IGF Guidance for Governments: Local content policies presents analysis of local content policies to help ensure the exploitation of a country’s resource wealth results in significant, sustainable and inclusive benefits for the host country and its communities.Download Guidance Document on Local Content Policies
What Are Local Content Policies?
Local content policies can serve as part of a government’s overall approach to ensure mining investment plays its full potential role in achieving the country’s national development objectives.
Local content policies can help reach a number of national development objectives, including: increasing employment levels; economic development via diversification; increased inclusivity in development, such as improved well-being for women, minorities, the historically disadvantaged and for local communities; and more government revenues from mining corporate income taxes, royalties and employment income tax.
If executed effectively, local content policies can also serve private sector objectives, including reinforcing firms’ social licence to operate and relieving shortages of skilled labour.
Why Is IGF Working on Local Content Policies?
Resource-rich economies—especially those in developing countries that may be over-dependent on only a few resources or operations—face a daunting challenge: how to translate hundreds of millions or even billions of dollars of mining investment into broad and sustainable economic development. The struggle is to avoid enclave development where all goods and services are imported, all employees are foreign, all extracted material is sold unprocessed and there is little resulting benefit to the host economy beyond taxes and royalties.
It is a struggle as widespread as it is difficult. An estimated 90 per cent of resource-rich countries employ some sort of local content policy, and a large number of them are in the process of reviewing or revising mining and investment codes and contracts with a view to better exploiting mining’s powerful potential. In countries where there are few other strong sectors, success is critically important.
Making such policies work is difficult, not least because there is no simple template for success. Each country has different resource endowments, different skill sets in their local suppliers and labour force, different infrastructure assets and challenges and different investment environments. As well, the success of such policies depends heavily on the success of other policies and regulations—such as education, science and innovation policies; infrastructure development; finance policies; support for entrepreneurs; and trade and investment policies—most of which are scattered across separate ministries.
Meeting the Challenges
The challenges of such policies, and their critical importance for sustainable development in many countries, led IGF member nations to name local content policies as their highest priority for guidance at the 2016 Annual General Meeting. IGF has been mandated to produce similar guidance in the past, on artisanal and small-scale mining and on tax base erosion and profit sharing.
The guidance document on local content policies launched at Investing in Africa Mining Indaba in February 2018. The guidance identifies policies to encourage:
- Local procurement of goods and services
- Direct employment of locals or disadvantaged persons
- Downstream linkages (i.e., processing of extracted products)
- Horizontal linkages (spillover benefits from mining into non-mining sectors)
- Building domestic capacity in the mining sector
IGF’s guidance on local content policies is a guide to the questions that policy-makers need to ask to help them decide on how best to proceed in this area. While it includes a large number of brief case studies to illustrate the lessons of history, each country’s solution will be unique, and dictated by its objectives and circumstance. The aim is to help governments, companies and citizens collaborate to ensure mining provides governments significant, gender-equitable, inclusive and sustainable development.
The guidance document also covers three cross-cutting themes: ensuring goals are achieved in a gender-equitable way; exploring the relationship between local content policies and countries’ obligations under trade and investment law; and exploring the implications of technological advances on the success of local content policies. The guidance will be used as part of the IGF’s stable of materials for delivering demand-driven in-country training for government officials in member countries.
Case studies were also created to illustrate real examples in various regions, relating to the guidance’s overarching themes. We invite you to explore these case studies below.
- Local Procurement of Goods and Services
- Direct Employment of Locals or Disadvantaged Persons
- Downstream Linkages
- Horizontal Linkages
- Building Domestic Capacity in the Mining Sector
Aaron Cosbey is a Senior Associate with IISD and IGF with over 25 years of experience in the areas of trade, investment and sustainable development. He has acted as expert advisor and consultant to a large number of countries, UN Agencies and IGOs, and led the process of developing the IGF guidance on local content policies.
Isabelle Ramdoo is a Senior Associate and Development Economist with IISD and IGF with over 15 years experience in mining-related trade and investment policies, with expertise on local content policies, strategies to scale up economic linkages across the mineral value chain, and broad-based economic diversification. Amongst others, she worked as a senior investment and linkages advisor for the African Minerals Development Centre and as a trade negotiator for the Government of Mauritius.
The guidance features the input of a number of contributors, including:
- Somine Dolo, President, Kanaga Consulting (horizontal linkages)
- Jeff Geipel, Mining Shared Value Managing Director, Engineers Without Borders, and Emily Nickerson, Mining Shared Value Director of Programs, Engineers Without Borders (local procurement)
- Tim Grice, Founding Director, Leapfrog International (mining employment)
- Nicolas Maennling, Senior Economics and Policy Researcher, CCSI, and Perrine Toledano, Head of Extractives Industries, CCSI (downstream linkages)
The guidance benefited from the support of an External Expert Advisory Group, serving in their individual capacities:
- Javier Aguilar, Regional Coordinator, LAC Region – Extractive Industries, The World Bank
- Jerry Ahadjie, Principal Planning and Policy Officer, Ghana Minerals Commission
- Nick Cotts, Vice President, Sustainability and External Relations, Newmont Mining Corporation
- Hannah Clayton, Manager, Social and Economic Issues, ICMM
- Johannes Danz, Program Manager of Extractives and Development, BGR
- Paulo De Sa, Senior Advisor, Inter-American Development Bank
- Jeff Geipel, Mining Shared Value Managing Director, Engineers Without Borders Canada
- Jane Korinek, Economist, Trade Policy Analyst, OECD
- Nicolas Maennling, Senior Economics and Policy Researcher, CCSI
- Monica Ospina, Founder and Director, O-Trade
- Ashlin Ramlochan, Principal, Sustainable and Responsible Supply Chain, Anglo American
- Osvaldo Urzua, Government and Institution Relations Manager, BHP Billiton
- Robin Weisman, Corporate Director at B2Gold Corp. and INV Metals Inc.
For more information, please contact project lead Aaron Cosbey at firstname.lastname@example.org.