Policies to improve the local impact from hydrocarbon extraction: Observations on West Africa and possible lessons for Central Asia

The paper offers specific inputs to the debate on local content promotion in the oil industries of West Africa and Central Asia. To this end, we document the international experience with local content promotion to derive best practices in the field. We then use a case study approach to devise a simple analytical framework for rationalizing the selection of viable sectors for local content promotion, in an attempt to make operational one of the best practice principles (efficiency) developed before. By proposing specific rules regarding the acceptability of a project, the analysis seeks to add rigor and address distortions on localization outcomes from rent-seeking. The emphasis is not on supporting efforts to “pick winners” and subsidize them through a range of by and large discredited instruments. Rather, the paper focuses on the specific public inputs the government would have to provide to support an otherwise market-driven process.