Assessing the Potential to Create Increased Economic Links

At a Glance
  • Policies to promote horizontal linkages should always follow a critical assessment of current capabilities developed by the extractive industries and their value chains, including in-depth consideration of the skills and technology developed for use by the mining and/or oil and gas sector.
  • Assessing the current situation involves: the depth of backward and forward linkages; assessing non-extractive economic sectors that could benefit; and understanding the transferable skills from extractive industry activity.

Policies to promote horizontal linkages need to start with an assessment of current capabilities developed by the extractive industries and their value chains. As Hausmann put it: “The probability that a country will develop the capability to be good at producing one good is related to its installed capability in the production of other similar, or nearby goods for which the currently existing productive capabilities can be easily adapted.”[1]

Assessing current capabilities includes consideration of the skills and technology developed for use by the mining and/or oil and gas sector. Any policy subsequently developed will need to understand existing capabilities to inform which capabilities may be deployed to support other sectors in the economy. Assessing the current situation will involve:

  1. The depth of backward and forward linkages (supplying the extractive industries and processing the outputs of the industries respectively);
  2. Assessing non-extractive economic sectors that could benefit from current and adapted capabilities;
  3. Understanding the transferable skills from extractive industry activity.

Each of these will be considered in the subtopics that follow.

View footnotes

[1] Ricardo Hausmann and Bailey Klinger, Structural Transformation and Patterns of Comparative Advantage in the Product Space, CID Working Paper No. 128, (John F. Kennedy School of Government - Harvard University, 2006)

Key Resources