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Horizontal Linkages (Beyond Extractives)

At a Glance

  • Horizontal linkages (sometimes called lateral linkages) refer to the development of new industries through the leveraging of capabilities and skills employed in extractive industry supply chains. As such, they provide a unique opportunity to diversify the economy away from the extractive sector.
  •  Horizontal linkages can stem from transferable skills that are not sector-specific, or from the adaptation of capabilities, know-how, and technologies already employed in the extractive sector.
  • Often referred to as ‘spillover benefits’ horizontal linkages are more likely to occur in countries where backward (upstream) linkages (such as procurement of goods and services) have already been created.
  •  Because increasing automation reduces the potential for the development of lower skilled backward linkages, it is also likely to reduce the development of horizontal linkages in less developed markets. If a country invests in advanced technical skills to seize opportunities provided by automation, however, these skills are likely to be useful in other sectors.
View footnotes

[1] Oyejide and Adewuyi, 2011, as cited in CCSI, Linkages to the Resource Sector: The Role of Companies, Government and International Development Companies, (Bonn and Eschborn: GIZ, 2016), 44

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

Case Studies

Key Resources

See more resources

Australia Horizontal Linkages: Positive Spillovers Through Horizontal Linkages

This resource provides a concise summary of Australia's experience developing horizontal linkages in the mining sector. As the title ...

Chile Horizontal Linkages: Using Taxation to Foster Horizontal Linkages

This resource provides a concise summary of Chile's experience developing horizontal linkages in the mining sector. Chile's attempt at ...

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 Industrialization ...

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 ...

Finland as a Knowledge Economy: Elements of Success and Lessons Learned

The case of Finland shows that it is possible for a small and peripheral country to transform itself from a natural-resource-based economy ...

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 informed the development of ...

South Africa Horizontal Linkages-Building Expertise by Overcoming Country-Specific Constraints

This resource provides a concise summary of South Africa's experience developing horizontal linkages in the mining sector. A unique case, ...

Topic Briefing

Horizontal (or lateral) linkages relate to the development of new industries using the capabilities and skills used by the extractive industry supply chain. For example, metal work skills required for the manufacturing 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 leveraged for use 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.) and from the adaptation of capabilities, know-how, and technologies developed to serve the extractive industries. As such, they are more likely to occur in countries where backward (upstream) linkages (procurement of goods and services) have already been created. Horizontal linkages are also often referred to as “spillover benefits”.[2]

Every stage of the mining and oil and gas life cycle provides for an opportunity to develop horizontal linkages, but the potential is highly dependent on whether backward linkages have been developed as a starting point. For instance, in the oil and gas sector, 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. This is because of the highly specialized and technical nature of goods and services required at this stage, which are unlikely to be available in the country of operation, particularly if the country is at 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, the civil engineering skills generated among the contractors can be transferable to other sectors. Another example of this is extractive industry projects that are working on building resilient infrastructure to decrease the threat of climate change. Here too, the skills developed by civil engineers could be useful to the rest of an economy planning for climate resilience.

Increasing automation may also reduce the potential development of lower skilled backward linkages and therefore the potential for development of horizontal linkages in less developed markets. However, if a country invests in advanced technical skills in order to seize the opportunities provided by automation, these skills will likely be useful in other sectors.

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.