Free Essay: SMEs and Enactment of Local Content in Trinidad and Tobago

Published: 2022-04-27
Free Essay: SMEs and Enactment of Local Content in Trinidad and Tobago
Type of paper:  Literature review
Categories:  Business Energy
Pages: 7
Wordcount: 1754 words
15 min read

Local content policies within the gas and oil division are part of an extended effort in research with the aim of collecting present data and knowledge on local content policies. The researchers attempt to find ways of developing guidelines for the monitoring and design of local content policies implantation. This chapter contains a literature review of previous researchers on the small and medium-sized enterprises and implementation of local content as well as documented case studies from various countries. The review will provide arguments for and against local content, qualitative and quantitative studies of SMEs and local content, as well as a study on local content in Tobago and Trinidad.

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Lewis, Pun & Lalla (2005), carried out an empirical study to determine the notch of total quality management is attained in small and medium-sized enterprises in Trinidad and Tobago. The results of their research suggested that SMEs were fixated on continual improvement and systems deployment, but then, they were unable to determine their deliberate course (p. 560-568) successfully. Additionally, the possible benefits which could have been derived from total quality management lacked in the gap analysis and top management commitment areas. Possessing submission needs which directly deal with such sectors could help small and medium-sized enterprises in aligning their practices in strategic process and changes in quality management towards top quality management.

The production of oil began in the early 20th C in Trinidad's Southern areas. In 1955, the state had its first offshore development and henceforth, its manufacture further extended to the East and later to the Northern Coastal areas. According to the country has matured to a hydrocarbon area and developments are anticipated to arise from the broad coastal areas of the north and east in future. Tordo and Anouti (2013, p.163), noted that Trinidad and Tobago are gifted with unexploited heavy-oil reserves on the offshores whose projections range between two-thousand six hundred to five thousand million barrels.

Local content

Extraction of commodities and taxes have had a minimal constructive outcome in the lives of the vast majority of African nations. Consequently, there has been developing acknowledgment in the previous decade that extraction of commodity alone can't fuel financial growth, yet that greater strategy is required to boost spillovers, relations, and diversification issues to the native economy. To accomplish these targets, a developing number of nations are enacting local content policies. The essential goal of local content needs is supporting and creating local manufacturers and service providers inside,e forward, and backward relations on the value chain.

Arguments for local content policies

A study was carried out by IHUA (2010) to investigate effects of the gas and oil industry in Nigeria's Local Content policy and the consequences for endorsing advanced involvement of homegrown SMEs in the industry. IHUA's studies discloses that the success has not been achieved yet by the local content policy in encouraging: awards of bigger contracts to indigenous firms, application of local technology, local participation, and stimulation of joint business plans between foreign and homegrown oil firms (p.8). Existing small and medium-sized enterprises are capable of creating awareness of essential prospects, since there might be openings in areas in which they lack necessary expertise for operation. Consequently, when a new expert entrant is invited, they open doors for collaborations in the future, and hence a successful industry will be enhanced. Multinationals can also be advantaged by having expertise and value for their cash.

Arguments against local content policies

Mithamo (2017), analyses the impact of national content enactment in Nigeria and states that local content policies can adversely impact foreign direct investment which benefits developing nations. It was evident that lessened foreign direct investments would likewise prompt a decrease in financial profits for the host nation. He inspires nations to embrace economic approaches that are both adaptable and receptive to the need for remote speculators. Another argument against local content laws is by Rivers and Wigle (2011) as they evaluate local content and legislation on local content and state that in the transient, local content can bring about unintended hostile outcomes. For example, a rise in unemployment because of abrupt rise in the production cost caused by a rise in material cost which results from wastes from the local content rules. It was opposed that local content policies lead to reduced costs in the host nations, stop the growth of free enterprise, and enhance protectionism. Cottier and Espa (2017) experimentally portray that local content regulations as adopted by developing nations to accomplish specific financial goals can end up being fiscally indefensible and could likewise prompt defective distribution of assets, and decreased proficiency.

According to Kolstad and Kinyondo, (2017), regions rich in resources usually expect and make progress toward local economies to gain profit through mineral activities, oil, and gas. The regions lack knowledge in exploiting extractive practices to improve the status of the economy, be it developing local firms and making way for employment opportunities or enhancing technology and skill building (Warner 2017). Local content is the procedure of creating financial wealth at the subnational and national level, as well as adhering to set public policy goals (Esteves, Coyne, and Moreno 2013, p.1).

Quantitative studies

Klueh, Pastor, and Segura (2009) documented the universal experience with the promotion of local content in deriving appropriate practices in the sector. They used case studies to devise modest systematic frameworks for justifying the collection of feasible sectors for promoting local content, with the aim of making operational one of the most developed principle before. Their research focused on specific inputs from the public that the government would need to offer to fund a market-driven course in the small and medium scale enterprise sectors.

From the 1960s to the present day, the Nigerian oil and gas business has had an essential role in the growth of the country's economy. The sector contributes close to eight percent of the total national income, and ninety-five percent of export revenue (Ihua, Ajayi and Eloji, 2009 p.163). Apparently, a considerable amount of this income goes to foreign contractors for procurement, engineering, and fabrication services; leading to assets flight and giving less to the local industries. The government came up with the policy of 'local Content' which advocated for the higher local involvement of small-medium scale enterprises in the sector and add value to the state. Ihua, Ajayi, and Eloji (2009), documents verdicts from case-studies of small to medium-sized businesses with the goal of finding the insinuations of the plan on their actions. It was discovered that even though the local content policy has accomplished minimal victory in providing local firms with contracts and encouraging limited joint project arrangements; however, problems like inadequate finances, bulky prequalification needs and ineffective supervision, continue hindering the policy value.

In March 2012, it was reported that Tullow Oil had found economical, practical oil in Kenya and, this saw a convergence of International Oil Companies (IOC), hoping to get a bit of the activity. Kenyans in Turkana town celebrated at their new possible source of income (Johannes, Zulu and Kalipeni, 2015, p. 143). Having as of late found financially reasonable amounts of oil and gas; Kenya is resolving to make sure that the great African resource does not consume its fingers revile but financial growth is accomplished from the exploitation and extraction of Kenya's natural asset. Nwapi and Andrews (2017), supports the application of local control policies by nations rich in resources, yet in an examination of Nigeria's national resources, laws strongly scrutinise the way in which the local content policies have been executed in Nigeria. Nwapi and Andrews give recommendations for the application of contracts to implement local content rules with financial specialists from outside, asserting that the sanctioning of blanket national laws without due respect to existing joint venture pacts and global settlements can make national, local content regulations unenforceable and impotent.

Qualitative studies

Mutula and Brakel (2006) employed a qualitative approach by using in-depth interviews and focus group discussions on researching the e-readiness of small-medium enterprises in Botswana's information and technology sector compared to global trends. The study found out that small and medium scale enterprises in Botswana are yet to attain a practical measure of e-readiness just like others in unindustrialized countries in reference to the developed nations. Mutula and Brakel offer a basis which can aid developing countries, in making informed technical investment decisions which may empower SMEs to enter the international electronic business environment.

Another study carried out by Jegede et al., (2013), evaluated the issues which hampered knowledge sharing and innovation in homegrown oil and gas industries in Nigeria. They had a goal in providing facts which would intensify sharing of knowledge amongst the natives in the firms and generate additional value that would foster the local content in the sector. From the study, it was discovered that innovation challenge centred on unskilled personnel, and high costs particularly in their departments of research and development, and the country's' poor economic state (p.1137). The primary initiators of innovation in the businesses also comprised of information from suppliers, clients/customers, competitors, and the parent firms.

One of the limitations to the development of production limit of the local business in Brazil and new investments in innovative work is the strain, faced by small-medium size businesses in acquiring finances because of the high capital cost from private banking. With a specific end goal to provide credit for local traders, the Program for the Mobilization of the National Industry of Oil and Natural Gas bolstered the organising of new funding methods and capitalisation of the creation chain through a coordinated effort with private and public banks.

Without the genuinely necessary money related and practical assets to misuse the gas and oil resources found in 2007 alone, Ghana looked for expertise from outside to build the Jubilee Field as well as the surrounding oil fields. In 2011, a local content approach was implemented to encourage local people, take an interest in exploiting energy. In 2013, successive Statutory Instruments were enacted to approve the approach. Senoo and Armah (2015, p.23), tries to explain the means by which implementing the Local Content Legislation in Ghana's oil and gas industry has brought satisfaction to proposed objectives and targets. The studies showed that even though the rational implementing such enactments are profoundly excellent, the orientation of the policy, the political, economic, and social setting and involvement of stakeholders do not back original enactments. Persons responsible for implementing the policy are thus required to guarantee that worries and suggestions are considered to give assurance that Ghana infers maximum profits from its energy firms.

One unusual wish sustained by many Ghanaians after the detection was the lessening of costs of oil-based goods and...

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