DEVELOPMENT STRATEGY DOI: 10.15838/esc/2014.6.36.3 UDC 338.24(470.12), LBC 65.050.2(2Rus-4Vol) © Uskova T.V., Kozhevnikov S.A. Management of the regional economy on the basis of partnership interaction between the authorities and business structures Tamara Vital’evna USKOVA Doctor of Economics, Deputy Director for Science, Federal State-Financed Scientific Institution the Institute of Socio-Economic Development of Territories of the Russian Academy of Sciences (56A, Gorky Street, Vologda, 160014, Russia, [email protected]) Sergei Aleksandrovich KOZHEVNIKOV Junior Research Associate, Federal State-Financed Scientific Institution the Institute of Socio-Economic Development of Territories of the Russian Academy of Sciences (56A, Gorky Street, Vologda, 160014, Russia, [email protected]) Abstract. The article studies the theoretical and practical aspects of the management of the region’s economy on the basis of interaction between the authorities and business structures. The authors prove that partnership is an optimal form of such interaction under the conditions of chronic budget deficit. Partnership facilitates the achievement of strategic goals of the territory’s development and structural adjustment of domestic economy; it also enhances the interest of the parties in achieving successful results of cooperation, and helps attract innovation technology and significant extra-budgetary investments in the economy. In addition, as world experience shows, public-private partnership is an effective tool to remove infrastructure constraints to economic growth, to improve the availability and quality of public services. The article shows that at present the development of partnership between the government and business is hindered by a number of organizational, legal and financial-economic problems and barriers. The authors identify priority directions for regional public policy and propose several measures to use the available potential of cooperation for dealing with territorial development issues. Key words: regional economy, partnership cooperation between the authorities and business structures, public-private partnership (PPP), investments, infrastructure. 34 6 (36) 2014 Economic and social changes: facts, trends, forecast DEVELOPMENT STRATEGY T.V. Uskova, S.A. Kozhevnikov Decentralization of power and increase of the parties and on a mutually beneficial of autonomy of the territories in the exchange of available resources to solution of socio-economic development achieve strategic goals for the territory’s tasks turn them into full-fledged economic development (fig. 1). entities that compete for human, financial, Currently, public-private partnership is investment and other resources. These used most widely in neoliberal countries processes emphasize the task to find ways (U.S., UK, Ireland, Australia) in order to and new sources of growth of the regional attract private business to provide services economy for ensuring a high quality of life. in the spheres that are traditionally within Under the circumstances a most the competence of the public sector. important condition for the solution of The United Kingdom is, undoubtedly, these specific tasks is to consolidate the the leader by to the number of concluded limited resources through the development projects and scope of partnership of active cooperation between the authorities agreements. It accounts for more than and business structures. The current world half of PPP projects implemented in practice shows that partnership is an Europe. The Private Finance Initiative effective model of interaction between (PFI), a national program adopted in the authorities and business, because it 1992 for attracting private investment in helps to use competitive advantages of the the economy, promoted the successful parties (public and private sectors) more development of public-private partnership. efficiently, to increase their interest in Seven hundred and twelve agreements with the successful achievement of the results a total cost of 54.3 billion pounds were of joint activities, to attract significant implemented under PFI during 1992–2011. extra-budgetary funds and innovation Currently, the cost of completed joint technologies in the sphere of competence projects under PFI is about ¼ of the overall of the state [3, 5, 12]. government investment in the country. At Partnership is characterized by cohe- that, the social sphere is top priority in rence and a certain balance of interests of the implementation of PPP projects. Two the authorities and business structures, by hundred and sixty two projects in education regulation of their rights, responsibilities, and healthcare (which is 71% of the total cross risk-sharing, and joint and several number of partnership agreements) have liability. The economic nature of partnership been concluded during the implementation implies close interaction between the of PFI [5]. participants to achieve their goals and Other major PPP markets in Europe in perform all of their obligations. Only in this 2011 comprised Spain (the value of case there is the possibility to use synergistic partnership projects was 4.3 billion euros), effect that is achieved as a result of this Portugal (3.1 billion euros), France cooperation due to the fact that each party (1.8 billion euros) and Belgium (1.7 has certain resources, access to which can billion euros) [15]. The majority of the be useful for the partners [10, 13, 16]. implemented projects are agreements in Thus, public-private partnership (PPP) the transport sector, healthcare, defense, is based on the use of competitive advantages education, and telecommunications [1]. Economic and social changes: facts, trends, forecast 6 (36) 2014 35 Management of the regional economy on the basis of partnership interaction between the authorities and business... Figure 1. Structural-and-resource model of public-private partnership AUTHORITIES Economic and financial resources: provision of tax benefits and subsidies to business, compensation of interest rate on loans, etc. Administrative and political resources: Ͳ providing business with access to areas previously closed to entrepreneurial RESULTS OF PARTNERSHIP activity; IMPLEMENTATION - lobbying of business interests Enhancement of the quality and accessibility (physical and economic) of the services Information resources: Reduction of the burden on the budget in creation of the positive company image in the implementation of socially significant PARTNERSHIP the eyes of the public and the business investment projects - providing business with community Optimizing the number of management access to areas previously personnel of the government bodies closed to entrepreneurial Enhancement of the efficiency of property BUSINESS STRUCTURES activity; management through the application of Financial resources: - lobbying of business technical and managerial experience, private financial and investment interests innovation business technology, and a resources smooth mechanism for project Innovation resources: management innovation ideas, projects, technology Effective project risk management Management resources: modern methods and technologies of project management The aim to develop partnership relations and programs for development of territories between the authorities and business due to and industries provide for the use of a great demand for investment resources for partnership mechanisms. economic modernization has been put in Public-private partnership is applied legal form in Russia. mainly in the infrastructure sectors that The adopted Concept for socio- experience considerable shortage of economic development of the Russian investment for their functioning and stable Federation until 2020 considers public- development in the long term1: private partnership as a promising tool for – transport infrastructure (motor ways, innovation development of the key sectors railroads, bridges, pipeline transport); of Russia’s economy (energy, agriculture, education) and for improvement of the 1 According to expert estimates, the investment required for the development of the global infrastructure up to 2030 is quality of life. Besides, the majority of 35 trillion U.S. dollars. (A World Economic Forum Global Risk federal, regional and municipal strategies Report 2010. Geneva, 2010. P. 18.). 36 6 (36) 2014 Economic and social changes: facts, trends, forecast DEVELOPMENT STRATEGY T.V. Uskova, S.A. Kozhevnikov – energy and utility infrastructure (pow- and utilities, according to the Vologda er grids, water, heat and gas supply, sewerage Oblast Department of Construction and and facilities for solid waste disposal); Housing and Utilities Services, requires – social infrastructure (healthcare, about 53 billion rubles, which is comparable education, culture and tourism facilities). to the total expenditures of the region’s Judging by successful international consolidated budget in 2013. experience, partnership raises the quality Besides, the situation is aggravated by and availability of these types of infrastruc- the fact that the oblast’s budgetary system ture services. is characterized by a significant excess of The development of partnership is now expenditures over revenues. Moreover, a very relevant task for the Vologda Oblast these processes have intensified after the authorities. This can be explained by a high 2008–2009 global financial and economic demand for financial resources for the crisis. In 2008 the consolidated budget modernization of the region’s economy and of the