IDEAS home Printed from https://ideas.repec.org/p/wiw/wiwrsa/ersa15p21.html
   My bibliography  Save this paper

Opportunities and benefits of local content requirement policy: case of Eastern Siberian oil and gas industry

Author

Listed:
  • Irina Semykina

Abstract

This paper explores the regional economic impact of mineral resource endowment and offers specific inputs to the debate on the local content requirement (LCR) policy, gaining urgency in modern economic and political environment. Focusing on the experience of the Eastern Siberia the paper examines the way national companies operate in the newly developing oil and gas provinces of Russia. The analysis of key economic indices shows that the existing approach based on rent-seeking strategy does not allow having any significant benefits from resource endowment in the regions. The key idea is that the establishment of completely new industry has to affect regional economic development, budget revenues dynamics, and employment, to influence the related industries and services in the region. Such benefits are of great importance especially for the Eastern Siberian regions which had been endured the alarming depopulation and deindustrialization processes since the collapse of Soviet Union in 1991. Oil and gas production is capital intensive industry, but at the same time involves quite limited number of employees. Equipment and machinery producing industries, as well as oil and gas related services and engineering, on the contrary can be referred to the highly skilled and labor intensive sectors. Moreover linkages between oil and gas industry and other local industries can impact regional economic growth through investments and creating value added activities in equipment and materials. Nowadays Russian national oil and gas companies do not have a clear local content strategy, it?s mainly addressed as part of the ?corporate social responsibility agenda?. The paper provides the review of the LCR policy which has been widely used in some countries with similar industry pattern like Norway, Brazil and Malaysia. The conducted analysis let to form possible scenarios and evaluate the dynamics of regional economic development depending on the scale of LCR policy. The developed approach based on statistical modeling allows assessing both direct and indirect (via intersectoral relations) effects of LCR policy. The obtained results allow to conclude that the implementation of LCR policy lead to the growth of real income per capita and the job creation in the region which give the opportunity to reverse the population decrease trend. The development of equipment and services suppliers for oil and gas industry by ripple effects can boost socio-economic development and diversify regional economics. The paper also dwells on some pitfalls and risks accompanying LCR policy and considers crucial points of introducing this kind of policy for local and federal government.

Suggested Citation

  • Irina Semykina, 2015. "Opportunities and benefits of local content requirement policy: case of Eastern Siberian oil and gas industry," ERSA conference papers ersa15p21, European Regional Science Association.
    • Handle: RePEc:wiw:wiwrsa:ersa15p21
    as

    Download full text from publisher

    File URL: https://www-sre.wu.ac.at/ersa/ersaconfs/ersa15/e150825aFinal00021.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Jeffrey D. Sachs & Andrew M. Warner, 1995. "Natural Resource Abundance and Economic Growth," NBER Working Papers 5398, National Bureau of Economic Research, Inc.
    2. Auty, Richard M., 1994. "Industrial policy reform in six large newly industrializing countries: The resource curse thesis," World Development, Elsevier, vol. 22(1), pages 11-26, January.
    3. Davis, Graham A., 1995. "Learning to love the Dutch disease: Evidence from the mineral economies," World Development, Elsevier, vol. 23(10), pages 1765-1779, October.
    4. Eduardo Amaral Haddad & Ana Carolina Giuberti, 2014. "Economic impacts of natural resources on a regional economy: the case of the pre-salt oil discoveries in Espirito Santo, Brazil," Economy of region, Centre for Economic Security, Institute of Economics of Ural Branch of Russian Academy of Sciences, vol. 1(1), pages 111-124.
    5. Gary Clyde Hufbauer & Jeffrey J. Schott & Cathleen Cimino & Martin Vieiro & Erika Wada, 2013. "Local Content Requirements: A Global Problem," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 6802, January.
    6. Gene M. Grossman, 1981. "The Theory of Domestic Content Protection and Content Preference," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 96(4), pages 583-603.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Irina Semykina, 2017. "Managing Regional Economic Development Through Local Content Requirements In Oil And Gas Industry," Economy of region, Centre for Economic Security, Institute of Economics of Ural Branch of Russian Academy of Sciences, vol. 1(2), pages 457-464.
    2. Hailu, Degol & Kipgen, Chinpihoi, 2017. "The Extractives Dependence Index (EDI)," Resources Policy, Elsevier, vol. 51(C), pages 251-264.
    3. Ackah-Baidoo, Abigail, 2012. "Enclave development and ‘offshore corporate social responsibility’: Implications for oil-rich sub-Saharan Africa," Resources Policy, Elsevier, vol. 37(2), pages 152-159.
    4. Amir Mousavi & Jeremy Clark, 2021. "The effects of natural resources on human capital accumulation: A literature survey," Journal of Economic Surveys, Wiley Blackwell, vol. 35(4), pages 1073-1117, September.
    5. Jack Pegram & Gioia Falcone & Athanasios Kolios, 2018. "A Review of Job Role Localization in the Oil and Gas Industry," Energies, MDPI, vol. 11(10), pages 1-18, October.
    6. Atkinson, Giles & Hamilton, Kirk, 2003. "Savings, Growth and the Resource Curse Hypothesis," World Development, Elsevier, vol. 31(11), pages 1793-1807, November.
    7. Graham A. Davis & John E. Tilton, 2005. "The resource curse," Natural Resources Forum, Blackwell Publishing, vol. 29(3), pages 233-242, August.
    8. Papyrakis, Elissaios & Gerlagh, Reyer, 2007. "Resource abundance and economic growth in the United States," European Economic Review, Elsevier, vol. 51(4), pages 1011-1039, May.
    9. Barbier,Edward B., 2007. "Natural Resources and Economic Development," Cambridge Books, Cambridge University Press, number 9780521706513.
    10. Mignamissi, Dieudonné & Malah Kuete, Yselle Flora, 2021. "Resource rents and happiness on a global perspective: The resource curse revisited," Resources Policy, Elsevier, vol. 71(C).
    11. Usui, Norio, 1997. "Dutch disease and policy adjustments to the oil boom: a comparative study of Indonesia and Mexico," Resources Policy, Elsevier, vol. 23(4), pages 151-162, December.
    12. Davis, Graham A., 2010. "Trade in mineral resources," WTO Staff Working Papers ERSD-2010-01, World Trade Organization (WTO), Economic Research and Statistics Division.
    13. Fubing Su & Guoxue Wei & Ran Tao, 2016. "China and Natural Resource Curse in Developing Countries: Empirical Evidence from a Cross-country Study," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 24(1), pages 18-40, January.
    14. Mohammad Ali MORADI, 2009. "Oil Resource Abundance, Economic Growth,and Income Distribution in Iran," EcoMod2009 21500069, EcoMod.
    15. João Sousa Andrade & António Portugal Duarte, 2013. "The Dutch Disease in the Portuguese Economy," GEMF Working Papers 2013-05, GEMF, Faculty of Economics, University of Coimbra.
    16. Terheggen, Anne, 2010. "The new kid in the forest: the impact of China's resource demand on Gabon's tropical timber value chain," MPRA Paper 37982, University Library of Munich, Germany.
    17. Edouard Mien & Michaël Goujon, 2022. "40 Years of Dutch Disease Literature: Lessons for Developing Countries," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 64(3), pages 351-383, September.
    18. Joya, Omar, 2015. "Growth and volatility in resource-rich countries: Does diversification help?," Structural Change and Economic Dynamics, Elsevier, vol. 35(C), pages 38-55.
    19. Carlos Morales, 2011. "Variedades de recursos naturales y crecimiento económico," Revista Desarrollo y Sociedad, Universidad de los Andes,Facultad de Economía, CEDE, December.
    20. Bin Amin, Sakib & Taghizadeh-Hesary, Farhad & Khan, Farhan & Manal Rahman, Faria, 2024. "Does technology have a lead or lag role in economic growth? The case of selected resource-rich and resource-scarce countries," Resources Policy, Elsevier, vol. 89(C).

    More about this item

    Keywords

    regional economics; oil&gas resources; local content requirement policy; Siberia;
    All these keywords.

    JEL classification:

    • O20 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - General
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wiw:wiwrsa:ersa15p21. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Gunther Maier (email available below). General contact details of provider: http://www.ersa.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.