Strategies to Increase Linkages to the Broader Economy

  • There is a tendency among natural resource governance stakeholders (governments, companies, civil society, donors, etc.) to focus on the development forward (downstream) linkages before horizontal linkages, whereas the latter often makes more economic sense.
  • Because many of the key components of targeting horizontal linkages are the same for targeting backward linkages, there is relatively little guidance for policymakers about strategies to develop horizontal linkages from extractive industry activity.
  • Once the appropriate assessments have been conducted, governments and other stakeholders can provide incentives for businesses to target non-extractive buyers (see Creating Incentives To Increase Economic Links), and can also consider capacity-building support for these firms (see Building The Capacity Of Local Businesses).

Key Resources

Topic Briefing

Historically, governments of host countries and stakeholders of natural resource governance in developing countries (eg. companies, civil society, and donors) have rarely focused on horizontal linkages when planning for their economic development out of the extractive sector. There is instead a natural tendency to think about developing forward (downstream) linkages before horizontal linkages, whereas the latter often makes more economic sense.

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There is also relatively little guidance for policymakers about strategies to develop horizontal linkages from extractive industry activity. This is partly because many of the key components of targeting horizontal linkages are the same for targeting backward linkages. For example, providing capacity-building or financial support for businesses is largely the same, whether these businesses are directly supplying the extractive industries, or if they are supplying non-extractive sector buyers.

Broadly speaking, to target opportunities for horizontal linkages, governments should first conduct the various assessments covered in the subtopic Assessing the potential to create increased economic links. The information provided from the assessments will inform the targeting of incentives and support for businesses who can utilize the newly discovered capabilities. With this understanding, governments and other stakeholders can provide incentives for potentially linked businesses to target non-extractive buyers, as described in Creating Incentives To Increase Economic Links, and can also consider capacity-building support for these firms in a way that is essentially the same as described in the “Building The Capacity Of Local Businesses” section of the Supplying Extractives section.

If there is enough demand from extractive industries to consider a policy goal of creating an industrial cluster the subtopic Developing industrial policy and leveraging clustering provides more information .