Local Content Policy and Modernisation

DOI: 10.20542/0131-2227-2017-61-1-67-77

V. Kondrat’ev (v.b.kondr@imemo.ru),
Primakov National Research Institute of World Economy and International Relations, Russian Academy of Sciences (IMEMO), 23, Profsoyuznaya Str., Moscow, 117997, Russian Federation 

Abstract. A local content requirement (LCRs) is a widely acknowledge protective device with two simple but powerful objectives: create jobs at home rather than abroad and channel business to home firms rather that foreign firms. Historically, local content requirements have been associated primarily with government procurements and mandates imposed on publicly funded projects. Political leaders who advocate local content policy often distinguish multiple objectives. Many of recent local content requirements identified in this article were inspired by three basic related factors. First, since the onset of the Great Recession foremost they wanted to create jobs and channel business to domestic companies. Second, they may have aspirations of building a world class industry, following the logic of infant industry analysis. Third, they believe that local content policy offers a promising path to long-term economic development. Classic local content requirements give bid preferences to local supplies (e.g., 25 percent on a construction project or a narrowly defined category of goods such as military uniform) at least have the benefit of transparency. The cost of such local content requirements can be easily calculated, their administration is relatively simple? And they are not prone to corruption. Much more common are quantitative restrictions and guidelines. They are highly objectionable both on economic and political grounds. From economic standpoint their cost is highly variable depending both on underlying supply and demand conditions and on administrative factor. The same characteristics make local content requirements highly attractive to their supporters. The costs are off-budget and can be dismissed in political debate. The benefits in terms of new jobs and new industries are easily achieved and whether large or small they are immediate. The payoffs come fast as foreign supplies are excluded from the market.

Keywords: local content requirements, government procurement, economic growth, building new industries, new jobs creation, domestic business activity 


1. Many Oil Experts Unconcerned Over China Unocal Bid. The Washington Post, July 1, 2005. Available at: http://www.washingtonpost.com/wp-dyn/content/article/2005/06/30/AR2005063002081.html (accessed 16.02.2016).

2. BHP Billiton Walks away from PotashCorp. CBC News, 15.11.2014.

3. Hufbauer G., Schott J., Vieiro M., Wada E. Local Content Requirements: A Global Problem. Washington, Peterson Institute of International Economics, 2013. 212 p.

4. Oliveira E. Overview of the Brazilian Industrial Health Complex. Brasilia, Brazilian Ministry of Health, 11.04.2011.

5. Botello J., Dedrick J., Kraemer K., Tigre P. From Industry Protection to Industry Promotion: IT Policy in Brasil. Irvine, University of California Center for Research on Information Technology and Organization, 1999. Available at: http://www.crito.u-ci.edu/publications/pdf-ppt/brazil-case-10-99.pdf (accessed 16.02.2016).

6. JETRO. Medical Device Market in Brazil and Its Regulation. Available at: https://www.jetro.go.jp/ext_images/brazil/topics/20140806962-topics/Sessao5-1_Goulart.pdf (accessed 16.02.2016).

7. New Record in Worldwide Wind Installation. World Wind Energy Association, Press Release Statistics, February 5, 2015. Available at: http://www.wwindea.org/new-record-in-worldwide-wind-installations (accessed 24.02.2016).

8. Statista Premium Account. Available at: http://www.statista.com/statistics/263492/electricity-prices-in-selected-countries (accessed 25.02.2016).

9. Powering Canada’s Future. Canadian Wind Energy Association. WINDVISION2025, July 2014. Available at: http://canwea.ca/wp-content/uploads/2014/05/Canada-Current-Installed-Capacity_e.pdf (accessed 24.02.2016).

10. Feed-in Tariff Program. Ontario Power Authority, August 10, 2012. Available at: http://fit.powerauthority.on.ca/newsroom/august‑10-2012-final-fit‑20-program-documents-posted (accessed 24.02.2016).

11. Ontario to Defend Local Content Rules that Have Brought $30B in Investment. The London Free Press, 19.11.2012.

12. Wind Energy Law in Canada. Gowlings, 2010. 64 p.

13. Using Energy to Build the Quebec of Tomorrow: Quebec Energy Strategy. Government of Quebec, Ministry of Natural Resources and Wildlife, 2006. 16 p.

14. Nigerian Oil and Gas Industry Content Development Act. 2010. 37 p. Available at: http://www.eisourcebook.org/cms/January%202016/Nigerian%20Oil%20and%20Gas%20Industry%20Content%20Development%20Act%202010.pdf (accessed 25.02.2016).

15. NNPC/Mobil JV Completes Fabrication of Platforms for New Offshore Operations. The Engineering Network, March 18, 2012. Available at: http://go.engineer-ng.net/forum/topics/nnpc-mobil-jv-completes-fabrication-of-platforms-for-new-offshore (accessed 25.02.2016).

16. Copland C., Levine L., Mallet W. The Role of Public Works Infrastructure in Economic Recovery. Congressional Research Service Report for Congress, September 21, 2011. Available at: https://www.fas.org/sgp/crs/misc/R42018.pdf (accessed 25.02.2016).

Registered in System SCIENCE INDEX

For citation:
Kondratev V. Local Content Policy and Modernisation. World Eonomy and International Relations, 2017, vol. 61, no. 1, pp. 67-77. https://doi.org/10.20542/0131-2227-2017-61-1-67-77

Comments (0)

No comments

Add comment






Dear authors! Please note that in the VAK List of peer-reviewed scientific journals, in which the main scientific results of dissertations for the degree of candidate and doctor of sciences should be published for the “MEMO Journal” the following specialties are recorded:
economic sciences:
5.2.5. World Economy.
5.2.1. Economic Theory
5.2.3. Regional and Branch Economics
political sciences:
5.5.4. International Relations
5.5.1. History and Theory of Politics
5.5.2. Political Institutions, Processes, Technologies


Current Issue
2024, vol. 68, No. 4
Topical Themes of the Issue:
  • Financial Contagion Propagation in Europe under the Impact of Global Shocks
  • Regional Powers on the African Continent: Trends and Prospects
  • Investment Activity of the PRC in the Kyrgyz Republic
  • “Land Grabbing” Concept: Global and National Aspects
Submit an Article
The Editorial Board invites authors to write analytical articles on the following topics:
  • changes in the processes of globalization in modern conditions
  • formation of the new world order
  • shifts in civilization at the stage of transition to a digital society

The editors are also interested in publishing synthesis articles / scientific reviews revealing the main trends in the development of certain regions of the world - Latin America, Africa, South Asia, etc.