ABSTRACT
The role of extractives in economic development is mostly measured in terms of their contribution to exports and GDP. This chapter argues that GDP-based metrics must be complemented with evaluations of the linkages between the extractive sector and other sectors of the economy, assessments of how mineral revenues are used to build other forms of capital, and value chain analysis including the extent of value added, which is embodied in local goods. The latter would clarify the position of resource-rich countries in global value chains and the potential to rise up in the ladder. This knowledge base can help formulate more refined and calibrated policy options and strategies to make extractives work for sustainable development in resource-rich countries, anchored on economic diversification. Successful economic diversification can reduce the exposure of resource-rich countries to external shocks arising from commodity price fluctuations, ameliorate terms of trade and maximise the share of wealth that is created and retained locally. To this effect, procurement offers an immediate opportunity to localise the supply value chain, foster small and medium-scale development and create decent jobs. COVID-19 supply-side disruptions have made local content more palatable and the business case for an inward-looking development agenda more compelling, opening-up avenues for more endogenous industrialisation.
