Local Procurement Policies, Agreements, and Requirements

At a Glance

  • Local procurement policies vary widely in form and content. Some are suggestions while others are mandatory. Some include specific lists of goods and services that extractive firms must procure locally, while others indicate a target percentage of local products in total procurement.

  • When designing local content policies and assessment systems, it is important to consider their implications. What are the estimated costs of compliance for extractive companies and local suppliers? What are the administrative costs for the regulator?

  • To support the development of policies, agreements, and requirements that foster local purchasing, it is important to ensure that targets and objectives balance ambitions for future growth with a realistic assessment of existing capacity in the local business sector.

Case Studies

Key Resources

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Local Content Policies in the Oil and Gas Sector

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Backward Linkages (Supplying Extractives)

Backward Linkages (Supplying Extractives) Defining Local

Backward Linkages (Supplying Extractives) Local Procurement Policies, Agreements, and Requirements

Jobs from Extractives Assessing Employment Potential and Skills Gaps Direct vs. Indirect Jobs

Jobs from Extractives Strategies for Job Creation In Extractives Direct Jobs

This report introduces local content policies (LCPs) and looks specifically at practices meant to promote the growth of economic links from ...

Local Content Laws and Contractual Provisions

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Backward Linkages (Supplying Extractives) Local Procurement Policies, Agreements, and Requirements

This resource presents the findings of a survey conducted on various local content frameworks in the mining and petroleum sectors among ...

Local Content, Trade and Investment: Is There Policy Space Left for Linkages Development in Resource-Rich Countries?

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Backward Linkages (Supplying Extractives) Local Procurement Policies, Agreements, and Requirements

This resource examines the compatibility of local content policies with international and bilateral trade and investment commitments and the ...

Local Content Policies in Minerals-Exporting Countries

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Backward Linkages (Supplying Extractives) Local Procurement Policies, Agreements, and Requirements

This resource examines policies implemented by several mineral-rich countries to maximize local economic benefits. Looking specifically at ...

Alternatives to Local Content

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Backward Linkages (Supplying Extractives) Local Procurement Policies, Agreements, and Requirements

This paper provides a conceptual and theoretical analysis, and finds that petroleum-rich countries should develop minimal local content ...

Local Content After a Booming Oil & Gas Cycle: Ambitions and Limits of Local Content Development

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Backward Linkages (Supplying Extractives) Local Procurement Policies, Agreements, and Requirements

This article explores lessons to be learned in relation to local content success from a decade of booming oil and gas activity globally. It ...

Local Content Laws and Contractual Provisions

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Backward Linkages (Supplying Extractives) Local Procurement Policies, Agreements, and Requirements

This resource presents the findings of a survey conducted on various local content frameworks in the mining and petroleum sectors among ...

Local Procurement at Anglo American

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Backward Linkages (Supplying Extractives) Local Procurement Policies, Agreements, and Requirements

This report presents a fundamental understanding of local procurement. Job creation, skills training, investment in infrastructure, and the ...

Beyond the Mine

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Backward Linkages (Supplying Extractives) Local Procurement Policies, Agreements, and Requirements

This sustainability report, published annually, offers a review of Newmont’s operations. Stakeholder engagement, the sustainability ...

Mines and Minerals

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Backward Linkages (Supplying Extractives) Local Procurement Policies, Agreements, and Requirements

This legal report outlines regulations as they relate to mines and minerals in Botswana, including licensing, permits, environmental ...

Topic Briefing

Local procurement can be encouraged  and enforced through a variety of means. These include (i) informal company commitments, (ii) formal agreements between investors and affected communities (such as community development agreements), as well as (ii) government requirements and policy provisions. These are wide-ranging in their approach. Some simply indicate that local purchasing should be prioritized; others—backed by regulations and other enforcement mechanisms—require companies to locally procure all or a target percentage of specific goods and services.

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In general, all methods that set a target for local purchasing are useful in increasing the amount of locally produced goods and services. How such targets affect investors’ perceptions of a country, meanwhile, varies. Global experience shows that strategies to protect local businesses have positive, neutral, and in some cases adverse impacts on a country’s attractiveness to investors (adverse, if the requirements are not considered feasible). In addition, it is important to consider that measures seeking to increase local procurement beyond what the market dictates would normally result in short- and medium-term cost inefficiencies that in turn reduce taxable income and a country’s fiscal linkages. Overall, the competitiveness of local industries affects the efficiency and pace at which local content can be developed.

Strategies and tools to build local business capacity are discussed in other parts of the ELLED Framework.These include Mentorship, Training and Skills, and the fostering of an enabling environment.