– GCCI Technical Advisor says

EFFECTIVE monitoring is necessary in order to foster the growth of local content that is devoid of corruption, in Guyana’s emerging Oil and Gas Industry, according to Technical Advisor attached to the Georgetown Chamber of Commerce (GCCI) Dr. Nazim Baluch.

Baluch, commenting on enforcement challenges to Local Content in the oil and gas sector, noted that deficiencies in capacity, transparency and government monitoring incentives are factors which contribute to insufficient monitoring and enforcement activities.

“Local content is seen as a key tool to help developing countries reap, in a sustainable manner, the economic and social benefits from their natural resources,” the Technical Advisor said.

However, if this is not implemented and managed carefully, while also being subjected to public scrutiny, he warned that local content can also offer significant opportunities for corruption to take place.

Particularly within the oil and gas sector, he noted that corruption and bribery are risks that have become an increasing concern for businesses. In fact, he noted that this sector has the highest incidence of corruption of all sectors and has incurred the most significant penalties. Transparency International, in its Bribe Payers Index (2011), noted that companies in the oil and gas sector were perceived to be more likely to bribe, than those in other sectors.

On the investment front, Baluch explained that corruption by way of bribery exists due to the high amounts of expenditure involved in projects, in the areas of procurement, sole-supplier sourcing, licenses and permits, poor custom controls, etc.

Additionally, he related that the main corruption risks in local content policies in the oil and gas sector also include nepotism and cronyism in hiring local staff, favoritism and conflict of interests, political interference, and the use of shell companies.

What corruption in local content does, according to him, is that it may also provide disincentives to investors, dissuading them for investing in a corrupt environment which may also violate foreign bribery laws in their countries.

“As businesses in emerging markets continue to grow for the oil and gas sector, companies will become increasingly challenged by bribery and corruption risks,” he cautioned.

To mitigate against this, he posited that government and civil society monitoring should not be looked at in isolation, but rather as mutually reinforcing and beneficial activities. And all parties should focus on capacity building, specific to the sector but also contributing to sustainable governance.

“Effective monitoring relies on access to information and lack of transparency can be a challenge for both government and civil society monitoring efforts,” he said. “Corruption arises from a lack of transparency and a lack of people empowerment to hold government to account.”

Baluch posited that governments and companies should publish all essential information vis a vis the monitoring of oil and gas projects. This would include publishing concession agreements, laws and regulations, assessments and reports and ongoing data on implementation and monitoring.

“The benefits of robust monitoring and enforcement activities are realised only over time, although they require significant devotion of resources in the present and the future,” he related.

As such, he opined that companies within the sector should address ‘corruption risks’ proactively by implementing effective anti-corruption compliance programmes, which would include mechanisms of: anti-corruption clauses, establishment of independent oversight bodies to oversee local content implementation, clear and transparent laws, inter alia.