Utilizing Inter-Sectoral Linkages to Drive Economic Transformation: A Theoretical Model for the Extractive Sector

This article postulates that, in principle, it is possible (1) to develop linkages between the extractive sector and other economic sectors; (2) for such linkages to contribute to economic diversification; and (3) for economic diversification to potentially drive positive economic transformation. We argue that achieving this three-stepped pathway is impossible without also achieving some level of political and social transformation. Empirically, many resource-rich countries have failed to develop linkages. Or, if they have, the linkages built remain limited to the development of supply chains serving the extractive sector, contributing little to economic diversification. In this article, we refer to limited linkages and dependence on exporting unprocessed minerals as the centripetal force of the extractive sector. This implies that capital investments and economic activities are concentrated around the extractive sector. We propose an alternative theoretical model that strives to foster the centrifugal force of the extractive sector – a term we use to capture the three-stepped pathway. This model is underpinned by multiple factors and their interactions, which are within the purview of the complex state and market relationship (posing as a challenge) and the role of minerals in the global transformation towards a clean energy system (posing as an opportunity).