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- Backward Linkages (Supplying Extractives)
- Local Procurement Policies, Agreements, and Requirements
- Government Regulations and Contractual Agreements
Government Regulations and Contractual Agreements
At a Glance
- Formal mechanisms to boost local procurement include government regulations and contractual agreements between companies and governments. These may address demand or supply.
- To increase supply, a government can require extractive companies to create supplier development programs that provide training and promote technology transfer.
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To increase demand, governments can set up contractual agreements by which participating companies must procure a specific set of goods or services locally.
- While, in the short term, companies may be willing to pay slightly higher prices for local goods or services—or overlook a slightly lower quality level—the long-run goal should be to develop fully competitive local industries.
- Policies and requirements typically fail to meet their objectives when there is a lack of capacity to implement, manage, and monitor local content requirements.
Case Studies
Key Resources
- Local Content, Trade and Investment: Is There Policy Space Left for Linkages Development in Resource-Rich Countries? (European Centre for Development Policy Management)
- Unpacking Local Content Requirements in the Extractive Sector: What Implications for the Global Trade and Investment Frameworks? (Isabelle Ramdoo)
- Space for Local Content Policies and Strategies: A Crucial Time to Revisit an Old Debate (Deutsche Gesellschaft fur Internationale Zusammenarbeit (GmbH))
- A Directory of Mining and Oil and Gas Contracts (Resource Contracts)
- World Investment Report 2001: Promoting Linkages (The United Nations Conference on Trade and Development)
- IGF Guidance for Governments: Local Content Policies (Aaron Cosbey, Isabelle Ramdoo)
Topic Briefing
Formal mechanisms to encourage local procurement include government regulations and contractual agreements between companies and governments. There is a wide range of policy provisions that governments can implement, both to increase extractive companies’ demand for local goods and services and to support the capacity of local suppliers.