Dear Editor,
In the lead up to the Local Content Policy (LCP) and Legislation there has been much talk about ‘local capacity’. There have been those who claim that Guyanese do not have ‘capacity’, suggesting that we possess neither the requisite experience nor skill in the oil and gas [O&G] industry to really take on more than a small percentage of the contracts available. This rhetoric is no doubt touted by those foreign O&G suppliers, both near and afar, in a bid to have a bigger share of the pie. They would be very happy to see a small percentage doled out via LCP to the locals above which it’s all theirs for the grabs. They bring up three basic evaluation criteria in their much touted ‘capacity evaluation’, hoping to catch the attention of, or rather work on the fears of the local policymakers. It goes like this: Guyanese have neither the experience, skill nor money to perform large O&G contracts and therefore it would be dangerous to the industry, and ultimately the economy, to allow them to be guaranteed via the LCP, a large percentage of the contracts available. Unfortunately, this demeaning and disrespectful rhetoric is loaded with fallacy. Hopefully, we can give the matter some clarity and reverse our way of LCP thinking from, “How much can Guyanese handle?” to “Let’s put in place mechanisms that maximize what Guyanese can handle.”
Beyond the facts that most O&G contracts are not ‘rocket science’ and that Guyanese all over the world have worked for decades in key positions in O&G and its associated industries, the fallacy of the ‘stated limited capacity’ argument is best understood after one considers gross and net capacity. The equation, Gross Capacity = Net Capacity (think local Capacity) + Collaborative Capacity should be understood by all. Collaborative Capacity (or Collaborative Capability) is a real term; it is the subject of much academic literature, undoubtedly due to its importance to developing organizations and nations. One good definition is, “The ability of organizations to enter into, develop and sustain interorganizational systems in pursuit of collective outcomes.” https://www.researchgate.net/figure/Interorganizational-Collaborative-Capacity-Factors-or-Dimensions-Organized-by_fig1_235112752 Capacity is not only a function of money, skill or experience, but also of linkages, opportunities, and the supporting environment. It is an ability, not a pre-existing status; and it is an ability that the LCP must facilitate and maximize. Collaborative Capacity is a prerequisite for any growing nation or organisation to leverage knowledge, and all other resources.
It is the Gross Capacity of a particular prospective contractor that would be the measure of their overall capability to perform a contract. The countries that have used collaborations such as joint ventures [JVs] to make massive technological leaps for their local industries are too numerous to mention. The Asian Tiger countries, and the oil-rich Middle Eastern countries all benefitted massively from local-foreign collaborations. Do you think that these foreigners formed collaborations with locals when they could have easily walked in and done it alone? The LCP must be designed to incentivize foreign companies to form alliances with locals. Thus, if a Guyanese business went to a prospective international partner and/or financier and said, “I am guaranteed a minimum percentage (say 35%) of O&G business, let’s form a collaboration.” The prospective partner would immediately recognize that the remaining (65%) is up for them to grab. Why then should they enter the collaboration? But what if the LCP allowed Guyanese business to say, “I’m unlimited in what I could get; I have the first shot at what’s available, and I propose a win-win collaboration with you.” Which approach do you think would gain more acceptance?
Here’s a quote about Ghana’s LCP. “Crucially, the incentives under the 2013 Regulation are not just stacked to the benefit of the citizens of Ghana and Indigenous Ghanaian Companies. Foreign investors intending to conduct business in the Ghanaian petroleum sector can take advantage of the dispensation given to Indigenous Ghanaian Companies by forming a joint venture business for the provision of goods and services in the petroleum industry.” https://www.mondaq.com/ oil-gas-electricity/317602/local-content-and-local-participation-in-ghanas-petroleum-industry-an-overview-of-the-petroleum-local-content-and-local-participation-regulations-2013-li2204 It is therefore imperative that our LCP framework must be designed to harness and maximize the building of the Collaborative Capacity of locals by insisting that foreigners first seek local collaborations if they would wish to get involved. To do so, the LCP must also provide the legislative and regulatory environment that fully supports such collaborations. It is the regulatory mechanism that matters. Respectfully, to legislate small, preconceived minima would not be the best approach. Who arrived at these percentages? Why say 35% and not 36%? Publish the metrics please; or were these figures pulled out of a hat?
We ought to focus on maximizing local participation and the building of gross capacity. Any LCP regulatory mechanism which starts out by guessing the existing ‘capacity’ of locals then simply doling out minimum percentages of guaranteed business that they think the locals can handle, would have missed the point of building Collaborative Capacity. By effectively limiting Guyanese opportunity from day one, you limit Guyanese capacity from day one; and thereby put Guyanese at a disadvantage from day-one. Guyanese companies are working hard to develop their Collaborative Capacity, but they need a supportive LCP framework to proceed. To our LCP policymakers, respectfully, the question to locals should not be, “What is your capacity?” But rather, “How high would your capacity be if we put in place an LCP framework that would maximize your Collaborative Capacity?” Remove the minimal, give Guyanese the first shot at 100% with their collaborations. If they fall short, then it’s open to the foreigners to take up the rest, with strict regulatory permissions. The sky is the limit. Let’s not forgo billions to outsiders.
Sincerely,
Name and Address Provided
