Today’s column concludes my discussion of Decision Rule 2, which posits: there is no overall economic justification for a Guyana state-owned oil refinery (of approximately 100,000 barrels/day). An effective local content requirements (LCRs) regime for its coming petroleum sector does not support this either, despite the claim it is required in order to maximize downstream value added. Today’s column draws on my previous review of the World Bank’s study of 48 countries experiences in this field. Before addressing this directly, a couple of observations are warranted.
First, in last week’s recap of UNCTAD’s review of South Africa’s experiences, I had stressed in support of Decision Rule 2 that, the earlier naïve/trivial view of LCRs as simply the percentage share of local inputs in a domestic producer’s output, has evolved into the more dynamic economic notion of: “localization/indigenization of production, value added, and development potential of domestic firms, operating throughout the petroleum sector’s value chain”.
