Georgetown, Guyana – (December 19, 2019) Director of the Department of Energy, Dr. Mark Bynoe, last evening, said that the Department of Energy has taken a considered, if non-popular approach, to properly assess the relevant “barriers to local development” in Guyana and has sought to design a fit for purpose Local Content Policy (LCP) with requisite applicable measures, realistic policy targets, and the metrics to monitor the effects of policy implementation.
Dr. Bynoe was at the time speaking at the Guyana Manufacturing and Services Association Limited (GMSA) 24th Annual Awards Presentation and Dinner, which was held at the Pegasus Hotel.
His address focused on, “Maximising Local Content by building capacity in the Manufacturing and Services sector to support the current Oil and Gas industry and beyond.”
The Director said that the hardest task policymakers have to tackle is designing and setting local content goals at the right level for Guyana’s circumstances. He noted that this task is made especially difficult because industrial capacity is unusually low and the socioeconomic expectation, and often resulting in political pressure, demand quick success stories from local content measures.
“Critical in this decision was to address the question of how ‘local’ the local content in question is meant to be, i.e. whether it should benefit Guyana as a whole (i.e. be described as ‘national’ content) or focus on a particular sector. At a minimum, this process should involve those key ministries whose sectors are set to benefit from the local content goals and the foreign investors who will be capable of a realistic evaluation of what is achievable under Guyana’s setting and circumstances and who will likely try to put a damper on the government’s high expectations. If the sources of input are too limited, the relevant government goals will go unchallenged and remain purely aspirational and often incapable of being accomplished,” he said.
The Energy Department Head noted that Guyana, like so many other nations before it, (Angola, Ghana and Equatorial Guinea), lacked some, if not, all of the instruments to undertake such investments in deep-water drilling themselves including, for example, suitably qualified local expertise and locally produced goods, forcing it to rely on outside support from foreign companies for these.
However, Dr. Bynoe said wealth being re-exported rather than being retained in-country has been a major concern to citizens. To counteract this risk in part, he said that Guyana has taken a considered approach to elaborate a fit-for-purpose LCP aimed at capturing more wealth for the country and its peoples through capacity building at all levels, but more particularly in the manufacturing and services sectors.
“There is a clear emphasis in this definition on training and knowledge transfer, capacity building and standards raising. The focus is clearly on an area where LC can be thought of as the added value that petroleum activities bring to the country in addition to the direct revenues obtained through sales of hydrocarbons belonging to the government or from taxes, service fees, state participation, or dues collected from companies carrying out upstream activities in Guyana. Guyana’s draft LCP seeks to attract investors into the country with the goal of producing higher efficiency and lower costs, while, at the same time, putting these potential investors on notice as to the minimum level at which they would be required to source products and services locally and/or work with local companies. It emphasizes the concept of comparative advantage,” Dr. Bynoe said.
He noted that Guyana’s LCP also emphasizes and encourages training and employment of Guyanese nationals within the industry, as well as investment in developing and procuring local goods and services, and “transfer” of technology through assistance, investment, licensing, trade and/or training.
In short, the Director said, it is a policy that emphasizes more than just dollars and cents, but places heavy emphasis on capacity building, knowledge transfers, efficiency promotion and technology transfers.
“To date, for example, over 1700 Guyanese are employed directly in the industry representing a 79 per cent growth over the 2018 figure with nearly 20 per cent of these being females, including four that are currently being trained overseas. Guyanese have been receiving professional and technical training and the Esso Exploration & Production Guyana Limited (EEPGL) is working with the Council for Technical Vocational Education and Training (CTVET) and the Board of Industrial Training (BIT) to, inter alia, conduct third-party assessment of some of its laboratory facilities at various TVET institutions, rehabilitate at least two labs, and assist with the revision of the curriculum to ensure they are more industry ready,” the Director of the Department of Energy noted.
Further, he said that the EEPGL is in discussions with the Government to establish a small and micro-financing facility to assist small indigenous businesses build their capacity and thus being in a position to access more of the local content being generated in Guyana.
The pool of local vendors utilized in the industry is expanding, with 485 being used in the third quarter of this year and there have been more than 70 joint ventures established since the formation of the Centre for Local Business Development (CLBD), Dr. Bynoe said. He noted that while more remains to be done, Guyana is realizing local content.
Dr. Bynoe said that it is the policymakers’ expectation that Guyana’s LCP will also aid in job creation for Guyanese in the petroleum sector, but also through the multipliers created (banking, power generation, manufacturing, construction or telecommunications), as well as to build technological capabilities for Guyanese.
The draft LCP seeks to ensure the highest possible rate of domestic employment, strengthen the local economy, and help the Guyanese economy to become less reliant on foreign capital and expertise, he said.
“The success of local industries can allow Guyana to become independent of expensive imports that would otherwise be needed. This LCP can, at least in theory, increase efficiency in the petroleum sector, improve Guyana’s overall balance of payments, and mitigate the burden on foreign currency that reliance on external sourcing often entails. The choice of the LCP approach adopted and the measures that it adumbrates seek to plug gaps that may exist and, logically, to address the nature and level of these gaps, rather than trying to create a one-for-all approach by mandating minimum quotas, for example, for domestic employment obligations and training budgets. Policies that are primarily focused on compliance of foreign investors with quotas, rather than approaching capacity building comprehensively as something that should and will benefit the entire domestic economy, may, therefore, compromise their own effectiveness,” he noted.
Meanwhile, President of the GMSA, Mr. Clinton Williams, in his remarks, said that the GMSA has recognised that Guyana’s economy has recorded consistent growth over the past four years. He noted that the organisation welcomes this as well as the projects that the Government has been embarking on to create a more conducive environment for investments.
“I want to place on record the GMSA’s recognition of the consistent growth of the country’s economy over the last four years. For this achievement, credit must be given to the state and the private sector. The Government for its part, has not only embraced development strategies consistent with Development Goals designed to mitigate against economic shocks and global warming but its actions remain underpinned by food security and the pursuit of new economic drivers such as ICT and renewable energy, trade services and the oil and gas sector. We welcome Government’s recently announced policy initiatives for the earliest implementation of the 30Megawatt solar farm and 10Megawatt farm and not to mention, the imminent generation of natural gas. The past few years have provided irrefutable evidence that our country is on the cusp of groundbreaking leap forward. Nothing should be allowed to deflect us from this course,” he said.