Defining Local

At a Glance
  • The clearer the definition of local (including via the use of supplier categories) the more useful the data will be in informing public policy and corporate activity.
  • What should be considered local content depends on the specific policy objectives a government hopes to achieve.
  • Economic benefits vary based on which criteria (or criterion) are prioritized.

Local’ can be and is being, defined in a variety of ways to reflect the specific needs and priorities of different extractive industry contexts around the world. How extractive industry sites and their stakeholders define local is fundamental to developing policy and programming to increase local procurement. The clearer the definition of local, including the use of multiple categories of suppliers, the more useful the data will be to inform policy and company actions.

In recent years, several best practice documents have been published to support actors in developing a definition of ‘local’. There is no right or wrong definition. What should be considered local content depends on the policy objectives that a government wants to achieve. For example, the classification system used in Indonesia's oil and gas sector—although rather complex—constrains the ability of companies of certain sizes to bid for contracts of certain values, for particular types of goods and services that are prioritized by the government to support the development of local capabilities considered to be sustainable and competitive in the long term. By contrast, the lack of ownership requirements in Brazil and Kazakhstan oil and gas sectors is consistent with these countries’ objectives to fast-track the transfer of knowledge and capacity by leveraging foreign investment. In one more example, in line with Malaysia’s policy objective to become a regional oil field services and equipment hub, the requirement that the foreign ownership of locally incorporated suppliers of oil field services and equipment has been relaxed. This is meant to incentivize inward investment and the transfer of technology in a sector where high-end technical solutions are the realm of a limited number of global oil service companies.

These different aspects of ‘local’ are important to consider, as economic benefits vary based on which criteria (or criterion) are prioritized.

Key Resources

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