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

See more resources

Mapping the Oil and Gas Industry to the Sustainable Development Goals: An Atlas

This resource examines the links between the oil and gas industry and the UN Sustainable Development Goals (SDGs), supporting a shared ...

New Local Content Laws & Contractual Provisions, Case Study: Mali Petroleum

This report, created by the Columbia Center on Sustainable Investment  (CCSI), summarizes Mali’s local content policies for the ...

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.