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Horizontal Linkages (Beyond Extractives)

At a Glance

  • “Horizontal” (or “lateral”) linkages refer to the development of new industries based on capabilities and skills from extractive industry supply chains. As such, they provide a unique opportunity to diversify the economy away from the extractive sector.
  • Horizontal linkages can be based on transferable skills that are not sector specific or from the adaptation of capabilities already employed in the extractive sector.
  • Often referred to as “spillover benefits,” horizontal linkages are more likely to occur when “backward” linkages (involving the local procurement of goods and services) or “forward” linkages (involving the processing of extractive outputs) have already been created.

Case Studies

Key Resources

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Commodities for Industrial Development: Making Linkages Work

This paper is a condensed version of the research and recommendations provided in “One Thing Leads to Another: Promoting ...

Extractive Industries: Optimizing Value Retention in Host Countries

This resource examines ways in which local content in the extractive industries can be addressed by providing an overview of policy tools to ...

Guinea Horizontal Linkages: Challenges of a Linkages-Driven Approach to Mining Infrastructure Environment

This resource provides a concise account of the Simandou project in Guinea developed by Rio Tinto in partnership with the government. Guinea ...

Mozambique Horizontal Linkages: Constraints of Building Horizontal Linkages in a Low-Capacity Environment

This resource provides a concise summary of Mozambique’s experience developing horizontal linkages in the case of the Mozal aluminum ...

Norway Horizontal Linkages: Local Context as the Main Driver for Horizontal Linkages

This resource provides a concise summary of Norway’s experience creating policy in the oil sector that has informed the development of ...

Topic Briefing

“Horizontal” (or “lateral”) linkages relate to the development of new industries using the capabilities and skills of the extractive industry supply chain. For example, metalwork skills required for the manufacture and assembly of oil rig control lines can be used to develop other construction and manufacturing industries. Similarly, IT skills developed for the oil sector can be used in other sectors.[1]

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Horizontal linkages provide a unique opportunity to diversify the economy away from the extractive sector. They can stem from transferable skills that are not sector specific (IT, finance, civil engineering, etc.) or from the adaptation of capabilities, know-how, and technologies specifically developed to serve the extractive industries. As such, horizontal linkages are more likely to occur in countries where backward linkages (goods and services procured from local suppliers) and/or forward linkages (the domestic processing of extractive outputs) have already been created. Horizontal linkages are also often referred to as “spillover benefits.”[2]

Every stage of the mining or oil and gas life cycle provides opportunities to develop horizontal linkages, but the potential is greatest where deep backward linkages have already been developed and can be used as a starting point. For instance, during the exploration stage of oil and gas projects, the potential for local procurement is likely to be limited to the basic needs of foreign companies setting up offices in a new country during the exploration stage. Highly specialized and technical goods and services required at this stage are unlikely to be available in the country of operation, particularly if the country is in the early stages of sector development.

On the other hand, in large-scale mining, which requires the construction of massive transportation infrastructure during the development phase, contractors’ civil engineering skills can already be easily transferred to other sectors. Another example of this is extractive projects that are building resilient infrastructure to decrease the threat of climate change. Here, too, skills developed by civil engineers could be useful to the rest of an economy planning for climate resilience.

In less-developed markets, increasing automation may also hinder the development of lower-skilled backward linkages, reducing the potential for the development of horizontal linkages. However, if a country invests in advanced technical skills to supplement and build upon automation, these skills will likely be useful in other sectors.

The Case Studies in this section show these ideas in practice. These ideas will be explored more deeply in each of the Horizontal Linkages subtopics.

Below are a series of relevant case studies to show these ideas in practice. These ideas will be explored more deeply in each of the subtopics.

View footnotes

[1] Oyejide and Adewuyi (2011) as cited in Columbia Center on Sustainable Investment (CCSI), Linkages to the Resource Sector: The Role of Companies, Government and International Development Cooperation (Bonn and Eschborn: Deutsche Gesellschaft fur Internationale Zusammenarbeit [GIZ], 2016), 44.

[2] Aaron Cosbey and Isabelle Ramdoo, IGF Guidance for Governments: Local Content Policies Draft (Winnipeg: International Institute for Sustainable Development, February 2018), 1.