Over at This is Africa, this article proposes that by putting local content policies i.e. import substitution at the heart of development plans, governments in sub-Saharan Africa can make the most of their new found reserves e.g. oil, gas etc. My question; is this principle WTO compatible?
“Local content is the fastest, most sustainable way for the benefits of the oil and gas sector to accrue to a society,” says Kevin Warr, former head of the energy market development team at the US Agency for International Development. It guarantees jobs in the core sector – engineers, geologists, senior managers and the like – and stimulates domestic supply chains delivering everything from chemicals, boats and drills to catering, security and IT. In 2005, Royal Dutch Shell spent $9.2bn on goods and services from low and middle income countries. Chevron’s procurement reached $45bn worldwide in 2008.
Local content is not new to sub-Saharan Africa. South Africa’s post-apartheid Black Economic Empowerment programme, which offered preferential training and employment to black communities, was essentially a local content policy writ large. But formal legislation specific to oil and gas has picked up only recently. In 2003, the Angolan government passed a law requiring procurement of basic oil-related goods and services to be reserved for Angolan companies. A year later, Equatorial Guinea passed its own law addressing equity participation by nationals in international oil companies.
Should we refer to this approach as local content, or joint venture policies? For instance China allowed foreign firms access the domestic market in exchange for technology transfer through joint production or joint ventures. In fact, 100% foreign owned firms were a rarity among the leading players in the industry. Most of the significant firms tended to be joint ventures between foreign firms and domestic (mostly state-owned) entities. See previous post on the role of joint ventures and investment in China's economic boom.
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