The concept of “Local Content” is not a new one, and contrary to popular opinion or use, is not limited in application to the oil and gas sector alone. A policy, whereby governments insist that firms doing business in the particular country use goods and services that are locally manufactured or supplied, is usually aimed at boosting the economic viability and competitiveness of indigenous businesses to the benefit of the country itself, and all of its citizens.
It is this same idea of self-development that results in some countries attaching conditionalities to loans to other countries, which see the lending country also providing the goods and services, including even labour, that is being financed by the loan. Indeed, China is well known for exporting goods, services and labour as adjuncts to its lending to many third world countries. Guyana itself is a recipient of this practice, as we have seen several large projects financed by the Government of China, also being executed by firms out of China, one example being the Cheddi Jagan Airport expansion project.
Over the years, successive governments of Guyana have had no clear or definitive policies surrounding the promotion of Guyanese firms as they seek to carry out the basic objectives of any business, which include maximising profits, growth and sustainability – the ability to continue in business without being depleted or downgraded.
The argument usually is that the foreign direct investment also brings with it advanced technology, systems and skills which are not available in this country. While this may be true, it still behoves the government to ensure through policies, laws and regulations, that there is a framework for local firms to benefit from the operations of external firms here. Sadly, the closest thing to a policy concerning the sustainable development of local firms is the occasional “buy local” sloganeering from politicians who do nothing otherwise to address the difficulties which local firms face, often through the bureaucracy and weak foreign policy of the government itself.
Many Guyanese firms continue to struggle to survive right here in Guyana, and struggle to get their products sold into the CARICOM market, of which Trinidad is perhaps a good example. At the same time, business firms from these countries seem to have unfettered access to the Guyanese market with their goods and services. It is probably not surprising then, that with the new oil and gas sector rapidly approaching its official production date, the Government of Guyana is yet to ink a formal Local Content Policy to guide the sector, and to ensure that Guyanese firms and individuals have a clear framework for positioning themselves to benefit from the expected exponential growth resulting from the sector. Taken in context then, it probably is also not surprising that the current administration, in the absence of a Local Content Policy, saw no contradiction in signing an Energy Memorandum of Understanding with the Government of Trinidad and Tobago, against the protestations of the local business sector.
The government has been very vocal in telling citizens to prepare themselves to participate in the new oil and gas economy, but has not yet provided the enabling environment or even completed the formulation of important policies to guide and to ensure that citizens benefit in a sustainable manner. The Centre for Local Business Development (CLBD), which is a training and mentoring facility that assists “small- and medium-sized Guyanese businesses with building their capacity and improving their competitiveness in a range of sectors that serve the oil and gas and other industries” was set up by Exxon’s affiliate, Esso Exploration and Production Guyana Ltd, and so stands to their credit and not the Guyana government’s. Country Manager, Rod Henson, called the centre “an investment in the people of Guyana and the future of the country,” and said that, “The centre will play a key role in furthering the capabilities of local businesses with which we are eager to partner.”
Just recently, local firm, Guysons Oil & Gas Logistics and Services Inc, received ISO 9000 certification from the International Organization for Standardization (ISO), a process facilitated by the CLBD. According to the CEO of Guysons Oil & Gas, Faizal Khan, “For the first time, because of our quality management systems, we are tendering for internationally-based tenders.” And even outside of the ambit of the CLBD, and in the absence of a Local Content Policy and accompanying legislation and regulations, other Guyanese firms and individuals are also taking initiatives and making bold steps to advance their business interests in the context of the oil and gas economy.
The encouraging progress of several firms and individuals aside, the uncertainty which pervades pronouncements coming from government sources regarding the dispensing of the expected oil and gas wealth, is disconcerting to say the least. The initiative of establishing a Sovereign Wealth Fund to deal with the investment of the oil proceeds, is limping along with a “Green Paper” tabled in parliament well over a month ago, and which was harshly criticised by analysts and the City Chamber.
In Guyana, with both of its major political parties having a history of socialism (now renounced by both) driving their economic policies in the past, it is probably not surprising that the local business sector and government have always shared a tenuous relationship, in Guyanese parlance, a “hold me, loose me” kind of engagement, with neither party fully trusting the other.
The formulation of a Local Content Policy is expected to benefit Guyanese firms by providing preferential business opportunities, increasing capacity, and also providing jobs and skills training for individuals, among other things. The Guyana government’s roll out of its Local Content Policy is just a first step in the process and it needs to happen soon.
