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Extraction Issues

dial3x2Put simply, AmCham-TZ and its members wholeheartedly support the establishment of a local content policy for Tanzania. However, we also emphasize that Tanzania’s local content policy should be one that is forward-thinking, adaptable, and enables world-class development.

(This document was submitted to the Ministry of Energy and Minerals on 20 May 2014 as part of their stakeholder consultation process.)

The American Chamber of Commerce in Tanzania (AmCham-TZ) wishes to submit its comments on the Government of Tanzania’s Draft ‘Local Content Policy for Oil and Gas Industry – 2014,’ issued 7 May 2014.

It is the goal of AmCham-TZ’s comments to assist the Government of Tanzania and the Ministries associated with the formation of this policy in gaining a more comprehensive and accurate view of the international oil and gas industry’s stance on this issue. We wish to speak on behalf of our members and, in particular, on behalf of U.S.-owned and -affiliated companies.

We and our members support this policy because we are made up of locally registered companies. We hire, procure, and invest locally. And in addition to the local labor we already employ, our members are invested in training programs that will allow Tanzanian workers to take on a greater percentage of industry jobs. Our members procure goods and services from a vast array of locally registered suppliers and service providers. And our members are invested in their communities and in the success of Tanzania through tax revenue, corporate social responsibility, and in some cases, local ownership in their enterprises. Though some of our companies may be foreign-owned or headquartered, our roots are deeply planted in Tanzania, and we wish to invest in the local economy for decades to come.

In order to enable enduring investment, we encourage the Government ensure that its local content policy:

Focuses on the long-term
The natural gas industry plans to be invested in Tanzania for at least the next four decades. Manufacturing and assembly of onshore and offshore installations will be an initial—but short-term—objective, and while training laborers is important, it means little if training leads to unemployment in a few short years. Therefore, we encourage an emphasis on training local workers to do jobs the industry needs for the long-term.

Despite the benefits direct employment will bring to Tanzania, we also encourage the Government to recognize that there is far greater potential for indirect employment, procurement, and revenue from the industry. The industry will contribute significant sums in tax revenue, and given the proper regulatory environment, it will enable local service and support sectors to develop and flourish over time, creating jobs and opportunity.

Therefore, we encourage the Government to collaborate with the industry, identify what labor and resources it can currently source locally, and provide incentives to local entrepreneurs to start businesses and develop those goods and services currently unavailable.

Adapts to an evolving market
Few in the 1960s could have predicted the rapid growth and development Tanzania has experienced in recent years. Similarly, few can predict all of the positive changes and developments the Tanzanian business environment will undergo in the next 30. Therefore, recognizing that this is a long-term investment, development of local content objectives should be an ongoing process that allows for benchmarks to be set in collaboration with industry needs and as local business sectors develop.

At the same time, once these benchmarks have been agreed upon, international investors in the oil and gas industry must be able to operate with the assurance that contracts will be honored and that legislation, regulation, and the local fiscal regime will remain constant and predictable. As new policies like this one are enacted and as necessary institutional restructuring takes place, we urge against the rewriting of existing contracts, which would lead to investor uncertainty and inevitably delay or prevent investment. Along those lines, we also encourage the development of a policy that lowers barriers to entry for new international investors. As local resources—including skilled labor, supplies, and services—expand, firms will source more content locally, but provisions should be made for new investors who can enter the market and provide healthy competition for firms currently working in Tanzania.

Promotes world-class development
Tanzania holds world-class investment potential, and we all wish to see the country achieve world-class development. In an industry as competitive and quickly evolving as the hydrocarbon sector, we encourage the Government to recognize the need for experienced, professional, and international firms to contribute to the development of the local oil and gas industry. Tanzania can only achieve world-class outcomes with the productive input of these firms, and we believe that an active, dynamic, and collaborative relationship between the Government and industry representatives can lead to the goals—both economic and developmental—that stakeholders on all sides wish to reach.

AmCham-TZ held a roundtable discussion in early May to discuss many of these issues. We were delighted to have Mr. Norbert Kahyoza from the Ministry of Energy and Minerals and Mr. Elias Kilembe from the Tanzanian Petroleum Development Corporation, as well as observers from the Ministry of Industry and Trade, present at that discussion. As this policy and others relevant to the oil and gas industry are drafted and refined, we hope to continue to promote dialogue and information sharing between the Tanzanian government, the oil and gas industry, and the U.S. government. Working together, we believe that these policies can be enacted in a way that allows both the industry and the people of Tanzania to flourish.

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