Business Chamber launches draft Local Content legislation

Dec 12, 2019 News

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– proposes 10% penalty for oil companies in breach of it

The Georgetown Chamber of Commerce and Industry (GCCI) on Monday released its model Local Content legislation, intended to promote the development of Guyanese companies and Citizens of Guyana involved in what would be the budding petroleum sector.

Within the draft legislation, the Chamber unfolded the document in three parts, which would seek to address key areas such as preliminary scope interpretation, Guyanese local content development and monitoring and accountability of the contractors/ operators.
For private sector development, which falls under the Local Content development, the GCCI was keen to explain that an operator or contractor must ensure that first consideration be given to Guyanese companies in the provision of goods and/or services directly related to the Petroleum Industry.
They must demonstrate why the Guyanese company has not been selected in the event that they are not; and the local company should be informed in detail by the operator or contractor within a reasonable time period, on the reason(s) for their non-selection in the provision of a good and/or service, GCCI added.
Under the scope of human capital development, the GCCI stipulated that Citizens of Guyana shall be given preference for employment in all phases of operations in the petroleum sector, as long as they possess the necessary qualifications and expertise.
An operator or contractor shall not import unskilled labour for conducting its operations undertaken under a right, license, permit, contract or concession.
The draft legislation goes on to say that the Minister of Natural Resources, for the purpose of the development of the human capital, must ensure that there is adequate training to improve the capacity of Guyanese in the Petroleum Industry through education and other training activities.
The third area, which speaks to monitoring and accountability, an operator or contactor must submit to the Natural Resources Minister a report on the use of Local Content in its operations; and effectively communicate its Local Content policies and procedures to its Contractors and to monitor and enforce their compliance.
The Chamber of Commerce emphatically stated that contractor or operator, who carries out any contract, contrary to the provisions of the Act, if legislated, would be committing an offence and is liable upon conviction to a fine of ten percent of the contract sum for each contract in which the offence is committed.
President of the Chamber, Nicholas Deygoo-Boyer, stated that the policy would mitigate the risk for investors. The oil sector is as expensive as it is lucrative. Hence, large investment sums are often plugged into projects.
He explained that for someone to make a smart investment, that person has to ensure that there is minimal risk to them. Recent media reports on the matter of local content and other issues closely related to the budding oil sector, he explained, may leave investors with some level of uncertainty.
This is due to the fact that though support for local content is almost unanimous, differing views on what constitutes a sufficient commitment to local content by a foreign company causes the goalpost to shift so much that investors may not be certain about where they should stand.
“Looking at the headlines, I’d say ‘You know it makes me nervous to think that I’d want to risk capital in here’,” Deygoo-Boyer said.
On the other hand, he said that the opportunity before Guyana is greater than most, if not all, of the prospects they may be considering in other parts of the world.
To quell uncertainty, the bridge over uncertainty, between investors and the local market, Deygoo-Boyer explained, is a local content policy.
“Because then you have – as investors, operators, contractors – an understanding of what the rules of the game will be. You know this section is going to be carved up for locals or the tendering process is going to be this way…
“So when I look at contracts, I know that contract execution and contract management must go along with these roles and methodologies.”
He said that the oil sector is not just going to be useful to Guyana through the revenues, it will earn the country, but through the stimulation of an upward surge in the standards of services and products that indigenous companies provide.
Boyer believes that, with just the right ingredients, Guyana has the opportunity to make strong, fruitful partnerships with foreign investors.
The Energy Department is currently working on the final Local Content Policy. The Georgetown Chamber and various other commentators have submitted contributions for the policy to be improved upon from the shortcomings that were pointed out in its previous iterations, to one that gives locals quality participation in the Petroleum sector.
The Energy Department hopes to complete the policy before the year is out. First Oil is expected to come about in just a few days.

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