as constructive oversight of companies’ local content plans.

The role of OGM Companies

Even for the oil and gas companies, the policy makers should consider short and long term benefits when designing their local content policies. The achievement of short-term positive outcomes might be easier to attain through certain mechanisms such as the establishment of workforce and procurement quotas, well-head maintenance and scholarships requirements.

Beyond the explicit licensing agreement associated with a given mining concession, the company needs to establish and maintain a social license to operate within the communities around the project site and in field engineering. Ensuring social and economic benefits flow to the local community is one important avenue for a company to pursue. Optimizing local content opportunities within its supply chain is practical and can potentially be commercially attractive for the company.

Role of Society Groups

The Civil Society Organizations also have an externally focused role in communicating with the community, public or private sector. This includes NGOs, industry bodies and the media. Many of the roles played by CSOs will require supplementary funding support, as typically their own operational budgets are meagre. Companies can engage and remunerate such groups to perform certain functions on their behalf, as can government or their field engineering agencies. Raising awareness within the company of local supply capability and also gaps in capability the company may be able to assist in strengthening.

Role of Donors

The role of traditional bi-lateral donors such as DFID, The EU, USAID and International Financial Institutions (IFIs) contributes in local content development to a significant level. Given the diversity of the donor landscape, the nature and level of contribution varies significantly. Individual agencies can play very active roles if supporting local economic development is part of their agenda in a given country.