This section contains links to resources that contain approaches to how host countries can retain value from extractive industry.The value envisioned includes acquisition of new skills and translates to better social understanding between the companies and the communities within which they operate. This results in development for the communities and the host country and easier and more enabling business environment for the company as they have attained a Social License to Operate.
This article provides a brief analysis and description of Local Content and the contexts in which they exist.
The publication contains information on the importance of local content for companies regardless of whether or not it is a legal requirement in the territories in which they operate.
3. Unpacking Local Content Requirements in the Extractive Sector: What Implications for the Global Trade and Investment Frameworks? Isabelle Ramdoo, September 2015
This paper focuses on the question of local content in the oil, gas, and mining sectors, particularly the policies put in place to foster its use, and how this fits into the international trade and investment frameworks. It initially unpacks the definition and the scope of local content and the different levels of regulatory requirements used to address the question. It then presents evidence of what has worked (or not) in different contexts and under different conditions, before turning to the global frameworks governing local content requirements (LCRs). It goes on to make some recommendations on how international regulatory frameworks could be improved to fit the needs of countries and companies, and for a more equitable distribution of wealth. (extract from publication) (Text Courtesy of the publication).
4. University of Calgary, The School of Public Policy, SPP Technical Paper, Volume 9 Issue 16, April 2016, A Survey of the Literature On Local Content Policies in The Oil and Gas Industry in East Africa by Chilenye Nwapi,
This paper is a good basis for beginning research on Local Content in East Africa. This paper is intended to outline and analyse policy perspectives and options that East African countries may consider in order to maximize the potential gains of the LCP. The paper is organized in three parts, the first part explains in detail the meaning of LCP and analyses its pros and cons. The second part analyses various options that East African countries may consider when formulating their LCP while the third part summarizes and concludes the discussion. (extract from publication)
This paper examines ways in which local content in the extractive industries can be addressed. The paper is divided in five parts. Part 1 describes the structure of the oil and gas and mining industries, including a discussion of the margins in the oil value chain as well as the stakeholders. Part 2 explains the positive and negative impacts of natural resources exploitation in host countries specifically the economic and environmental impacts. Part 3 identifies the main challenges that developing countries face in optimizing value retention and examines ways in which they can be addressed. Part 4 presents three different country experiences of local industry development strategies in the extractive industries. The paper concludes with some policy implications and conclusions with regards to local content development strategies. (extract from publication).
6. Natural Resource Governance Institute (NRGI) Reader, 2015 Local Content: Strengthening the Local Economy and Workforce
The reader expounds on local content requirements as described in Percept 5 of the Natural Resource Charter. It is an easy and informative read.
(Image courtesy of the Natural Resource Governance Institute)
Deciding to Extract: The first decision faced by a government or community is if and when to begin extracting their natural resources and convert them into monetary or other benefits. During this stage, governments may take the opportunity to get prior informed consent from the local communities, to designate environmentally or culturally significant areas as off-limits to exploration and production, or even to reserve certain areas for particular methods of extraction (e.g., artisanal mining.)
Getting a Good Deal: After a decision is made to extract, the government must decide on a framework for awarding rights to explore and extract, and establish the legal and financial terms governing those rights.
Ensuring Revenue Transparency: Once the terms are set, extraction will begin and the companies will typically pay a variety of financial or in-kind payments to the government. The part of the government and the manner in which these payments are collected is dictated by the extraction contract and the legal framework, and varies from country to country. This stage of revenue collection has been the focus of much national and international advocacy through efforts such as the EITI, new United States listing requirements for extractive companies, and the International Accounting Standards Board's consideration of a reporting standard for extractives.
Managing Volatile Resources: As the revenues begin to arrive, the government and communities must decide how to make effective use of the revenues in light of their finite nature and the challenges of commodity price swings. This stage requires deciding how much to save and how much to spend to mitigate against the adverse effects of dependency on natural resource revenues and encompasses long and medium-term planning, as well as annual budgets.
Investing for Sustainable Development: Extractive resource are non-renewable assets that must be replaced with other assets-physical, human and financial – which can support a country's economic growth and development when the resources are depleted or prices decline.
(Text Courtesy of the Natural Resources Governance Institute)
(Image courtesy of EITI)
Here is a short overview what the value chain steps cover:
Legal framework, distribution of licenses and contracts: This section sets the stage of how the sector is governed, particularly in relation to the rights to extract.
Exploration and production: This covers information on what exploration activities are under way and how much the country produces and exports. Learn more here.
Revenue collection: The major companies disclose what they pay to the government in tax, royalties, signature bonuses, etc. The government discloses what it receives.
Revenue allocation: Once revenues are collected from companies, they need to be recorded in government accounts. Usually, most of the revenue goes to the central government. Sometimes it goes straight to or is transferred to the subnational government or to special funds or projects.
Social and economic spending: This covers some of the ways the extractive sector is contributing to social and economic development. Companies disclose where funds have been mandated to be spent on social projects. The government is asked to publish information about the role of the extractive sector in the economy. How many people are employed in the sector? How important is the contribution of the sector to the economy? This allows citizens to understand the importance of oil, gas and mining in their country.
(Text courtesy of the EITI website)