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R. S. Muhongo
10.2.1 Understanding Local Content Policies
It should be noted that local content policies are the main driver of development in oil and gas-rich countries if implemented properly. This has
been evident in developed and mature oil and gas economies such as
Norway, Brazil, Trinidad and Tobago and the United Kingdom. On the
other hand, in Sub-Saharan Africa, countries like Angola and Nigeria
who have implemented these policies but have not gained similar results
as their counterparts of Norway and Brazil. Local content can be understood in three perspectives, namely the economic, social and political
perspectives.
Local content policies found their origin from an economic school
of thought, classical economists such as Grossman defined local content
as ‘a given percentage of domestic value-added or domestic components
are embodied in a specified final product’.
18 Furthermore, local content
has also been regarded as a policy that increases the costs of production
for foreign investors.
19 Thus, the policy involuntarily hinders foreign
direct exchange from potential international players due to the increased
costs. Secondly, local content is a policy that has a direct impact on the
community through the objective of welfare maximization.
20 It is a vital
component within a resource-rich country’s political economy. It should
be noted that local content policies emanate from deliberative political
motives of policymakers, to what could be known as ‘government intervention’.
21 The government intervention takes place through two forces,
namely market and public forces as to intervene in the enclaved extractive
industry. The policy has been used to solicit political support through
clientelism, therefore, maintaining power and destroying democracy by
18 Grossman, Gene M. “The theory of domestic content protection and content preference.”
The Quarterly Journal of Economics 96.4 (1981): 583–603.
19 Kolstad, Ivar, and Abel Kinyondo. “Alternatives to local content requirements in resource-rich
countries.” Oxford Development Studies 45.4 (2017): 409–423.
20 Nwapi, Chilenye. “Corruption vulnerabilities in local content policies in the extractive sector:
An examination of the Nigerian Oil and Gas Industry Content Development Act, 2010.”
Resources Policy 46 (2015): 92–96.
21 Tordo, Silvana, et al. Local content policies in the oil and gas sector. The World Bank, 2013.
R. S. Muhongo
10.2.1 Understanding Local Content Policies
It should be noted that local content policies are the main driver of development in oil and gas-rich countries if implemented properly. This has
been evident in developed and mature oil and gas economies such as
Norway, Brazil, Trinidad and Tobago and the United Kingdom. On the
other hand, in Sub-Saharan Africa, countries like Angola and Nigeria
who have implemented these policies but have not gained similar results
as their counterparts of Norway and Brazil. Local content can be understood in three perspectives, namely the economic, social and political
perspectives.
Local content policies found their origin from an economic school
of thought, classical economists such as Grossman defined local content
as ‘a given percentage of domestic value-added or domestic components
are embodied in a specified final product’.
18 Furthermore, local content
has also been regarded as a policy that increases the costs of production
for foreign investors.
19 Thus, the policy involuntarily hinders foreign
direct exchange from potential international players due to the increased
costs. Secondly, local content is a policy that has a direct impact on the
community through the objective of welfare maximization.
20 It is a vital
component within a resource-rich country’s political economy. It should
be noted that local content policies emanate from deliberative political
motives of policymakers, to what could be known as ‘government intervention’.
21 The government intervention takes place through two forces,
namely market and public forces as to intervene in the enclaved extractive
industry. The policy has been used to solicit political support through
clientelism, therefore, maintaining power and destroying democracy by
18 Grossman, Gene M. “The theory of domestic content protection and content preference.”
The Quarterly Journal of Economics 96.4 (1981): 583–603.
19 Kolstad, Ivar, and Abel Kinyondo. “Alternatives to local content requirements in resource-rich
countries.” Oxford Development Studies 45.4 (2017): 409–423.
20 Nwapi, Chilenye. “Corruption vulnerabilities in local content policies in the extractive sector:
An examination of the Nigerian Oil and Gas Industry Content Development Act, 2010.”
Resources Policy 46 (2015): 92–96.
21 Tordo, Silvana, et al. Local content policies in the oil and gas sector. The World Bank, 2013.