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Jul 24, 2018 News
A strong foundation is important to everything. If one is to examine the foundation needed for Guyanese to benefit fairly from local content then the conversation needs to move beyond just a policy. A policy alone represents a weak foundation; strong foundation would be reflective of legislation.
That was the focus of a presentation made yesterday by Attorney-at-law and Oil and Gas academic, Charles Ramson.
Ramson was a panelist at the Local Content forum held by the University of Guyana at the Arthur Chung Conference Centre.
There, he said that the government’s posture does not suggest that it is serious about securing strong local content, the kind that resuscitate the local business community and change the lives of many Guyanese.
In fact, Ramson said that the way things seem, if the government does pursue local content legislation, it would not be before 2020.
“They have no intention to pass it before Guyana’s first oil production planned for March 2020.”
Ramson opined that the two most important pieces of legislation directly connected to our oil and gas production are the Sovereign Wealth Fund legislation and the Local Content legislation.
Ramson said that by now, the government should have noticed that Guyanese have not been benefitting the way they should have from the Liza phase one project and should have therefore made moves to secure a better reality.
Ram said, “The Liza Phase one project is worth US$4.4B and the bulk of the budget is spent in the development stage which is now. We are just about a year and a half away from our first oil production, which is a US$4.4B phase one project.
“Nevertheless, there is minimal noticeable economic activity for ordinary Guyanese. Guyana discovered oil in March 2015 so it has been more than three years since our world-class discoveries. Yet, we do not have a public position on these two critical areas.
“More than enough time has passed, and ordinary Guyanese could have been seeing far more benefits from this project if there were a local content legislation.”
Ramson said that oil companies do not want local content legislation “and we should not be surprised about that part. What is surprising is Government’s position to avoid legislation and just adopt a policy.”
Ramson said that the government is making a big mistake “because policies are not enforceable without the teeth of the law.”
The Attorney said that local content legislation, if tailored appropriately, would see the greatest benefit to ordinary Guyanese through greater spending in the economy, more jobs, and the transfer of knowledge, skills, and technology.
He said, “A simple look at the Math will tell you that just 10% of guaranteed spending in the economy from the Liza phase 1 project will see US$440M spent in Guyana’s domestic economy. That would be a huge and much needed injection…
“This would have a net positive impact on both monetary position and fiscal position.”
Ramson said that in order to justify the non-adoption of local content requirement legislation, it is often argued that local content legislation creates market inefficiencies and therefore add costs. But this, he says, is a circular argument.
According to Ramson, Guyana stands a great chance losing revenue through corruption anyway. “So either way, money is lost. It is better to have the inefficiency created so that ordinary Guyanese will benefit through jobs, partnerships, and the transfer of skills and knowledge rather than the loss of money to the enrichment of government officials or inefficient bureaucracy and project spending misallocation.”
He said that it is often argued as well that local content requirement legislation will discourage investment.
“That is also false. It only occurs when those requirements are set too high. Those local content requirements can and need to be phased and it also needs to be for a set time frame as we nurture the development of this new oil and gas industry in Guyana and we nurture the involvement of Guyanese in the industry.”
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