Defining Local

At a Glance
  • How policy makers define the term “local depends on the specific policy objectives they hope to achieve.

  • Clarifying the definition of local across categories and sectors informs both public policy and corporate activity.
  • Economic benefits of local procurement vary based on context and policy priorities. 

Key Resources

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Topic Briefing

The term “Local” , in the context of procurement, is defined in a variety of ways around the world, according to context-specific needs and priorities. Clear definitions are fundamental to developing policy and programming to increase local procurement. The clearer the definition, across supplier categories, the more useful it will be to policy makers and extractive companies.

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In recent years, several overviews of global best practices in the extractive industry have been published. Policy makers may find it helpful to review these when developing a definition of local. There is no right or wrong definition. What is considered local depends on the policy objectives that a government wants to achieve. For example, the rather complex classification system used in Indonesia’s oil and gas sector constrains the ability of companies of certain sizes to bid for contracts of certain values. Additionally, particular types of goods and services are prioritized by the government, which does the most 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’s and Kazakhstan’s oil and gas sectors is consistent with these countries objectives to fast-track the transfer of knowledge and capacity by leveraging foreign investment. In line with Malaysias policy objective to become a regional hub for oil field services and equipment, policy makers have relaxed ownership requirements so that locally incorporated suppliers of oil field services and equipment may be foreign owned. 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 .

The economic benefits of local procurement vary based on the specific context and policy objectives.