- Horizontal Linkages (Beyond Extractives)
- Assessing the Potential to Create Increased Economic Links
- Adapting Supplier Capabilities to Other Sectors
Adapting Supplier Capabilities to Other Sectors
At a Glance
- Once the supply of capabilities is identified, demand can be determined by considering which nonextractive economic sectors could stand to benefit.
- Assessing which nonextractive sectors could best make use of these capabilities involves significant, context specific research and consultation.
- Well-connected goods use similar institutions, infrastructure, physical factors, and technology and are therefore likely to offer more opportunities for horizontal linkages than poorly connected goods.
- The Product Space Conditions the Development of Nations (Barabasi, Hausmann, Hidalgo, Klinger)
- Operationalizing the Product Space: A Roadmap to Export Diversification (Piergiuseppe Fortunato, Carlos Razo, Kasper Vrolijk)
- The Observatory of Economic Complexity (The Massachusetts Institute of Technology Media Lab Macro Connections Group)
This toolkit presents a methodology designed to operationalize the concepts of product space and export sophistication. The resource ...
This resource provides a theoretical underpinning of the product space, providing a clear picture of the relatedness between products. The ...
This online reources offers a visualization of the product space for extractive industries. This includes on overview of various ...
The supply of transferrable skills and adaptable capabilities is determined by assessing the depth of backward and forward linkages. The demand can be determined by assessing which nonextractive economic sectors could benefit from capabilities developed in the extractive sector. Demand is country and context specific, and requires significant research and consultation to be understood. Assessing this demand will require close coordination with and among relevant ministries, including labor, education, and industry, to create a baseline analysis of the capabilities of the local economy.
The Product Space, developed by Hidalgo et al. at the Center for International Development at Harvard University, can be used to understand which horizontal linkages make the most economic sense. The Product Space shows the complexity and connectedness of tradable goods. A “complex” good requires several production processes and extended knowledge; examples include machinery, electronics, and medical products. Goods with less complexity include extractive industry resources and unprocessed agricultural commodities.
A well-connected good has many linkages to other goods because it uses similar institutions, infrastructure, physical factors, and technology. Well-connected goods will likely offer more opportunities for horizontal linkages. For example, a country that exports apples will also have most of the conditions suitable to export pears: soil, climate, packing technologies, frigorific trucks, skilled agronomists, etc.
Assessing the nonextractive sectors that could best utilize the capabilities used in the mining and/or oil and gas sectors is similar to the process of assessing backward linkages, as described in
Assessing the current situation. However, it necessarily involves sectors and businesses outside the extractive industry value chains. Assessing the nonextractive sectors that could utilize these capabilities will involve:
- Research on current economic capabilities using existing data on the types of industries present in a country
- Consultations with extractive industry projects and operations, their suppliers, and nonextractive-sector businesses to identify potential overlaps in capabilities
- Multi-stakeholder dialogues to discuss and verify these potential overlaps
There are few case studies that demonstrate how to assess the potential for horizontal linkages. However, several case studies of backward Linkages offer practical guidance in ensuring that research, consultation, and dialogue processes generate the necessary information.