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.
- Developing a Transparent System for Local Contracting, A Manual for Practitioners Based on the eProcurement Experience in Chad (International Finance Corporation, Esso Exploration and Production Chad, Inc.)
- New Local Content Laws & Contractual Provisions, Case Study: Burkina Faso Mining (Columbia Center on Sustainable Investment)
- New Local Content Laws & Contractual Provisions, Case Study: Mali Mining (Columbia Center on Sustainable Investment)
- New Local Content Laws & Contractual Provisions, Case Study: Mali Petroleum (Columbia Center on Sustainable Investment)
- New Local Content Laws & Contractual Provisions, Case Study: Senegal Petroleum (Columbia Center on Sustainable Investment)
- Local Content Policies in Minerals-Exporting Countries (Organisation for Economic Co-operation and Development)
- Local Content, Trade and Investment: Is There Policy Space Left for Linkages Development in Resource-Rich Countries? (European Centre for Development Policy Management)
- Local Content Policies in the Oil and Gas Sector (Yahya Anouti, Osmel E. Manzano, Silvana Tordo, Michael Warner)
- Local Content Laws and Contractual Provisions (Columbia Center on Sustainable Investment)
- Alternatives to Local Content (Abel Kinyondo, Ivar Kokstad)
- Mines and Minerals (Government of Botswana)
- Local Content Policies and Corruption in the Oil and Gas Industry (Maíra Martini)
This report, created by the Columbia Center on Sustainable Investment, summarizes Mali’s local content policies for the mining sector. ...
This report, created by the Columbia Center on Sustainable Investment, summarizes Senegal’s local content policies for the petroleum ...
This report, created by the Columbia Center on Sustainable Investment, summarizes Burkina Faso’s local content policies for the mining ...
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.
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.