Making policies work


Discussion Papers (series)

Local content, trade and investment: Is there policy space left for linkages development in resource-rich countries?

Discussion Paper 205

December 2016

Ramdoo, I. 2016. Local content, trade and investment: Is there policy space left for linkages development in resource-rich countries? (Discussion Paper 205). Maastricht: ECDPM

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Local content policies (LCPs) seek to promote the supply of domestically produced goods and services and the employment of the local workforce. They generally require that a producer sources part of its inputs or labour force from the domestic economy. In the extractive sector, it may also require that companies conduct certain activities, such as technology transfer or research and development in the country where the extractive operations take place. These are essentially aimed at reducing the volume or
value of imports or at restraining the employment of foreign labour.

Such measures can be critical to ensure that the maximum of benefits from production activities accrue to local economic actors. LCPs remain widely used and recent years have even seen a proliferation of instruments to support industrial objectives, in particular in the extractive sector where the linkages with the broader economy remain weak and shallow. This is because LCPs are often perceived as important to achieve national development objectives by resource-rich countries in particular.

Key messages

  • Local content policies are critical to ensure that the maximum of benefits from production activities accrue to local economic actors.
  • Yet, local content policies entail some distortionary effects in favour of local actors, which may be considered as too discriminatory if done in an unbridled manner.
  • International trade and investment rules have, over time, disciplined the use of industrial policies, including local content policies.
  • Developing countries still maintain numerous flexibilities and significant policy space to stimulate linkages development.

Read Discussion Paper 205

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Photo: Rio Tinto bus and broken glass at the Rössing mine, Namibia. Credits: jbdodane via flickr.

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Economic Transformation and TradeExtractive SectorsDiscussion Papers (series)EmploymentIndustrialisationMining