Local Procurement Policies, Agreements, and Requirements

At a Glance

  • Policies can be wide-ranging in their specificity to prioritize local purchasing, from general provisions to requirements to buy specific lists of goods and services, or a target percentage of products that must be purchased locally.
  • Measures to increase local procurement beyond what the market would normally do results in short and medium-term cost inefficiencies that in turn reduce taxable income and a country’s fiscal linkages.
  • To support the development of policies, agreements, and requirements that lead to increased local purchasing, it is important to ensure that targets and objectives balance the desire to be ambitious with existing capacity in the local business sector.

Case Studies

Key Resources

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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 including company commitments and formal agreements such as community development agreements, as well as by governments through requirements and policy provisions. These policies can be wide-ranging in their specificity to prioritize local purchasing, from general provisions that local purchasing should be prioritized (see below for examples from both company statements and the Mining Acts of select countries) to requirements to buy specific lists of goods and services or a target percentage of products that must be purchased locally.

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In general, all methods to set a target for local purchasing can be useful to increase the amount of locally produced goods and services. However, experience has shown that results are quite varied in implementing these strategies, ranging from positive, neutral, and in select cases adverse impacts on the investment attractiveness of the country if requirements are considered not feasible. In addition, it is important to consider that measures to increase local procurement beyond what the market would autonomously do normally result in short and medium-term cost inefficiencies, that in turn reduce taxable income and a country’s fiscal linkages. The competitiveness of local industries is, therefore, an important policy objective.

To support the development of policies, agreements, and requirements that lead to increased local purchasing, it is important to ensure that the targets and objectives balance the desire to be ambitious and the current capacity of the local business sector. There are a number of strategies that will be covered in other subtopics of the Framework that focus on building local business capacity, one way being through Mentorship, Training and Skills, as well as through fostering an enabling environment.