320
R. S. Muhongo
10.3.2 Structure of the Country’s Economy
The nature of the host economy is a pivotal determinant of whether
local content policies will thrive within a given resource-rich country. It
should be noted that countries that do not solely depend on the extractive industry to develop and maximize social welfare for its citizens tend
to gain more from the policy, than countries that are petro-states or
solely dependent on the extractive sector for economic survival.
31 This
is because of the local content policy to be efficient in any economy, the
economy must have the absorptive capacity to absorb the massive inflow
of the foreign direct investment otherwise the lack of such an absorptive
capacity can lead to the Dutch disease.
32
Economies such as Brazil and Norway that had thriving industries
(shipping and fishing industry) pre-discovery of the oil and gas resources
have developed exemplary local content policies, mainly attributed to
the fact that the economies have skills and capabilities to leverage on
to the oil and gas industry within their domestic economies. This made
these economies ready to facilitate the interaction between the oil and
gas industry and other industries such as the shipping industry that
developed linkages in the whole economy. Economies such as Kenya,
Uganda and Tanzania do not have the absorptive capacity to individually contain the extractive foreign direct investment. Hence the economy
cannot leverage on its capacity to facilitate domestic integration into the
oil and gas industry.
10.3.3 The Labour Market of the Country
The labour market of an economy determines what level local content
targets should be set at. The government must readily avail of a workforce that can integrate the extractive industry and be internationally
31 Larsen, Erling Røed. “Escaping the resource curse and the Dutch disease? When and why
Norway caught up with and forged ahead of its neighbours.” American Journal of Economics
and Sociology 65.3 (2006): 605–640.
32 Ramírez-Cendrero, Juan M., and Eszter Wirth. “Is the Norwegian model exportable to combat
Dutch disease?” Resources Policy 48 (2016): 85–96.
R. S. Muhongo
10.3.2 Structure of the Country’s Economy
The nature of the host economy is a pivotal determinant of whether
local content policies will thrive within a given resource-rich country. It
should be noted that countries that do not solely depend on the extractive industry to develop and maximize social welfare for its citizens tend
to gain more from the policy, than countries that are petro-states or
solely dependent on the extractive sector for economic survival.
31 This
is because of the local content policy to be efficient in any economy, the
economy must have the absorptive capacity to absorb the massive inflow
of the foreign direct investment otherwise the lack of such an absorptive
capacity can lead to the Dutch disease.
32
Economies such as Brazil and Norway that had thriving industries
(shipping and fishing industry) pre-discovery of the oil and gas resources
have developed exemplary local content policies, mainly attributed to
the fact that the economies have skills and capabilities to leverage on
to the oil and gas industry within their domestic economies. This made
these economies ready to facilitate the interaction between the oil and
gas industry and other industries such as the shipping industry that
developed linkages in the whole economy. Economies such as Kenya,
Uganda and Tanzania do not have the absorptive capacity to individually contain the extractive foreign direct investment. Hence the economy
cannot leverage on its capacity to facilitate domestic integration into the
oil and gas industry.
10.3.3 The Labour Market of the Country
The labour market of an economy determines what level local content
targets should be set at. The government must readily avail of a workforce that can integrate the extractive industry and be internationally
31 Larsen, Erling Røed. “Escaping the resource curse and the Dutch disease? When and why
Norway caught up with and forged ahead of its neighbours.” American Journal of Economics
and Sociology 65.3 (2006): 605–640.
32 Ramírez-Cendrero, Juan M., and Eszter Wirth. “Is the Norwegian model exportable to combat
Dutch disease?” Resources Policy 48 (2016): 85–96.