Popkova (Ed.) - The Future of the Global Financial System; Downfall or Harmony (2019)

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Lecture Notes in Networks and Systems 57

Elena G. Popkova Editor

The Future of the Global Financial System: Downfall or Harmony

Lecture Notes in Networks and Systems Volume 57

Series editor Janusz Kacprzyk, Polish Academy of Sciences, Warsaw, Poland e-mail: [email protected]

The series “Lecture Notes in Networks and Systems” publishes the latest developments in Networks and Systems—quickly, informally and with high quality. Original research reported in proceedings and post-proceedings represents the core of LNNS. Volumes published in LNNS embrace all aspects and subﬁelds of, as well as new challenges in, Networks and Systems. The series contains proceedings and edited volumes in systems and networks, spanning the areas of Cyber-Physical Systems, Autonomous Systems, Sensor Networks, Control Systems, Energy Systems, Automotive Systems, Biological Systems, Vehicular Networking and Connected Vehicles, Aerospace Systems, Automation, Manufacturing, Smart Grids, Nonlinear Systems, Power Systems, Robotics, Social Systems, Economic Systems and other. Of particular value to both the contributors and the readership are the short publication timeframe and the world-wide distribution and exposure which enable both a wide and rapid dissemination of research output. The series covers the theory, applications, and perspectives on the state of the art and future developments relevant to systems and networks, decision making, control, complex processes and related areas, as embedded in the ﬁelds of interdisciplinary and applied sciences, engineering, computer science, physics, economics, social, and life sciences, as well as the paradigms and methodologies behind them. Advisory Board Fernando Gomide, Department of Computer Engineering and Automation—DCA, School of Electrical and Computer Engineering—FEEC, University of Campinas—UNICAMP, São Paulo, Brazil e-mail: [email protected] Okyay Kaynak, Department of Electrical and Electronic Engineering, Bogazici University, Istanbul, Turkey e-mail: [email protected] Derong Liu, Department of Electrical and Computer Engineering, University of Illinois at Chicago, Chicago, USA and Institute of Automation, Chinese Academy of Sciences, Beijing, China e-mail: [email protected] Witold Pedrycz, Department of Electrical and Computer Engineering, University of Alberta, Alberta, Canada and Systems Research Institute, Polish Academy of Sciences, Warsaw, Poland e-mail: [email protected] Marios M. Polycarpou, KIOS Research Center for Intelligent Systems and Networks, Department of Electrical and Computer Engineering, University of Cyprus, Nicosia, Cyprus e-mail: [email protected] Imre J. Rudas, Óbuda University, Budapest Hungary e-mail: [email protected] Jun Wang, Department of Computer Science, City University of Hong Kong Kowloon, Hong Kong e-mail: [email protected]

More information about this series at http://www.springer.com/series/15179

Elena G. Popkova Editor

The Future of the Global Financial System: Downfall or Harmony

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Editor Elena G. Popkova Institute of Scientiﬁc Communications Volgograd, Russia

ISSN 2367-3370 ISSN 2367-3389 (electronic) Lecture Notes in Networks and Systems ISBN 978-3-030-00101-8 ISBN 978-3-030-00102-5 (eBook) https://doi.org/10.1007/978-3-030-00102-5 Library of Congress Control Number: 2018953030 © Springer Nature Switzerland AG 2019 This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of the material is concerned, speciﬁcally the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microﬁlms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a speciﬁc statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional afﬁliations. This Springer imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

Preface

This volume contains the best works that were presented at the conference “The Future of the Global Financial System: Downfall or Harmony,” which took place on April 13–14, 2018, in Limassol, Cyprus. The conference was devoted to reconsideration of the role and meaning of the global ﬁnancial system in the modern global economy in the context of the crisis, which started in 2008 and is still observed in a lot of countries, and to development of conceptual and applied recommendations for activation of development of the global ﬁnancial system. All works underwent peer-review and conform to strict criteria that include high level of originality (more than 90%), elements of scientiﬁc novelty, contribution into development of economic science, and wide possibilities for practical application. The target audience of this scientiﬁc work includes postgraduates, lecturers of higher educational establishments, and researchers who study the modern global ﬁnancial system. Based on the authors’ conclusions and results, representatives of the target audience will be able to build their new scientiﬁc research. The topics of the works contained in this volume cover (but are not limited to) the following issues, which are interesting for the modern economic science and practice: – Financial globalization as a foundation of modern times; – new role of ﬁnances in the global economy: from background to foreground; – transition of ﬁnancial system from infrastructure to new vector of development of the global economy in the twenty-ﬁrst century; – ﬁasco of the modern ﬁnancial system and ways of overcoming it; – problems and perspectives of harmonization of the global ﬁnancial system; – scenarios of development of the global ﬁnancial system. Materials of the volume are divided into the following parts: development of ﬁnancial systems of micro-, meso-, and macro-levels, ﬁnancial infrastructure of the modern economy, legal issues of development of the modern ﬁnancial system, and management of the global ﬁnancial system. The conference was organized by the

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Institute of Scientiﬁc Communications (Volgograd, Russia). Almost 2,500 scholars participated in the conference as visitors and speakers, with more than 500 scientiﬁc works.

Introduction The recent global ﬁnancial and economic crisis attracted attention of international society to the modern global ﬁnancial system, showing its unsustainability and causing threats to its further development in the long term. Obvious, the current trajectory of its movement is not perfect for participants of international ﬁnancial relations and requires correction. If these corrections are not timely, the next crisis might lead to downfall of the whole modern ﬁnancial system. On the contrary, selection of right direction of its development will ensure harmonization of interests of its participants and establishment of balance at the global ﬁnancial markets. Due to this, topicality of determining new outlines of the global ﬁnancial system, which allow making it more sustainable against crises, grows constantly. Materials of this volume are devoted to generalizing the accumulated experience in transformation of ﬁnancial system and discussing perspectives and developing recommendations for modernization of the modern ﬁnancial system in view of new challenges of the modern times for increasing its sustainability. For this, efforts of various experts in the sphere of ﬁnance are united, which allowed comparing various points of view on the future of the global ﬁnancial system and compiling its various forecasts and scenarios. This will allow reducing uncertainty and risk of execution of international ﬁnancial operations and will increase international ﬁnancial flows. This volume contains the best works that were presented at the conference “The Future of the Global Financial System: Downfall or Harmony,” which took place on April 13–14, 2018, in Limassol, Cyprus. The conference was devoted to reconsideration of the role and meaning of the global ﬁnancial system in the modern global economy in the context of the crisis, which started in 2008 and is still observed in a lot of countries, and to development of conceptual and applied recommendations for activation of development of the global ﬁnancial system. The conference was organized by the Institute of Scientiﬁc Communications (Volgograd, Russia). This volume contains scientiﬁc studies in the sphere of economic, management, and law—which ensured a multi-disciplinary approach to studying the modern global ﬁnancial system and substantiation of the offered recommendations from the organizational and managerial and normative and legal points of view. One of the most interesting works of the volume is the article by Elena Sysoeva, Elena Budilova, Oksana Kachur, and Olga Dolgova “Financing of Russian Companies in the Conditions of Distortion of International Trade Relations and Economic Sanctions,” which contains the authors’ opinion on the problem of deﬁcit

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of ﬁnancial resources for development of the modern Russian entrepreneurship and offers the means for its complex and highly effective solution. The work of Tatiana Malova and Marina Pivovarova “The Dilemmas of Macroeconomic Management: Impact on Global Financial Stability” is very interesting for researchers, as it contains framework strategic recommendations for provision of sustainability of the global ﬁnancial system on the basis of macroeconomic regulation tools. Legal aspects of future development of the global ﬁnancial system are reflected in the work “Peculiarities of Protecting the Rights of Participants of Financial Markets in Court”— this article contains practical recommendations for modernizing the normative and legal and institutional provision of supporting stability of the global ﬁnancial system. This work is logically continued by the work of N. V. Tskhadadze and N. V. Chernorizova “International Financial Markets in the Conditions of Transformation of the Financial System.” These and other works contain objective and various opinions on the future of the global ﬁnancial system and offer perspective solutions to the problem of activation of its post-crisis growth and prevention of new crises, as well as restoration of its leading role in the global economy.

Conclusions As a result of the conference, it is possible to conclude that the future of the global ﬁnancial system is not ambiguous. Joint efforts of the authors of the works of the volume allowed determining the main factors and risks of development of the global ﬁnancial system, tracking transformation of its role in the global economy before, during, and after the 2008 global crisis, and determining perspectives of its sustainable development in the long term. The most important result of the series of research is actualization of the problem of development of the global ﬁnancial system. We hope that these works will attract attention of the global society to this problem and will lead to implementation of complex measures (including our recommendations), aimed not only at provision of highly effective execution infrastructural role of the global ﬁnancial system in economic systems of various scale but also at assigning a new role to it—accelerator of growth and development of the global economy. One of the advantages of this volume is that it contains studies not only in the sphere of macroeconomics but also meso-economic and microeconomics. Due to this, it was possible to study the issues of including regions of national economic systems into the global ﬁnancial systems, development of separate ﬁnancial markets and ﬁnancial organizations, and the issues of overcoming of ﬁnancial barriers on the path of development of entrepreneurship. We’re proud that our joint efforts were able to cover such large layer of scientiﬁc and practical issues, thus reducing uncertainty as to future development of the global ﬁnancial system. At the same time, we acknowledge topicality and lack of

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solutions to such issues as provision of balance (overcoming disproportions) of the global ﬁnancial system’s development, standardization and uniﬁcation of functioning of national ﬁnancial markets and activities of ﬁnancial organizations, harmonization of the level and rate of its development with the needs of global economic subjects, etc., and call for scholars and experts to conduct research aimed at solving them.

Contents

Development of Financial Systems of the Micro-, Meso-, and Macro-Levels Inﬂuence of Integration Processes on Economy of the Agro-Industrial Complex: A View from the Positions of Various Models of Economic Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Larisa V. Popova, T. A. Dugina, A. V. Malofeev, I. S. Korabelnikov, and E. A. Likholetov Economic Analysis of Labor Resources Usage in Regional Markets . . . Tatiana N. Gogoleva, Pavel A. Kanapukhin, Margarita V. Melnik, Irina Y. Lyashenko, and Valeriya N. Yaryshina Technical Forensic Technique of Human Hair Examination: Forensic Practice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Eduard E. Genzyuk, Lyudmila A. Spektor, Viktoria S. Kirilenko, and Aleksandr V. Sukhanov

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Project Finance for Africa’s Construction Sector: Can Stabilization Funds Work? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lubinda Haabazoka

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The Shift of the Competition Paradigm in the Banking Sector of Russia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Anna Kladova, Marina Alpidovskaya, and Valeriy Gordeev

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Socio-Cultural Activities in the Implementation of Educational Programs for Tourism Based on the Competence Model . . . . . . . . . . . . Irina V. Borisenko, Tatyana V. Degtyaryova, and Gulmira B. Grigoryeva

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Communicative Tolerance of Students of Higher Educational Establishments in the Context of Social and Economic Dimension of the Region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Snezhana V. Yavon and Tatyana N. Ivanova

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Financial Conditions for Ensuring of Self-development of Regions . . . . Zhanna A. Zakharova The Role of the Financial System in Solving Socio-economic Problems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Konstantin Lebedev and Yuliya Budovich

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The Current Practice of the Strategic Planning in Russian Regions: Innovative Model of Strategic Planning “Galaxy 7 7 7” of the Leontief Centre-AV Group Consortium and Experience of Its Approbation in Krasnodar Krai . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 Konstantin V. Getmantsev, Daria V. Lanskaya, Tatiana A. Myasnikova, and Yuri I. Treshevsky Contradictions in the Motivation of Top Managers of Corporation by the Method of Economic Added Value . . . . . . . . . . . . . . . . . . . . . . . 114 Sergey N. Yashin, Egor V. Koshelev, Victor P. Kuznetsov, Yuliya V. Zakharova, and Alexey A. Ivanov Self-regulation in Tourism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126 Marina L. Davydova, Yuriy A. Bokov, Yevgeniy V. Stel, and Vladimir A. Zolotovskiy Olympic Movement in Kindergarten . . . . . . . . . . . . . . . . . . . . . . . . . . . 135 Alla A. Oshkina Labor Activity of the EAEU Migrants in Moscow . . . . . . . . . . . . . . . . . 142 Tatiana N. Yudina, Yuri N. Mazaev, Tatiana V. Fomicheva, Irina V. Dolgorukova, and Tatiana N. Bormotova Agricultural Products’ Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154 Aleksei V. Bogoviz, Elena I. Semenova, and Julia V. Ragulina Trafﬁc Safety as a Factor of Competitiveness of Economic System and a Reason for Increase of Differentiation of Developed and Developing Countries: Management on the Basis of New ICT . . . . 161 Vladimir A. Zelikov, Yuriy V. Strukov, Vera V. Razgonyeva, Ruslan A. Korablev, and Alexander Y. Artemov Digital Currency in the Development of Payment Systems on the Bitcoin Platform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167 Elena N. Egorova, Irina V. Mukhomorova, and Anton I. Mosalev Social Consequences of the Impact of Information Technologies on the Values of Modern Youth in the Conditions of the Global Financial and Economic Crisis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176 Mariana Y. Lokova, Marina N. Khanova, Gyuldzhan K. Azamatova, Albina O. Vindizheva, and Natalya N. Reshetnikova

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Factors of Socio-Economic Development of Rural Regions in the Area of Inﬂuence of City Agglomerations . . . . . . . . . . . . . . . . . . 183 Maria A. Bitarova, Konstantin V. Getmantsev, Elena V. Ilyasova, Ekaterina M. Krylova, and Yuri I. Treshchevsky Constructing Regional Social Inclusion: Foundations of Sociological Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195 Tatiana N. Yudina, Irina V. Dolgorukova, Egor Y. Kireev, Tatiana M. Bormotova, and Tatyana V. Fomicheva Financial Infrastructure of the Modern Economy The Model of Managing the Development of Agricultural Machinery Market Infrastructure on the Basis of Public-Private Monitoring . . . . . 205 Irina Morozova, Tatiana Litvinova, Ivan A. Mordvintsev, and Olga V. Konina Institutional Frameworks of Place Marketing in Russia: Barriers and New Possibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213 Yulia I. Dubova, Vyacheslav V. Golikov, Zhanna V. Gornostaeva, and Vladimir Zhidkov Directions of Perspective Development of Innovational Infrastructure of Russian Regions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219 Larisa L. Alekhina, Margarita N. Burtseva, Anna G. Savina, Svetlana A. Ilminskaya, and Irina V. Skobliakova Strategic Goals of Socio-Economic Development of Regions in the Conditions of Economic and Financial Limitations . . . . . . . . . . . 229 Elena V. Endovitskaya, Igor E. Risin, and Yuri I. Treshchevsky Global Information Space: A Non-linear Approach . . . . . . . . . . . . . . . . 236 Nelli I. Morozova, Olga S. Buryakova, Natalia Z. Aliyeva, and Elena B. Ivushkina Economic Efﬁciency of Using the Electric Grid Complex: Problems of Reserves of Network Power and Development of Intelligent Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 241 Olga Danilova and Irina Belayeva Effectiveness of Financial Support for the Resource Base of Innovative Development in Regions During Crisis . . . . . . . . . . . . . . . 251 Sergey A. Grachev, Marina A. Gundorova, Oleg A. Donichev, Denis Y. Fraymovich, and Maria I. Zakirova Contents of the Third Age University in Russia: Prospects of Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260 Inna Vysotskaya, Tamara Yovanovich, Natalya Prom, Olga Toporkova, and Oxana Evtushenko

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Information Hindrances and Communication Barriers in Project Interactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 273 Marianna S. Santalova, Elvira P. Lesnikova, Svetlana N. Nechaeva, Alla V. Borshcheva, and Olga G. Charykova Conditions of the Internationalization of Chinese Yuan: Changes for Five Years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 282 Inna V. Kudryashova The International Business Cooperation and Its Inﬂuence on Enterprise Financial Security Under Globalization . . . . . . . . . . . . . . 294 Natalia Reshetnikova, Magomedgabib Magomedov, Dmitry Buklanov, and Elena Zakharchenko Normal Flow of Resources as a Basis for Improving the Quality of Final Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 309 Alexander A. Bazhenov, Igor E. Mizikovsky, Ekaterina P. Garina, Viktor P. Kuznetsov, and Alexander I. Gavrilov Economic Security as a Factor of Formation of Modern Russian Entrepreneurial Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 316 Ulyana A. Pozdnyakova and Margarita T. Kozhukhova Role of the State in Financial Mechanism of Development of Industrial Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 325 Vera I. Menshchikova, Marina A. Kakushkina, Evgeny V. Sukhanov, and Irina B. Shapovalova Innovational Tools of Provision of Food Security Through State Support for the AIC in the Conditions of the Digital Economy . . . . . . . 334 Aleksei V. Bogoviz, Elena I. Semenova, and Ivan S. Sandu Informatization of the Russian Society: Evaluation and Perspectives . . . 341 Julia V. Ragulina, Svetlana V. Lobova, and Alexander N. Alekseev Strategizing as a Tool of Information and Analytical Provision and a Technology of Regional Development Management . . . . . . . . . . . 348 Daria V. Lanskaya, Yuri I. Treschevsky, Konstantin V. Getmantsev, and Tatyana A. Myasnikova Financial Barriers to the National Cancer Program Implementation in Modern Russia and Means to Overcome Them . . . . . . . . . . . . . . . . . 357 Yuri V. Przhedetsky, Natalia V. Przhedetskaya, Viktoria Y. Przhedetskaya, Ksenia V. Borzenko, and Viktoria V. Pozdnyakova New ICT as a Threat to Physical Development and Health of a Modern Human or a Means of Propaganda of Healthy Living . . . . 364 Elena S. Berezhnaya, Vladimir A. Bondarev, Yevgeniya V. Zazulina, Natalya V. Koloskova, and Anna V. Strichko

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Failure of the Funded Model of the Russian Pension System: Reasons and Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 371 Lyubov V. Grigorieva, Leyla A. Mytareva, and Ekaterina A. Shkarupa Metaphor in Financial and Economic Discourse . . . . . . . . . . . . . . . . . . 384 Svetlana V. Shustova and Alla F. Korlyakova Legal Issues of Development of the Global Financial System Establishment of the Institute of Tax Consulting as an Element of Market Relations and the Object of Economic and Legal Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 399 Lyudmila S. Kirina and Natalia A. Nazarova The Concept of Restoration of the Leading Role of the Global Financial System in Activation of Growth and Development of the Global Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 407 Elena G. Popkova and Tatyana V. Alferova Possibilities of the International Cooperation and Export of Subjects of Small and Medium-Sized Business Under the Conditions of Financial Crisis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 414 Tatyana Y. Anopchenko and Vladislav I. Ostrovskiy Issues Related to Foreclosure of Pledged Property in Russia: Theory and Practice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 421 Olga N. Kichalyuk, Oksana A. Morozova, Lyudmila A. Spektor, and Aleksandr V. Sukhanov Fundamentals of Russian Economic Policy for Increasing Competitiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 432 Alexey M. Tsikin and Marina L. Alpidovskaya Revival and Renewal of Political Economy . . . . . . . . . . . . . . . . . . . . . . 443 Sergey S. Slepakov, Natalia N. Novoselova, and Veronika V. Khubulova Structural Modeling of the Institution of Russian Entrepreneurship in the Spirit of “Old” Institutionalism . . . . . . . . . . . . . . . . . . . . . . . . . . 451 Svetlana L. Sazonova Formation of Target Programs of Innovation and Investment Development of Regions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 461 Tatiana L. Bezrukova, Irina V. Kuksova, Nadia I. Korda, and Svetlana S. Kirillova

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Ways to Protect Personal Honor and Dignity Pursuant to Current Criminal Legislation of the Russian Federation as an Important Problem of Modern Age . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 473 Olga N. Kichalyuk, Oksana A. Morozova, Viktoria S. Kirilenko, and Anna A. Kulikova Financing of Russian Companies in the Conditions of Distortion of International Trade Relations and Economic Sanctions . . . . . . . . . . . 487 Elena Sysoeva, Elena Budilova, Oksana Kachur, and Olga Dolgova Actual Problems of International Cooperation of Russia in the Sphere of Cyber Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 495 Dmitry A. Lipinsky, Konstantin N. Evdokimov, and Aleksandra A. Musatkina Problems of Classiﬁcation of Illegal Gambling Activities . . . . . . . . . . . . 505 Aleksandr V. Sukhanov, Eduard E. Genzyuk, Anna A. Kulikova, and Liana R. Barashyan Social Precarization in Post-Soviet Countries: Common Features and Differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 516 Olga V. Mramornova, Natalia A. Ivanova, Olga Y. Sokolova, Aynulkhat Z. Musaeva, and Saﬁa S. Abutalimova Strategic Alternatives of Regional Intellectual Capital Management . . . 528 Yuri N. Lapygin and Pavel Y. Makarov Possibilities of Import Substitution in the Russian Pharmaceutical Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 537 O. S. Peskova, T. B. Boriskina, O. V. Urova, and A. V. Fetisov Peculiarities of Protecting the Rights of Participants of Financial Markets in Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 545 Galina E. Ageeva, Petr P. Lang, Andrei V. Loshkarev, Tatiana V. Chugurova, and Ekaterina N. Churakova On the Compliance of Civil Standards of the Russian Federation with International Standards in the Field of the Fight Against Corruption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 553 Dmitry A. Lipinsky, Victoria V. Bolgova, and Aleksandra A. Musatkina Protecting the Rights of Economic Entities in the Event of Competition Restraint by Public Authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 563 Marina Y. Kozlova, Igor V. Rostovshchikov, Viktor A. Rudkovsky, and Alena N. Volchanskaya

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Establishing Legal Regulation Standards of Family Relations in the RF in the USA in the Conditions of Financial and Economic Crisis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 572 D. A. Kokova, Z. A. Zumakulova, Z. B. Khavzhokova, and N. N. Reshetnikova Budget Limitations in the Process of Formation of the Digital Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 578 Aleksei V. Bogoviz, Alexander N. Alekseev, and Julia V. Ragulina Circumstances Mitigating Punishment in the Russian Criminal Law . . . 586 Lyudmila A. Spektor, Anna A. Kulikova, Aleksandr V. Sukhanov, and Aleksei A. Shishkin Regarding the Issues of Implementation of International Laws on Fighting Corruption by the Russian Federation . . . . . . . . . . . . . . . . 603 Dmitry A. Lipinsky, Aleksandra A. Musatkina, and Pavel A. Rumyantsev Characteristics of Certain Crimes Against Peace and Security of Mankind as “Essential Threats” . . . . . . . . . . . . . . . . . . . . . . . . . . . . 612 Oksana Y. Grechenkova and Yulia A. Kuzmenko Public Prosecutor’s Waiver of Prosecution as a Sub-institution of the Russian Criminal Procedure Law . . . . . . . . . . . . . . . . . . . . . . . . 622 Anna A. Kulikova, Liana Barashyan, Viktoria S. Kirilenko, and Eduard E. Genzyuk Public Prosecution in Criminal Procedure: Modern Goals and Tasks . . . 637 Aleksei A. Shishkin, Eduard E. Genzyuk, Lyudmila A. Spektor, and Viktoria S. Kirilenko Management of the Global Financial System An Individual in the Contemporary Public Administration . . . . . . . . . . 649 Aleksandr M. Starostin, Elena N. Tovanchova, and Yulia L. Shepeleva Balance-Cognitive Approach to Foresight-Development of Management Audit Efﬁciency Digital Economic Systems in the Context of Strategic Drift . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 657 Galina I. Sidunova and Anna V. Shokhnekh System Regulation of Key Directions of Modern Financial Policy in the Conditions of Financial Globalization . . . . . . . . . . . . . . . . . . . . . 666 Elizaveta O. Tappaschanova, Salikh A. Baizulayev, Ekaterina S. Kovanova, Elmira G. Shurdumova, and Saida A. Zhirova

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The Dynamic Model of Increase of Population’s Health Level in Russian Regions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 673 Natalia A. Shchukina, Irina A. Tarasova, Tatiana E. Kozhanova, and Oksana A. Avdeyuk The Dilemmas of Macroeconomic Management: Impact on Global Financial Stability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 683 Tatiana Malova and Marina Pivovarova Forming a Strategy for Development of Russian Gas Industry in Modern Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 692 Alexey M. Tsikin Russia on the African Natural Gas Market . . . . . . . . . . . . . . . . . . . . . . 705 Larisa S. Shakhovskaya and V. I. Timonina Creation and Functioning of Special Economic Zones in Russia: Tendencies Problems and Perspectives . . . . . . . . . . . . . . . . . . . . . . . . . . 708 Inna V. Mitrofanova, Natalia S. Melnikova, Rustam A. Yalmaev, and Makka A. Yalmaeva Tendencies of Development of the Tools of Strategic Planning of Industrial Companies’ Activities in Post-industrial Economy . . . . . . . 718 Elena V. Popov and Mikhail V. Khachaturyan The Study of Modern Approaches to Development of Economic Systems Through Managing Their Complexity . . . . . . . . . . . . . . . . . . . 726 Anna A. Parshina, Valery V. Levchuk, Elena V. Shpilevskaya, Ekaterina P. Garina, and Alexander P. Garin The Modern Approach to Forming the Conception of Functions of Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 734 Yuliya Budovich, Konstantin Lebedev, and Anna Lebedeva Exploring Alternative Strategies for Managing the Complexity of a Product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 741 Ekaterina P. Garina, Viktor P. Kuznetsov, Nataliya S. Andryashina, Elena V. Romanovskaya, and Svetlana N. Kuznetsova Increasing the Complexity of the Product Manufacture: Assessment of Trends and Prospects of the Process . . . . . . . . . . . . . . . . . . . . . . . . . 748 Ekaterina P. Garina, Viktor P. Kuznetsov, Alexander P. Garin, Elena V. Romanovskaya, and Nataliya S. Andryashina International Financial Markets in the Conditions of Transformation of Financial System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 757 Nelli V. Tskhadadze and Nina V. Chernorizova

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The Main Tendencies and Directions of State Policy in the Sphere of Technological Development of Russia . . . . . . . . . . . . . . . . . . . . . . . . . 765 Tatiana A. Alekhina, Oksana E. Konobeeva, Elena E. Konobeeva, Evgenia V. Simonova, and Maria A. Stepanova Deformations of the Global Financial System in the Conditions of Globalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 774 Tatyana V. Zhukova, Olga V. Panﬁlova, Ilona V. Avlasenko, Lyudmila M. Avlasenko, and Anastasiya V. Belousova The Internet as a Synergetic Model Information Interaction Between Chaos and Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 783 Elena B. Ivushkina, Nelli I. Morozova, Irina B. Kushnir, and Olga S. Buryakova Economic Analysis of Effectiveness of the Existing Tools of State Support for Entrepreneurship in the AIC in the Digital Economy . . . . . 789 Aleksei V. Bogoviz, Yury A. Bugai, and Aleksey V. Minenko Socio-Economic Mechanisms of Supporting the Institute of Family in the Conditions of Financial Crisis . . . . . . . . . . . . . . . . . . . . . . . . . . . 795 Elena V. Smirnova, Svetlana V. Mitrofanova, Nina I. Medvedeva, Valentina V. Gorbunova, and Lilianna Y. Grazhdankina Conceptual Approaches to Formation of Financial Strategy of a Higher Education Institution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 803 Oksana N. Momotova, Lyudmila V. Belokon, Soﬁya G. Kilinkarova, Tatyana A. Mayboroda, and Galina V. Stroi Applying an Algorithm for Vertex Minimization of Non-deterministic Finite Automata (NFA) on the Basis of a Multi-heuristic Approach for Studying Social and Economic Performances of Region . . . . . . . . . . 813 Svetlana V. Pivneva, Tatyana N. Ivanova, Galina V. Akhmetzhanova, Anastasia A. Kurilova, and Julia A. Anisimova Financial Tools as an Alternative to Bank Deposits and Deposits of Microﬁnance Organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 819 I. E. Shaker and N. S. Shaker Risks and Management of Sustainable Development of the Global Financial System The Forecasting Approach to Strategic Development of Economic Subjects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 829 Olga S. Glinskaya, Anna V. Shokhnekh, Olga V. Prokopova, and Irina S. Skorikova

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Global Crisis: Overcoming the Uncertainty of the Concept in the Philosophical Paradigm of Globalization . . . . . . . . . . . . . . . . . . . 836 Anna Guryanova, Nonna Astafeva, Natalya Filatova, Elmira Khaﬁyatullina, and Nikolai Guryanov The Tools of Sustainable Development of Industrial Production Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 844 Lyudmila V. Strelkova, Dmitriy I. Tarasov, Julia A. Makusheva, Oleg V. Troﬁmov, and Viktor P. Kuznetsov Crisis of the Consumer Basket in Russia . . . . . . . . . . . . . . . . . . . . . . . . 852 Marianna S. Santalova, Elvira Lesnikova, Svetlana Nechaeva, Ksenia Sadykova, and Irina Nizovaya Problems and Perspectives of Development of the World Financial System in the Conditions of Globalization . . . . . . . . . . . . . . . 862 Galina V. Vorontsova, Ramazan M. Ligidov, Tatiana A. Nalchadzhi, Irina M. Podkolzina, and Galina V. Chepurko Increase of Effectiveness of Regulation and Development of Entrepreneurship in the Conditions of Increase of Russia’s Economic Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 871 Irina A. Morozova, Olga E. Akimova, Anna A. Khryseva, and Margarita T. Kozhukhova Modeling Well-Balanced Development of Innovational and Investment Activities of Economic Systems . . . . . . . . . . . . . . . . . . . 883 Ludmila I. Malyavkina, Irina B. Ilyukhina, Liliya M. Marchenkova, Elena M. Samorodova, and Liubov I. Starikova Provision of Sustainability of Development of Entrepreneurial Structures in the Conditions of Financial Crisis . . . . . . . . . . . . . . . . . . . 896 Viktor P. Bardovskii, Maria A. Vlasova, Natalia N. Sokolova, Ivan V. Ilin, and Elena V. Troshina Imperatives of Forecasting of Socio-Economic Development of Russian Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 908 Gilyan V. Fedotova, Ruslan K. Ilyasov, Oksana A. Kovalenko, Denis D. Tkachenko, and Tatiana D. Malyutina Increase of Economic Security of Internet Systems of Credit Organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 922 Gilyan V. Fedotova, Roman R. Chugumbaev, Nina N. Chugumbaeva, Alexander V. Sukhinin, and Emma V. Kuzmina Risk-Oriented Approach to Tax Control for Stabilization of Financial Systems of Developing Countries by the Example of Modern Russia . . . 932 Irina V. Gashenko and Yulia S. Zima

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Managing the Global Financial System on the Basis of Artiﬁcial Intelligence: Possibilities and Limitations . . . . . . . . . . . . . . . . . . . . . . . . 939 Elena G. Popkova and Valentina N. Parakhina Disaggregation of Industrial Enterprises as One of the Ways to Overcome the Economic Crisis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 947 Anastasia D. Efremova, Victor P. Kuznetsov, Marina V. Artemyeva, Aleksey I. Grigoryev, and Eduard V. Sintsov Historical Experience of Development of the Tokens of Value and Scenarios of Its Modern Application . . . . . . . . . . . . . . . . . . . . . . . . 954 Aleksandr L. Kleitman, Tatiana B. Ivanova, and Elena V. Timacheva Economic Consequences of the Collapse of the Financial System . . . . . . 962 Olga Akimova, Helen Vitaleva, Irina Dneprovskay, and Natalia Ketko Sustainable Development of Entrepreneurship as the National Economic Security’s Mainframe Condition . . . . . . . . . . . . . . . . . . . . . . 972 Irina A. Morozova, Irina V. Dneprovskaya, and Margarita T. Kozhukhova Anti-crisis Cluster Innovation Strategy Risk Management with Usage of Real Put Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 987 Sergey N. Yashin, Egor V. Koshelev, Alexey A. Ivanov, Alexander P. Garin, and Elena P. Kozlova Sustainable Finance as a Way of European Companies’ Transition to Green Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1002 Maria S. Shalneva and Yuliya V. Zinchenko The Modern Global Financial System: Social Risks Vs. Technological Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1013 Elena G. Popkova, Olga V. Fetisova, Tatyana A. Zabaznova, and Tatyana V. Alferova The Global Information Space as a Source of Formation of Threats and Dangers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1020 Natalia Z. Alieva, Elena B. Ivushkina, Irina B. Kushnir, and Olga S. Buryakova Implementation of Sustainable Development Goal to Reduce Inequality in the Russian Federation at Present Time . . . . . . . . . . . . . . 1027 Svetlana Zemlyanukhina, Larisa Sankova, Elena Yanchenko, Liliya Otstavnova, and Natalia Ivanova

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The Model of Managing the Risk Component of Intermodal Transportations Based on New Information and Communication Technologies Within Optimization of Transport Logistics of a Modern Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1036 Vladimir A. Zelikov, Mikhail A. Chernyshev, Alla A. Lysochenko, and Svetlana G. Chumachenko Veriﬁcation of State Programs of Geographically-Distributed Economic Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1043 Mikhail A. Kovazhenkov, Gilyan V. Fedotova, Timur K. Kurbanov, Elena O. Uchurova, and Baira I. Zerenova Regulating the Risk of Forest Companies with Decisions that Are Indifferent to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1054 Nikolai G. Sinyavsky Problems and Perspectives of Innovational Development of the Global Financial System Implementing Leading Experience and Innovational Technologies into the Activities of the Penal System as a Factor of Economic Optimization of Financial and Human Resources . . . . . . . . . . . . . . . . . 1075 Elena A. Timofeeva The Concept of Industrial Enterprises’ Economic Development Amid the Global Financial and Economic Crisis . . . . . . . . . . . . . . . . . . 1085 Anastasia A. Sozinova, Tatiana A. Burtseva, Olga V. Fokina, Anna A. Grabar, and Ekaterina S. Tufyakova The Structure of the Mechanism of Strategic Management of Innovational Development of Socio-Economic System . . . . . . . . . . . . 1094 Olga V. Godina, Liudmila S. Maksimenko, Lev I. Ushvitsky, Lyudmila V. Slavnetskova, and Marina N. Denshchik Peculiarities of Digital Transformation of the System of Bank’s Economic Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1104 Gilyan V. Fedotova, Nikolai I. Lomakin, Denis D. Tkachenko, and Anastasia A. Gontar The Model of Component Evaluation of Company’s Innovational Potential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1113 Tatyana V. Goryacheva, Ekaterina A. Lapteva, Arkadiy P. Plotnikov, Irina N. Pchelintseva, and Lyudmila V. Slavnetskova Capabilities of Information Technologies in Introducing the Children to the World of Professions . . . . . . . . . . . . . . . . . . . . . . . . 1124 Olga V. Dybina

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The Role and Inﬂuence of Information Exchange on Creation of Networks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1130 Marina Katkova and Vladimir Tregubov Increase of Economic Effectiveness of Investment Projects in Industrial Parks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1138 Svetlana N. Kuznetsova, Dmitry N. Lapaev, Marina V. Artemyeva, Yaroslav S. Potashnik, and Elena P. Kozlova Analysis Methodology of Innovative Development in Regional Industrial Segment by Graph Theory . . . . . . . . . . . . . . . . . . . . . . . . . . 1145 Oleg L. Goykher, Roman V. Skuba, Olga S. Bugrova, Vladimir E. Strelkov, and Roman I. Kudryakov Improvement of Methodological Approaches to the Effectiveness Assessment of Innovation Development of Regional Economy . . . . . . . . 1155 Pavel N. Zakharov, Karina V. Nazvanova, and Artur A. Posazhennikov Hannah Arendt and Herbert Marcuse’s Critique of Modernity . . . . . . . 1169 Evgeniya Bujor, Alexey Volobuev, and Elena Kuzina Prospects of Using Virtual Technologies in Modern Corporate Business Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1181 Elena Klochko and Olga Brizhak Using Internet Services in Teaching Methodology . . . . . . . . . . . . . . . . . 1193 Marina L. Gruzdeva, Zhanna V. Smirnova, Zhanna V. Chaikina, Olga V. Golubeva, and Olga T. Cherney Inﬂuence of Innovations on Regional Socio-Economic Development . . . 1200 Aleksei V. Bogoviz, Julia V. Ragulina, and Mariana K. Barcho Perspectives of Growth of Labor Efﬁciency in the Conditions of the Digital Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1208 Aleksei V. Bogoviz, Svetlana V. Lobova, and Julia V. Ragulina Shift of the Global Investment Flows in the Conditions of Formation of Digital Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1216 Aleksei V. Bogoviz, Svetlana V. Lobova, and Julia V. Ragulina The Cost and Value of Human Capital in the Modern Digital Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1224 Aleksei V. Bogoviz, Svetlana V. Lobova, and Julia V. Ragulina Distortions in the Theory of Costs in the Conditions of Digital Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1231 Aleksei V. Bogoviz, Svetlana V. Lobova, and Julia V. Ragulina

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Information and Communication Technologies as a New Vector of Development of the Modern Economy . . . . . . . . . . . . . . . . . . . . . . . . 1238 Natalia Y. Kozhanchikova, Anna A. Polyakova, Marina K. Chistyakova, Maria A. Vlasova, and Irina V. Ushakova A Study of the Effects of Technological Innovations on the Performance of Commercial Banks in Developing Countries A Case of the Zambian Banking Industry . . . . . . . . . . . . . . . . . . . . . . . 1246 Lubinda Haabazoka Innovational Projects as a Basis of Progress of the Global Financial System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1261 Tatiana L. Bezrukova, Elena V. Popova, Boris A. Bezrukov, and Valery A. Spesivtsev Russian Bank Association as a Driver Force of Institutional Changes . . . 1270 I. N. Shapkin Author Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1283

Development of Financial Systems of the Micro-, Meso-, and Macro-Levels

Influence of Integration Processes on Economy of the Agro-Industrial Complex: A View from the Positions of Various Models of Economic Systems Larisa V. Popova, T. A. Dugina, A. V. Malofeev, I. S. Korabelnikov, and E. A. Likholetov(&) Volgograd State Agricultural University, Volgograd, Russia [email protected], {deisi79,malofeev_1981,korablick.ru, l.evgeni.a}@mail.ru

Abstract. The purpose of the work is to study the peculiarities of integration processes and their influence on economy of the agro-industrial complex of various models of economic systems. The authors use the method of regression analysis for determining the dominating type of integration (internal or external), calculate the values of regression indicators, and determine the type if influence of integration processes on economy of the agro-industrial complex (positive or negative influence). For determining the dominating type of integration, dynamics of the values of the corresponding indicators are studied. The indicator of internal integration is the index of intensity of competition in domestic sectorial markets according to the World Economic Forum. The indicator of external integration is the index of economic globalization according to the KOF. The level of development of economy of the AIC is evaluated on the basis of the index of food production according to the World Bank. The data are studied in dynamics of three years: from 2015 to 2017 by the example of the countries that correspond to various distinguished models of economic systems. As a result, it is concluded that various models of economic systems are influenced differently by internal and external integration. The authors substantiate the necessity for mandatory accounting of the influence of integration processes during management of development of the AIC economy. For that, the proprietary mechanism of management of integration processes in the interests of stimulating the development of the AIC economy from positions of various models of economic systems is created. Keywords: Integration processes Models of economic systems

AIC economy

1 Introduction The modern scientiﬁc approach to studying economic systems supposes not only consideration of their spheres in close interconnection but also assigning equal value to them for supporting sustainable socio-economic development and well-balanced economic growth. At the same time, during determination of the values of spheres for © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 3–9, 2019. https://doi.org/10.1007/978-3-030-00102-5_1

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economic systems, not only their export potential but also domestic needs for manufactured products in the interests of import substitution and self-provision of economic systems are taken into account. This led to reconsideration of the role of economy of the AIC in economic systems, which was ousted to the background during domination of the post-industrial concept – it was not a part of the service sphere and did not stimulate competitiveness of the national economy; at present, it becomes most important, as it ensured production of strategic goods – food products. The global economic depression of the recent years changed the character of integration processes in the global economic systems, leading to the tendency of disintegration and the change of types of integration – from internal to external and vice versa. In the new economic conditions, countries of the world cannot create precise forecasting scenarios of development of external and internal environment – so, for supporting their sustainability they prefer the strategies of national production diversiﬁcation that replaced the strategies of specialization. Due to this, topicality and scientiﬁc & practical signiﬁcance of studying the essence and character of influence of integration processes on economy of the AIC of modern economic systems grew. The authors offer a hypothesis that various models of economic systems are dominated by different integration processes, and their influence on economy of the AIC is different. The purpose of the work is to verify the offered hypothesis and to study the peculiarities of integration processes and their influence on economy of the AIC of various models of economic systems.

2 Materials and Method The most popular classiﬁcation is classiﬁcation of models of economic systems according to the World Bank as to the criterion of the level and rate of their socioeconomic development, according to which two main categories of the countries are distinguishedн: developed and developing countries. That’s why most of modern scientiﬁc studies, devoted to integration processes in economies of different countries, are performed on the basis of these categories of economic systems. The results of studying the essence and influence of integration processes on economies of developed countries are presented in the works (Amri 2017), (Ha 2015), (Omri et al. 2015), (Park 2013), (Shahbaz et al. 2017), (Solé et al. 2015), and (Xue et al. 2014), and on economies of developing countries – in the works (Amri 2017), (Aziz and Asadullah 2017), (Bogoviz et al. 2017), (Couharde and Generoso 2017), (Darku and Yeboah 2018), (Popkova et al. 2018), (Temiz Dinç et al. 2017), and (Zahonogo 2017). The performed literature review on the selected topic showed that the existing publications shed light on the issues related to development of economic systems under the influence of integration processes. However, the aspects of their influence on economy of the AIC are poorly studied and require further consideration. The currently applied classiﬁcation of economic systems does not fully consider their differences as to the criterion of economy of the AIC. That’s why we deem it necessary to supplement this classiﬁcation by two well-known classiﬁcations of

Influence of Integration Processes on Economy of the Agro-Industrial Complex

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countries. The ﬁrst one is based on differences in the conditions for development of economy of the AIC and supposes distinguishing the countries with favorable and unfavorable conditions, and the second is based on differences in the types of economic systems and envisages differentiation of the countries with pre-industrial (agrarian), industrial, and post-industrial (service) economy. For evaluation of the influence of integration processes on economy of the AIC of various models of economic systems, we use the method of regression analysis. This methods helps to determine the dominating type of integration (internal or external), calculate the values of indicators of regression (coefﬁcient m in the model of paired linear regression of the type y = mx + b and coefﬁcient of determination r2), and determine the type of influence of integration processes on economy of the AIC (positive or negative influence). For determining the dominating type of integration, dynamics of the values of the corresponding indicators are studied. The indictor of internal integration is the index of intensity of competition in domestic sectorial markets (6.01 Intensity of local competition) according to the World economic forum – the lower the indicator, the higher the level of monopolization of these markets and the more intensive the processes of internal integration. The indicator of external integration is the index of economic globalization according to the KOF. The level of development of economy of the AIC is evaluated on the basis of food production index according to the World Bank. The data are studied in dynamics of three years (2015–2017) by the example of the countries that conform to various distinguished models of economic systems. The values of these indicators are given in Table 1.

3 Results Preliminary statistical analysis of the data of Table 1 showed that all countries – except for Russia and Nepal – have positive dynamics of external integration and positive dynamics of internal integration. This is explained by the fact that growth of global competition leads to corresponding increase of competitive struggle in internal sectorial markets, including economy of the AIC. At that, participation in international integration associations limits the possibilities in regulation of integration processes, hindering support for domestic entrepreneurship through establishment of the barriers for external market players. Russia and Nepal are peculiar for negative dynamics of external integration and positive dynamics of internal integration. This is explained by the fact that due to limited influence of foreign market players and requirements for supporting the competitive environment from integration associations in internal sectorial markets, including economy of the AIC, monopolization takes place – as state anti-monopoly regulation is less effective than market self-regulation. The determined tendencies allows determining the dominating type of integration in all models of economic systems. The calculated indicators of regression and the conclusions on the type of influence of integration processes on economy of the AIC are given in Table 2.

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As is seen from Table 1, different models of economic systems are influenced by internal and external integration differently. External integration, which dominates in developed countries, performs positive influence in economic systems with favorable conditions for development of the AIC, and negative influence – in systems with unfavorable conditions.

Table 1. Dynamics of the values of indicators of integration and development of economy of the AIC in various models of economic systems by the example of the corresponding countries in 2015–2017. Type of classiﬁcation

Models of economic systems

Examples Internal integration External integration of countries 2015 2016 2017 2015 2016 2017

Level and rate of socio-economic development Conditions for development of economy of the AIC Type of economic system

Developed Developing

USA Russia

Economy of the AIC 2015

2016

2017

5.8 5.3

5.9 5.2

6 5

67.04 68.91 71.58 116.2 118.45 123.8 54.96 53.74 52.06 121.6 120.3 119.7

Favorable Poland 5 Unfavorable Netherlands 5.8

5.1 5.9

5.3 5.9

72.1 74.48 77.06 116.5 119.56 123.5 90.25 91.24 93.06 116.5 115.24 113.05

Preindustrial Industrial Postindustrial

Nepal

5.1

4.9

4.8

27.78 26.61 24.72 136.8 137.4

138.5

China Japan

5.4 6

5.5 6.1

5.5 6.2

48.74 50.65 52.84 130.8 125.81 121.67 57.2 60.82 63.47 96.5 91.01 87.05

Source: compiled by the authors based on: (World Economic Forum (2018), (KOF 2018), (World Bank 2018).

Determining the model of economic system

Developed country

According to the level and rate of development

Developed country

Conditions for the AIC

Conditions for the AIC

Unfavorable

Favorable

Unfavorable Favorable Limitation of integration

Pre-industrial type?

No

Change of the type of integration

Yes Stimulation of further development of current integration processes

Fig. 1. Algorithm of management of integration processes in the interests of stimulating the development of economy of the AIC from the positions of various models of economic systems Source: compiled by the authors

Influence of Integration Processes on Economy of the Agro-Industrial Complex

7

Internal integration, which dominates in developing countries, in economic systems, which correspond to the pre-industrial type, i.e., specialize in the agrarian sector of economy, stimulates further development of their economy of the AIC, i.e., performes positive influences, and in economic systems with unfavorable conditions for development of economy of the AIC or those that do not specializes in it – performs negative influence on economy of the AIC. This shows the necessity for mandatory consideration of the influence of integration processes during management of development of economy of the AIC. For that, we developed the algorithm of management of integration processes in the interests of stimulating the development of economy of the AIC from the positions of various models of economic systems (Fig. 1). The algorithm in Fig. 1 shows the logic of management of integration processes in the interests of stimulation of development of economy of the AIC from the positions of various models of economic systems. The initial point of this process is determining the model of economic system. Then, depending on the set character of the influence of integration processes on economy of the AIC, various models of economic systems (Table 2) envisage the corresponding managerial measures. In developed countries with favorable conditions for development of economy of the AIC and in developing countries that specialize in this sphere of national economy (development according to the pre-industrial type), it is recommended to stimulate further development of current integration processes, as they positively influence economy of the AIC. In developed countries with unfavorable conditions for development of economy of the AIC, which is negatively influenced by dominating external integration, it is necessary to set limitations. In developing countries with unfavorable conditions for development of economy of the AIC that do not specialize in this sphere of national economy, it is expedient to change the type of integration. Stimulation of external Table 2. Characteristics of the influence of integration processes on economy of the AIC of various models of economic systems Type of classiﬁcation

Models of economic systems

Example of Dominating country type of integration

Level and rate of socio-economic development Conditions for development of economy of the AIC Type of economic system

Developed Developing

CШA Russia

Indicators of regression m r2

Type of influence of integration processes on economy of the AIC

external internal

1.69 0.98 positive 5.86 0.85 negative

Favorable Poland external Unfavorable Netherlands external

1.41 0.99 positive −1.22 0.99 negative

Preindustrial Industrial Postindustrial

Source: compiled by the authors.

Nepal

internal

−5.29 0.88 positive

China Japan

external external

−2.22 0.99 negative −1.51 0.99 negative

8

L. V. Popova et al.

integration will stimulate the growth of competition in domestic economy of the AIC, thus overcoming the tendency of its monopolization that negatively influences its development.

4 Conclusions Thus, the offered hypothesis was proved – on the basis of the ofﬁcial statistical information on dynamics of recent years and by the example of different countries it is proved that integration processes influence economy of the AIC of different models of economic systems differently. That’s why the factor of integration should be considered in the process of development and implementation of national strategies of management of development of economy of the AIC in the interests of maximization of its positive or limitation of negative influence. For this, the proprietary algorithm of management of integration processes in the interests of development of economy of the AIC from the positions of various models of economic systems was developed. The advantage of this algorithm is its universality which ensures its application in any model of economic systems. However, foundation on the results of analysis on the basis of limited selection (in each model only one country is considered) leads to probability of deviation of certain countries of the world from the distinguished models of economic systems. That’s why determination of these deviations and their inclusion into the developed algorithm create constitute perspectives for further scientiﬁc research.

References Amri, F.: Intercourse across economic growth, trade and renewable energy consumption in developing and developed countries. Renew. Sustain. Energy Rev. 69, 527–534 (2017) Aziz, N., Asadullah, M.N.: Military spending, armed conflict and economic growth in developing countries in the post-Cold War era. J. Econ. Stud. 44(1), 47–68 (2017) Bogoviz, A.V., Ragulina, Y.V., Komarova, A.V., Bolotin, A.V., Lobova, S.V.: Modernization of the approach to usage of region’s budget resources in the conditions of information economy development. Eur. Res. Stud. J. 20(3), 570–577 (2017) Couharde, C., Generoso, R.: Economic growth and hydro-climatic thresholds in developing countries, (Croissance économique et seuils hydro-climatiques dans les pays en développement). Mondes En Dev. 179(3), 67–84 (2017) Darku, A.B., Yeboah, R.: Economic openness and income growth in developing countries: a regional comparative analysis. Appl. Econ. 50(8), 855–869 (2018) Ha, E.: The impact of democracy, government ideology, and globalization on social spending in less developed countries. Int. J. Comp. Sociol. 56(5), 338–365 (2015) KOF. Index of Globalization (2018). http://globalization.kof.ethz.ch/query/. Accessed 17 Jan 2018 Omri, A., Ben Mabrouk, N., Sassi-Tmar, A.: Modeling the causal linkages between nuclear energy, renewable energy and economic growth in developed and developing countries. Renew. Sustain. Energy Rev. 42, 1012–1022 (2015)

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Park, S.H.: Capital openness, monetary integration, and wage-setting coordination in developed European countries. Econ. Ind. Democr. 34(4), 637–666 (2013) Popkova, E.G., Bogoviz, A.V., Pozdnyakova, U.A., Przhedetskaya, N.V.: Speciﬁcs of economic growth of developing countries. Stud. Syst. Decis. Control. 135, 139–146 (2018) Shahbaz, M., Shahzad, S.J.H., Mahalik, M.K., Sadorsky, P.: How strong is the causal relationship between globalization and energy consumption in developed economies? a country-speciﬁc time-series and panel analysis. Applied Economics, p. 1–16 (2017) Solé, T.T., Ríos, M.S., Perdiguer, M.F.: Education as a factor of economic growth in less developed countries | (La educación como factor de crecimiento económico en los países menos desarrollados). Sistema, 2015-January(237), p. 113–128 (2015) Temiz Dinç, D., Gökmen, A., Nakip, M., Azari, N.M.: The impact of foreign trade issues on economic growth in some developing countries including Iran and Turkey. J. Transnatl. Manag. 22(3), 171–202 (2017) World Bank. Food production index (2018). https://data.worldbank.org/indicator/AG.PRD. FOOD.XD?view=chart. Accessed 17 Jan 2018 World Economic Forum. The Global Competitiveness Report (2018). http://www3.weforum.org/ docs/GCR2017-2018/05FullReport/TheGlobalCompetitivenessReport2017–2018.pdf. Accessed 17 Jan 2018 Xue, B., Geng, Y., Müller, K., Lu, C., Ren, W.: Understanding the causality between carbon dioxide emission, fossil energy consumption and economic growth in developed countries: an empirical study. Sustainability (Switzerland) 6(2), 1037–1045 (2014) Zahonogo, P.: Globalization and economic growth in developing countries: evidence from subsaharan Africa. Int. Trade J., 1–20 (2017)

Economic Analysis of Labor Resources Usage in Regional Markets Tatiana N. Gogoleva1(&), Pavel A. Kanapukhin1, Margarita V. Melnik2, Irina Y. Lyashenko1, and Valeriya N. Yaryshina1 1

2

Voronezh State University, Voronezh, Russia [email protected], [email protected], [email protected], [email protected] Financial University Under the Government of the Russian Federation, Moscow, Russia [email protected]

Abstract. The purpose of the article is to substantiate the necessity for considering the territorial peculiarities of using labor resources employed at harmful and hazardous productions, determined on the basis of the economic and statistical analysis, during formation of the optimization model and the procedure of decision making for selecting the programs of the planned control of the employment sphere for labor safety quality. There are various methodologies of labor safety, oriented at characterizing this process within a speciﬁc company and without a direct connection to management of labor safety within the region. T.V. Azarnova developed the approach to evaluation of effectiveness of regional management of labor safety quality and formed the optimization stochastic model of the system of planned control of the employment sphere in the labor safety sphere which is oriented at the differentiated management of the control functions as to the groups of companies that are distinguished depending on the complexity of the structure and level of implementation of the labor safety processes. The authors offer to use – apart from studying the situation at speciﬁc companies and groups of companies – the economic and statistical analysis of regional peculiarities of the influence of the production environment and the labor process factors for statistically determined groups of companies on the labor conditions of employees. Results: using the economic and statistical analysis of regional peculiarities of the labor conditions of employees allowed determining the speciﬁcs of the influence of various factors at the level of federal districts of Russia and among the regions of the Central Federal District. The obtained results became the basis of the offers that are to be taken into account during development of the effective system of regional management of labor safety quality. Keywords: Labor market Labor conditions Statistical analysis of labor at the regional market Regional system of management of labor safety quality GEL Classiﬁcation Codes: C19 econometric and statistical methods and methodology J08 Labor economics policies © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 10–19, 2019. https://doi.org/10.1007/978-3-030-00102-5_2

General. Others

Economic Analysis of Labor Resources Usage in Regional Markets

11

1 Introduction In the modern conditions, labor quality and labor safety are the factor of effectiveness of labor resources usage – and the quantity of resources reduces in Russia. Quality of labor safety and related processes are regulated by multiple laws and bylaws. At the same time, the preventing activities are still not developed, and violations in the sphere of labor safety tend to repeat and perform huge material and moral damage to the society and the state. Thus, optimization of labor safety quality by means of optimization of state control in the sphere of labor law and labor safety becomes very topical. The system of management and control over economic subjects depends on connection between the goals of the managed object and the possibilities of the subsystems. Effectiveness of management is influenced by the measures for optimization of the whole system of management [2]. One of the directions of optimization is formation of the programs of planned control in the sphere of employment for quality of labor safety, during development of which it is necessary to take into account the peculiarities of companies and external socio-economic conditions and institutes that determine the environment of their functioning and form the regional peculiarities of the state of employees’ labor conditions. Thus, there’s a necessity to consider the internal characteristics of organization of production processes at companies and the external environment of their development.

2 Research Methods At the legislative level, the issues of labor safety in the RF are regulated by the Labor Code and the Law “On special evaluation of labor conditions”, which determine the main norms of the state of labor conditions [9]. At present, there are various analytical approaches to evaluation of the state of labor safety, which authors – O.U. Drozhchanaya, E.A. Krasnoshchekaya, M.P. Gandzyuk, R.P. Kerb, and E.V. Spatar [3–6, 8] – focus on determining the system of indicators that would help to conduct the evaluation, emphasizing on the situation in the analyzed sphere at the company level. Thus, the main and sole object of evaluation is company as an economic subject. At the same time, the problem of labor quality and labor safety should not be ﬁxed to the company level, as it is more complex and includes diverse external conditions in which the company’s activities are conducted. These conditions, created by the external environment, should be taken into account at the public level of considering and solving the problems of labor quality and labor safety – at the regional level. Such problems are not viewed by the above authors. The works of Azarnova [1, 2] set the question of managing the quality of labor safety at the regional level and its assessment – for which the optimization stochastic model of the system of planned control of the employment sphere and the algorithm of ﬁnding the optimal intensity of control were formed – which ensure the differentiated management of the control functions as to the companies. This model is oriented at development of recommendations for the regional programs of control over labor safety quality as to the groups of companies with a certain complexity of the structure

12

T. N. Gogoleva et al.

and the level of implementation of the labor safety processes. Thus, the emphasis was shifted to the level of homogeneous groups of companies of one region which are controlled by the regional authorities. However, determination and consideration of the regional peculiarities of the external environment, which form the factors that influence the state of labor conditions, are not envisaged. This aspect of the problem should be studied in detail on the basis of analysis of the ofﬁcial statistics data. For evaluation of the state of labor conditions at companies depending on their territorial location, it is necessary to consider several groups of factors: natural and geographic, technological (factors of the production environment factors of the labor process), and socio-economic factors. Natural and geographic factors determine the peculiarities of functioning of separate spheres that are located on various territories. These peculiarities are reflected in the corresponding territorial codes (CЗB-CTAЖ, CЗB-КOPP, CЗB-ИCX). At the same time, there are no methods of accounting of territorial peculiarities of various productions within the same group of spheres (e.g., processing productions are represented by various spheres in Belgorod and Voronezh Oblasts, so the state of labor conditions will be determined by various factors). Technological factors that determine the state of labor conditions are the object of attention of annual statistical observations. Each company ﬁxes its indicators by determining the number of employees who are under the influence of the production environment factors (chemical, biological, influence of sprays, noise, vibration, neon and ionizing rays, micro-climate, light environment, etc.) and the factors of the labor process (work load and work tension). Labor conditions, according to the tasks of statistical observation within the ofﬁcial state statistics in the RF, are studied at large and medium companies of the following types of economic activities: agriculture, hunting and forestry (as well as provision of services in these spheres); mineral production; processing productions; production and distribution of electric energy, natural gas, and water; manufacture of food products; textile and sewing production; construction; transport and communications. As these indicators are uniﬁed for all companies of Russia, and the ofﬁcial statistics provides their generalized values in the territorial aspect, they are used in this research for comparative analysis of external environment that determines the state of labor conditions. Socio-economic factors that determine the territorial peculiarities of the state of labor conditions include the relations that emerge between employees, employers, and the society on the whole as to formal and informal execution of the normative requirements. In the ofﬁcial statistics this group is not determined, so this research studies its influence only in general features. In the course of the analysis a task was set of determining the types of activities and risk factors for which the studied regions have the most vulnerable positions from the point of view of the state of labor conditions. This analysis was performed on the basis of the ofﬁcial statistics that characterizes the situation in the federal districts of the RF and Oblasts of the Central Federal District (CFD) [7].

Economic Analysis of Labor Resources Usage in Regional Markets

13

3 Peculiarities of the State of Labor Conditions of the Employees in View of the Federal Districts of Russia (as of Year-End 2016) Comparative analysis of the general situation that characterizes the state of labor conditions in various territorial entities of the RF was conducted at the level of federal districts. The task of this stage was to determine the peculiarities in the labor conditions in various regions on the whole and as to the above sectorial groups. The general situation that characterizes the state of labor conditions in the federal districts of the RF regardless of the sectorial groups and the factors of hazardous influence is shown in Fig. 1. It should be emphasized that the regions are different as to the indicators of average Russian value (38.5% of the employees work in abusive and (or) hazardous labor conditions.

The share of employees who work in abusive and (or) hazardous labor condions, %

40.1

38.5 29.5

33.3

40.2

43.8

48.1

46.8

27.1

Fig. 1. The share of employees who work in abusive and (or) hazardous labor conditions, conduct activities in agriculture, hunting, forestry, extraction of minerals, processing productions, production and distribution of electric energy, natural gas and water, construction, and transport and communications in federal districts of the RF (as of year-end 2016).

Figure 1 brings us to the conclusion of a large scatter of the indicator that characterizes the share of the employed in the abusive and (or) hazardous labor conditions, as compared to the average Russian level (the lowest indicators – 27.1%; 29.5% of the employed against the highest indicators 46.8%; 48.1% in the corresponding federal districts). The share of regions in which the studied indicator is below the average indicator (the Central and North Caucasus Federal Districts) account for 27.0% of the average number of employees of the RF. In its turn, in the Urals, Far Eastern, and

14

T. N. Gogoleva et al.

Siberian Federal Districts, where the indicator is higher than the average Russian indicator, 31.1% of all employees of the RF are employed. Further analysis of territorial peculiarities of employment in the abusive and (or) hazardous labor conditions supposes their determination at the sectorial level. The existing statistics allows doing this for the sectorial groups (Table 1). It seems that the causes of the differences for the sectorial groups between the federal districts are related to the peculiarities of the used technologies (technological factors) and geographic conditions (natural and climatic factors). Comparative analysis of the role of various factors of the production environment and the labor process (technological factors) showed that the influence of noise, air ultrasound, infrasound, and work load are most popular in Russia. The “anti-leaders” as to the share of the employed influenced by noise, air ultrasound, and infrasound (the most popular unfavorable factor of the production process) are the Siberian (23.3% of the employed), Far Eastern (22.5%), and Ural (22.3%) federal districts. The smallest share of the employed is subject to the influence of this factor in the North Caucasus Federal District (10.1%). Analyzing the share of the workers employed in the conditions of large work load – which is the second most widespread unfavorable factor – it is possible to note that the largest share of the employed in the conditions of this factor is observed in the Siberian Federal District (24.1%), the smallest share – in the Central Federal District (12%). The peculiarities of the role of separate factors that determine abusive (hazardous) conditions of labor in the sectorial view are as follows: – of all the employed in agriculture, the largest share of the workers in the unfavorable conditions is observed in the Ural Federal District (40.8%), the smallest share – in the Central (24%) and the North Caucasus (25.7%) Federal Districts. The most widespread unfavorable factors are noise, air ultrasound, infrasound, and chemical factor, which requires special attention within the measures on management of labor safety. – mineral production is peculiar for the large share of the employed in the abusive and (or) hazardous labor conditions, which constitutes 55.6% in Russia. The average Russian indicator is exceeded in the Siberian (69.9%) and the Central (67.6%) Federal Districts. It is rather high in the North Western (59.7%), Far Eastern (58.8%), and Privolgsky Federal Districts (57.4%). This situation could be explained by the sectorial speciﬁcs and geographic location of the companies of this group of spheres. – in the sector of production and distribution of electric energy, natural gas, and water, the largest share of the workers in the abusive and hazardous conditions is observed in the Siberian (54.5%) Federal District, the smallest – in the North Caucasus Federal District (28.4%). – in processing industries, the maximum share of the workers in the hazardous conditions is observed in the Ural Federal District (52,5%). This district is also the “anti-leader” for such signiﬁcant factors as influence of noise, ultrasound, and infrasound (29.9%), as well as work load (24.3%). The smallest share of workers in hazardous conditions – as to the level of noise, ultrasound, and infrasound – is observed in the North Caucasus Federal District (30.5% and 13.1%, accordingly).

Economic Analysis of Labor Resources Usage in Regional Markets

15

Table 1. Share of the employed in abusive and (or) hazardous labor conditions who conduct activities for separate sectorial groups in the federal districts of the RF (2016), % Northwestern ФO

South FD

North Caucasus FD

Privolgsky FD

Ural FD

Siberian FD

Far Eastern FD

30.8 24.3

35.5

30.5

26.3

31.5

43.4

35.2

31.3

31.2 18.5 55.6 67.6

43 59.7

11 52.4

5.5 52.7

17.6 57.4

15.8 42.9

41.2 69.9

35.8 58.8

42.2 31

43.8

38.8

30.5

45.9

52.5

51.3

48.5

31.9 28.9 29 28.3

32.7 31.5

31.7 37.8

29.4 12.3

35.9 27.5

29.2 10.6

33.1 29.3

42 16.9

37.9 29.6 31.1 29.2

37.9 33.3

32.4 27.3

28.9 24.9

42.7 28.6

39.7 30.8

45.3 38.2

49.3 38

Sphere

RF

Agriculture, hunting Forestry Processing productions Processing productions Food productions Textile and sewing productions Construction Transport and communications

Central FD

The minimum share of the employed in the analyzed sector who work in the hard labor conditions is observed in the Central Federal District (11.3%). – in the construction sector, 49.33% of the workers of the Far Eastern Federal District work under the influence of hazardous conditions. This is the maximum value of this indicator for the whole country (with the average Russian value 37.94%). The best situation is observed in the North Caucasus (28.92%) and the Central Federal Districts (29.62%). The most signiﬁcant unfavorable factor for whole Russia and for all federal districts in this sectorial group is work load of the labor process: 20% of all workers experience the influence of this factor. The second most widespread factor is noise, ultrasound, and infrasound. – in the transport sector, 39.29% of the employed work under the influence of abusive and (or) hazardous conditions. The largest share is observed in the Siberian and Far Eastern Federal Districts (47.99% and 45.7%, accordingly). The smallest share is observed in the Ural (36%) and South (36.6%) Federal Districts. The leaders are such unfavorable factors as work load (the largest share of the employees subject to this factor is observed in the Siberian Federal District – 22.71%, the smallest share – in the Central Federal District – 13.5%); noise, ultrasound, and infrasound (the largest share of the employees subject to this factor is observed in the Far Eastern Federal District – 21.8%, the smallest share – in the Central Federal District – 10.95%). – the communication sector is peculiar for a small share of the employees working in hazardous conditions. It varies from 2.65% in the South Federal District to 7.98% in the Urals Federal District. The main reason for that is the technological speciﬁcs of the sectorial group. The received results allow for the following conclusion: at the level of federal districts there are substantial differences of the influence of factors that determine the state of labor conditions of employees; at that, the main factors belong to the natural & climatic and technological. The smallest sectorial differences between federal districts

16

T. N. Gogoleva et al.

are observed if the sphere in the country is peculiar for a relative homogeneity of technological processes (the example with the technological group “communications”).

4 The State of Labor Conditions of Employees in the Regions of the Central Federal District (As of Year-End 2016) In order to identify the peculiarities of the influence of abusive and (or) hazardous factors that are peculiar for speciﬁc regions, as compared to the situation in the federal districts, it is necessary to conduct analysis of the results of statistical observations at the level of a separate federal district and spheres. This reduces the influence of the natural & climatic factor on the regional peculiarities of the studied influences and increases the role of the technological and socio-economic characteristics of speciﬁc regions. For this purpose, the statistical data that characterize the influence of abusive and (or) hazardous factors on employees in the Central Federal District and its oblasts were studied (Fig. 2).

The share of employees who work in abusive and (or) hazardous labor condions, % 42.4 29.5

38.7 37.4 37.3

43.1 35.9

34.3

31.2 30.9 30.9 31 23.2 24.3 24.7

26.3

29.8 29.3

24.2

Fig. 2. The share of employees who work in abusive and (or) hazardous labor conditions, conduct activities in agriculture, hunting, forestry, extraction of minerals, processing productions, production and distribution of electric energy, natural gas and water, construction, and transport and communications for the regions of the Central Federal District of the RF (as of year-end 2016).

The least “hazardous” – from the point of view of labor conditions (Fig. 2) are Moscow, Orel, and Ryazan Oblasts, and Moscow, and the most “hazardous” are Belgorod and Lipetsk Oblasts. This is due to the structural peculiarities of these regions’ economies and their geographical peculiarities (technological and natural & climatic factors in our classiﬁcation).

Economic Analysis of Labor Resources Usage in Regional Markets

17

Table 2 shows the general results of comparison of the oblasts of the CFD (excluding Moscow) as to the indicator “share of workers in the abusive and (or) hazardous labor conditions” in the sectorial view. It should be noted that all spheres are rather close as to the studied indicator in sectorial groups “processing productions” and “transport and communications”. Large differences and the presence of indicators that deviate from the average values are peculiar for the following sectorial groups: – agriculture and forestry, hunting: the share of workers who work in abusive and (or) hazardous conditions is much lower in Ryazan, Orel, and Bryansk Oblasts. Such main factor of the production environment as “noise” is not observed here, Table 2. Share of workers in abusive and (or) hazardous labor conditions in the oblasts of CFD for large groups of spheres, 2016. Oblasts of the CFD

Agriculture, hunting

Mineral extraction

Processing industries

Food Textile and production sewing industries

Construction Transport and communications

CFD on the whole Belgorod Oblast Bryansk Oblast Vladimir Oblast Voronezh Oblast Ivanovo Oblast Kaluga Oblast Kostroma Oblast Kursk Oblast Lipetsk Oblast Moscow Oblast Orel Oblast Ryazan Oblast Smolensk Oblast Tambov Oblast Tver Oblast Tula Oblast Yaroslavl Oblast

24

67.6

31

28.9

28.3

29.6

28.2

24.1

74.6

49.9

46.1

2.6

46

25.1

17.9

94.7

41

35.2

19.4

31.6

27.3

35

58.8

31.9

29.5

34.6

41.9

29.3

27.6

59.3

32.7

29.6

20.9

38

27

29.2

57

39.4

24.1

42.6

11.5

15.8

35.4

66.1

44.1

29.4

20.3

31.8

24.6

26.4

54.8

43.5

34.6

45.9

17.3

31.9

23.6

82.9

32.8

32.9

24.4

45.9

27.4

31.1

65.3

52

32.1

15.9

49.1

27

20.6

21.8

23.8

22.5

24.2

18.3

25.2

15.9

–

31.5

24.3

7.2

35.3

20.6

4.2

45.4

25.7

15.8

7.2

30.3

27.4

18

8.8

35.3

44.6

22.2

35

33.1

25.7

–

30.1

27.8

26.1

38

25.9

18.7

–

35

30.4

36.1

21.5

24.5

21.4

48.7

31.6

23.9

6.3

36.8

25.2

36.9

42.7

37.4

33.7

38.2

46.4

30.3

18

– –

– –

T. N. Gogoleva et al.

and the influence of the “work load” factor of the labor process is much lower. If the levels of development of the agricultural production technologies in the oblasts of the CFD are more or less equal, the average shares of the workers at hazardous productions are the results of influence of socio-economic factors that are not taken into account by statistics; processing productions: the oblasts of the CFD have different types of processing productions or lack companies belonging to this group of spheres (Orel, Tver, and Tambov); food productions: in this group, high indicators are peculiar for Belgorod and Smolensk Oblasts – at that, the structure of food industry of these regions is traditional for the CFD, as well as the technologies used; at the same time, the factors “noise” and “work load” in these oblasts are higher than the average indicator for the CFD; the reason of deviations lies in the socio-economic factors that are not considered by statistics; textile and sewing production: the lowest indicators are peculiar for Belgorod, Ryazan, Orel, and Tula Oblasts, which is peculiar for the factors of the production environment and labor processes; construction: in the range of oblasts (Belgorod, Kursk, Lipetsk, and Yaroslavl) there is substantial increase of indicator as compared to the average indicators for the CFD; it seems that these oblasts use obsolete technologies in this group of spheres.

5 Conclusions and Recommendations There’s a certain differentiation as to the quantity and quality of employment in abusive and hazardous labor conditions between various regions of Russia, which is caused by objective reasons (natural & climatic peculiarities and peculiarities of the sectorial structure of the studied groups of sectors as to speciﬁc districts). Processing industry is the most vulnerable one from the point of view of the state of labor conditions – on average, 55.6% of the workers are in abusive and (or) hazardous conditions. At the same time, as for homogeneous – from the point of view of the natural & climatic and technological factors that influence the labor conditions – regions, there are also substantial differences, which are explained by the influence of socio-economic factors that are to be taken into account during formation of the regional programs of control over labor safety, which will raise the effectiveness of the system of regional management labor safety. Management of control functions should be differentiated as to companies not only depending on the complexity of their structure and level of implementation of the labor safety processes but also in view of regional and sectorial peculiarities of the production processes organization. As the performed analysis showed, out of three groups of factors distinguished in this study (natural & climatic, technological, and socio-economic) that influence the state of labor conditions, the least studied and statistically uncontrolled are external socio-economic conditions and institutes that determine the environment of functioning of companies as the main economic subjects and form regional peculiarities of the state

Economic Analysis of Labor Resources Usage in Regional Markets

19

of labor conditions of employees, at which the regional programs of labor quality control are oriented. Expert technologies should be used for evaluating the influence of this group of factors. Acknowledgments. The study is conducted with the ﬁnancial support of the Russian Foundation for Basic Research (project No. 16-06-00535-a)

References 1. Azarnova, T.V.: The method of processing of the expert and statistical information during determining the optimal intensity of planned control over organizations in the sphere of labor safety. The theory of active systems: works of the International scientiﬁc and practical conference. IPU RAS, pp. 254–261 (2007) 2. Azarnova, T.V.: Optimization of management by the labor market and population’s employment in the region on the basis of the models of the functional and marketing effectiveness and quality: doctoral thesis: 05.13.10, Voronezh, 395 p. (2010) 3. Gandziuk, M.P., Kupchik, M.P., et al.: Foundations of labor safety, Kyiv, Osnova, 416 p., pp. 68–70 (2000) 4. Drozhchanaya, O.U.: Improvement of management over labor safety at a company. Bulletin of Kurgan SAA, No. 4, pp. 29–31 (2013) 5. Kerb, L.P.: Foundations of labor safety, Kyiv. KNUE, 215 p., pp. 18–20 (2003) 6. Krasnoshchekova, E.A.: Methodologies of evaluating the socio-economic state of labor safety at Russian companies. Bulletin of Saratov State Technical University, vol. 2, No. 1(55), pp. 279–283 (2011) 7. The state of labor conditions of employees that conduct activities in agriculture, hunting, forestry, mineral production, processing production, production and distribution of electric energy, natural gas and water, construction, and transport and communications in the RF in 2016. Federal State Statistics Service (Rosstat), Chief transregional center (CTC), vol. II, pp. 1, 2, 3 (2016) 8. Spatar, E.V.: Evaluation of labor safety with various methods. Equipment. Technologies. Engineering, No.1, pp. 5–9 (2016) 9. Federal law “On special evaluation of labor conditions” dated December 28, No. 426-FZ (2013). http://www.consultant.ru/document/cons_doc_LAW_156555/

Technical Forensic Technique of Human Hair Examination: Forensic Practice Eduard E. Genzyuk, Lyudmila A. Spektor ✉ , Viktoria S. Kirilenko, and Aleksandr V. Sukhanov (

)

Institute of Service Sphere and Entrepreneurship (Branch) of Don State Technical University, Shakhty, Russia [email protected]

Abstract. The paper presents the capabilities of comprehensive examination of human hair with the use of methods that were developed and put to practice by the Criminal Expertise Centre of the Ministry of Internal Aﬀairs of the Russian Federation. It contains the description of examination of hair that allows identi‐ fying the most probable origin of hair belonging to a particular person, including a new method – analysis of DNA extracted from a single hair for the purpose of identiﬁcation of a person who lost it. The paper describes the basics of diagnostic and identiﬁcation examination of odor traces collected from the human hair. Details of the capabilities of each hair examination method and obtaining search and evidence information, which is particularly important in the operational investigative work of law enforcement agencies. The description is based on the development of a series of well-known researchers and practitioners, generalized and complemented with authors’ projects. The methods can be used in the search, investigation and forensic work of the departments of the Ministry of Internal Aﬀairs of the Russian Federation and other government services and agencies. Keywords: Expert examination · Forensics · Diagnostic materials · Police Examinations

1

Introduction

Human hair can often be found at the scene and are often the only material evidence in criminal cases initiated on various cases of grave crimes endangering the life and health of citizens, as well as thefts, motor vehicle accidents, etc. Hair is the most common object of forensic biological examination, but it is at the same time one of the most hardto-examine objects. In addition, quantitative characteristics of the object (a single hair or a bunch of hair was submitted for examination) and its quality, presence or absence of the suspect, and, accordingly, comparative samples of his/her hair exert dominant inﬂuence on the course of examination, because evidentiary information can be obtained in the ﬁrst case (for example, by means of odor or genetic examination of a single hair collected at the scene), and the search information is needed in the second case, and it can mainly be obtained by means of microscopy method, determination of the group identity and the sex identity, detection of hair diseases. © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 20–31, 2019. https://doi.org/10.1007/978-3-030-00102-5_3

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The paper presents ample description of morphological methods of human hair examination that are used to solve a number of questions of forensic biological exami‐ nation: whether the submitted objects are hair; what is the speciﬁc identity of hair; what is its regional origin; whether the hair was torn out or lost; whether the existing hair damage has occurred as a result of a mechanical injury, etc. The morphological exami‐ nation of the hair is the basic examination for a variety of objective reasons, and it is often the only method in most crime laboratories of the Ministry of Internal Aﬀairs of the Russian Federation. However, this examination by no means can reply to the major question of forensic biological examination: does a single hair found at the scene orig‐ inate from a particular person, e.g. from the suspect or from the victim. In this case, other examination methods should also be involved for solving this problem; in partic‐ ular, three methods of determination of the group identity of hair. Sometimes using a set of the abovementioned methods for examination of hair allows more likely deter‐ mining their origin from a particular person or emphatically denying their origin from a particular person. In recent years, it has become possible to examine the human hair by means of a new method of molecular genetics – DNA analysis method which usually allows identifying a person. This method can be easily reproduced by the experts who know the basics of DNA analysis, if the bulb part of the examined single hair is present (if a single hair was torn out). However, this examination requires high qualiﬁcation of the expert and special examination conditions; in particular, if only a stem of a single hair was submitted for examination, a special concentrating and ﬁltering unit is required for Centricon-type DNA produced by Amicon, Inc. The methods for laboratory examination of odor traces were developed and are used in the Criminal Expertise Centre of the Ministry of Internal Aﬀairs of the Russian Federation. The odor-containing substances that accumulate on the skin and hair are a complex mixture of substances – waste products of cells of a living body. The odor examination of hair is a new opportunity in the examination of human hair; it is one of few accessible methods that allow individualizing a person being by his/her traces. The authors of this research in the presented paper come forward with a speculation according to which the oﬀered complex of methods will allow expanding the capabilities of the employees of forensic departments in the comprehensive examination of hair collected from the scenes. This paper is aimed at testing of this hypothesis and deﬁning the role of clusters in the creation of ﬁnancial innovations in social insurance which assumes fulﬁllment of the following tasks: The target of research consists in the methodology and the process of technical forensic examination of hair developed in the course of forensic expert practice.

2

Research Data and Methods

The theoretical foundation of research is made of the papers of various authors in the ﬁeld of the study of theory and methodology of technical forensic examination of hair;

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one may single out the papers of (Pavlova, A.Z., 2012), (Bogomolov, D.V., 2011), (Larev, Z.V., 2012), (Amanmuradov, A.Kh., 2012) from the abovementioned papers. The research is based on the papers of the contemporary researchers dedicated to the role study, which includes the articles of (Gorbunova 2010), (Nesterina (2010), (Such‐ kova 2015) et al. The paper uses the materials of various researchers on the issues of application of the theory and methodology of identiﬁcation and diagnostics in the course of a technical forensic examination of hair that may be used for examination. A review of literature has shown that there are a number of signiﬁcant faults during a set of particular examinations by the odor samples collected from the scene in the theory of forensic practice. In this regard, we consider it necessary to carry out a comprehensive examination aimed at technical forensic methods of human hair exami‐ nation. The information analysis basis of research is made of data of previous research studies in the ﬁeld of practical activity under consideration, including the obtained results of the examinations of the objects that were referred by the forensics to the biologically sourced objects. The methodological basis of research is made of both the general scientiﬁc exami‐ nation methods: analysis, synthesis, induction, deduction, formalization, and mainly the technical legal examination methods. This paper describes two formerly published methods of extraction of DNA from hair. The methods were modiﬁed and repeatedly tested by the authors on experimental and forensic samples of human hair, diﬀering in size, color, presence of bulb cells, and shelf life.

3

Findings

3.1 Inspection of the Scene: Detection, Fixation and Collection of Hair, Its Referral to the Criminalistics Expert Examination Inspection of the scene for the purpose of detection of hair should be carried out on a case-by-case basis with due consideration of the type of a crime. In case of murders or inﬂictions of bodily harm, when there are traumas of the hairy part of the head or body of the victim, special attention should be paid to the instrument of crime, since the hair of the victim may still be preserved on it. In case of a sex crime it is necessary to thor‐ oughly examine the vestibule of vagina, region of the anus, oral cavity. Besides, it is expedient to comb the pubic hair of persons that are targeted in the investigation with subsequent collection of hair that was combed out, and to thoroughly examine the undergarment. In case of thefts, for example, with particular care, special care should be taken during the inspection of the protruding and conﬁning parts and surfaces of objects in the way of invasion and departure of the oﬀender from the scene (for example, window overpanels, manhole edges, etc.). It should be borne in mind that the hair can often be found on the walls and on other objects of the indoor environment; as a rule, they are glued to the surfaces of the room with drops of blood and can be located at a rather large distance from the scene of murder or inﬂiction of bodily harm. If there are traces of struggle or in case of possible contact

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of the victim with the possible person who committed the attack, the hair of the latter can be found on the clothes of these people. In case of motor vehicle accidents, as well as in case of transportation of the victim or corpse in the body of the car, respectively, the hair can be detected on the protruding parts of a vehicle. In other words, inspection of the scene should be carried out with thorough fore‐ casting of the points of possible contact of the hairy parts of the criminal’s or victim’s body, with objects forming the situation at the scene in general. The hair that was found at the scene is collected by means of a pair of wide-jaw pincers or by hands protected with rubber gloves. The hair can be collected by applying it to the adhesive tape. These methods of hair collection do not cause any additional damage to the hair, nor do they aﬀect its serological characteristics. If the hair was detected in the drops of dried blood, it is collected together with the blood or parts of its host. The hair that was collected from the human body, from diﬀerent points of the same object or from diﬀerent objects of the same scene should be packed in individual packages with an indication of a place where the hair was collected, a person who collected the hair, and the amount of the hair. In addition to the established procedural order, this is due to the fact that moisture can easily penetrate the hair, therefore sweat that got on the hair from the hands of the person who collected it can distort the results in the determination of the group identity of hair. Do not slabber your ﬁngers to make it easier to remove hair from the object. For the same reason, the expert in a case must determine whether or not the hair that was sent for examination had any contact with any liquid which, in turn, could contain the antigens of a human being, an animal, or microorganisms. All experts should bear in mind that it is possible to collect and conserve the odor from the hair after having spent a set of odor examinations suitable for identiﬁcation of a person by odor. With the precise ﬁxation of the points of collection of each individual hair, the data that was obtained in forensic examination can help with reconstruction of certain moments of the event. In the case of a mismatch in the amount of hair indicated by the investigator, with the amount of hair found by the expert at the opening of the package, as well as in case of detection of additional hair on the objects that were sent to the examination, a certiﬁcate is compiled that is undersigned by the laboratory scien‐ tists. One copy of the certiﬁcate is sent to the agency from which the evidence was received, while the other one is left in the laboratory together with a copy of the expert opinion. If a question is raised about the possible origin of hair from a particular person, then it is necessary to inquire the hair samples of this person collected from the ﬁve regions of the head (10–15 single hairs from each region) and packed in individual packages. If necessary, the expert has the right to request the hair samples from the diﬀerent parts of the human body. Before examination the expert should clarify whether the hair of this person was not subjected to any change – haircut, coloring, curling, etc. from the moment of the event up to the moment of collection of the sample at the scene. In addition to hair samples, the expert should obtain a blood sample of the same person. The expert opinion should contain the information about the type and the amount of hair that was prone to damage (fully or partially) during the examination.

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3.2 Determination of the Group Identity of Collected Hair. Capabilities of Determination of Sex Identity of a Person by Hair It is important to note that upon consideration of the forensic practice, cytological methods can only be used to establish genetic sex, which in certain cases may be incon‐ sistent with gonadal, hormonal, phenotypical and passport sex of a person. During the examination of hair that was found at the scene, on the clothes, on the body of a criminal or a victim, it is in many cases of great importance that the following question is cleared up: who owned the hair – a man or a woman. Establishing the sex by hair (in combination with other identiﬁed characteristics) increases the evidentiary value of the information obtained about the objects under examination. Genetic sex can be identiﬁed by a single hair provided there are vaginal tunics consisting of epithelial cells on its root part. The presence of vaginal tunics is characteristic of healthy hair that was torn-out. It is commonly known that the root part of the hair ends in thickening – a bulb, is immersed in the skin and located in the hair follicle, which consists of two epithelial and one connective-tissue coats. One can distinguish between internal and external coleorhizas of hair in the epithelial part of follicle. External epithelial vagina is the continuation of surface epithelium, from which the horny layer disappears at the point of transition to the follicle. The cells of external epithelial vagina contain light vacuo‐ lated cytoplasm and distinctively color tingible nuclei. Theoretical justiﬁcation of the possible detection of the signs of sex at the cellular level is a well-known fact: female cells diﬀer from the male cells in sex chromosomes (XX-chromosomes in female cells, XY-chromosomes in male cells). Due to peculiar property of the Y-chromosome which consists in selective staining with ﬂuorescent dyes, a positive sign was obtained for the diagnosis of the male sex. When the chromo‐ somes are stained with ﬂuorescent dyes, primarily with acridine derivatives (DNAbinding dyes), glowing areas appear in similar places of homologous chromosomes which enables their identiﬁcation. And the brightest glow is given by the distal part of the long arms of the Y-chromosome of the male cells. When we deﬁne the polymorphism of phosphoglucomutase enzyme (PGM), human hair with bulbs (to be more precise – with follicles of torn hair) can be conveniently classiﬁed into ten groups. It is commonly known that this method is used for purposes of forensic biological examination during the examination of traces of blood, sperm, saliva, as well as tissue fragments of organs of a human being. The hair bulb is examined using the method of isoelectric focusing which was described above in methodological recommendations (Pavlova 2012; Gorbu‐ nova 2010). The hair bulb examination requires no preliminary preparation of the object; the bulb of torn hair is placed directly on the gel and is subjected to isoelectric focusing. PGM is the only enzyme from the known genetically polymorphous enzymes, the amount of which in the bulb of a single hair is suﬃcient for the examination. Genetic polymorphism of this enzyme that is determined using the isofocusing method (4 allels, 4 pairs of isoenzymes), allows classifying the objects of examination into 10 groups at once with a successful distribution of phenotypes among the population.

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3.3 Technical Forensic Examination of Hair Using the DNA Analysis Method A particular person can be identiﬁed by hair lost at the scene by means of a new method of molecular genetics – method of analysis of the polymorphic sections of a human genome. The principle of this method is based on extraction and decontamination of DNA preparation from the examined single hair and subsequent analysis of particular sections of the DNA molecule. When studying the polymorphism of the DNA molecule, certain loci called tandem array clusters are usually analyzed; they occupy a strictly deﬁned position in the genome, are inherited according to the Mendel’s laws, have a large number of alleles in the population, diﬀering in number of repeating elements. One of the methods of detection of DNA polymorphism consists in the use of polymerase chain reaction (hereinafter referred to as PCR) which allows signiﬁcantly increasing the number of examined DNA fragments conﬁned by oligonucleotide primers with a prede‐ termined sequence. This method has a certain advantage, since it is applicable to work with a small amount of genetic material, which is especially important in cases where hair remains at the crime scene that does not contain any bulbs. The hair collected at the scene can be torn out, lost or cut. Hence, it can either have or not have undamaged hair bulb, as well as individual cells (remainder) of the hair bulb. The basic amount of genetic material is contained in the hair bulb, and the examination of such single hair is much simpler than the examination of the stem of hair without the bulb part. There are no issues during the extraction of DNA from the blood stains, like during the extraction of DNA from a single hair: even with a small spot of blood, the amount of the nuclear cells (lymphocytes) is large enough; besides, hair contains a significantly smaller amount of such cells. The lowest amount of DNA is contained in the follicles of the lost hair (10–20 times lower than in the living hair), and all the more – in the stems of hair. In this regard, special methods of extraction of DNA from hair are an important problem and greatly facilitate the hair identification process. We should note that there are few foreign publications on this issue. Before you proceed with the extraction of DNA from the examined single hair, it is necessary to carry out its microscopic examination and establish the presence (or absence) of a hair bulb, and determine by the appearance of the bulb, which hair – living or dead – was submitted for examination. In addition, in some cases microscopic exami‐ nation allows you to determine the presence of certain contaminants on the single hair. The presence of blood cells, cells of sperm or other body waste is particularly essential, as it can misrepresent the result of genotype determination of DNA of the hair. Micro‐ scopic examination of hair is carried out without the use of any chemical agents, namely without ﬁxation by means of a hair spray, without the use of antireﬂection liquids, etc. A single hair is placed on the object-plate, adding 1–2 water drops, covered with coverglass and microscoped with magniﬁcation power of 200x, 400x. The presence or absence of the whole bulbs is determined. If there is no whole bulb, the presence of certain epithelial cells of hair follicle is determined, and if epithelial cells are absent, it is neces‐ sary to determine the presence of the near-root part of the stem of hair. Most of the nuclear cells in the stem of hair are concentrated in the near-root part. There should clearly be no nuclear cells at the peripheral end of a single hair; hence, there is no sense

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in extracting the DNA; we recommend using this part of hair for negative test for hair dirtiness. Before the examination can be started, the samples of hair to be examined should be washed in distilled water for 1 h with a slight shaking (using the shaker, magnetic mixer, etc.). The hair contaminated with blood, sperm or saliva should be washed in 1% aqueous solution of glycine for 1 h with shaking. Glycine, being a weak detergent, increases the solubility of proteins and promotes their washing. The hair is then rinsed with distilled water. The main parameter of acceptability of a particular method of extraction of DNA from hair, as well as from other sources, is the quantitative yield of a well-puriﬁed DNA. It has been established that the concentration of DNA extracted from the bulb part of the torn out living hair may reach 200 ng per single hair. At the same time, the amount of DNA in the follicles of the lost hair with loose hair bulb decreases to 10–20 ng. The DNA content in the stem part of a single hair is virtually impossible to measure using the currently known methods, including using the method of UV spectroscopy or ﬂuo‐ rophotometry. In this paper, the eﬀectiveness of the method of puriﬁcation of the extracted DNA and the amount of DNA was estimated by means of polymerase chain reaction. The process of optimization of such response to the examination of the DNA of the hair is beyond the scope of this paper. In order to summarize it all, it is necessary to pay attention to some features related to the setting of these methods. Since a negligibly small amount of DNA is discharged from hair containing only the remainder of hair bulb or not containing it at all, it is necessary to purify DNA thoroughly to eliminate various impurities that inhibit the PCR reaction. The main inhibitory impurities in this case can be, ﬁrstly, melanin, and, secondly, cellular proteins. In order to eliminate the inhibition of PCR by melanin, we recommend taking not more than 7 cm of hair for DNA examination, and in order to eliminate inhibition by the remaining cellular proteins, we recommend carrying out a PCR reaction in a volume of at least 60 μl. Special care should be taken when examining the hair in cases of the assumption or identiﬁcation of presence of biological impurities (blood, sperm, saliva) on them. The hair should be thoroughly washed and treated in a special way: 1% glycine solution, dehydrated ethanol, freezing at a temperature of −20… −70 °C. The DNA can only be extracted from the stem part of a single hair and its subsequent analysis provided there is additional puriﬁcation and concentration of the drug on a Centricon-100 concen‐ trating unit (by Amicon, Inc. for example). This method has been implemented during the expert examinations in the Criminal Expertise Centre of the Ministry of Internal Aﬀairs of the Russian Federation. Putting it into practice in other forensic departments requires special training of the experts and the presence of the corresponding material and technical basis. 3.4 Examination of Odor Characteristics of Human Hair The diagnostic capabilities of the preliminary examination of hair have been preserved through present, but priority is still given to the forensic use of odor traces of a person. In fact, it is not the wireframe materials from which the hair is formed (washed hair loses an individualizing odor), but related odorous substances that emit a smell. The odor

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traces of a human being are odorous products of the intracellular metabolism; they are transferred from the cells by blood and are then removed to the surface of skin cover and hair. The lipid components of sweat envelop and impregnate the porous structures of the hair, which (along with traces of blood and sweat) become the source of the unique individual smell of the subject, his biological “passport”. The stability of metabolic processes of the body is dependent upon genetic factors that determine the stability of the individual odor of a human being throughout his/her virtually entire life. Despite the fact that odor traces are secondary formations on the hair; they contain unique infor‐ mation required for the detection of crimes and the identiﬁcation of criminal participants. The question of the presence or absence of the odor of a particular person on the collected hair can be answered in the process of the laboratory comparison of their odor with the odor samples obtained from individuals suspected of implication in the committed crime. The odor samples collected from human hair (on the ﬂannelette or ﬂannel napkin) can be stored for a year or more in air-tight glass jars and be used to establish (or rule out) the fact of the subject’s involvement in the event. When the experts examine the odors from hair, specially trained laboratory dogs are used as detectors. The sets of the auxiliary odor samples, against which a particular feature of the odor trace from the hair can be identiﬁed and subsequently evaluated (species, individual (personal), sex and age, and other characteristics of the odor of a human being), serve as another examination instrument. The following tasks are solved in the determination of the origin of the hair collected from certain persons by the odor samples: establishment of origin of hair found during the inspection of the scene, examination, or during other investigative activities, from the criminal; identifying other persons involved in the event (injured persons, eyewit‐ nesses) to identify their individual odors on the collected hair; identifying the individual odor of the same person on the hair collected from various scenes (merger of several criminal cases). The following questions can be presented to the experts for solving at the present day (subject to the availability of trained dogs of appropriate specialization): 1. 2. 3. 4. 5.

Are there any odor traces of a human being on the hair submitted for examination? Is the submitted hair suitable for odor examination? Does the odor traces from the hair belong to one person or to several persons? What is the sex of a person who left the odor traces on this hair? What is the approximate age of a person (childhood, middle age, elderly age) who left the odor traces from the hair submitted for examination? 6. Is there any individual odor of this person on the collected hair sample? 7. Who exactly from several persons (whose comparative samples were submitted for examination) left the odor traces from the hair submitted for examination? The answers to the ﬁrst, second, third and fourth questions allow putting up and check a particular investigative lead, to narrow down the circle of suspects in the involvement in the committed crime. The answers to other questions help to determine the origin of odor traces from the particular persons, allow to understand the distribution of roles among the persons involved in the event, and separate their odor traces from the odor traces of people who are not implicated in the event under investigation.

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The odor traces on hair that may be used for examination may be preserved for decades. However, such traces that were formed on the hair, during a momentary contact of person with them (for example, in a ﬁght), are preserved only for several hours after their occurrence. The air temperature and humidity, wind, the degree of dirtiness of the hair and other features can slightly change the time of preservation of odor traces on hair. Separated hair can better retain the odor traces in the cold, in the shade, and indoors; the odor traces can be retained worse in the wind, on heated objects, in heated rooms with high temperature. Hair extracted from the soil, which was in contact with moldy or rotting objects, loses the individualizing odorous substances and is not suitable for odor identiﬁcation. In order to perform a comparative examination, odor samples and odor-containing objects collected at the scene, as well as comparative odor samples obtained from the subjects of investigation, shall be submitted, for example, to the Criminal Expertise Center of the Ministry of Internal Aﬀairs of the Russian Federation. If an order on the commissioning of expert examination of odor traces from the human hair was made, the ﬁndings of the examination shall be documented in the form of the expert opinion; if the examination was carried out by order of the head of internal aﬀairs agency or criminal investigation department, the ﬁndings should be documented in the form of the expert’s certiﬁcate. Relying on the analysis of judicial practice, Public Prosecution Oﬃce of the Russian Federation supports the application of the results of the laboratory identiﬁcation of hair by the odor traces in the investigative practice and judicial examination. The reliability of the results of the laboratory investigation of odors from hair is comparable to the accuracy of instrumental analysis. The following documents shall be submitted in case of commissioning of the expert examination of odor traces from the hair: (1) order on commissioning of the odor exami‐ nation of hair; (2) collected hair with the estimated odor of a human being or odor samples from it, applied to the cotton napkins; (3) comparative odor samples obtained from individuals veriﬁed for involvement in a crime (gauze swabs with dry blood samples, hair samples (a strand of “greasy” hair shaved from the head) or sample of odorous substances, applied to the cotton napkins in case of a half-hour contact with the human body); (4) samples with foreign (background) odors from the scene of investi‐ gative activities (odors of animals, oil-products, food, medicines, etc.) applied to the cotton napkins during inspection; (5) control samples of clean cotton cloth that was used for the collection of odor samples submitted for examination. The best and the purest source of the individual smell of the subject is his blood, the samples of which are collected from each subject of investigation in healthcare settings (3–4 drops of blood are dried indoors on the gauze swab, and then packed into paper). Where that is not practicable, the undergarment collected from the subject of investi‐ gation or his/her sweat samples can be submitted as sources of the individual smell. The sweat samples are usually collected by a person who wasn’t engaged in the collection of the odor samples at the scene in this case; it is necessary to prevent acci‐ dental penetration of his odor traces both in the odor samples from the scene and in the comparative odor samples. Otherwise, there may be a merge of the samples to be compared by the odor of the worker who collected them, during the examination.

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In order to obtain a comparative sample, a person from whom it is collected is invited to take two clean ﬂannelette ﬂaps out of the jar (or foil) and place them separately on the body in the expanded form: behind the waistband of the trousers, behind the collar or under the cuﬀs of clothing pressed against the body (in order to prevent contamination of samples with the products of speciﬁc cutaneous glands, one shouldn’t collect sweat from the axillary region and inguinal region of the body). The ﬂannelette ﬂaps can also be placed on the body of the subject of investigation by any participant of this investi‐ gative activity who nevertheless must use a pair of pincers and rubber gloves. The ﬂaps should be removed from the body no earlier than in 30 min. When the odor samples are collected from the subjects of investigation, it is neces‐ sary to make sure that there is a good contact of the ﬂannelette with the subject, as well as in the fact that the donor is wearing his own clothes (otherwise the odor samples may turn out to be unsuitable for the comparative examination). The ﬂannelette ﬂaps with the collected odor samples are arranged and packed in the same way as the odor samples from the scene: in glass containers or in foil, marking them with labels (tags) with an indication of surname, name and patronymic of the person from whom the sample was collected; his occupation, age, and part of the body from which the comparative sample was collected; the time of contact of ﬂannelette ﬂaps with the body; the presence of characteristic odor during the collection of comparative samples. The originator of the identiﬁcation odor examination of hair must provide the most exhaustive information about the conditions of receipt of the submitted comparative samples. It must be borne in mind that the same interfering odors (if they are present simultaneously on the object collected from the scene and in comparative samples collected from the suspects) can become a unifying feature for the biodetector. Compa‐ rative odor samples are the most free from extraneous components, the presence of which in the samples collected from the odor-containing objects is quite possible, should be used in order to eliminate detrimental eﬀect of such interference in the identiﬁcation analysis. The laboratory detection dogs are currently used in the analysis of odor traces of human hair for the identiﬁcation of a genus, sexual or other group identity, as well as individual identity are used within the framework of implementation of the two main stereotypes of workplace behavior that are developed in the dogs by means of special training. The stereotypes of workplace behavior diﬀer in the form of assignment of search task for the dogs. In one instance, dogs are presented with an odor sample to be searched immediately. In this stereotype, the information about the desired odor is stored in the short term memory of detection dogs before the start of each search; the dogs smell the given sample at the start, remember its odor, and then try to smell this odor out among the dozens of objects arranged in the comparative (selective) series. The odor examination is carried out in the laboratory room in conditions that are optimal for detection dogs (temperature of +20 °C, air humidity of 60–80%), with the maximum elimination of extraneous irritants. The analyzed objects (usually one or two) and the auxiliary odor-containing objects in the comparative series are arranged on the ﬂoor in a circle that is inscribed into the perimeter of the laboratory room. It is advisable to cover the jars with the odor-containing objects with conoid-shaped tin cap holders (with an open top cut at the level of the upper edge of the used can). Such holders allow

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giving additional stability to the jars and hiding the descriptive notes on them (encryption of the objects for exclusion of unintentional prompts to the biological detectors from the expert who manages their actions). The odor samples that were not memorized by the dogs and obtained from the contact traces of a human being left on the dummy objects, or having other odor characteristics in accordance with the examination tasks, serve as auxiliary objects in the examinations. By controlling the dog through the leash and commands, the trainer, being inside the circle, encourages the dog to go ahead of himself and consistently sniﬀ the placed objects. In order to exclude unintentional prompts to the dog from the animal trainer, the place from which the walk of biodetector starts and the direction of movement are determined by the other expert participating in the examination. Each object of the series is sniﬀed by the dog for a fraction of a second in an individual fashion peculiar to each animal, but without omissions and delays, in a mode determined by the trainer. When a familiar smell is detected in any of the objects, the dog distinguishes it by a signal posture learned during training, making his choice based on a memorized odor sample. The necessary functional behavior of detection dogs is supported by the positive reinforcement (praise “Good!” followed with a delicacy). It is important to remember that before identifying any feature of the examined odor trace, it must be tested for presence or absence of odor interference. The diagnostic features in the examined sample can only be determined if there are no interfering odors that spontaneously attract dogs. This examination allows avoiding misinterpretation of the meaning of signals by the trained dogs.

4

Conclusions

The examination found out that the presence of odor of a human being in the hair that is subject to examination is always random in nature. The test for suitability for exami‐ nation is directed either at possible identiﬁcation of the subjects of investigation by odor, or at waiver of examination in case of absence of human odor in the samples. We must also take into account the fact that the odor samples that are clearly sniﬀed by the dogs at the beginning, are gradually depleting due to the volatility of the constituent compo‐ nents. The losses are also unavoidable when collecting, transporting and storing the odor-containing objects. Identiﬁcation of the fact of mixing of odor traces (odor of one or several persons) present on the object is assessed in practice in consultation with the experts, judging from the circumstances of the event and version under development. The comparative series of odor traces is used in this case as a kind of probe for testing the presence or absence of a mixture of odor traces of several persons in the examined odor sample from the hair. Auxiliary objects (with the odors of people of the same sex), one examined object and one control object which has an odor of a human being of the opposite (required) sex. The procedure of identiﬁcation of male and female odors on the examined object may vary and can be determined by the circumstances of a particular case of a problem that is put before the experts. The presence or absence of a female odor is determined in the comparative series consisting of eight auxiliary objects with male odors, one object

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with a female odor (reference object) and one object under examination. At least two detection dogs specially trained for detection of a female odor in the examined object are used. The examination is currently preceded by the test of the analyzed object for the presence of odor interference. After being convinced of their absence, the objects are prepared for two comparative series diﬀering in the sex of the donors from whom these auxiliary odor-containing objects were obtained. In conclusion, attention should be paid to the fact that odor traces are secondary formations on the hair; they contain unique information required for the detection of crimes and the identiﬁcation of criminal participants. The question of the presence or absence of the odor of a particular person on the collected hair can be answered in the process of the laboratory comparison of their odor with the odor samples obtained from individuals suspected of implication in the committed crime. The odor samples collected from human hair (on the ﬂannelette or ﬂannel napkin) can be stored for a year or more in air-tight glass jars and be used to establish (or rule out) the fact of the subject’s involvement in the event.

References Pavlova, A.Z., Bogomolov, D.V., Larev, Z.V., Amanmuradov, A.Kh.: Hair as the object of examination in case of poisoning with the salts of heavy metals. Sudebno-Meditsinskaya Ekspertiza (Forensic Medical Examination), No. 6, pp. 25–29 (2012) Gorbunova, O.L.: The use of monoclonal antibodies in forensic medical examination during examination of hair. Probl. Ekspert. v Meditsine (Probl. Exam. Med.) 10(3–4), 66–68 (2010) Suchkova, E.V.: Learning and teaching support of forensic examination of human and animal hair. Biblioteka Kriminalista (Forensics Library). Academic periodical, No. 6(23), pp. 264– 267 (2015) Nesterina, E.M.: On the organization of a special project work group under ENFSI on experimental examination of hair. Teoriya i Praktika Sudebnoy Ekspertizy (Theory and Practice of Forensic Examination), No. 3(19), 216–218 (2010) Suchkova, E.V.: Mistakes in forensic examination of human and animal hair. Sudebnaya Ekspertiza (Forensic Examination), No. 2(38), 43–50 (2014)

Project Finance for Africa’s Construction Sector: Can Stabilization Funds Work? Lubinda Haabazoka(&) School of Business, Copperbelt University, P.O. Box 21692, Kitwe, Zambia [email protected]

Abstract. The construction sector remains one of the most important economic sub sectors of any country’s economy. A well-developed construction sector is a prerequisite to enhanced infrastructure development which is cardinal to a country’s economic development. One of the factors that enhance construction sector growth is ﬁnance. Unfortunately Africa is still unable to attract large investments into its construction sector as compared to other continents because investors view the continent mostly as a source of cheap mineral resources. In this paper, it is observed that the size of Africa’s construction sector despite its rapid growth remains relatively small as compared to other continents. The paper also shows that the challenges facing the African construction sector include poorly developed capital markets, high interest rates and the resource curse among others. It is also noted that Africa needs to establish stabilization funds to channel resources from sell of commodities to fund infrastructure development. Keywords: Project ﬁnance JEL Classiﬁcation: G28

African construction sector Stabilisation Fund

F34 F38 N67 O160

1 Introduction It is difﬁcult to overstate the importance of infrastructure in any economy. Any country’s economic development agenda is dependent on the availability of high quality infrastructure that facilitates transactions between participants of different economic sub sectors. How well a country’s construction economic sub sector is developed depends on the availability of cheap and stable long term project ﬁnance. Project ﬁnance as opposed to other sources of funding has the following advantages: – Non-recourse project ﬁnancing that does not impose any obligation to guarantee the repayment of the project debt on the project sponsor. – Off balance sheet debt treatment which isolates project risks, taking them off balance sheet so that project failure does not damage the owner’s ﬁnancial condition. – Leveraged debt meaning equity is not diluted. – Avoidance of restrictive covenants in other transactions because the project ﬁnanced is separate and distinct from other operations and projects of the sponsor, existing restrictive covenants do not typically apply to the project ﬁnancing. © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 32–60, 2019. https://doi.org/10.1007/978-3-030-00102-5_4

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– Favourable tax treatment giving an incentive to private sponsors to participate in infrastructure development. – Political risk diversiﬁcation. – Risk sharing by spreading risks over all the project participants, including the lender. – Collateral limited to project assets. – Lenders are more likely to participate in a workout than foreclose. Given the political and economic risks associated with investing in Africa, and also low ﬁnancial sector liquidity and undeveloped capital markets, project ﬁnance remains one the best routes for funding the much needed infrastructure development for the African continent. The main aim of this paper is to outline the role of project ﬁnance in enhancing construction sector growth in Africa. The paper also aims to outline the size of Africa’s construction industry, explain the major sources of project funding and also study the challenges and prospects for the sector. This paper contains 10 sections: Section one is the introduction; Section two outlines the review of existing literature on construction sector ﬁnance and economic growth and also the role of stabilization funds in enhancing infrastructure growth; Section three outlines the conceptual framework of the study; Section four illustrates the size of Africa’s construction sector; Sections ﬁve discusses construction sector project ﬁnance from a global perspective; Section six illustrates construction sector project ﬁnance from an African perspective. Section seven outlines African construction sector project ﬁnance challenges; Section eight outlines African construction sector project ﬁnance prospects; Section nine provides policy recommendations on how stabilization funds can be a source of project ﬁnance for infrastructure development and economic diversiﬁcation; and Sect. 10 is the conclusion.

2 Literature Review 2.1

Overview of Project Finance

A huge body of literature is available today on the subject of structured ﬁnance in general and project ﬁnance in particular. The majority of authors agree on deﬁning project ﬁnance as ﬁnancing that does not depend on the soundness and creditworthiness of sponsors. According to Fight (2010), a project is a unique endeavour to produce a set of deliverables within clearly speciﬁed time, cost and quality constraints. Projects are different from standard business operational activities as they: • Are unique in nature. They do not involve repetitive processes. Every project undertaken is different from the last, whereas operational activities often involve undertaking repetitive (identical) processes. • Have a deﬁned timescale. Projects have a clearly speciﬁed start and end date within which the deliverables must be produced to meet a speciﬁed customer requirement.

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• Have an approved budget. Projects are allocated a level of ﬁnancial expenditure within which the deliverables are produced, to meet a speciﬁed customer requirement. • Have limited resources. At the start of a project an agreed amount of labour, equipment and materials is allocated to the project. • Achieve beneﬁcial change. The purpose of a project is typically to improve an organization through the implementation of business change. • Involves an element of unique risk. Gatti (2012a, 2012b) deﬁnes project ﬁnance as the structured ﬁnancing of a speciﬁc economic entity—the SPV, or special-purpose vehicle, also known as the project company—created by sponsors using equity or mezzanine debt and for which the lender considers cash flows as being the primary source of loan reimbursement, whereas assets represent only collateral. A typical project ﬁnance deal will have a structure as outlined in Fig. 1 below.

Fig. 1. Structure of a project ﬁnance deal Source: Author

The main difference between project and traditional project ﬁnance as seen in Fig. 1 is that for project ﬁnance, the sponsors of the project use another entity (the SPV) to source funds to build the project. In corporate ﬁnance however, the ﬁnancer and borrower are the sponsors themselves. Figure 2 below highlights the main differences between traditional and project ﬁnance 2.2

Review of Similar Studies

2.2.1 Infrastructure and Economic Growth A lot of studies have been done on the role of infrastructure in enhancing economic development. Calderón and Servén (2015) provide an empirical evaluation of the impact of infrastructure development on economic growth and income distribution using a large panel data set encompassing over 100 countries and spanning the years 1960–2000. The empirical strategy involves the estimation of simple equations for GDP growth and conventional inequality measures, augmented to include, among the

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Fig. 2. Differences between traditional and project ﬁnance Source: (Gatti 2007)

regressors, infrastructure quantity and quality indicators, in addition to standard controls. To account for the potential endogeneity of infrastructure (as well as that of other regressors), the authors use a variety of generalized-method-of-moments (GMM) estimators based on both internal and external instruments and report results using both disaggregated and synthetic measures of infrastructure quantity and quality. The two robust results are: (1) growth is positively affected by the stock of infrastructure assets, and (2) income inequality declines with higher infrastructure quantity and quality. A variety of speciﬁcation tests suggests that these results do capture the causal impact of the exogenous component of infrastructure quantity and quality on growth and inequality. These two results combined suggest that infrastructure development can be highly effective to combat poverty. Furthermore, illustrative simulations for Latin American countries suggest that these impacts are economically quite signiﬁcant and highlight the growth acceleration and inequality reduction that would result from increased availability and quality of infrastructure. In their study “assessing the Impact of Infrastructure on Economic Growth and Global Competitiveness”, Palei (2015), aims to identify the key infrastructure factors that determine national competitiveness, which in turn influence positively on the total results of industrial policy. The results of their study showed that national competitiveness is influenced basically by the level of institutional development and other seven factors, including infrastructure, in turn infrastructure factor is determined mainly by the quality of roads, railroad infrastructure, air transport and electricity supply. These ﬁndings contribute to an understanding of the key factors that determine economic growth. A study by Ismail and Mahyideen (2015), establishes that infrastructure plays a key role in facilitating trade, especially since recent trade liberalization in Asia has resulted in signiﬁcant tariff reductions. The study quantiﬁes the impacts of both hard and soft infrastructure on trade volume for exporters and importers in the region as well as on various economic growth indicators. Results demonstrate that improvements in transport infrastructure (i.e., the road density network, air transport, railways, ports, and logistics) have resulted in increased trade flows. Information and communications technology (ICT) infrastructure has also enhanced trade, as the numbers of telephone

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lines, mobile phones, broadband access, internet users, and secure internet servers are found to have positive trade effects for both exporters and importers in Asia. Thus, although more attention has traditionally been given to hard infrastructure, the impact of soft infrastructure on trade flows must also be more thoroughly examined. Aschauer (1998) argues that public infrastructure underpins the quality of life: better roads reduce accidents and improve public safety, water systems reduce the level of diseases, and waste management improves health and aesthetics of environment. Agénor and Moreno-Dodson (2006) study the link between infrastructure availability and health as well as education of society that proves that infrastructure services are crucial for health and education quality and availability which to a big extent effects welfare. According to the world statistical analysis, households use approximately one third and one half of infrastructure services as ﬁnal consumption. 2.2.2 Stabilisation Funds and Infrastructure Development Stabilisation Funds also known as Sovereign wealth funds (SWF) are investment funds owned by governments of sovereign states and funded by foreign exchange and reserve assets (Goodal et al. 2013). They are generally funded by revenues accrued from the export of non-renewable natural resources, usually oil and other hydrocarbons taxed or owned by the government, or by transfers of reserves held by countries running current account and budgetary surpluses. There are many studies done on stabilization funds and economic growth. Thouraya Triki and Issa Faye (2011), in their paper, discuss the potential role that sovereign stabilization funds could play in African economies, both as recipient countries and home countries. They ﬁrst draw a landscape of African stabilization funds putting them in perspective, and describing their characteristics and investment activities in Africa. They also provide some insightful patterns about foreign SWFs activities on the continent. In their analysis, they suggest that African stabilization funds are small and mainly focus on achieving stabilization objectives. They indicate that the funds are also characterized by poor governance structures. Thus, their role as long term institutional investors in Africa is likely to be negligible if current practices are maintained. To fully beneﬁt from their stabilization funds, there is a need for African economies to: – Clarify stabilization fund roles, objectives and responsibilities as suggested by the ﬁscal transparency and reserve management guidelines established by the IMF; – Carefully synchronize deposits and drawdowns from commodity-based stabilization funds with the country’s income accruing from the sale of nonrenewable natural resources in order to ensure that revenues are set aside to stabilize the country’s fundamentals, should resources be exhausted. For instance, countries need to establish limits on the contribution of commodity revenues to ﬁscal deﬁcits and create “permanent endowment” that will serve long term savings objectives only. This endowment could be used to invest in relatively illiquid assets over a longer time horizon and enhance African stabilization fund participation in African ﬁnancial systems; – Implement strong corporate governance structures to make sure that resources are well managed and that stabilization fund investment strategies are supporting the country’s macroeconomic policies and development plans;

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– Avoid overregulation of investable sectors/companies; – Ensure a foreign-investor friendly business environment and strong protection of investors’ rights; and – Make sure that the risk of stabilization fund controlling banks’ capital can be mitigated through the implementation of safeguards to ensure that the banks are compliant with local regulation and market practices. Seedwell (2016), analyses the potential role that sovereign wealth funds could play in infrastructure development in Africa. He also elaborates on the trends and patterns of sovereign wealth funds in Africa, and possible funding mechanisms for infrastructure development as well as risks and opportunities. In their paper, Seedwell notes that infrastructure funding needs are very large in Africa. Traditional ways of ﬁnancing infrastructure, such as public ﬁnances, the banking sector and overseas development ﬁnances, are all experiencing challenges. Yet the investment potential of sovereign wealth funds (other name for stabilization fund) for ﬁnancing sub-Saharan Africa’s infrastructure development has remained largely untapped. As such, sovereign wealth funds (SWF) can play an important role in ﬁnancing infrastructure development in Africa. Allocating about 20% of Africa´s sovereign wealth funds could close the existing annual infrastructure ﬁnancing gap, assuming no inefﬁciencies. Sovereign wealth funds can ﬁnance infrastructure directly through joint ventures or co-ﬁnancing and public private partnerships, or indirectly through strengthening and deepening the ﬁnancial systems. In terms of policy, Seedwell notes that there is a need for coordination between SWFs and government policy (both ﬁscal and monetary) to ensure that the role of SWFs in infrastructure ﬁnancing does not lead to instabilities and volatilities. The domestic investment of the SWF needs to be considered within the overall macroeconomic framework and overall private sector and public sector investment to ensure that it promotes macroeconomic stability and development and does not displace private investors. Since SWF are often created by governments from some reserve funds, governments can make deliberate efforts to ﬁnance infrastructure. For example, they can ensure that SWFs’ mandates include infrastructure as an investment category or create a sub-entity with a speciﬁed mandate towards infrastructure investment, as exempliﬁed by Ghana, Nigeria and Angola. It is important for SWFs to have clear objectives and ensure that investment strategies are consistent with underlying objectives or mandates. This could help them to support infrastructure development well. Implementing strong corporate governance structures could ensure that resources are well managed and that SWFs’ investment strategies are supporting the country’s macroeconomic policies and development plans. African governments can also promote infrastructure investment by demonstrating commitment to investor protection. One way of doing this is to showcase successful infrastructure projects which can be considered as reference points by investors. This is especially important in countering the blanket perceptions of Africa as a risky investment environment by foreign investors. Political stability, stable rules, good governance, zero tolerance on corruption and transparent procurement processes and upholding of legitimate projects despite changes in government are some of the good signals.

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Naveen Thomas (2016), in investigating how sovereign wealth funds are impacting infrastructure projects in emerging markets ﬁnds that in recent years, sovereign wealth funds (SWFs) have risen in number, grown substantially in total assets under management, and realigned their investments in response to the global ﬁnancial crisis and other economic changes. One area of increased focus is infrastructure projects in emerging markets, a trend with the potential to impact economic development signiﬁcantly in these regions. SWFs have cited various reasons for this shift toward infrastructure. First, although public equities remain SWFs’ largest single asset class overall, increased volatility in these markets and the risks inherent to investing in them has encouraged SWFs to seek alternatives. Second, due to the low interest rates that have followed the global ﬁnancial crisis, SWFs have reduced their exposure to ﬁxed income investments, which have traditionally comprised another core asset class. Third, the cost and duration of many infrastructure projects provide a good match for SWFs’ large amounts of capital, long-term investment horizons, and comparatively low need for liquidity. As a result, many industry analysts as well as SWFs themselves expect that this trend toward alternative assets such as infrastructure will only continue. Moreover, although developed countries still account for a majority of SWFs’ allocations at a portfolio level, many of these investors have signiﬁcantly increased their placements in emerging markets in recent years and plan to continue doing so. This is motivated not only by the desire to diversify portfolios but also by the increase in investment opportunities that such markets have been providing. In addition, many of the largest SWFs are themselves located in the Middle East and Asia and often invest in emerging economies in those areas due to regional ties. Further increasing allocations to such markets, many developing countries are using new or existing SWFs to invest in their own domestic infrastructure. This recent growth in SWFs’ infrastructure investment comes at a time of great need. Analysts estimate that up to $67 trillion may need to be spent on infrastructure globally by 2030, and that developing countries may account for nearly half of this amount. At the same time, the ﬁnancial crisis has reduced banks’ lending capacity and increased the cost of borrowing, thereby inhibiting many potential investors from contributing to this need. But SWFs, with large pools of cash precluding the need for bank ﬁnancing, can help to ﬁll this void by further devoting funds to infrastructure. To be sure, SWFs cannot by themselves support the developing world’s immense infrastructure requirements, which will have to be met by a combination of changes including productivity increases. In addition, not all infrastructure projects provide a good match for SWFs’ typical risk proﬁles, so these investors may not help at all in some situations. But the prospect of increased SWF investment in this area at least offers one positive sign in an otherwise daunting ﬁnancial picture. As a result, emerging economies in great need of infrastructure development should avoid the protectionist impulses that many developed nations tended to exhibit toward SWFs prior to the ﬁnancial crisis. Instead, such investment, made with appropriate political and legal protections in place for all parties, should be acknowledged for its urgent necessity and encouraged in its proper execution. Schubert (2011), analyses the critical topic of infrastructure investment by sovereign Wealth Funds. He argues that given the goal of maximizing citizen welfare, investment in local infrastructure is an appropriate allocation. He presents arguments for why such investments increase owner utility and some negative consequences from

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using Sovereign Wealth Fund monies in this manner. Schubert comes down decidedly on the pro-investment side. He discusses different types of infrastructure investments with the conclusion that all types merit at least some consideration. He analyses different methodologies for allocating funds for infrastructure investment. The conclusion made by Schubert is that Sovereign Welfare Funds should conduct infrastructure investment. He believes that such investment within the portfolio of the SWF is more likely to lead to maximizing citizen welfare than is a portfolio without such investment. He agrees that the issue carries more weight when other ﬁnancing sources are not available or are extremely limited. Practically, Schubert suggests that, in cases where Sovereign Wealth Funds are not currently invested in local infrastructure projects, a part of the current capitalization of the Fund be transferred for the purpose, but after that one of the strategic allocation models noted above be applied. He notes that in ﬁnance we buy the future and so we favor the use of expected values in allocation over ex post values. While the actual outcomes will vary from those expected, on average expectations should be accurate and basing investment allocation on expected values should help the Fund reap better rewards for their secondary objective (greater return for risk, diversiﬁcation, stabilization, or intergenerational transfer) then would ex post distributions. Finally Schubert noted that infrastructure investment performance needs to be clearly goal oriented and shortfalls need to be monitored and explained. In the end, the key goal is to maximize the utility of the Sovereign Wealth Fund’s citizen owners and managing performance is critical to that end. Gelb et al. (2014), note that though not entirely new, SWFs permitted or mandated to invest domestically are emerging on a wider scale. However, they have not been systematically assessed, therefore there is much to learn about their processes and activities. The note that more research is needed to better understand their operations and potential role for ﬁnancing in developing countries. Since SWFs permitted or mandated to invest domestically combine features of traditional SWFs and development banks, they can draw on good practice examples from both types of institutions. Establishing rules on the type (for example, commercial and/or quasi-commercial investment) and modalities (for example, no controlling stakes, leveraging private investment) is one way to ensure separation between the activities of the SWF and those of other government institutions with investment mandates, such as the budget, the national development bank, the investment authority, and state-owned enterprises. The critical issue remains that of limiting the SWF’s investment scope to those appropriate for a wealth fund. If investments that generate quasi-market returns are permitted, the size of the home bias should be clearly stipulated and these investments should be reported separately. The overall objective is to create a system of checks and balances to help ensure that the SWF does not undermine macroeconomic management or become a vehicle for politically driven “investments.” The difﬁcult environments in which some SWFs are being established suggest that these will often be major concerns. Only if the SWF is allowed to operate as a professional expert investor can it strengthen the management of the public investment program and contribute to building national wealth. Della Croce and Yermo (2013), in their study note that the disruption to long term ﬁnance patterns is due to a mix of underlying problems which are in part a consequence of recent developments following the ﬁnancial crisis and in part due to some more

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structural problems and longer term trends. Institutional investors, such as pension funds, insurers and sovereign wealth funds due to the longer-term nature of their liabilities, represent potentially major source of long-term ﬁnancing for illiquid assets such as infrastructure. Over the last decade, institutional investors have been looking for new sources of long term, inflation protected returns. Asset allocation trends observed over the last years show a gradual globalization of portfolios with an increased interest in EMs and diversiﬁcation in new asset classes. The economic downturn is likely to have a lasting impact on the fund management industry and on long term asset allocation strategies of institutional investors. On one hand, in promoting more cautious investment strategies and a greater focus on portfolio risk management in the coming years. On the other hand, the prolonged low-yield environment has heightened the need for return-enhancing strategies, pushing some investors to invest in alternative assets. More fundamentally, the role of institutional investors in long term ﬁnancing is constrained by the short-termism increasingly pervasive in capital markets as well as structural and policy barriers such as regulatory disincentives, lack of appropriate ﬁnancing vehicles, limited investment and risk management expertise, transparency, viability issues and a lack of appropriate data and investment benchmarks for illiquid assets. In order to better understand the impact of these factors, more granular data at the level of individual investors is needed. It is also necessary to better understand the extent to which institutional investors such as pension funds, insurers, SWFs and PPRFs may provide alternative or complementary sources of ﬁnancing for infrastructure. As highlighted in the G20/OECD Policy Note: “Pension Fund Financing for Green Infrastructure Initiatives”, investment in infrastructure by institutional investors is still limited due to, among other things: a lack of appropriate ﬁnancing vehicles, investment and risk management expertise to deal with infrastructure investments, regulatory disincentives, lack of quality data on infrastructure, a clear and agreed investment benchmark and challenges particular to ‘green infrastructure’ (e.g., regulatory and policy uncertainty and inexperience with new technologies and asset classes). These challenges should be further examined with possible implications for the policy framework under which ﬁnancial institutions operate. Ultimately, there is a need for further guidance promoting long-term investment by institutional investors to support policies that facilitate investments in infrastructure. Sanjay (2015) in his study proposes an independent Global Infrastructure Investment Platform to channel capital, especially from SWFs, into much-needed investments in infrastructure, and puts forward a general list of tentative steps toward the creation of the GIIP. Peters proposes a focus on SWFs as key investors because they have the deepest pockets and a long-term outlook. The GIIP would play an important role in shrinking the gap between the current global savings glut and the growing need for infrastructure investments. In principle, it would be mutually advantageous for both the investors—offering them higher returns over longer periods of time than existing assets —and the host country, where high return investment projects are currently going unfunded. Peters notes that there are, of course, a large number of institutional and policy challenges associated with the creation of the GIIP. He suggests, however, that the most of these seemingly impossible barriers are surmountable. Peters presents a detailed outline of the GIIP to discuss the various operational challenges, enormous

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commitment, expertise and goodwill from many partners that will be required to ensure success of such an initiative. The acknowledgement that something is hugely difﬁcult should not deter one not to take on the challenge. In the case of the GIIP, the beneﬁts appear to far exceed the costs in whatever shape or form they manifest themselves. The ﬁrst step would be to identify a group of SWFs, pension funds, insurance funds, development banks, and foundations that would be interested in exploring this project further. Ideally, the founding sponsors would represent all regions of the world. A second step would be to team up with a group of development banks that would take on the role of founding guarantors. The start-up phase of the GIIP will likely combine a bottom-up and top-down process, where a private initiative is supported by a coalition of willing governments and development banks. To kick-start the process as a ﬁrst step, seed funding from foundations and other supporting actors would allow a team of infrastructure experts, investment bankers and international investment lawyers to establish the legal structure of the GIIP and gather templates for investment agreements, as well as identify a ﬁrst set of projects that could be funded. The initial phase of operation of the GIIP would begin with a pilot project that focuses on a particular country, region or small subset of countries. This pilot project could then be scaled up to include other countries where there is strong demand for long-term investments in infrastructure. Based on the outcome of the pilot project, other countries would be encouraged to utilize the GIIP to attract long-term investments from SWFs. Eventually the GIIP would not only promote development in a very signiﬁcant way, but also provide SWFs with information about attractive investment opportunities. Peters notes that regional organizations should play a prominent role in the platform. He notes that the GIIP can clearly serve as the catalyst for coordination of these parties. Furthermore, some safeguard mechanisms, such as insurance, monitoring, and auditing, could be employed to enhance coordination: The organizations backing the platform, both as facilitators and guarantors, should be comprised of a healthy mix of cultures and nationalities to lessen the risks both of perceived and of real exclusion. The guarantees expected to be offered by multilateral organizations, as the World Bank’s MIGA (Multilateral Guarantee Investment Agency), would consist of insurance against defaults of infrastructure projects due to political unrest (Irwin 2007). Investors such as SWFs are likely to want maximum monitoring of long-term projects in the infrastructure development that they take on. Meanwhile, countries or individual companies managing the projects are likely to want minimum monitoring. Therefore, the best outcome for all parties concerned would be to have the monitoring, as well as the auditing process carried out by an independent party or organization. Both the founding guarantors and investors would agree on the contours of the appropriate governance structure of the GIIP and target return for investors. Further, they would determine whether investments are made through a closed or open-ended fund, the modality of the guarantee, and a calendar for the start of the operation and its potential evolution as the platform grows.

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3 Relationship Between Infrastructure Development and Economic Development From the review of similar studies, we conceptualize the relationship between enhanced infrastructure development and economic growth as shown in Fig. 3 below.

Fig. 3. Conceptual framework Source: Author

From Fig. 3, we can see that construction sector project ﬁnance is dependent on factors such as: favorable economic climate, developed capital market that can provide the necessary equity and debt capital, stable political climate, clear legal framework, clear government policy that promotes project ﬁnance, availability of a market for real estate products and enhanced regional integration that can provide for transnational projects such as the constructions of highways, electricity supply grid and railway line across borders. It should also be noted that in order for countries to establish sound and transparent stabilization funds the above named conditions should also be met. The importance of the construction sector for African economies is that it can enhance the much needed infrastructure development that in turn can enhance job creation, contribution to GDP, enhance energy security, provide a good transport system needed for the enhancement of trade, provide regional competitiveness that can enhance foreign direct investment inflows and enhance Africa’s social welfare in general. Such development of affairs can trigger national social economic development in African countries.

4 Size of African Construction Sector Figure 4 below illustrates the size of the construction industry in Africa. The construction industry in Africa has been steadily growing with the amount of large construction sector projects growing from $222.767bn in 2013 to $375,410bn in 2015.

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Fig. 4. Size of African construction industry Source: Delloite 2014

The Southern part of Africa continued to dominate in terms of construction sector size with $140bn in 2015 as compared to $83bn in 2013. The rest of Africa also posted construction sector growth in 2015 as compared to the years 2013 and 2014. Table 1 below shows the key infrastructure indicators for selected African countries. Table 1. Key infrastructure Indicators in selected African countries Key Infrastructure Indicators in Selected Countries Country Quality of Infrastructure (2012– Dealing with 2013), Score is 1–7 where Construction 7 = Best Permits (Days) Angola 2.0 204 Kenya 4.4 125 Namibia 5.2 123 Nigeria 3.0 116 South 4.5 78 Africa Zambia 3.8 124 Source: Author Based on KPMG, World Bank Data

Average Building Cost USD per Square M 2,388.1 716.0 – 1.124.9 1,038.8 1,560.8

From the table, we can see that Africa continues to have low quality infrastructure with only Namibia scoring 5.2 (the highest in Sub Saharan Africa) out of 7 from the

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countries sampled. The time for dealing with construction permits also remains very high with only South Africa giving an average of 78 days. Delays in the issue of construction permits remains one of the inhibiting factors for acquiring project ﬁnance. The average cost of building a square meter remains relatively low in Africa with only Angola recording high ﬁgures of $2,388.1 per square meter, way above the continent’s average.

5 Construction Sector Project Finance – The Global Perspective Project ﬁnance remains one of the main sources of construction sector ﬁnance and is responsible for the implementation of large infrastructure projects around the world. Figure 5 below looks at the growth of global project ﬁnance for the period 2003– 2013.

Fig. 5. Size of Global Project Finance Source: World Bank 2014

We can see from Fig. 5 that global project ﬁnance has grown in size from $70bn in 2003 with just 302 projects to over $200bn in 2013 with 584 major projects recorded around the world. The only decline was recorded for the period 2008 when the world experienced the global ﬁnancial crisis. Figure 6 below outlines the trends of global project ﬁnance loans and global syndicated loans. Syndicate loans are a major source of debt ﬁnance for project ﬁnancing. From Fig. 6, we can see that global project ﬁnance loans for the period 2007 to 2013 have remained stable at around $200bn a year. The amount of global syndicated loans has also slightly reduced from around $4.5 trillion to just above $4 trillion. Table 2 below shows the amount of global project ﬁnance by sector. From the table above, we can conclude that investors preferred investing in the power sector with investments averaging above 35% of the total funds committed

Project Finance for Africa’s Construction Sector: Can Stabilization Funds Work?

45

Fig. 6. Trends in global project ﬁnance loans and global syndicated loans Source: Thomson OneBanker

Table 2. Global Project Finance by Sector 2011

2012

2013

Amount Number % of total Amount Number % of total Amount Number % ot Total amount amount amount Power Transportation Oil and Gas Petrochemicals Leisure, real estate, property Industry Water and sewerage Mining Telecommunications Waste and recycling Agriculture and Forestry Total Global Project Finance

81 534.20 44 724.00 39 391 70 4 364.80 14 494.00 12 154.90 997.20

299

38.0

110

20.8

63

18.4

11

2.0

57

6.8

17

5.7

8

0.5

10 328.60 5 314.00 724.10

27

4.8

10

2.5

8

0.3

64 014.60 40 202.40 60 681.00 4 311 10 10 413.90 7 605.40 3 285.20 4 513.60 1 529.10 842.30

479 00

3

02

128.00

214 506.50

613

100.0

197 526.60

283

32.4

94

20.4

56

30.7

11

2.2

47

5.3

12

3.9

12

1.7

15

2.3

4

0.8

6

0.4

70 077.00 40 715.20 39 862.40 10 719.00 7 771.70 16 768.30 6 511.80 5 495.70 4 332.10 1 887.40

342

34.3

75

19.9

60

19.5

9

5.3

34

3.8

15

8.2

14

3.2

17

2.7

7

2.1

8

0.9

0.1 540

100.0

0.0 204 140.60

581

100.0

Source: Thomson OneBanker

towards projects ﬁnance. The second most preferred sector was transportation followed by oil and gas. Table 3 below illustrates global project ﬁnance committed to various regions around the world.

46

L. Haabazoka Table 3. Global project ﬁnance by geographical area 2011 Amount

Central 1 America South America 11 Carribean 1 North America 23 Total Americas 38 Africa and 16 Middle East North Africa Sub Saharian 5 Africa Middle East 11 Europe 67 Eastern Europe 15 Western 52 Europe Central Asia Total EMEA 84 Australasia 23 Southeast Asia 14 North Asia 6 South Asia 45 Japan 1 Total Asia91 Paciﬁc Total Global 214 Project Finance

2012 Number % of total amount 9

0.9

680.60 27 156.00 3 589.40 78 305.20 117 870.50 29

5.4 0.5 11.0 17.9 7.9

879.20

0.00 786.00

0 15

0.0 2.7

084.50 14 443.80 211 302.00 21 141.80 190

Amount

7 890.00

2013 Number % of total amount 20

4.0

9 379.80 27 25.00 1 22 102.70 80 39 397.50 128 20 717.50 42

4.7 0.0 11.2 19.9 10.5

4 488.80 9 403.60

3 25

2.3 4.8

5.2 31.4 7.1 24.3

6 825.10 14 46 298.40 176 9 030.50 21 37 267.90 155

3.5 23.4 4.6 18.9

570.00 2 884.30 242 382.00 52 035.90 41 449.60 21 925.70 124 524.10 16 317.30 254

0.3 39.6 10.9 6.5 3.0 21.4 0.7 42.6

2 914.00 2 69 929.90 220 42 566.50 34 13 530.30 31 8 093.30 34 21 643.60 83 2 365.50 11 88 199.20 193

1.5 35.4 21.5 6.8 4.1 11.0 1.2 44.7

506.80 613

100.0

197 526.60

541

100.0

Amount

2 406.00

Number % of total amount 9

1.2

11 198.50 32 52.50 1 37 711.10 97 51 368.10 139 29 335.10 53

5.5 0.0 18.5 25.2 14.4

0.00 11 032.30

0 35

0.0 5.4

18 52 13 39

302.80 18 715.20 189 609.70 27 105.50 162

9.0 25.8 6.7 19.2

7 90 21 13 8 14 3 62

960.00 5 010.30 247 614.10 46 709.90 53 984.00 20 916.60 48 537.80 28 762.40 195

3.9 44.1 10.6 6.7 4.4 7.3 1.7 30.7

204 140.80 581

100.0

Source: Thomson OneBanker.

The most preferred project ﬁnance destinations for the period 2011 to 2013 were Europe, America and Asia. Sub Saharan Africa unfortunately received only around 4% on average of the total global project ﬁnance.

6 Construction Sector Project Finance – The African Perspective Table 4 below outlines the main characteristics and sources of project funding in Africa. It should be noted from the table above that, Africa continues to heavily rely on external ﬁnancing for its projects as local sources do not have adequate liquidity. African investors also continue to rely on export credit agencies to provide political and commercial risk coverage for their projects.

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47

Table 4. Characteristics of African project ﬁnance source Financing sources Multilateral Agencies International Commercial Banks Export Credit Agencies

• Key ﬁnanciers of infrastructure PF in Africa • In 2012 top MLAs arranged $ 5.4 bn: $ 4.4 bn excluding South Africa; $2.5 bn excluding extractive industries. Power: $ 2.3 bn (43%) • Cover banks against country and commercial risks • MLT exposure: $42 bn export in credits, plus EXIM • $30 billion excluding South Africa • Focus mostly on extractive industries and sovereign deals • Provide local currency but constrained by B/S size, prudential ratios and liquidity cost • Support Infrastructure deals, mostly in forex • Constrained by size • Potential to be developed

Local Commercial Banks Regional Development Banks Regional/National NBFI Sources: Gatti (2012a, 2012b)

Fig. 7. Growth in African project ﬁnance Source: World Bank 2014

Figure 7 below outlines the growth in project ﬁnance in Africa for the period 2003– 2013. From Fig. 7 above, it should be noted that project ﬁnance in Africa has risen sharply from just $1.2bn in 2003 with only 5 major projects to over $10bn in 2013 with over 35 projects. Decline in construction sector project ﬁnance was only noted for the years 2008 and 2010 during the global ﬁnancial crisis. Figure 8 below shows African project ﬁnance by sector. From the ﬁgure above, we can see that African project ﬁnance investors preferred the Oil and Gas sector, investing over $27bn or 46% of total project ﬁnance deals for the period 2003 to 2013. Power and mining were the second most preferred sectors with investments totaling $10bn for each of the sectors.

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Fig. 8. Africa Project ﬁnance deal by sector Source: World Bank 2014 Table 5. Top 10 SSA countries in terms of deal volume Top 10 SSA countries in terms of deal volume and no. of projects (All sectors) Country No. of Projects Deal Size ($M) Nigeria 28 17,791 Ghana 14 10,925 South Africa 45 9,928 Ango1a 8 4,460 Madagascar 1 2,100 Zimbia 7 2,047 Gabon 6 2,018 Ivory Coast 8 1.399 Kenya 9 1,357 Mozambique 4 1.327 Total 130 53,354 Source: World Bank 2014

Table 5 below shows the top 10 largest construction sectors by deal size in Sub Saharan Africa for the 2003 to 2013. From the table, we can see that Nigeria had most investments in its construction sector with over $17bn invested with more than 28 large projects administered. Ghana and South Africa came second and third with $10.9bn and $9.9bn worth of investments respectively into their construction sectors for the analyzed period. Mozambique was number 10 with 4 projects worth only $1.3bn meaning that the rest of Sub Saharan countries not included in the top ten list had investments of less than $1.3bn. The Table 6 below shows the top 10 recipients of external construction sector ﬁnancing in Africa.

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49

Table 6. Top 10 recipients of external infrastructure funding Ranking PPI ODF 1 South Africa South Africa 2 Nigeria Kenya 3 Kenya Ethiopia 4 Tanzania Tanzania 5 Ghana Congo, D R. 6 Sudan Uganda 7 Côte d’lvoire Nigeria 8 Congo, D R. Ghana 9 Benin Senegal 10 Uganda Cameroon 10 Zambia 10 Burkina Faso Source: Gutman et al. (2015)

China Ghana Ethiopia Cameroon Zambia Nigeria Mozambique Mauritius Tanzania Sudan Eq. Guinea Uganda

Overall South Africa Nigeria Ghana Kenya Ethiopia Tanzania Cameroon Congo, D.R. Uganda Zambia

From Table 6, we note that South Africa was the most preferred destination for external infrastructure funding from Private Participation in Infrastructure (PPI), Ofﬁcial Development Funds (ODF) and the major foreign sponsor China. Figure 9 below shows the trend in the growth of external infrastructure investment commitments by source in Africa for the period 1990 to 2011.

Fig. 9. External infrastructure investment commitments by source in US$ million Source: (Gutman et al. 2015)

From Fig. 9, it can be seen that from 1990, Africa has heavily relied on ofﬁcial development funds for the implementation of its projects. The positive factor that can be noted from the above ﬁgure is the increase in private sector participation in infrastructure development from 1993 to 2012. Private sector participation now accounts for the bulk of infrastructure investment commitments to Africa. It can also be seen from Fig. 9 that, the role of Chinese investments has rapidly grown in the African construction sector from 2001.

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Figure 10 below shows the role of government funds in funding infrastructure development across Africa.

Fig. 10. African governments’ spending on infrastructure as a % to GDP (2012)

From the ﬁgure above, it can be noted that the majority of governments across Africa spend between 4.1% to 8% of their income to GDP on infrastructure development. It should however be noted that government spending on infrastructure is not the only source of infrastructure funding. In many developed market economies, the role of the private sector should always be greater than that of government. Figure 11 below shows the role of bond ﬁnancing in infrastructure development. From the ﬁgure above, we can see that African governments have in the recent past resorted to sovereign bond issues for their infrastructure development ambitions. Zambia for instance has borrowed over $2.5bn in Eurobond issues to fund its infrastructure development program. Of the countries surveyed, Gabon and Ghana had the most debt. Many scholars have observed that the issue of Eurobonds by African countries in the recent past has created budget deﬁcits as governments set aside money for foreign debt repayment. Table 7 below outlines the role of private funding in enhancing infrastructure development around the world. From Table 7, we can see that private infrastructure funders preferred mostly Latin America and the Caribbean, Europe and East Asia. Africa was the third most preferred

Project Finance for Africa’s Construction Sector: Can Stabilization Funds Work?

51

Fig. 11. Sovereign bond issues by selected African Countries (2013) Source: Dealogic

Table 7. Private Participation in Infrastructure Investments by Region Regions

2013 PPI Investment US$ Billions

Latin America and 69.3 the Caribbean Europe and Central 28.5 Asia East Asia and Paciﬁc 19.4 Sub Saharan Africa 14.9 South Asia 13.8 Middle East and 4.5 North Africa Total 150.4

Percentage of Total

2012 PPI Investment US$ Billions

Percentage of Total

Increase in 2013 over 2012

46%

87.0

48%

.20%

19%

22.5

12%

27%

13% 10% 9% 3%

17.2 12.8 35.1 6.7

9% 7% 19% 4%

13% 16% −61% −33%

100%

181.3

100%

−17%

Source: World Bank (2013b) and World Bank (2014)

destination. The Middle East and South Asia recorded a negative trend because these regions were the major exporters on infrastructure funds. Figure 12 below outlines the preferred sectors for PPIs in Africa. From the ﬁgure above, it is noted that for the period 2005 to 2013, PPIs preferred to invest in the telecom sector with 64.1% of total investments going to that sector. The second most preferred sector was electricity with 18.6% followed by seaports with 9.6%.

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Fig. 12. Private participation in african infrastructure investments by sector (2005–2013) Source: (Gutman et al. (2015))

7 Challenges of African Construction Sector Project Finance There are many challenges facing African construction sector project ﬁnance growth: Among the challenges are: – – – – – –

Less developed capital markets; Low domestic ﬁnancial market liquidity Less construction sector company participation on stock markets; Corruption and hectic process of acquiring construction permits; Unavailability of credit ratings by African Construction Sector companies; and High Interest rates

The Fig. 13 below outlines the number of construction sector listed equities in selected countries.

Fig. 13. Construction-related listed equities in selected countries Source: KPMG Report (2015)

Project Finance for Africa’s Construction Sector: Can Stabilization Funds Work?

53

From Fig. 13, we can see that from the selected African countries, stock markets had only listed an average of 6 construction sector companies despite the overall number of listed companies on those respective markets exceeding 50 companies. Zambia for example only has 1 construction sector company listed out of a total of 22 companies listed on the Lusaka Stock Exchange. Table 8 below outlines interest rates in selected countries around the world. Table 8. Interest rates in selected African countries (2016) Country Cost of Capital (Interest Rate, %) United States of America 0.5 Chile 3.5 Japan 0.0 Nigeria 14 South Africa 7.0 Zambia 15.5 China 4.3 Ghana 26 Source: Author based on IMF, World Bank and Bank of Zambia data

From Table 8 below, we can see that African countries had the highest lending rates from the sampled population. This means that African companies are unable to raise funds on domestic ﬁnancial markets. This is one of the reasons why Africa still depends on externally sourced ﬁnance to fund large infrastructure projects. Sourcing funding on foreign markets increases foreign exchange risks African companies because of the long term nature of projects.

8 Prospects for African Construction Sector Project Finance Despite the many challenges being faced in Africa in terms of project ﬁnance for the construction sector, the sector stills remains one of the most attractive around the world. Amongst the factors that construction sector project ﬁnance investors should look for in Africa are: – The high African infrastructure sector funding gap that gives opportunities to lenders; – High infrastructure deﬁcit in Africa that allows for more projects to be implemented; – Cheap labour and construction costs that makes it possible for projects to be proﬁtable; and – Fast population growth in African cities that shows high future demand for infrastructure.

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Fig. 14. Annual infrastructure funding gap Source: World Bank 2014

Figure 14 below outlines the yearly infrastructure funding Gap in Africa. From Fig. 14, it can be noted that Africa has an annual infrastructure funding deﬁcit of $48bn that can potentially be taken up by various project ﬁnancing sources given the attractive interest rates in Africa. Given the low interest rates in Europe and Japan, it is believed that Africa will be a preferred investment destination provided that the political and economic environment remains stable. Table 9 below outlines the deﬁcit in infrastructure across Sub Saharan Africa. From the table above, we can see that the African continent remains a big market for infrastructure projects with high demand for infrastructure being recorded in the roads, telecommunications, and electricity generation sectors. The high level African infrastructure underdevelopment as compared to other low income countries around the world is the main reason governments and multilateral Export and Credit agencies should put the continent on its main infrastructure development agenda. Figure 15 below shows the cost of building across selected countries. From Fig. 15, it can be noted that only Angola amongst African countries sampled had the highest building costs. The rest of the African countries sampled had lower building costs as compared to countries from other continents making Africa a competitive destination for project funding due to cheaper construction sector costs. Table 10 below outlines the dynamics in population growth in the top 10 largest African cities. From Table 10, we can see how the population in major African cities has grown from 1985. Forecasts show increased population growth in all the major cities towards 2025. This population growth is a sign that there is an ever increasing demand for infrastructure across Africa signaling a higher future demand for project ﬁnance in the African construction sector.

Project Finance for Africa’s Construction Sector: Can Stabilization Funds Work?

55

Table 9. Infrastructure deﬁcit in sub saharan Africa Normalized units

Sub-Saharan African low-income countries

Other low-incone countries

Roads Paved-road density 31 134 Total road density 137 211 Telecommunications Main-line density 10 78 Mobile density 55 76 Internet density 2 3 Electricity Generation capacity 37 326 Electricity coverage 16 41 Water and sanitation Improved water 60 72 Improved sanitation 34 51 Source: Yepes, Pierce, and Foster (2008) and reproduced in Foster and Briceño-Garmendia (2009: 1–2). Note: Road density is measured in kilometers per 100 square kilometers of arable land; telephone density in lines per thousand population; generation capacity in megawatts per million population; electricity, water, and sanitation coverage in percentage of population with access to services.

Fig. 15. Building costs in selected countries Source: KPMG Report (2015)

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L. Haabazoka

Table 10. Population Dynamics in Sub-Saharan Africa’s Top 10 most Populated Cities (Thousands) Urban 1985 1990 1995 Agglomeration Lagos 3,500 4,764 5,983 Cairo 8,328 9,061 9,707 Kinshasa 2,722 3,520 4,493 Khartoum 1,611 2,360 3,088 Abidjan 1,716 2,102 2,535 Dar-es-Salaam 1,046 1,316 1,668 Johannesburg 1,773 1,898 2,263 Nairobi 1,090 1,380 1,755 Kano 1,861 2,095 2,339 Cape Town 1,925 2,155 2,394 Source: World Urbanization Prospects: The

2000

2005

2010

2015* 2020* 2025*

7,281 8,859 10,788 13,121 15,825 18,857 10,170 10,565 11,031 11,944 13,254 14,740 5,414 6,766 8,415 10,312 12,322 14,535 3,505 3,979 4,516 5,161 6,028 7,090 3,028 3,545 4,151 4,923 5,896 6,971 2,116 2,683 3,415 4,395 5,677 7,276 2,732 3,272 3,763 4,114 4,421 4,732 2,214 2,677 3,237 3,958 4,939 6,143 2,602 2,895 3,271 3,902 4,748 5,724 2,715 3,100 3,492 3,810 4,096 4,388 2011 Revision, UNDESA, New York, 2012.

9 Recommendations From the above analysis, it is a fact that Africa is not attracting enough project ﬁnance in its construction sector as compared to other continents. This means that policy makers in African countries should effectively use income from export of mineral resources to fund infrastructure development. Many countries like Russia, Saudi Arabia, Kuwait and the United Arab Emirates have amassed a lot foreign exchange reserves that they have channeled to ﬁght budget deﬁcits when commodity prices are low and invest in infrastructure development and other sectors of the economy when prices are very high. Table 11 below outlines various stabilization funds that have been set up in selected countries and their main achievements. Table 11. Stabilisation funds in selected countries Country Name of Fund Russian Reserve Fund Federation Fund for Future Generations

Uses of Funds Financing budget and pension fund deﬁcit Long term investments to save for future Generations

Kuwait

General Reserve Financing budget Fund deﬁcits

Chile

Copper Stabilisation Fund

Facilitating ﬁscal stability

Major Achievements Russia has managed to balance large capital inflows and outflows in the short term, stabilise the Russian Rouble, funded the winter Olympics and insulated itself from the effects of the global economic crisis and sanctions Kuwait managed to create intergenerational equity e.g. transforming non-renewable assets into diversiﬁed ﬁnancial assets for future generations Managed to provide steady income for the government budget in periods of low copper prices (continued)

Project Finance for Africa’s Construction Sector: Can Stabilization Funds Work?

57

Table 11. (continued) Country Norway

Nigeria

Name of Fund State Petroleum Fund

Stabilisation Fund Future Generations Fund Nigeria Infrastructure Fund Venezuela Macroeconomic Stabilisation Fund Source: Author

Uses of Funds Economic diversiﬁcation

Major Achievements Norway has managed to diversify its economy by investing in equities, real estate, agriculture sector and other ﬁxed income securities Financing budget Nigeria has managed to develop deﬁcits domestic capital assets, including but Long term investments not limited to transport, energy, water management and communications to save for future though the funds are still young Generations Financing infrastructure development From 1999 the funds Venezuela managed to fund its socialist agenda but low oil prices can be used as the have reversed all gains made President orders

From Table 11 above, it can be seen that most resource rich countries are increasingly creating funds to accumulate resources from the export of mineral resources when commodity prices are very high. The accumulated resources mostly are used to provide ﬁscal stability when commodity prices are low but countries like Norway, Nigeria and Russia have used these resources to fund strategic infrastructure development with Nigeria creating a speciﬁc infrastructure fund. In order to efﬁciently diversify Africa’s economy with the main aim of enhancing infrastructure development through the provision of government stimulated project ﬁnance, African governments need to take an active role by deliberately creating stabilisation funds whose main aim will be to cushion any price reduction in commodity prices and also to provide for reserves for future generations so that they can also beneﬁt from today’s wealth even many years after the resources are depleted. The stabilisation fund should comprise of the Reserve fund whose main aim is to provide for safeguard against short term risks and the Fund for Future Generations whose main aim is to provide for future generations. The main source of funds for the stabilisation fund should be taxes on excess proﬁts. Money from the reserve fund can be invested in short term ﬁrst class government papers like USA treasury bills. Money from the Fund for future generations should only be invested in ﬁrst class long terms bonds and notes and also in the proposed Economic Diversiﬁcation fund whose main aim is to provide cheap long term loans to African ﬁnance providers guided to provide project ﬁnance at subsidized market rates. The formation of the Economic Diversiﬁcation fund to be run by a committee comprising of members from individual country central banks and the Ministry responsible for ﬁnance will help transform tax income from excess mine proﬁts into loans for other sectors of the economy with the construction sector being top priority. The algorithm of the organization of the Economic diversiﬁcation fund is outlined in Fig. 16 below.

58

L. Haabazoka

Fig. 16. Algorithm of the organization of the Economic diversiﬁcation fund Source: Author

The Mechanism of the fund is as follows: Step 1. The government based on forecasted excess tax collections will every year decide on how much money is pumped into the fund created speciﬁcally for economic diversiﬁcation – the Economic Diversiﬁcation fund. Step 2. From the Economic Diversiﬁcation fund which will be overseen by the Central Bank, long term loans will be provided to commercial banks through a tender process with the banks possessing the best ﬁnance utilisation proposals getting the funds. Step 3. Banks will on agreed periodic intervals pay back the principal plus interest to the Economic Diversiﬁcation Fund. Step 4. The custodians of the Economic Diversiﬁcation Fund together with government will decide on the size of the tranche of money from proﬁts that will be returned to the Fund for Future Generations. The smooth functioning of the proposed funds will need transparency, effective tax systems and the political will. The Economic Diversiﬁcation Fund will help solve the challenges facing the African Banking systems by providing a stable resource base, reducing the effects of low capitalization of African ﬁnancial institutions by supplying cheap long term ﬁnances. Since acquiring of funds will be on a competition basis, governments can be able to demand that a large portion of their resources are loaned to sectors it feels need them most. This should however not be confused with guided lending because acquiring such resources will be given only to banks that will ask for them.

Project Finance for Africa’s Construction Sector: Can Stabilization Funds Work?

59

10 Conclusions Despite the major challenges being facing by the African continent in terms of attracting construction sector project ﬁnance, statistics presented in this paper show the following positive trends: – Increase in Private Sector Participation in funding construction sector projects; – Increase in funding for electricity generation sector that has potential to reduce energy deﬁcits on the African continent; – High and attractive lending rates that have a potential entice investor from low and in some cases negative interest rate countries to Africa; – High population growth that guarantees demand for infrastructure; – Low construction labour costs making Africa attractive; – Acquiring of credit ratings by various African countries making it possible for them to access sovereign debt; and – The increasing role of China as a project ﬁnance provider rather than relying on western sources that provide funds with conditions attached.

References African Development Bank (AfDB). Africa Infrastructure Development Index (AIDI) 2000–2010. http://www.afdb.org/ﬁleadmin/uploads/afdb/Documents/Publications/Economic_Brief_-_ The_Africa_Infrastructure_Development_Index.pdf Ahmad, E.: Public Finance Underpinnings for Infrastructure Financing in Developing Countries. Paper prepared for the G-24 (2014). http://g24.org/wp-content/uploads/2014/03/PublicFinance-and-Infrastructure_23Feb_2014.pdf Davis, J., Ossowski, R., Daniel, J., et al.: Stabilization and Savings Funds for Nonrenewable Resources: Experience and Fiscal Policy Implications. ‘Fiscal Policy Formulation and Implementation in Oil- Producing Countries’, IMF (2003) Della, C.R., Yermo, J.: Institutional Investors and Infrastructure Financing. OECD Working Papers on Finance, Insurance and Private Pensions, No. 36. OECD Publishing (2013). http:// dx.doi.org/10.1787/5k3wh99xgc33-en Delloitte: Construction on the African Continent: opportunities, risks and trends (2012) Dornel A.: Project Finance for Infrastructure in Africa. World Bank (2014) Fasano, U.: Review of the Experience with Oil Stabilization and Savings Funds in Selected Countries. IMF Working Paper, WP/00/112 (2000) Gatti, S.: Project Finance in Theory and Practice, II edn. Academic Press, San Diego (2012a) Gatti, S.: Project Finance in Theory and Practice, II edn. Academic Press, San Diego (2012) Gatti, S.: Private Financing and Government Support to Promote Long-term Investments in Infrastructure. OECD Working Papers on Finance, Insurance and Private Pensions, No. 37, OECD (2014) Gatti, S.: Fueling European Union Growth: Financing and Investing in Infrastructure. Working Paper (2012b) Gatti, S., Hellowell, M., Vecchi, V.: Does the private sector receive an excessive return from investments in health care infrastructure projects? Evidence from the UK. Health Policy 110–2, 243–270 (2013)

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Gelb, A., Tordo, S., Halland, H.: Sovereign Wealth Funds and Domestic Investment in ResourceRich Countries: Love Me, or Love Me Not? Poverty Reduction and Economic Management (PREM) Network (2014). World Bank www.worldbank.org/economicpremise Groce, R.D., Gatti, S.: Financing infrastructure – International trends. OECD J. Finan. Market Trends 2014(1) Gutman, J., Sy, A., Chattopadhyay, S.: Financing African Infrastructure – Can the world deliver? GE Foundation Publication (2015) Ismail, N., Mahyideen, M.: The Impact of Infrastructure on Trade and Economic Growth in Selected Economies in Asia, ADBI Working Paper Series (2015) KPMG Construction and Infrastructure Sector report 2015. http://www.kpmg.com/Africa/en/ IssuesAndInsights/Articles-Publications/General-Industries-Publications/Documents/ Construction%20and%20Infrastructure%20in%20Africa%202015.pdf Kudrin A.: Stabilisation Fund: Foreign and Russian Experience. Voprosi Ekonomiki, vol. 2 (2006) Levchenko, A.A.: Institutional quality and international trade. Rev. Econ. Stud. 74(3), 791–819 (2007) Maﬁmidiwo, B., Iyagba, R.: Comparative study of problems facing small building contractors in Nigeria and South Africa. J. Emerg. Trends Econ. Manag. Sci. (JETEMS) 6(2), 101–109 (2015) Naveen, T.: How Sovereign Wealth Funds are Impacting Infrastructure Projects in Emerging Markets. Duke University School of Law (2016). https://law.duke.edu/sites/default/ﬁles/ centers/cicl/Abstract-%20Naveen%20Thomas.pdf Reisen, H.: How to Spend it: Sovereign Wealth Funds and the Wealth of Nations. OECD Development Centre, Policy Insight. See also for a longer version “How to spend it: commodity and non commodity sovereign wealth funds”, Deutsche Bank Research, Working Paper Series, Research Notes, 28 June 2008 (2008). https://www.dws-investments.com/EN/ docs/market-insight/comm_non_comm_Q2_08.pdf Rozanov, A.: A liability based approach to sovereign wealth. Central Banking Quarterly Journal Vol. 18, no. 3 , February 2008. Ruiz-Arranz, M. and M. Zavadjil (August 2008), “Are emerging Asia’s reserves really too high?”, IMF Working Paper, 192 Sanjay, P.: Sovereign Wealth Funds and Long Term Investments in Infrastructure: Why the glaring absence? Columbia University (2015). http://www.ofce.sciences-po.fr/pdf-articles/ actu/SWFs-LTIs-and-the-Infrastructure-Platform.pdf Schubert, W.: Sovereign wealth funds and dedicated infrastructure investment. J. Appl. Business Econ. 12(6), 32–39 (2011) World Bank: Handbook on Infrastructure Statistics. Washington, DC (2011). http://www.afdb. org/ﬁleadmin/uploads/afdb/Documents/Publications/AfDB%20Infrastructure_web.pdf World Economic Forum: Global Competitiveness Index (2014). http://www.weforum.org/reports

The Shift of the Competition Paradigm in the Banking Sector of Russia Anna Kladova1(&), Marina Alpidovskaya2, and Valeriy Gordeev3 1

Financial University Under the Government of the RF, Yaroslavl Branch, Yaroslavl, Russia [email protected] 2 Financial University Under the Government of the RF, Moscow, Russia [email protected] 3 Yaroslavl State Technical University, Yaroslavl, Russia [email protected]

Abstract. Bank competition has been renowned for its relevance to the national economies in general, especially in developing countries. The paper presents the results of an integrated research of bank competition in Russia on the basis of neoclassic non-structural methods and the political economy approach. The ﬁndings show a shift of the competition paradigm in the sector due to the activity of the state which now incorporates the roles of the regulator and of the major competitor in the national banking market. Keywords: Bank competition Competition paradigm Measures of competition State intervention JEL Classiﬁcation Codes: E58

Monopolization

G21 L12

1 Introduction The competition in banking both on national and global levels has been a matter of signiﬁcant scientiﬁc interest for several decades. The major ﬁndings in this sphere imply that the lack of competition in banking is detrimental to such matters as prices of ﬁnancial products, access to ﬁnance for small business entities, the entire life-cycle dynamics of non-ﬁnancial industries (Cetorelli 2003; Cetorelli and Strahan 2006) as well as economic growth in general (Bikker et al. 2012). However, while the level of competition in most industries is typically associated with concentration and assessed in terms of the Structure-Conduct-Performance (the S-C-P) Paradigm, numerous banking sectors’ studies have proven that contestability might be a feature of highly concentrated banking markets if the entry and exit barriers in such markets are low (Arrawatia and Misra 2012). Therefore, the market structure of a banking market is usually a starting point of a research involving more complex non-structural methods than those which are normally used in the S-C-P Paradigm. The banking sector of Russia consists of 927 registered credit organizations. Nonetheless, only 567 of them (approximately 62%) are actually considered operating at the moment while others’ licenses have been either annulled or withdrawn by the © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 61–68, 2019. https://doi.org/10.1007/978-3-030-00102-5_5

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Central Bank of the Russian Federation (the CBR). The quantity of banks operating in Russia has been systematically declining for more than a decade – from 1329 in 2004 to 572 in 2017. The signiﬁcant acceleration of the decline has coincided with the change of the CBR’s top management in 2013 and the following radical shift in the CBR’s prudential policy. Naturally, this process causes scientists’ interest towards the true reasons of the changes in the Russian banking sector, the sector’s actual market structure and its level of competition as well as towards the role of the state in the evolution of bank competition in Russia. The extent of bank competition in Russia has been examined by many Russian and foreign researchers (Vernikov 2009; Mamonov 2010; Anzoategui et al. 2010; Fungáčová et al. 2010) in the past decade. This paper adds to the existing body of research by presenting a combined view of bank competition in Russia which includes the non-structural instrumental assessment of the national banking market as well as an explanation of the current competition processes in it through a political economy perspective.

2 Materials and Methods 2.1

Sample Selection

Our research is based on the bank-level panel dataset derived from the ofﬁcial quarterly and annual ﬁnancial reports of the banks included in the sample. We have also used the aggregate data and the bank rankings provided by the banki.ru website. The sample includes 200 banks which have accounted for 91.6% of the sector’s total assets by 2013. Due to the uneven composition of the sector two characteristics have been taken into account: the ownership type and the size of the banks. The description of the ﬁnal sample is presented in Table 1. Table 1. Descriptive characteristics of the ﬁnal sample of banks The size of the bank

Total quantity of banks in the group

Large bank Medium bank Total

79 121

The ownership type ForeignStateowned banks controlled banks 15 20 6 16

200

21

36

Domestic private banks 44 99 143

The criteria of the size are based on the classiﬁcation introduced by M. Mamonov (Mamonov 2010). According to it, the banks, total assets of which exceed 50 bln roubles, are considered large. The banks with total assets lying between 10 and 50 bln roubles are classiﬁed as medium. The small and extra-small banks with total assets under 10 bln and under 1 bln roubles respectively have not been included in the sample

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due to their statistically insigniﬁcant impact on the general body of banks in Russia. The state-controlled banks include those in which the state’s direct or indirect share exceeds 50%. The group also includes the subsidiary banks of the state-controlled banks. The foreign-owned banks include the ones in which the non-residents’ share exceeds 50%. The domestic private banks have been chosen on the basis of three conditions: the resident status of the owners, absence of any known direct or indirect links between the owners and the state as well as the share of such owners exceeding 50%. 2.2

Methodological Approach

The instrumental assessment of the level of competition in the banking sector of Russia has been performed within the non-structural approach. Two alternative non-structural measures of market power have been estimated: the Lerner index as a direct measure and the Panzar and Rosse H-statistic (Panzar and Rosse 1987) as an indirect one. The full description of the variables used in the equations for both of the measures is presented in Table 2. Table 2. Variables used for the calculation of the H-statistic and the Lerner indexes Variable TCi TAi IIi TIi AFRi PPEi PONILEi OIi/IIi EQi/TAi LNSi/TAi ONEAi/ TAi DPSi/Fi ROAi a0 ai, bi, ci, d ei

Description of the variable Total costs of a bank Total assets of a bank Interest income of a bank Total income of a bank The price of a bank’s borrowed funds The price of labor for a bank The price of a bank’s physical capital Ratio of a bank’s other income to its interest income Ratio of a bank’s equity to its total assets Ratio of a bank’s total loans to non-ﬁnancial entities and individuals to its total assets Ratio of a bank’s other no-expense assets to its total assets A bank’s share in the banking sector’s total deposits of the non-ﬁnancial entities and individuals A bank’s return on assets Constant variable denoting bank-level ﬁxed effects The estimated coefﬁcients of the cost function (the Lerner index) or the product function (the H-statistic) Error term, which is assumed to be normally distributed

The descriptive statistics of the variables in both of the models are presented in Table 3.

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A. Kladova et al. Table 3. Descriptive statistics of the variables in the H-statistic and the Lerner indexes

Variable

lnAFR

lnPPE

lnPONILE

lnOI/II

lnEQ/TA

lnLNS/TA

lnONEA/TA

lnDPS/F

lnTA

lnII

lnTI

lnTC

Mean

−3.021

−3.978

−6.911

−3.837

−2.043

−0.753

−2.605

−0.496

17.862

15.314

17.236

17.208

Median

−2.936

−3.922

−6.900

−3.864

−2.128

−0.518

−2.476

−0.359

17.550

14.997

17.015

16.995

Maximum

0.556

−1.693

−2.236

0.051

0.584

−0.047

−0.537

0.269

23.368

20.813

22.928

22.890

Minimum

−5.962

−5.515

−10.481

−9.915

−2.767

−8.283

−5.401

−8.419

12.628

−9.908

13.828

13.732

St. dev.

0.567

0.567

1.371

1.527

0.401

0.867

0.760

0.853

1.284

1.294

1.437

1.442

2.2.1 Lerner Index The Lerner index represents the extent to which a bank exerts excessive market power. It is usually deﬁned as the difference between a bank’s price and the marginal cost, divided by the price. The index ranges between a minimum of zero, which denotes perfect competition, and a maximum of 1. The lower numbers indicate lower market power and, therefore, higher levels of competition, and 1 indicates monopoly. The numbers between 0 and 1 are interpreted as monopolistic competition. In this research, the banks’ prices are calculated as the ratios of total revenue to total assets. The marginal cost is estimated on the basis of a translog cost function with total assets as the output price and prices of labor, physical capital and borrowed funds as the input prices (1): LnTCi ¼ aoi þ b0 lnTAi þ b1 0; 5 ðlnTAi Þ2 þ a1 lnAFRi þ a2 lnPPEi þ a3 lnPONILEi þ b2 0; 5 lnTAi lnAFRi þ b3 0; 5 lnTAi lnPPEi þ b4 0; 5 lnTAi lnPONILEi þ a4 lnAFRi lnPPEi þ þ a5 lnAFRi lnPONILEi þ a6 lnPPEi lnPONILEi þ a7

ð1Þ

0; 5 ðlnAFRi Þ2 þ a8 0; 5 ðlnPPEi Þ2 þ a9 0; 5 ðlnPONILEi Þ2 þ ei The equation is estimated using Ordinary Least Squares (OLS). The marginal cost of a bank is calculated using the estimated coefﬁcients of the cost function according to the following Eq. (2): MC ¼ ðb0 þ b1 lnTAi þ b2 lnAFRi þ b3 lnPPEi þ b4 lnPONILEi Þ

TCi TAi

ð2Þ

After the process of estimation of the marginal cost is over, individual Lerner indexes as well as general ones both for the sector and the groups within the sample can be calculated and compared. 2.2.2 The H-statistic The H-statistic is a measure which represents the sensitivity of a bank’s revenues to its input prices. The measure’s maximum is 1, which denotes perfect competition. The numbers between 1 and 0 indicate monopolistic competition, while 0 and negative values mean that the sector operates under monopoly or a cartel.

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The H-statistic is obtained by estimating the equation of a bank’s product (3): lnIIi ¼ ai þ b1 lnAFRi þ b2 lnPPEi þ b3 lnPONILEi þ c1 ln ln

OIi EQi þ c2 ln þ c3 IIi TAi

LNSi ONEAi DPSi þ c4 ln þ c5 ln þ ei TAi TAi Fi

ð3Þ The equation is estimated using OLS. The interest income of a bank is used as a proxy for its product. The proxies for the input prices are similar to the ones in the cost function. The H-statistic itself is calculated as a sum of the b1, b2 and b3 coefﬁcients. In order to assess the level of competition with the help of the H-statistic, one should perform a preliminary test of the market is question. The purpose of the test is to verify that the market in question is in fact in long-run equilibrium. An indicator of that condition is a situation in which the return on assets is not related to input prices. Otherwise, the results and the interpretation of the H-statistic are not to be considered valid.

3 Results Using the panel dataset, we have calculated the Lerner indexes and the H-statistic for the banking sector of Russia in general as well as for the three types of ownership and the two types of bank sizes separately. The estimated values are presented in Table 4.

Table 4. The H-statistics and the Lerner indexes for the banking sector of Russia The sector in general/A segment of the sector The Lerner index The H-statistic The banking sector 0.46 0.70 Large banks 0.48 0.56 Medium banks 0.45 0.70 State-controlled banks 0.47 −0.45 Foreign-owned banks 0.49 0.89 Domestic private banks 0.45 0.50

The Lerner indexes estimated in our research, contrary to the earlier works (Anzoategui et al. 2010; Fungáčová et al. 2010), indicate that the level of market power in the sector in general is more than twice as high as the earlier estimated levels. Naturally, the levels of market power inside the separate groups are also much higher than the ones calculated by other researchers. We suppose that the major reason of this deviation is the difference in the time span covered by the earlier research and the fact that the span does not take into account the world ﬁnancial crisis of 2008–2009 as well as its aftermath for the economy of Russia. In our opinion, the global ﬁnancial shock could not pass unnoticed for the banks operating in Russia. The ones which have

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survived the turbulence have done so by employing competitive strategies ensuring that their level of market power is sufﬁcient for staying in business. The H-statistic for the banking sector in general is in line with some of the earlier research (Mamonov 2010; Anzoategui et al. 2010). It indicates that the banks in Russia generally operate under monopolistic competition. However, our results for the two types of bank sizes and the three types of ownership differ signiﬁcantly from those presented by other researchers. According to our estimations, the level of competition in the group of large banks is much lower than the one estimated by other researchers (Mamonov 2010). Although it still indicates that the group operates under monopolistic competition, the results are not as close to perfect competition as in those works. The same is true for the group of medium-sized banks. Also, while the groups of foreignowned and domestic private banks operate under monopolistic competition, our research shows that the former are much closer to being perfectly competitive than the latter. The difference between the two groups has not been as signiﬁcant in the earlier research. But the most prominent difference is the one between our estimation of H-statistic for the group of state-controlled banks and the results presented in the earlier published works. Our result indicates that the state-controlled banks in Russia either operate under monopoly, or, a more plausible interpretation, form a cartel. Our speculations on the possible reasons of that are presented in the next section.

4 Discussion Considering that the major purpose of a cartel is raising the proﬁts of its members by elimination, restriction and regulation of competition within the cartel while simultaneously suppressing the external competitors, there is no competition, from the political economy point of view, among the members of a cartel. Therefore, the state-controlled banks in Russia do not compete with each other. Instead, they represent a single competitor in the banking market of Russia – a competitor created and protected by the state as the primary stakeholder. Being united as a competitive entity, the banks personify the state as the major participant of the competitive processes in the market in question. And while normally in the market economy the state is rather a regulator, than a participant, the speciﬁc conditions of the economy of Russia and of the evolution of its banking sector, in particular, ensure that the current role of the state is completely different. Due to the fact that, unlike the Western banking sectors, the initiator of creating and developing the banking sector of Russia has historically been the state, its presence in the market has always been much more prominent and visible. And while it has, in fact, provided a more or less market framework for the sector up to the Socialist revolution in 1917, it has always aimed to keep the ﬁnancial beneﬁts of its presence in the banking sphere. The actions which the state has employed in order to reach this goal have varied throughout the centuries evolving from creating a network of state-owned banks in the 18th century and systematically providing them with paternalistic support to nonlimited “borrowing” the resources of such banks later on in order to ﬁnance the deﬁcit of the state budget. During the Soviet era, the state has moved from total elimination of

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the banking sector to its resurrection as a state monopoly which has allowed a consistent use of the sector’s funds as the cheapest form of ﬁnancial resources for almost 70 years. The post-Soviet transition period has briefly created an illusion of the state’s retreat from the banking market, with hundreds of private banks, both foreign and domestic-owned, appearing and actively competing with each other. However, at the eve of the 21st century the illusion has quickly disappeared at the ﬁrst signs of the global ﬁnancial turbulence, and by now the state’s presence in the banking market of Russia has been continuously expanding for more than a decade. Thus, the traditional paradigm of market competition in banking which assumes that autonomous banks compete in a competitive environment created and supported by the state, has never been fully applicable to the reality of the banking market in Russia. And while during certain periods of time the sector has been fairly close to perfect competition, its “normal” market structure is either monopolistic competition or oligopoly with a very strong presence of state as the regulator and the beneﬁciary at the same time. However, during the last decade the sector has witnessed a shift of the competition paradigm, according to which the state is now actually a participant of the banking competition in Russia while simultaneously acting as the regulator of the market environment. This dual position has brought to life a new set of speciﬁc competitive methods ensuring the leading position of the state as a competitor in the market. The main of such “exclusive” methods is the “cleanup” of the sector by the CBR. This involves frequent and unpredictable revocation of bank licenses, which invariably leads to the banks’ bankruptcies. The reasons of these actions are often formal and nontransparent, and the victims of such revocation are very often the banks from the top100 of the sector. Naturally, the process causes panic among the clients, both corporate and private. In this unstable situation only the state-controlled banks stay invincible to the prudential action, which obviously adds to their image as the only reliable type of banks in the country, attracts numerous clients (especially private depositors) and ensures the high level of their market power. Another “exclusive” competitive method of the state is the purchase of the large domestic private banks through the CBR’s subsidiary entity - the Banking Sector Consolidation Fund. The Fund has been formed at the expense of the CBR in order to ﬁnance the rehabilitation of banks as a means of preventing their bankruptcy. In the process of the rehabilitation the banks are transferred into the state’s property and, therefore, join the group of the state-controlled banks thus adding to the state’s competitive power in the market. Coincidentally, the banks which are now under the rehabilitation procedures are large banks with wide and well-developed networks throughout the country. Altogether, the actions of the state as a competitor in the market lead to its continuous monopolization which, in turn, may cause severe disruption of the national economy in general.

5 Conclusion The aim of the paper was to cover the current competition paradigm of the banking sector of Russia through an integrated research involving both instrumental estimations of the level of competition and market power in the sector and an explanation of the

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estimations through a political economy perspective. Our ﬁndings have shown that while the sector in general is operating under monopolistic competition, one of the leading competitors in the market is the state personiﬁed by a cartel of the statecontrolled banks. Being simultaneously a regulator and a competitor, the state uses speciﬁc competitive methods which lead to the sector’s monopolization and may be detrimental both to the banks’ clients and to the economy in general. Acknowledgments. The article is published with the support of the grant of the Russian Foundation for Basic Research (RFBR) “Problems of the conﬁguration of the global economy of the 21st century: the idea of socio-economic progress and possible interpretations, No. 18-01000877 A”.

References Anzoategui, D., Martinez Peria, M.S., Melecky, M.: Banking Sector Competition in Russia. Policy Research Working Paper 5449 (2010) Arrawatia, R., Misra, A.: Competition in banking industry: a literature review. IRACST 1(3), 120–126 (2012) Banki.ru. http://www.banki.ru/ Bikker, J., Shaffer, S., Spierdijk, L.: Assessing competition with the Panzar-Rosse model: the role of scale, costs, and equilibrium. Rev. Econ. Stat. 94(4), 1025–1044 (2012) Central Bank of the Russian Federation. http://www.cbr.ru/ Cetorelli, N.: Life-cycle dynamics in industrial sectors: the role of banking market structure. Federal Reserve Bank of St. Louis Rev. 85, 135–147 (2003) Cetorelli, N., Strahan, P.: Finance as a barrier to entry: bank competition and industry structure in local U.S. market. J. Finan. 61, 437–461 (2006) Fungáčová, Z., Solanko, L., Weill, L.: Market power in the Russian banking industry. BOFIT Discussion Papers 3 (2010) Mamonov, M.: Non-structural approach to evaluation of the level of competition in Russian banking sector. Bankovskoye delo 11, 17–24 (2010) Panzar, J., Rosse, J.: Testing for ‘monopoly’ equilibrium. J. Ind. Econ. 35(4), 443–456 (1987) Vernikov, A.: Russian banking: A comeback of the state. BOFIT Discussion Papers 24 (2009)

Socio-Cultural Activities in the Implementation of Educational Programs for Tourism Based on the Competence Model Irina V. Borisenko ✉ , Tatyana V. Degtyaryova, and Gulmira B. Grigoryeva (

)

Institute of Service and Business (Branch) of Don State Technical University, Shakhty, Russia [email protected], {Shevchenko76,Grigoryeva62}@bk.ru

Abstract. The article discusses the prospects of realization of the competence approach in the Russian tourism education. The article contains the results of the study on the implementation of competence model of training specialists for tourism through the prism of socio-cultural activities. Keywords: Competence · Competence model of a specialist Socio-cultural activities · Socio-cultural animation and tourism

1

Introduction

The training system of professionals for tourism industry in Russia began to develop in the 1990s. At this time the ﬁrst state educational standards appeared. In 2011 the Russian higher education system underwent some signiﬁcant changes, it was then that Russian universities switched to a multilevel system of education, in connection with the adop‐ tion of Federal state educational standards (FSES) of a new generation, which include basic educational programs (BEPs). Those BEPs are being implemented through the competence model. First of all, we should note some diﬀerences between the term “competence” in Europe and Russia: “The concept of “competence” includes several terms: the inborn tendency (talent), ability (personalities), skills…”, and in Russia it includes: “the ability of a graduate to apply knowledges, skills and personal qualities for successful activity in a certain area”. In addition to fundamental diﬀerences of understanding of compe‐ tencies it should also be emphasized that in the Russian version (a bachelor of tourism) the professional competences dominate over the cultural ones (16 vs 14). Their analysis suggests that, in the framework of the Russian competence model the student must not only have a body of knowledges and develop a set of skills – on completion of training he/she needs to have the motivation to operate eﬀectively outside of the classroom tasks. We can consider the motivation to acquire tourism education as an indicator of personal development and the success of adaptation as a specialist in the ﬁeld of tourism - as an indicator of professional development of a person and his/her successful career. It is clear that the diﬀerence between these two results is huge. This problem is compounded by a lack of clear deﬁnitions of certain competencies in the Federal State Educational Standards (FSES), which does not allow to correlate them © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 69–76, 2019. https://doi.org/10.1007/978-3-030-00102-5_6

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with certain sets of knowledges. And, as a consequence, based on the competences proposed by FSES is quite diﬃcult to formulate a clear “model specialist”. All this actualizes the need for search and development of new approaches and mechanisms in the preparation of a specialist in tourism. In this article, the authors have proposed a model of training of specialists in tourism through the prism of socio-cultural activities. The study was based on the hypothesis that the implementation of competence-based approach is not only the problem of the content of education, but of the learning techniques used and the creation of appropriate pedagogical conditions.

2

Theoretical Basis of the Study and Literature Review

Modern socio-cultural activities pay more and more attention to cultural values as a factor of stabilization and strengthening of spiritual and moral potential of Russia. A special attention should be paid to the modern theory of socio-cultural activities which developed the concept of having a deep relationship with socio-cultural animation. Despite the fact that the majority of domestic scientiﬁc works animation is considered in the context of entertainment and recreation, there is a tendency to give it a deeper meaning associated with the development of personality and his/her appeal to spiritual values. The socio-cultural animation is one of the most rapidly developing areas of modern socio-cultural activities, which involves implementation of creative programs of rehabilitation, recreation, socio-psychological consolidation of public groups on the basis of the cultural values. Gradually, the interpretation of socio-cultural animation as social-educational activ‐ ities to promote the spiritual and moral principles takes place. The socio-cultural anima‐ tion is a complex concept, the theoretical foundations are closely associated with social pedagogy. Jacques Friedman, who developed the Programme of education of the nation in France in the 70s of the XX century, talked about the creation of harmony of the unity of a child and his/her development. As a result of this program by the end of the 20th century the socio-cultural animation had become an independent phenomenon in the ﬁeld of leisure. Up to 60s of XX century the socio-cultural animation had no scientiﬁc understanding. R. Labourie and P. Bernard write about the diﬃculty to distinguish the space of animation, produce a lot of areas of entertainment activities. French sociologists who studied the entertainment activity saw the fundamental role of culture. The socio-cultural animation has been actively developing in Russia for several decades as a sphere of practical activity. The bibliographical survey of books and thesis in the degree which can be called “socio-cultural animation in education” found in total 33 titles, including: 20 of disser‐ tation research; 2 of monographs; 11 of training and educational textbooks. In modern Russian science the thesis research in the socio-cultural animation were defended in the section of Pedagogical Sciences. The signiﬁcant results were achieved in two academic programs: “Theory, methodology and organization of socio-cultural activities” and “Theory and methodology of professional education”. Here we can see

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the beginning of systematic study of this topic, considered as a perspective direction of development of science and practice. It is important to note that the study of the socio-cultural animation began in Russia with the thesis by E. B. Mambekov “Leisure in France: an animated model”, defended in 1992. These studies were continued in 2005 with the works which showed the trends in the decision of socio-signiﬁcant problems through the implementation of the educational potential of technologically organized resources of culture and art. In the basis of these studies there are theories by A. D. Zharkov, M. A. Ariarsky, N. N. Yaroshenko, etc. Of particular importance for our study are the works of N. N. Yaroshenko which reveal the essence and importance of the socio-cultural animation as one of the most rapidly developing areas of the socio-cultural activities. The theoretical basis of the study consists of philosophical, psychological and peda‐ gogical concepts and theories of the personality development: – the requirement and motivational theory of the organization of behavior (N. V. Simonov); – youth leisure as a phenomenon, integrating personal and socio-cultural factors, recreational and educational functions and implemented on the basis of their collab‐ oration (B. C. Bibler, A. Sukalo, etc.) – regulations on self-development which is based on the internal contradictions as major factors for development (S. L. Rubinstein, V. I. Andreev); – concepts of socio-cultural activities developed in the works of M. A. Ariarsky, E. I. Grigorieva, A. D. Zharkov, Yu. D. Krasilnikov, V. I. Solodukhin, T. K. Solodukhina, V. Ya. Surtaev, H. H. Yaroshenko, etc.; – theoretical analysis of socio-cultural activities in the formation and development of personality done by T. G. Bortnikov, M. I. Dolzhenkova, G. N. Novikova, V. M., Ryabkov, E. Yu. Streltsova, B. A. Titov, V. E. Triodin, V. V. Tuev, D. V. Shamsut‐ dinova, etc. To problems of professional training of specialists of tourist industry in Russia a number of studies are devoted. These studies deal with the aspects of training specialists in the sphere of tourist animation in the educational institutions of Tourism degree (I. I. Bulygina, T. I. Galperin, O. V. Eremkina, V. D. Ermilova, L. V. Kurylo, F. N. Lavrov, P. O. Losaberidze, E. M. Priezzheva, L. A. Semenova, I. F. Sadzhai, A. A. Fedyakin, etc.). Another group consists of researchers engaged in the study of the structure of the modern education system, the development of various innovative projects in the ﬁeld of socio-cultural activities, taking into account religious, national, regional and local speciﬁcity. They are works by S. P. Belovolova, V. S. Bibler, T. F. Kryaklina. Among the main characteristics of the study of methodological literature in the sociocultural animation we should notice its practical, methodical character, and its orienta‐ tion on the formation of a specialist as an organizer of leisure activities of the population in the tourism industry. Despite the signiﬁcance of the results of scientiﬁc research and the presence of the pedagogical experience of using the potential of the technology of the socio-cultural animation, none of the authors have not attempted to justify the socio-pedagogical

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approaches for the use of tools of the socio-cultural animation in tourism education taking into account competencies and learning outcomes. Having studied the experience of domestic and foreign theorists and sources in the ﬁeld of animation we propose the following deﬁnition: the socio-cultural animation is a special direction in an animation environment, research and transformative activities of which is aimed at community groups or individuals of society to study their social behavior, using a variety of social, pedagogical and psychological methods.

3

Methods and Subject Base of a Research

The choice of methods has been caused by the need to solve two main objectives of the research: (1) to reveal and record the requirement to the professional activity of the bachelor of tourism in the form of obvious descriptors; (2) to formulate the personal characteristics necessary for successful realization in this type of professional activity. To solve the ﬁrst task we use the method of the content analysis and synthesis of the oﬃcial and informal (corporate) documents containing the description of the labor func‐ tions, the abilities and knowledges necessary for their implementation, job evaluation catalogs. National standards of tourism, qualiﬁcation reference books, duty regulations of the enterprises of tourism, the Project of a national frame of qualiﬁcations became empirical base for the realization of this task. During the research work we analize the psychological, professional and adaptation changes of students of the Tourism degree, including their questioning, their systematization and classiﬁcation was carried out.

4

The Results of the Study (Findings and Discussion)

The view of tourism education through the prism of socio-cultural activities (and more speciﬁcally - the socio-cultural animation) allowed the authors not only to identify the problems in implementation of the competence approach the BEPs (for the FSES), but also to ﬁnd their solutions. (1) The employers were interviewed and the survey showed that 75% of managers see the problem of adaptation of new employees in the absence of the skills of group work. Thus, we needed to include in the curriculum the forms of work aimed at the formation of intergroup and group relations. Interpersonal and intergroup relations as forms of socializing communication take in sociocultural animation a certain place. In the course of such relationships deep psychological levels of interaction of individuals play out. Supportive atmosphere natural to the animated programs provides an environment for eﬀective interpersonal relationships that rebuilds the person, forms his/her new opportunities and shows potential ones. The Department organized the work of two clubs: “Heritage of the Don region” and leisure club “Centrifuge”. Event organizers of the clubs were groups of students studying at this time some special discipline “Organization and Realization of Excursions” and “Animation”, participants were students of all courses of Tourism. The “Centrifuge”

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arranges unique, singular events, workshops, trainings, thematic discussions, video presentations, quizzes, entertainment programs on various subjects. The work of the clubs is supervised by teachers and is ﬁxed in the programs of disciplines as practical. As a result, the student organizers get managerial competence (organizational skills, responsibility, and a great reputation of the lead guide) and professional competence (higher professional education, work experience, knowledge of a foreign language). With the implementation of these teaching methods all the students, both the organ‐ izers of club events and the members of clubs formed the social competence - the ability to work in teams and motivate, inﬂuence and persuade, the ability to learn innovation, resolve conﬂicts, and of course a personal charm. Especially it should be noted that, despite the voluntary nature of participation in the meetings of the clubs, more than 87% of students of Tourism has taken an active part in them that undoubtedly is very high. (2) The FSES of the third generation on the direction “Tourism” comes from the phenomenon of actual knowledge, but insuﬃciently emphasizes the dynamism, variability of social requirements to a graduate in a market economy, the need to advance demands. A modern specialist in tourism must be able to work with diﬀerent groups of consumers, it’s dictated not only by the needs of the labour market, but also the changing attitudes of the contemporary Russian society and the need for the formation of the society. The FSES divides the curriculum into the basic (compulsory) and variable (proﬁle) part. The variable part involves the possibility of expanding or deepening of competencies deﬁned by the content of the basic part. Here the necessity of designating additional professional (core) competencies for the variable part of the professional part appears. We attempted to train specialists with special background and using methods of active pedagogy. To implement this idea, it was decided to attract students to develop and implement diﬀerential animation programs (in the framework of independent volunteer work, but which was estimated with additional points at the ﬁnal assessment), in such places as: orphanage home, nursing home, rehabilitation center for children, etc. The authors formulated the thesis that this form of socio-cultural activities is mainly aimed at the socialization of a student. Within the animation process the socialization can be viewed as socio-psychological adaptation of an individual, his/her occurrence in a speciﬁc social environment and change in accordance with it so that he/she could solve the most important not only professional tasks, but also tasks of his/her life until selfactualization. In this approach, students gain experience of social interaction and selfrealization, thereby determining their level of social services and acquiring the profes‐ sional competence. (3) The socio-cultural animation allows to solve the tasks of ensuring the conditions for comprehensive and free development of the personality, his/her creative expres‐ sion, but also creates the conditions for eﬀective control in the sphere of culture. This is the problem of cultural competency (CC) which is to be implemented in the framework of the BEP. The development of the CC at the beginning of each academic year, the survey asks students about socio-cultural preferences. The results of the survey help to create a perspective plan for educational work on the

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basis of the actual preferences of the students. In it, such activities are included: parties of Russian poetry, Patriotic campaigns and ﬂash mobs, competitions on sports tourism, discussion sessions, intellectual games. The monitoring of educational work is carried out in two main areas. Firstly, the operation parameters are monitored, and the participation and (or) extent of interest of the students is paid the great attention. Secondly, the monitoring is carried out, the assessment and prediction of mental and social well-being of students is given by testing in the socio-psychological service of the University. The eﬀectiveness of these actions still can be judged by how the graduates are involved in socio-cultural activities. For example, in the capital of the Republic of Uzbekistan Tashkent a graduate of the Department created the club “Cultural layer”, members of which are creative and scientiﬁc elite of the city. The format and topics of the event are borrowed from the activities undertaken by the Department and continued in a diﬀerent cultural space. (4) The professional competences (PC) of a bachelor in Tourism include: readiness for implementation of projects in the tourist industry, the ability to organize the process of customer service, willingness to use innovative technologies in tourist activity, etc. The success of the activities of a specialist of socio-cultural sphere largely depends on the degree of mastery of the technology of socio-cultural design, which is the competent analysis of a concrete situation, the development and implemen‐ tation of projects and programmes that optimise the basic components of human life. The relevance of the basics of socio-cultural design is caused by, ﬁrstly, the fact that this technology has a wide scope for all occupations in the socio-technical sphere. Secondly, the owning of the logic and technology of socio-cultural design will allow staﬀ to carry out analytical, managerial and advisory and methodological functions in the socio-cultural sphere more eﬀectively. Thirdly, design techniques ensure the competitiveness of a specialist on the labor market - the ability to develop social projects and to apply for ﬁnancing - this is a real opportunity to create a workspace within existing institutions and organizations, and outside. In the process of preparing socio-cultural programs within the volunteer, educational and club work the students take on the ability to prepare and conduct a cultural event (or a system of events and actions), after explaining its idea, deﬁning goals and objec‐ tives, the means proposed for their solution.

5

Results and Research Perspectives

According to the research results we can conclude that the implementation of the educa‐ tional programs of bachelors of tourism in terms of socio-cultural activities makes it possible to give the results of the education the social and personal character, to increase signiﬁcantly the motivation and interest of students, to implement the competencies required for a graduate of the Tourism degree in their further eﬀective employment.

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The authors together with the consortium of 17 universities of Europe and the CIS in the framework of the programme of the European Commission Erasmus+ (Project EurDiQ) participate in the development of a pilot program in the Tourism degree for the 7th qualiﬁcation level (Master degree) on the basis of professional standards, qual‐ iﬁcations framework of the industry (SQF) and learning outcomes. The successful expe‐ rience in the development and implementation of educational programs of bachelors of tourism in terms of socio-cultural activities opens the prospect to continue on the next qualiﬁcation level - Master of Tourism.

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Communicative Tolerance of Students of Higher Educational Establishments in the Context of Social and Economic Dimension of the Region Snezhana V. Yavon1 ✉ and Tatyana N. Ivanova2 (

1

)

Volga State University of Service, Tolyatti, Russia [email protected] 2 Tolyiatti State University, Tolyatti, Russia [email protected]

Abstract. Tolerance is one of the most signiﬁcant social-psychological phenomena and behavioral characteristics of individuals and social groups. The number of reasons for the manifestation of tolerance, moreover – destructive tolerance in the modern sociocultural and economic-political context is steadily increasing and therefore requires multicenter study and explanation of these phenomena. The authors of this article have studied the communicative tolerance of students of higher educational establishments in the Tolyatti city district through social and economic measurement of the level of development of quali‐ ties and characteristics which are inherent in intolerant individual in terms of interpersonal relations. The study was conducted at the premises of three higher educational establishments in the Tolyatti city district: Volga Region State University of Service, Tolyatti State University and Volzhsky University named after V.N. Tatischev – 240 respondents aged 18–25 (March-April 2017). The study of young people has demonstrated that impatience is one of the character‐ istic psychological traits for adolescence. Keywords: Tolerance · Communicative tolerance · Young people Economic measurement, region, students of higher educational establishments Intolerant behavior · Attitude development

The work was carried out within the framework of the grant project of the Russian Foundation for Basic Research No. 17-46-630560 “Conceptual innovative model of the socio-eco-economic system of the Samara region”. In the present context, the issue of the formation of tolerance in young people is one of the tasks of its sociocultural development (Sitarov 2008). The signiﬁcance of the development of tolerant attitude is determined by the processes that disturb both the international community and Russian society. First of all, it is the growth of various kinds of extremism, aggressiveness, as well as the expansion of conﬂict zones and conﬂict situations. These social phenomena aﬀect young people the most, since they are characterized by maximalism, the desire for simple and swift solutions to complex social problems due to their age peculiarities. One should pay attention to the importance of studying the causes, motivations and argumentation of intolerant attitudes and behavior,

© Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 77–86, 2019. https://doi.org/10.1007/978-3-030-00102-5_7

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which is very important for the study of counterarguments in the process of educational work with students of higher educational establishments. In modern science, in the context of the multifaceted nature of the manifestation of tolerance in modern society, a large number of methodological approaches to the essence of the concept under investigation have been developed, which determines the complexity of a study of concepts of tolerance. In this article, the term “tolerance” refers to the voluntary confession and respect for freedom of thought, ideas and actions, while granting others the right to live in accordance with their own view of the world. Formation of tolerant attitudes, tolerant behavior, as well as prevention of various kinds of intolerance is perceived by scientists and experts as a global problem of the modern era. It is exactly this perception that occurs today. At the same time, the historical character of the tolerance and intolerance itself is recognized; that’s why upbringing of the rising generations in the spirit of tolerance is certainly one of the most vital social tasks. Today, the tolerance issue has started to be ﬁlled with new content; it has become particularly signiﬁcant. It is conditioned primarily by the globalization processes that are taking place in the world. One could argue about whether there is a single economic or cultural space, but the growing interdependence of people is obvious. No individual community can exist in isolation any longer in the face of such problems as, for example, environmental problem. Even the most diverse people, and hence, diﬀerent cultures, have to come into contact with each other nowadays. The intercultural exchange has sharply intensiﬁed due to the information technology boom and is becoming virtually ubiquitous, and the tolerance to cultural diﬀerences becomes an essential prerequisite for the dialogue of various groups of people. And, despite the diﬃculty of implemen‐ tation of this condition, there is no feasibly signiﬁcant alternative to tolerance at the moment. Tolerance should be described as a social norm which includes the following compo‐ nents: social susceptibility of interacting subjects, interest in each other’s characteristics; recognition of equality of partners; renunciation of domination and violence; willingness to accept another person as he/she is; trust, the ability to hear and listen to others; sympathy, empathy. Communicative tolerance is one of the most important and informative traits of a human. It is collective in nature, since it reﬂects the factors of his/her fate and attitude development, communication experience, culture, values, needs, interests, attitudes, nature, temperament, habits, thinking peculiarities, and, of course, the emotional ster‐ eotype of behavior. This characteristic of an individual refers to the core, because it largely determines its way of living and activities – the state of things in the immediate circle and at work, career advancement and the performance of professional duties. This is a systematizing characteristic, since many other qualities of an individual, in the ﬁrst place moral, char‐ acterological and intellectual, show agreement with it and form a certain psychological ensemble. That is why the features of communicative tolerance may be indicative of mental health, inner harmony or disharmony, self-control and self-correction ability (Grebenets 2013).

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Everyday communication is indicative of various manifestation of communicative tolerance: some people are very tolerant towards others, others can hide their hostility towards partners fairly well, still others are capable of using the power of persuasion to force themselves to ignore the unpleasant qualities of other people. Similarly, a particular degree of reduction of communicative tolerance is manifested in a broad range: certain traits of another person can cause partial, substantial or complete disapproval, irritation or zero tolerance. Tolerance in communication is divisible into situational, typological, professional and general tolerance (Nikitina and Tolstikova 2012): – situational tolerance is the attitude of a person towards a speciﬁc conversation partner; – typological tolerance is the attitude towards a collective type or group; – professional tolerance is the attitudes in the working environment, in interaction with those people whom one has to deal with by the nature of work; – general tolerance – tolerance conditioned by personal experience, temperamental attributes, ethical principles, and predetermining other forms of communicative tolerance to a great extent. In order to study the communicative tolerance of students of higher educational establishments in the Tolyatti city district, a diagnostic technique for general commu‐ nicative tolerance by V. V. Boiko was used; it allows diagnosing tolerance through measurement of the level of development of qualities and characteristics that are inherent in intolerant individual in terms of interpersonal relations. This technique allows diag‐ nosing tolerant and intolerant attitudes of an individual which manifest during the communication process. The form of methodology of a study is subdivided into 9 scales (5 questions in each scale), which gives 45 questions in total. Each scale is designed for identiﬁcation of intolerant traits of an individual: 1. zero tolerance or incomprehension of individuality of another person; 2. using oneself as a sample in case of assessment of behavior and way of thinking of others; 3. judgmental or conservative attitude in the assessments of others; 4. inability to hide or mitigate unpleasant emotions when confronted with incommu‐ nicative qualities of the partners; 5. desire to alter, re-educate the partners; 6. desire to change the partners in such a way that they met his/her requirements, make them “convenient”; 7. inability to forgive others for mistakes, awkwardness, and unintentionally caused inconveniences; 8. intolerance to the physical or mental discomfort created by others; 9. inability to adapt to the temper, habits and desires of others. As a result, the greater is the total amount of points scored, the higher is the degree of general communicative intolerance of a student of a higher educational establishment in the Tolyatti city district.

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The study was conducted at the premises of three higher educational establishments in the Tolyatti city district: Volga Region State University of Service, Tolyatti State University and Volzhsky University named after V.N. Tatischev – 240 respondents aged 18–25 (March-April 2017). Analysis of the ﬁndings has shown that overall the level of development of commu‐ nicative tolerance in students of higher educational establishments in the Tolyatti city district is satisfactory (“Table 1”). High degree of communicative tolerance was noted in 5% of students; at the same time, there are no students with zero tolerance of others. The majority of students (75% of students of all higher educational establishments in the Tolyatti city district), medium degree of tolerance can be observed. Out of all higher educational establishments, the students with high ﬁgures of tolerance (14.3% of students of VUnaT who took part in testing) were identiﬁed in VUnaT alone. As for the other ﬁgures, all presented higher educational establishments are at about the same level. Table 1. Overall level of communicative tolerance of students of higher educational establishments in the Tolyatti city district, % Location of study High degree of tolerance (0 to 45) VRSUS 0 TSU 0 VUnaT 14.3 All 3 higher 5 educational establishments

Medium degree of tolerance (46 to 85) 76.9 69.2 78.6 75

Low degree of tolerance (86 to 125) 23.1 30.8 7.1 20

Zero tolerance of others (126 to 135) 0 0 0 0

Particular attention should be paid to the behavioral blocks in which high overall points were scored. The more total points are scored on a particular feature, the less testtaker is tolerant towards people in this particular aspect of the relationship with them, and the more diﬃcult it is for him/her to establish an eﬀective communication process. Conversely, the fewer points are scored by the test-taker on a particular behavioral feature, the higher is the level of his/her general communicative tolerance in this partic‐ ular aspect of the relationship (“Table 2”). According to the conducted study, a suﬃciently large number of students showed a low level of communicative tolerance. Particularly low ﬁgures can be observed in VRSUS in the ﬁrst four blocks of questionnaire which is indicative of inability of students of VRSUS to accept the individuality of the people meeting them and assess the people based on their own self; they are fairly judgmental and conservative in their assessments of others and cannot hide or mitigate the unpleasant impressions in the event of a conﬂict with incommunicative qualities of people to a certain degree. Particularly low ﬁgures can be observed in the students of TSU concerning the matters related to proneness of students to re-educate and rehabilitate partners, to change their partners in such a way that they met their requirements, make them “convenient”, and the inability of students to forgive mutual oﬀences. In matters relating to tolerance of others’ discom‐ forts and adaptability in interaction with people, all students who took part in testing

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demonstrated high ﬁgures of communicative tolerance. It is worth noting that the students of VUnaT in all blocks of questionnaire proved themselves as fairly tolerant individuals. Table 2. Analysis of communicative tolerance of students of higher educational establishments in the Tolyatti city district, % Item No. 1 2

3 4

5 6 7

8 9

Main blocks of questionnaire You cannot or do not want to understand or accept the individualities of others When you assess the behavior, way of thinking or certain characteristics of individuals, you take yourself as a reference You are judgmental or conservative in assessing people You do not know how to hide or at least mitigate the unpleasant feelings that arise when you are confronted with incommunicative qualities of your classmates (colleagues) You are willing to alter, re-educate others You want to change your partners in such a way that they met your requirements, make them “convenient” You do not know how to forgive others for mistakes, awkwardness, and inconveniences unintentionally caused to you You are intolerant of the physical or mental discomfort in which your conversation partner came to be You cannot adapt well to the tempers, habits, attitudes or sights of others

VRSUS 23.07

TSU VUnaT 30.77 14.28

23.08

38.46

21.43

15.38 30.77

38.46 38.46

21.43 7.14

30.77 46.15

23.08 23.08

14.28 14.28

30.77

15.38

21.43

7.69

7.69

7.14

15.38

15.38

14.28

There was an attempt during the study to identify the prerequisites for intolerant behavior in modern society. It has been found that the majority of students who took part in questionnaire survey (32.5% of all students of a higher educational establishment in the Tolyatti city district) feel particularly strongly about towards other people who are intolerant to someone else’s opinion, aggressive, rude, and showing intolerant behavior. This emotion is followed by such emotions as contempt and shame, which, in turn, are followed by the desire to comprehend the prerequisites for such behavior. 10% of respondents take such forms of behavior in stride. Thus, it can be concluded that more than 87% of respondents have demonstrated negative or close to negative attitude towards people who are intolerant to someone else’s opinion, aggressive, rude, who would stop at no end to achieve their goal. One should pay special attention in the study of tolerance to the response of responding students to a situation in which they were subjected to aggression and rude‐ ness. The majority of respondents prefer ignoring such behavior on the part of their conversation partner (55%). 30% of responding students prefer to reciprocate rudeness, and 12.5% of responding students tried to bring the rude person to reason.

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People have to behave intolerantly fairly often in modern society. It is especially important to understand the inner experiences of a person who has found himself/herself in such a situation. The majority of students (55%) had a hatred for life which exposes people to such circumstances. Similar in terms of percentage ratio were the feelings of shame and hatred with regard to those who provoked such behavior (12.5%). It is worth noting that there has been a positive trend – nobody of respondents never felt satisfaction due to the fact that they managed to have their own way, and only 2.5% of respondents admitted that they have already got used to the fact that they manifest intolerant behavior. According to the majority of responding students of higher educational establish‐ ments in the Tolyatti city district, the most tolerant period in the Russian history was the period before the 1917 revolution – only 2.5% of respondents believe that this period was ﬁlled with intolerance and aggression. Most respondents (30%) for some reason or other consider the current presidency of V. V. Putin as the most intolerant period of all presented periods. It is followed by the presidency of B. N. Yeltsin (10%) and M. S. Gorbachev (7.5%). The maximum number of respondents (45%) believes that intolerant relations were always dominant in Russia. The respondents have identiﬁed the areas of society where intolerance, violence, aggressiveness are pronounced the most – street, public places (20%), politics and health (17.5%), sports (10%), law-enforcement and information sectors (7.5%). Service sector, family (private) life, human services and social activities complete this list (2.5%). According to the responding students, there is no aggression, intolerance and cruelty in professional life and education. The majority of respondents believe that the main reason for an increase in the level of intolerance and aggressiveness in recent years is the fall of living standards of the population which is associated with the transition to market relations (35%). A fairly large number of students noted a low educational and cultural level of the population, as well as a massive propaganda of aggressiveness and xenophobia in the media (22.5% each). Besides, weak regime was mentioned as one of the other reasons for this. When answering the question about the reasons for the higher level of tolerance and respect for other people in certain Western countries as compared to Russia, a fairly large number of students noted that a high standard of living (32.5%) is one of the main factors of the formation of tolerance. However, 35%, which constitutes the majority, claim that manifestation of intolerant relations can be found anywhere. 60% of respond‐ ents believe that there are such processes, phenomena, facts and people towards which one cannot be tolerant. However, it is worth noting that these ﬁndings allow us to observe only the main trends which are inherent in mutual relations between the respondent and his/her part‐ ners. A personality manifests itself more bright and versatile in direct one-to-one communication. Thus: – the level of development of communicative tolerance in students of higher educa‐ tional establishments in the Tolyatti city district is satisfactory; – the majority of students who have participated in the study, towards other people who are intolerant to someone else’s opinion, aggressive, rude, and showing intolerant behavior, ﬁrst of all, indignation;

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– more than 87% of respondents have demonstrated negative or close to negative atti‐ tude towards people who are intolerant to someone else’s opinion, aggressive, rude, who would stop at no end to achieve their goal; – according to the respondents, the most tolerant period in the Russian history was the period before the 1917 revolution, and the most intolerant period is the current pres‐ idency of V. V. Putin; – the main reason for an increase in the level of intolerance and aggressiveness in recent years is the fall of living standards of the population which is associated with the transition to market relations. An increase in the degree of tolerance of citizens in the domestic conditions is impossible outside the system of education and attitude development. Education has always performed the educational function; however, in the context of today’s Russian reality, it has become necessary not only to form the basic moral criteria in an individual, but also to teach them to be tolerant and ﬂexible in a complex multifaceted world, to develop along with this world, to have the basic skills of eﬃcient communication and to interact with other members of society while remaining for ever one. Therefore, we can safely state the obvious - the development of tolerant attitude is transformed into a strategically signiﬁcant goal for the purposes of education in Russia (Obryvko 2015; Ponomarev et al. 2016). A higher educational establishment as one of the most signiﬁcant institutes of social‐ ization is aimed at developing the system of knowledge of occupational skills, common cultural and general professional competences, and at directly inﬂuencing the person‐ ality of students through an increase in the level of their social-psychological compe‐ tence and psychological culture. The development of tolerance takes priority in this context, for which reason the training of students must be focused on the development of their ethnopsychological competence and axiological attitude towards intercultural exchange which is based on the principles of tolerance (Yakunin et al. 2016). At the same time, the mental space of the university environment is saturated with national priorities today: the ideas of patriotism, national identity, high spirituality, the value of work and service for the beneﬁt of the motherland, the traditions of ethnic and religious tolerance, and openness to other cultures. The ﬁndings of sociological studies in recent years indicate that one cannot distinguish the head motif of a man of education which makes up the true spirituality of an individual in a students’ educational envi‐ ronment today: manifestation of interest to others, to processes occurring in the country, sympathy and ability to endorse an interested dialogue. Communication and interests of young people are generally conﬁned to a simple behavioral model which is closed in by the interests of a fairly mundane pragmatism. Today, a higher educational establishment is aimed at solving the tasks of providing every citizen with the opportunity for intellectual, cultural and moral development, since it is in it that young people go through the most important stage of socialization, civic consciousness, realizing, accepting or denying socially signiﬁcant values. Focused educational work is aimed at harmonizing the impact of the ethnosocial environment on people, forming their own positive experience of international interaction, weakening the possible negative impact of interethnic relations on them (Yakunin 2015).

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The issues of the attitude development of young students in the context of multi‐ confessionality and multinationality have been gaining in importance in the educational activities of higher educational establishments over the past decade. In this regard, a large number of diﬀerent activities are being carried out by the three major higher educational establishments in the Tolyatti city district even as we speak. For example, an educational project “Festival of National Cohesion” is carried out every year by the VRSUS within the framework of the festival “Students’ spring”. TSU takes measures aimed at prevention of extremist manifestations, focused on the formation of a positive attitude of young students, excluding the very possibility of application of force to others to achieve any goals. The presence of such disciplines in the educational process as law, legal science, culturology, constitutional and civil law, not only forms basic legal knowledge about civil rights of an individual and their protection in the students, but also to contributes to patriotic education, inoculation of knowledge and skills in the area of settlement of international and social conﬂicts, restiveness and prevention of mani‐ festation of intolerant behavior to young students. Besides, in each of the three main higher educational establishments, special attention is paid to the organization and holding of public, mass participation, and recreative sporting events, since the rational use of students’ extracurricular time in the interests of the development of positive atti‐ tude in them certainly leads to a reduction in tension, aggression, and law violation. The existing structural and functional model of formation of tolerance in young students which is partially implemented in the higher educational establishments in the Tolyatti city district is currently based on the basic ideas of the humanistic approach, and is also based on the principles of positions, multicultural environment, cooperation, and co-creation; integrates the informative, target, resultative and organizational compo‐ nents; reﬂects the speciﬁcs of the multicultural environment of a higher educational establishment; ensures the integrity of the educational process and an increase in the level of tolerance. The basic ideas embedded in this model include the axiological equality of men with diﬀerent national peculiarities, the humanization of interactions among participants in the educational process. Successful implementation of this model of formation of tolerance of young students is achieved through a complex of pedagogical conditions, which includes the unity of the educational and extracurricular activities of students; information and psychological education and training of students; person-centered interaction “student – teacher”, a program for the development of the branch, teaching practice, etc. It is these conditions that make it possible to maximally expand the range of cultural and educational contacts of the participants in the educational process, and to develop a tolerant attitude in them. In the present context, in the course of a focused eﬀort aimed at the formation of tolerance in students, one should be guided by the structural and functional model of formation of tolerance in young students in a multicultural environment of a higher educational establishment and the model of a graduate – a tolerant individual who is ready for communication in a multicultural environment based on the speciﬁed charac‐ teristics: – understanding the need for coexistence of various cultures as the basis for preserving the life on earth;

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– holistic view of the multicultural worldbuilding, the theory and practice of interna‐ tional relations; – acceptance of various cultures as equal, equipollent and equivalent; – aiming for knowledge of various cultures, identiﬁcation of their inherent peculiari‐ ties; – manifestation of goodwill and savoir vivre in mutual relations with representatives of various cultures; – availability of skills of intercultural exchange through the language of communica‐ tion, tolerance and respect of its speciﬁcs. We perceive the model of a graduate as a certain ideal which can be achieved on condition of implementation of structural and functional model of formation of toler‐ ance. That said, successful solution to this problem depends on the desire and ability of the academic staﬀ of a higher educational establishment to bring the actual results bring into proximity with the desired results. Besides, youth students’ organizations, associations and movements, which are an important form of self-government and play a special role in the mechanisms of social activities of young people, prevention of intolerant behavior in a students’ environment, representing the interests of young people in state youth policy and implementing its subjectivity in all life spheres of society, are of particular importance in this context. In this regard, it should be noted that it is important to create a supportive environment for creative self-fulﬁllment of an individual and for leisure activities during extracurricular time, to elaborate various forms and means of integration of students into creative activity. To this end, on-stage performance groups, clubs, studios, interest groups, and athletic associations are organized in a higher educational establishment. Sporting and mass participation events are the most important means of educational and health promotion activities and are aimed at promotion of physical ﬁtness and sports, healthy lifestyle, organization of interesting leisure time and involvement of students in sporting and mass participation events, which in turn is of great importance in the formation of the tolerant way of thinking in young people. Educational work and prevention of intolerant behavior in students’ groups should also be performed by curators through conversations, thematic curatorial classes and face-to-face work with students. We believe that development of tolerant attitude in the educational process of a higher educational establishment can be made possible provided that the following elements of behavior are formed: – the capacity for tolerant speaking and maintaining one’s own position as a point of view; – the willingness to tolerate the statements of others (the perception of opinions and assessments of other people as an expression of their point of view having the right to exist – regardless of the degree of cleavage in regard to their own views); – the capacity for interaction and the capacity for reaching a compromise and consensus; – tolerant behavior in stressful situations, when there are diﬀerences in points of view, collisions of opinions or assessments.

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Modern students entering an active social and professional life, are the very force that will be able to inﬂuence the formation of Russian society and the state in the near future. Thus, the formation of tolerant qualities of the modern Russian young people in our country can become a powerful instrument for subsequent social transformations. The formation of tolerance in the context of education space of a higher educational establishment is the most important task of modern society.

References Grebenets, E.S.: Certain issues of development of an attitude of communicative tolerance in the studies of domestic pedagogues and psychologists. Srednee Professionalnoe Obrazovanie (secondary vocational education), No. 11, pp. 16–17 (2013) Nikitina, N.I., Tolstikova, S.N.: A set of methodological approaches to the study of tolerance of specialists providing social services. Chelovecheskiy Kapital (Human Capital), No. 7(43), pp. 15–19 (2012) Obryvko, E.I.: Educational work aimed at formation of tolerance, culture of peace and interethnic concord in a students’ environment of a higher educational establishment. Gazette of the Altai State Pedagogical University, No. 23, pp. 89–90 (2015) Yakunin, V.N., Yamashev, V.M., Anuchin, O.I., Adaevskaya, T.I., Ovsyannikova, N.V.: Religious tourism and pilgrimage in Russia: cultural-historical analysis. Turkish Online J. Des. Art Commun. 6, 2595–2603 (2016). No. NVSPCL Yakunin, V.N.: Current trends of innovative development of a higher educational establishment. Baltiyskiy Gumanitarnyi Zhurnal (Baltic Academic Magazine), No. 3(12), pp. 78–83 (2015) Ponomarev, P.A., Letun, M.V., Ponomareva, A.P.: Formation of a tolerant individual in the context of a higher educational establishment. Molodoy Uchenyi (Young Scientist), No. 29, pp. 629–633 (2016) Sitarov, V.A.: Tolerance. Social studies of young people. Encyclopedia/Publishing editor – Zubok, Y.A., Chuprov, V.I. Academia, pp. 509–510 (2008)

Financial Conditions for Ensuring of Self-development of Regions Zhanna A. Zakharova(&) Vladimir Branch of Russian Presidential Academy of National Economy and Public Administration, Vladimir, Russia [email protected]

Abstract. The purpose of the article is to study the ﬁnancial possibilities of the regions in providing their self-development. Author uses data from ofﬁcial statistics to examine the indicators of the region’s budget provision and analyze the ﬁnancial possibilities of the regions’ budgets in question of realization of potential for self-development of these territories. Study is conducted on the example of seven regions of the Russian Federation (Vladimir, Ivanovo, Kaluga, Kostroma, Yaroslavl regions, Nizhny Novgorod and Ryazan regions) that are typical for central Russia and comparable in key parameters of social and economic development. On the basis of conducted research author concludes that there is insufﬁcient investment of budgetary resources and limited application of ﬁnancial instruments in the development of industries and types of economic activity that contribute for enhancing the potential for selfdevelopment of the studied regions. Obtained results may be interesting for government authorities at the regional level, in terms of focusing on those areas of economic development that enable the use of the internal resource capabilities of the region. Author also determined the directions for further exploratory research in terms of clarifying the list of direct and inverse indicators that reflect the parameters of the region’s self-development and the quality of life of the population. Keywords: Region Self-development Potential of region’s self-development JEL Classiﬁcation Codes: O 11

Financial instruments

O4

1 Introduction The study of the issue of ensuring the region’s self-development is relevant for a number of reasons. First of all, self-development can be considered as a basis for ensuring sustainable growth of the region’s economy in the long term. Taking into account the subsidization of most of the budgets of constituent entities of the Russian Federation, self-development can provide a solution to the problem of leveling the state of budgetary security and narrowing the gap in socio-economic development between the leading regions and outsider regions in terms of improving the living standards of the country’s population as a whole. © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 87–96, 2019. https://doi.org/10.1007/978-3-030-00102-5_8

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Theme of self-development is quite relevant in view of the fact that this process allows to activate the internal potential, the internal resource capabilities of the region (natural, climatic, labor). It is necessary to emphasize the fact that not all the regions mentioned have fully utilized the potential of self-development. From the author’s point of view, a promising area for the development of federal economic policy in the regions is the search for the optimal set of ﬁnancial and organizational instruments that ensure the most complete disclosure and activation of the potential for selfdevelopment that will ensure the stability and self-sufﬁciency of the region’s economy. The aim of the work is to study the ﬁnancial possibilities of the regions in realizing their potential for self-development.

2 Methodology At present time there are a number of contradictions in the regional economy that hamper the sustainable development of the economy of the Russian regions. It should be noted that the stimulation of the process of regional self-development through the targeted policy of the federal center can make it possible to smooth out or achieve a partial resolution of these contradictions. We emphasize the fact that we do not consider self-development as a spontaneous process (although this took place in the early 1990’s), but we are talking about the need to use the instruments of the federal center as a kind of push for ensuring the self-development of the regions. Self-development of territories and the activation of the internal resources of the region (natural, territorial, industrial, labor and others) that can largely ensure the stable state of the regional economy and improve the quality of life of the population (Zakharova and Bogatyrev 2018). One of the main contradictory moments we can observe is the contradiction between the potential for self-development of territories and the ability, the possibility of the region in its implementation. Under the potential of self-development, we mean the existence of a certain reserve of the resources of the territory and public needs (possibly also a sustainable demand) for the use of this resource. Thus, some regions have signiﬁcant natural resources, which must be used in connection with the tasks of both internal development and the possibility of interterritorial exchange, including in the scale of the world market. For example, Vladimir, Kostroma, Ivanovo and several other regions of Central Russia have signiﬁcant reserves of peat deposits. At the same time, there is a need for society to use peat as soil in private plots, as well as in houses and apartments, as fertilizer in agricultural production, as a building material (peat building blocks), as fuel in municipal boiler houses. However, peat extraction is carried out at an insufﬁcient rate (represented by a limited number of enterprises), which does not allow to use this resource to a signiﬁcant extent. In addition, for example, for the use of peat briquettes as fuel it is necessary to modernize obsolete fuel oil and coal boiler houses in the regions, which requires a considerable amount of investment resources. Also in some regions, the tourist and recreational potential is not sufﬁciently used. At territories of the Vladimir, Ivanovo, Yaroslavl, Kaluga and Nizhny Novgorod regions, due to the high urbanization of the population (approximately 80% of the urban population), there is a signiﬁcant domestic demand for recreational services

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(recovery, recreation, treatment), as well as a steady demand for visiting facilities tourist and recreational areas of these regions by residents of Moscow and the Moscow region (in view of environmental problems, high pace of life and limited territorial resources of the region). However, the use of tourist and recreational resources is also limited due to the low quality of provision of tourist services, insufﬁcient development of tourist and providing infrastructure. And such kind of economic activity as «Hotels and restaurants» in the GDP structure of the Vladimir region for 2016 is 1.1% and Ivanovo 1.4%. In addition, Vladimir, Ivanovo, Kostroma regions have a signiﬁcant potential of forest resources (51% of the territory of Vladimir and Ivanovo regions and 74.3% of Kostroma region). At the same time, large tracts of forests are idle, in view of their inaccessibility, from the point of view of the lack of infrastructure development. And such kind of economic activity as «Processing of wood and production of wood products» is underdeveloped (in the structure of manufacturing industry of the regions this type of economic activity forms 2.4% in the Vladimir region, 1.5% in the Ivanovo region, which is clearly not enough compared to Kostroma region, where this ﬁgure is 23.3%). In the regions under consideration water resource is also not sufﬁciently used. Such kind of economic activity as «Fish farming and ﬁshing» has practically disappeared, although there is quite a lot of water bodies in the regions. Currently water bodies are mainly used for water supply, although during Soviet period there were entire plants that stocked ponds and water bodies, a large area of agricultural land is not used (Babaev 2013; Babaev et al. 2015). Emphasizing the attention of regional and federal authorities on the need to implement projects and programs, stimulating the investment process in these types of economic activity, would also encourage the use of signiﬁcant internal resource opportunities of the regions. However, according to A. Shvetsov, in a complex of factors of territorial development the state support measures steadily retain a decisive role, which not only substantially supplement, but in many cases replace the efforts to create and use the preconditions and conditions for the self-development of the territories. Such assistance is provided by a variety of methods based on the application by federal authorities of certain instruments to solve the problems of economic growth of certain territorial entities. The range of tasks to be achieved extends from overcoming depressive states and anti-crisis support of the territories to stimulating their «advanced development» in the course of socioeconomic modernization (Shvetchov 2016). At the same time, the range of instruments for self-development offered to the regions by the federal center is rather limited. This set of instruments may include ﬁnancial transfers to regions from the federal center, including federal targeted programs, budgetary credits and funds from development institutions (the Investment Fund of the Russian Federation, Vnesheconombank, etc.). Attention should be paid to important fact that special legal regimes (special economic zones, territories of advanced development) have become most widespread at the present time as a result of the implementation of the federal policy of interaction with the regions. In this context, we can draw attention to the need for expanding the right for the regions to choose the tools to ensure conditions for self-development, taking into account the speciﬁc features of the region in terms of the structure of the economy, the availability of labor resources, the level of infrastructure development, etc.

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However, an important condition for ensuring the self-development of territories is its self-sufﬁciency. According to T.V. Sherstyankina, economic self-sufﬁciency includes a wide range of factors: resource base, concentration of enterprises, external economic relations, investment attractiveness, development of the agro-industrial complex, which assumes the formation of a regional budget at the expense of internal potential. The region thus acquires the possibility of self-development (Sherstyankina 2009). Economic self-sufﬁciency of the region is the situation in which the region’s revenues provide the necessary budgetary costs, the ability of the region to develop independently on the basis of effective use of available resources, the ability to build economic relations within the region, without attracting resources from outside (Volodona 2014). Researchers also assign a special role to the criteria that reflect the degree of decentralization of budgetary resources as the most important condition for ensuring the region’s self-development (Tatarkin and Molchanova 2012). In this paper we focus on ﬁnancial instruments for ensuring the self-development of territories, because one of the signiﬁcant problems in the social and economic development of the regions is the lack of ﬁnancial and investment resources for solving the problems of regions with insufﬁcient potential for self-development. The methodological basis of the research is general scientiﬁc research methods (analysis and synthesis, deduction and induction, normative and positive methods, etc.), quantitative econometric methods (summary and grouping of statistical data, regression and regression analysis, statistical indices).

3 Results Let’s consider some ﬁnancial instruments used by the federal center to increase the region’s self-sufﬁciency. Note that the gratuitous transfers which come to the consolidated budget of the regions (the budgets of Vladimir, Ivanovo, Kostroma and other regions are scarce), are primarily federal budget funds (Table 1). These amounts help to fulﬁll social obligations to the population of the region. Table 1. Share of gratuitous revenues in the region’s Gross Domestic Product (GDP). Indicator

Vladimir region Ivanovo region Kaluga region Kostroma region Nizhny Novgorod region Ryazan region Yaroslavl region

2013 million rubles

% of GDP

2014 million rubles

% of GDP

2015 million rubles

% of GDP

2016 million rubles

% of GDP

13,505.4 14,056.2 7,708.8 7,584.2 20,408.4

4.4 9.0 2.6 5.5 2.2

12,419.4 14,516.1 7,968.5 6,671.7 25,370.1

3.7 9.5 2.4 4.6 2.5

13,149.6 13,365.9 8,831.5 6,996.5 23,689.9

3.66 7.8 2.6 4.5 2.2

12,251.9 11,699.5 12,646.1 6,742.3 21,097.6

3.1 6.5 3.4 4.2 1.7

11,101.0 7,884.2

4.0 2.2

11,144.4 7,066.1

3.8 1.8

11,913.6 8,808.2

3.8 2.0

12,131.9 6,649.5

3.6 1.4

Source: compiled by author according to the data of Federal State Statistics Service «Regions of Russia. Social-economic indicators», section «Finance» 2017 year http://www.gks.ru/bgd/regl/b17_14p/IssWWW. exe/Stg/d03/23-02.doc

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91

According to Table 1, the level of gratuitous receipts decreases in most of regions (Vladimir, Ivanovo, Kostroma, Nizhny Novgorod, Ryazan, Yaroslavl regions), and the ﬁnancial dependence on the federal Center can be reduced, but at the same time the need to carry out social tasks (implementation of «May Decrees» of the President of the Russian Federation) further increases credit for the regions (Table 2). So, according to Table 2, the volume of state domestic debt has increased over the past year in most of the regions (Vladimir, Kostroma, Nizhny Novgorod, Yaroslavl regions). At the same time, in the structure of the debt burden most part is occupied by budgetary credits from other budgets of the budgetary system of the Russian Federation (mainly the federal budget). In addition, over the past year in the structure of this burden we see a decline of the commercial debt of the studied regions (Ivanovo, Kostroma, Kaluga, Ryazan, Nizhny Novgorod, Yaroslavl regions). It is remarkable that the Vladimir region does not use commercial loans as debentures. Of course, the decline of commercial loans in the structure of public debt of regions and their replacement by budgetary credits (in all the regions studied there is an increase in budgetary credits) on the one hand reduces the risk of regional default, but on the other hand, increases dependence on the decisions of the federal center, which in turn reduces motivation for self-sufﬁciency and self-development. However, unlike a commercial loan, budgetary loans are used not for the development of the region, but either to partially cover the budget deﬁcit, or to close the social obligations facing state authorities of the subject of Russia. At the same time, considering the structure of investments in ﬁxed assets by sources of ﬁnancing for the period from 2013 to 2016, the increase in the share of budget resources should be noted in most of regions (Table 3). Table 2. Volume and structure of the state domestic debt of the region for 2016 and 2017 (billion rubles). Region

Volume of the state domestic debt, billion rubles Government securities

Vladimir region Ivanovo region Kaluga region Kostroma region Nizhny Novgorod region Ryazan region Yaroslavl region

Loans from credit institutions, foreign banks and international ﬁnancial organizations 2016 2017

Budgetary credits from other budgets of the budgetary system of the Russian Federation 2016 2017

2016

2017

0.0 0.00 0.00 1.65 31.60

0.0 0.0 0,0 3.786 4.162 0.0 10.661 7.563 6.053 8.763 0.0 1.3 0.0 28.94 29.71 1.05 11.22 8.46 8.45 12.48 38.3 22. 00 5.112 19. 42 31.847

0.625 0.0 10.543 12.4 19.15 8.679

Total State guarantees

2016

2017

2016

2017

0.0 0.11 0.503 0.00 0.395

0.0 0.44 0.47 0.0 0.262

3.786 16.826 30.74 21.325 73. 42

4.162 16.766 30.178 21.989 75.521

0.0 0.0

26.362 23.462 39.109 41.171

9.464 15.194 13.998 0.00 1.972 18.03 20.049 0.00

Source: compiled by author according to the data of ofﬁcial site of the Ministry of Finance of the Russian Federation https://www.minﬁn.ru/ru/perfomance/public_debt/subdbt/2018/

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Table 3. Share of budgetary funds in the structure of investments in ﬁxed assets by sources of ﬁnancing, %. Region

Budgetary funds, % 2013 Share of raised funds

2014 Federal budget

Regional budget

Share of raised funds

2015 Federal budget

Regional budget

Share of raised funds

2016 Federal budget

Regional budget

Share of raised funds

Federal budget

Regional budget

Vladimir region

12.9

6.6

3.9

14.0

8.8

2.7

12.5

6.9

3.2

19.4

10.6

6.7

Ivanovo region

28.0

16.8

7.8

22.6

11.1

7.7

36.0

22.6

7.1

21.5

12.0

4.9

Kaluga region

10.5

6.1

3.3

10.9

5.9

3.9

24.3

19.5

3.7

29.2

24.8

3.6

Kostroma region

22.6

14.8

5.2

14.3

8.3

4.4

12.5

9.2

2.1

8.9

4.8

2.4

Nizhny Novgorod region

16.3

9.8

4.5

14.2

8.1

4.2

19.1

12.5

4.8

23.5

16.6

5.4

Ryazan region

18.3

12.0

5.7

19.2

12.2

5.1

20.4

14.4

4.5

18.6

10.9

5.6

Yaroslavl region

13.3

5.9

4.8

8.2

2.8

3.2

10.4

5.8

3.3

10.6

6.8

2.0

Source: compiled by author according to the data of Federal State Statistics Service «Regions of Russia. Social-economic indicators», section «Investment» 2017 year http://www.gks.ru/bgd/regl/b17_14p/Main.htm

According to Table 3, for the period from 2013 to 2016 the share of budget funds increased in the structure of investments in ﬁxed assets in such regions as Vladimir, Nizhny Novgorod, Kaluga and Ryazan regions. There is a signiﬁcant increase in the share of budgetary investments of federal budget funds in Kaluga and Nizhny Novgorod regions, which is more related to the need to attract these funds due to the implementation in the regions of projects on image characteristics (preparation for the World Cup in Nizhny Novgorod region), or due to active investment policy pursued by the state authorities of the region (Kaluga region). For such territories as Vladimir, Ivanovo, Kostroma and Ryazan regions the increase in the share of budgetary funds was due to decrease in the share of banks’ credit resources in the structure of attracted funds. Thus, in the current situation, regions and enterprises themselves in the absence of macroeconomic stability and the high cost of credit resources tend to be more conservative in their planning of their activities, they are afraid to assume unnecessary responsibilities and are in no hurry to implement the planned scenario for capital investments. However, these moments restrain the self-development of both the branches and types of economic activity and the regions themselves. At the same time investing in ﬁxed assets involves using not only raised funds (credit and budgetary), but also own funds of enterprises. Nevertheless, the analysis of investments in ﬁxed assets by types of economic activity shows that the main investment resources, with the predominantly own (at the expense of the enterprises’ own funds), are accumulated in the manufacturing industries. According to Table 4, most of the funds are invested in such types of economic activity as «Manufacturing» (Kostroma region – 50%, Kaluga region – 40.7%, Vladimir, Nizhny Novgorod, Yaroslavl and Ryazan regions – more than 30%), «Transport and

region

Total

100

100

100

100

100

100

100

Agriculture, hunting and forestry

4.46

12.51

4.17

2.53

14.19

3.53

4.06

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Fishery, fish farming

[Source: compiled by author]

Yaroslavl

region

Ryazan

region

Novgorod

Nizhny

region

Kostroma

region

Kaluga

region

Ivanovo

region

Vladimir

/region

Industry

Mining

0.13

0.07

0.03

0.00

0.00

0.00

0.25

Manufacturing industries

33.65

31.50

33.29

50.40

40.73

25.41

36.44

Production and distribution of electricity, gas and water

16.62

13.35

6.76

14.52

7.11

14.95

9.17

Building

2.16

1.83

0.94

0.12

0.56

0.08

0.23

Wholesale and retail trade; repair

6.09

3.74

4.90

9.82

2.76

5.28

5.38

Hotels and restaurants

0.02

0.00

0.00

0.00

0.00

0.00

0.01

Transport and communications

19.51

19.41

23.66

6.35

22.66

21.43

17.06

Financial activities

1.90

0.67

1.06

2.94

0.72

2.06

1.26

renting and provision of services

Transactions with real estate,

6.79

8.40

15.71

7.01

8.01

12.24

15.05

4.61

4.22

4.17

3.30

2.44

9.75

8.14

Education and health and the

personal items

household products and

of motor vehicles, motorcycles,

Table 4. Structure of investments in ﬁxed assets by types of economic activity in 2016, %.

Public administration and

2.24

4.20

4.95

2.94

0.70

4.84

2.28

Financial Conditions for Ensuring of Self-development of Regions 93

social insurance

provision of military security; provision of social services

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Z. A. Zakharova

Communications» (Ivanovo, Nizhny Novgorod, Kaluga regions – over 20%), «Production and distribution of electricity, gas and water» (Ivanovo, Kostroma, Ryazan and Yaroslavl regions – about 15% and above), «Real estate transactions, rent and services», «Wholesale and retail personal trade, repair of motor vehicles, motorcycles, household products and personal items». And there are no signiﬁcant investments in ﬁxed assets in such economic activities as: «Agriculture, hunting and forestry» (except Ryazan region – 12.5% and Kaluga region – 14.2%), «Fishery, ﬁsh farming» (almost in all regions 0%), «Mining», «Construction», «Education, health care and provision of social services», etc., exactly the kinds of economic activity for which the regions have potential for self-development, and whose contributed investment would intensify internal resources of territories. Thus, as the study shows, ﬁnancial instruments used by the federal Center (reduction of gratuitous transfers, increase in budgetary loans), and the current policy of regional authorities on investment do not promote the internal potential of selfdevelopment of these regions, which requires the development of more efﬁcient ﬁnancial and organizational instruments. In practical terms, foreign experience of state regulation of regions with insufﬁcient potential for self-development is interesting. Thus, in China the task of ensuring the self-development of territories is a part of state policy. There is declared the need to introduce speciﬁc policies to help impoverished regions to improve their ability to selfdevelopment through the provision of ﬁnancial subsidies, investments in projects of development of science, technology and education, environmental improvement (China’s Population and Development in the 21st Century 2000). In European countries, such as Germany, transfers from the federal budget (like federal budget subsidies used in Russia) can be replaced by means of the region, which are not to deduct the federal budget, in the case of successful development of the region. Such policy creates motivation for local authorities to open new enterprises, create jobs and infrastructure (Dubrovin 2008). So, to change the structure through the creation and development of new industries in the region through targeted budgetary investments (for example, in the state of Tennessee USA) to eliminate its socio-economic gap the largest energy system was created, that helped speed up the industrialization processes. Preferential tariffs for electricity attracted high-tech enterprises to the region, which helped to improve the conditions and quality of life of the population (Borodin and Erokhin 2015). From all the diversity of foreign experience in implementing state regulation of regions with insufﬁcient potential for self-development, the states with a federal structure are the territories of speciﬁc interest.

4 Conclusions Public-private partnership can be presented as a promising avenue for engaging the potential of the region’s self-development in the system of ensuring high rates of social and economic development, especially when we implement infrastructure projects, as well as the projects that allow the use of previously underutilized resources (for example, natural, climatic and other resources). Proceeding from the above, it is

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possible to propose the following ﬁnancial and organizational measures to activate mechanisms for the self-development of Russian regions. Firstly, it is necessary to solve the task of attracting investment resources (private domestic investments) in the industry, types of economic activity, the development of which contributes to the activation of the region’s internal resource capabilities (tourism, river and lake ﬁsh farming, development of peat extraction, forestry, etc.). Secondly, it is necessary to have adequate forecasts on the formation of promising economic activities for each region as a factor that must be taken into account when developing or adjusting the strategy for the social and economic development of the region. In terms of development of public-private partnership in the region the availability of this tool will reduce uncertainty from the point of view of business regarding the decision to participate in the PPP project. Thirdly, not all the regions of Russia have a «critical mass» of large business, which makes it possible to provide conditions for the development of small and medium-sized businesses in the «small around big» scheme. In this regard, a promising tool is the idea of forming macroregions and the implementation of ambitious largescale projects within macroregions, and tasks that are difﬁcult to solve by the forces of one region. However, the existing regulatory framework is not sufﬁcient for the development and implementation of macro-regional policy documents. Thus, in 172FZ «About Strategic Planning in the Russian Federation», the macroregion is declared as a subject of strategic planning, but actually the real set of management tools is limited. Fourthly, innovation-active enterprises have the highest competitiveness, it is necessary to expand measures to support the development and implementation of innovations in the region. As support measures, not only budgetary credits may be envisaged, but targeted budgetary allocations, tax beneﬁts also (for example, in the US there are tax rebates that stimulate the use of alternative energy and energy saving measures, and in Japan, investment tax credits from income tax are provided for the development of the scientiﬁc base and the creation of new technologies). Fifthly, additional sources of funding for projects and programs that allow the use of internal resource capabilities of the regions are needed. For example, according to the experience of Germany, it is possible to replace subsidies from the budget with funds of the region that are not deductible to the federal budget, these funds are used for innovative development or development of new enterprises and industries that promote the activation of various resources (natural, climatic, economic) in the region.

References Babaev, B.: Actual Problems of the Regional Economy and Activation of the Territorial Factor of Social and Economic Development: Monograph, 174 p. PresSto Ivanovo (2013) Babaev, B., Zakharova, Z., Zakharov, P.: Role and place of the concession in the socio-economic development of the territory. Econ. Educ. 4, 51 (2015) Borodin, V., Erokhin, A.: Regional integration as a factor of increasing the potential of territory self-development. Reg. Econ. Theor. Pract. 4, 2–12 (2015)

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China’s Population and Development in the 21st Century: Information Ofﬁce of the State Council of the People’s Republic of China, Beijing (2000). http://www.fmprc.gov.cn/ce/celt/eng/zt/ zfbps/t125259.htm Dubrovin, Y.: Modern Administrative and State Reforms in the Leading Countries of the European Union, 218 p. Mysl Publishers, Moscow (2008) Sherstyankina, T.: Innovative and cognitive tendencies in determining of self-sufﬁciency of Russian regions. Bull. Buryat State Univ. Series «Philosophy, Sociology, Political Science, Culturology» 14, 96–100 (2009) Shvetchov, A.: «Points of Growth» or «Black Holes» (Towards the effectiveness of the use of «zonal» instruments of state stimulation to revive the economic dynamics of territories). Russ. Econ. J. 3, 40–61 (2016) Tatarkin, A., Molchanova, M.: Conceptual approach to the self-development of territories. J. Econ. Theor. 4, 132–138 (2012) Volodona, A.: Tendencies of strengthening the orientation of Russia’s regions towards selfsufﬁciency and competitiveness economy. Right. Management: collection of works of young researchers of BSU 1(1) (2014). http://izdatelstvo.isea.ru/epm/archive.aspx?id=1 Zakharova, Zh., Bogatyrev, V.: Interconnection between the categories of region’s selfdevelopment and population’s living standards. In: Advances in Intelligent Systems and Computing, pp. 440–447 (2018)

The Role of the Financial System in Solving Socio-economic Problems Konstantin Lebedev ✉ and Yuliya Budovich (

)

Financial University Under the Government of the Russian Federation, Moscow, Russian Federation {KNLebedev,JBudovich}@fa.ru

Abstract. The purpose of this work is to demonstrate the real role of the Russian ﬁnancial system in solving the socio-economic problems of the country’s devel‐ opment. Achieving this goal involves the study of the impact on the socioeconomic development of the country’s ﬁnancial system parameters that have this eﬀect, the ability of ﬁnancial regulators to inﬂuence these parameters, as well as the ﬁnancial policy of the Russian state. The study found that the role of the Russian ﬁnancial system in solving the socio-economic problems of the country’s development is insigniﬁcant, that the situation in the ﬁnancial system itself is under the strongest inﬂuence of events occurring in the real sector of the country’s economy, as well as in the world ﬁnancial system, that the traditional levers of ﬁnancial policy are more in the power of not ﬁnancial, but non-ﬁnancial regulators of the economy. It follows that the solution of the problems of socio-economic development of the country, including the problems of the ﬁnancial system itself, depends mainly on the state policy in the ﬁeld of the real sector of the economy. The tasks of the Russian state in the ﬁeld of Finance are, ﬁrst of all, improving the quality of ﬁnancial services and improving the eﬃciency of ﬁnancial sector organizations. Keywords: Finance · Financial regulator · Non-ﬁnancial system JEL Classiﬁcation Code: A12 · E50 · E52

1

Introduction

In the strategic planning documents of the Russian Federation, the ﬁnancial system of the country is often given a signiﬁcant role in solving the problems of socio-economic development of the country. For example, in the Conception of long-term socioeconomic development of the Russian Federation for the period up to 2020, the achieve‐ ment of economic growth rates of 6–7% and inﬂation rates of 3% per year were declared the goals namely of the ﬁscal and monetary policy of the state (RF Government, 2008-1), i.e. the impact of the state on the socio-economic development of the country through its ﬁnancial system. In the Strategy for the development of the ﬁnancial market of the

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Russian Federation for the period up to 2020, ensuring the accelerated economic devel‐ opment of the country was declared the purpose of this document (RF Government, 2008-2). In the Strategy for the development of the banking sector of the Russian Federation for the period up to 2015, the active participation in the modernization of the economy was named the purpose of the development of this sector (RF Government and Central bank 2011). However, in reality, the possibilities of the Russian ﬁnancial system, including its regulators, to address the socio-economic problems of the country’s development (low economic growth, high inﬂation, poverty, etc.) are very limited.

2

Materials and Method

The proof of this situation involves the study of the impact on the socio-economic development of the country of the quality of the ﬁnancial system, the traditional ﬁnancial levers (loan rates, tax incentives, etc.), the ability of ﬁnancial regulators to inﬂuence these levers, as well as the relationship of ﬁnancial regulators to their intended goals of macroeconomic policy and ﬁnancial levers of impact on socio-economic development.

3

Results

Consider the impact on economic growth of the level of country’s ﬁnancial market development. The leadership of the country has made purposeful eﬀorts to improve the ﬁnancial market of the country. However, at the end of 2008 it acknowledged that Russia has actually failed to create a competitive ﬁnancial market (RF Government, 2008-2)1, and in 2011 it recognized that Russia has failed to create a modern and highly competitive banking sector (RF Government and RF Central bank 2011). This means that at least until 2008 there was no developed ﬁnancial market in the country. Just under the undeveloped ﬁnancial market there was a fall in Russian GDP, which lasted from 1991 to 1998 inclusively. But with the same underdeveloped ﬁnancial market, Russia in subsequent years actually fulﬁlled V.V. Putin’s plan to double GDP in 10 years, however, announced only on May 16, 2003 (Bulin 2015), when the average annual rate of economic growth for 10 consecutive years was 6.9% per year (from minus 5.35% in 1998 to 6.35, 10.05, 5.09, 4.74, 7.25, 7.15, 6.39, 8.15, 8.54, 5.25 in the next 10 years (School of investor 2015)). This suggests that the developed ﬁnancial market is by all accounts not necessary for stable and rapid economic growth, i.e. economic growth does not depend on how well the ﬁnancial market is developed. 1

In particular, the most important tasks remained unresolved, such as the creation of legal mechanisms aimed at preventing insider trading and manipulation in the ﬁnancial market; building a system of prudential supervision of professional participants in the securities market; creating conditions for securitization of ﬁnancial assets; legal regulation of compensation payments to citizens in the securities market; the formation of a mass retail investor; the devel‐ opment of derivative ﬁnancial instruments.

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Note that in the same years in a country with a well-developed ﬁnancial market, namely the United States, the rate of economic growth was: 4.7, 4.1, 1.0, 1.8, 2.8, 3.8, 3.3, 2.7, 1.8, minus 0.3%, respectively (Kravets 2017), i.e. 2.6% on average. Also note that during the period of quality growth of the Russian ﬁnancial market in the crisis-free 2011–2013 GDP growth rates amounted to 4.3, 3.4, 1.3% respectively (School of investor 2015), or 3% on average per year, i.e. were more than 2 times lower than in the previous decade in the underdeveloped ﬁnancial market. The power of inﬂuence on the economy of traditional levers of ﬁnancial policy, as well as the possibility of inﬂuence of ﬁnancial regulators on them, can be challenged. An important lever of inﬂuence on the real sector of the economy is the value of interest rates on loans. It is believed that the increase in rates through changes in invest‐ ment spending ﬁnanced by bank loans leads to a reduction in the rate of economic growth, while the decline leads to growth (McConnell and Brue 2006). However, it appears that the dependence of economic growth on interest rates is ambiguous. It is known, for example, that a number of countries have experienced sustained and rapid economic growth at high real interest rates. For example, in Turkey in 2002–2007 there was an economic growth with an average annual rate of 6.8% at a rate of 11.1%, India in the years 1980-2013–6 at a rate of 5.4, Chile during the years 1984-2013–5.6 at a rate of 8, and Brazil in 2000–2008 economic growth, however at 3.7% per year, at all occurred at a real rate of 43.1% (Drobyshevsky et al. 2016). As far as Russia is concerned, studies have shown that before the 2008 crisis the impact of interest rates on the real sector was insigniﬁcant, and now their impact on economic growth is ambiguous (Drobyshevsky et al. 2016). The substantial independence of economic growth in Russia from interest rates explains the reluctance of the Bank of Russia to assume a “double mandate”, i.e., in addition to inﬂation, to be responsible for economic growth. It is known that only in the 2nd half of 2016 parliamentarians twice failed to carry out appropriate amendments to the Law on the Bank of Russia, which were ﬁrst proposed by members of the Federation Council (Money 2016) and then by deputies of the Orel region (Tegin 2016). Obviously, the leaders of the Bank of Russia are well aware that economic growth in our country does not depend on its interest policy. Of course, one can try to explain the ambiguity and weakness of the impact of interest rates on economic growth through the interaction of several channels of their inﬂuence on it, in diﬀerent situations having diﬀerent force, defending the idea of a signiﬁcant dependence of economic growth on interest rates and, accordingly, signiﬁcant oppor‐ tunities of macroeconomic policy. So, according to the theory of irreversible investment created by Arrow and Bertola and Caballero, the growth of rates of loans negatively aﬀect the production due to the rising costs of borrowing and positively due to the growth of investments in anticipation of further rise in interest rates, i.e. due to the increase in costs from postponing the investment (Arrow 1968; Bertola and Caballero 1994). However, it is logical to assume that interest rate is simply not a signiﬁcant factor of economic growth. From Keynesian economic theory it is known that the percent is not the main driver for investment on which economic growth depends, and so is the expected return of investment projects. But with regard to Russia, there is more convincing evidence of the insigniﬁcant impact of interest rates on economic growth. In our country, bank loans account for no more than 10% of the sources of ﬁnancing of

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investments in ﬁxed assets (Rosstat 2018), i.e. 9/10 investments in ﬁxed assets and, accordingly, 9/10 of economic growth do not depend on interest on loans. By the way, the instruments of the non-bank ﬁnancial market, namely the funds from the issue of shares and corporate bonds in the total volume of sources of investments in ﬁxed assets generally occupy only about 1% (Rosstat 2018). Since the rate of inﬂation reﬂects the purchasing power of money that are an element of the ﬁnancial system, it can be said that the rate of inﬂation is also a ﬁnancial lever to inﬂuence socio-economic development, including economic growth. In this regard, we draw attention to the ambiguity of the dependence of economic growth on inﬂation. Having the following data series on inﬂation in the period 1999–2014: 36.6, 20.1, 18.8, 15.06, 11.99, 11.74, 10.91, 9, 11.87, 13.28, 8.8, 8.78, 6.1, 6.58, 6.45, 11.36% respectively (inﬂationinrussia.com 2018), it is possible to establish that approximately the same growth rate, namely of 6.36% in 1999 and 6.39% in 2005 (School of investor 2015), was observed at more than three times diﬀering rates of inﬂation – 36.6 and of 10.91%, respectively, and approximately the same rate of inﬂation, namely 11.99% in 2003, and 11.36% in 2014, corresponded to more than ten times diﬀering rates of economic growth of 6.39 and 0.6% respectively (School of investor 2015). At the same time, ﬁnancial regulators, including the central bank of the country, have limited opportunities to inﬂuence this parameter of the ﬁnancial system. Of course, analysts close to the banking system explain the record decline in inﬂation rates in 2017 to 2.8% per year by the conservative policy of monetary authorities (Regnum 2017). However, a broader expert opinion is united in the fact that this phenomenon has at least several reasons, which, in addition to the interest policy of the Bank of Russia, include stabilization and depreciation of the dollar rate, the fall in consumer spending of Russians (which reached a 5-year minimum) and high yields of the last two years (Migunov 2017). At the same time, some experts consider the eﬀorts of the Bank of Russia are not the main reasons for the decline in inﬂation. So economists from the Russian Academy of national economy and public administration believe that the main reasons for the slowdown in prices in 2017 are a good harvest in this year, strengthening of the ruble (due to the increase in oil prices and increased demand for Russian assets) and the slow recovery in demand (BBC 2017). Government policy in the real sector of the economy, especially the policy of public spending, not the initiatives of ﬁnancial regulators, has always played a decisive role in the development of inﬂationary processes in the country, as many leading economists of Russia constantly pointed out. For example, the Director of the Institute of Economics, corresponding member of Russian Academy of Sciences R.S. Grinberg pointed to a fundamental misunderstanding of the nature of inﬂation in our country, the fact that the monetary factor in its development plays an insigniﬁcant role (Krasavina 2006). It is unlikely that the state can boast of particular successes of its eﬀects on the economy, carried out through the ﬁnancial system, such as tax incentives and subsidies to enterprises (acting as policy measures in diﬀerent industries and sectors of the real sector of the economy). For example, in the framework of the state program “Economic development and innovative economy”, adopted in 2013, the Fund for the promotion of innovation was allocated 5 billion roubles for support of small innovative enterprises, and the Fund supported 619 of such enterprises, then, in the framework of the state

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program “Development of industry and increasing its competitiveness”, adopted in 2014, subsidizing of interest rates on investment credits and expenses on research and development work (Kuznetsov et al. 2016). However, there is really no transition to an innovative type of development. Thus, the share of industrial enterprises engaged in technological innovation in the total number of industrial enterprises from 2010 to 2015 in the country has not changed (9.3% in 2010, 9.5% in 2015), remaining at the level of 2009, and in 2016 even fell to 7.7% (Rosstat 2017), while the Strategy of innovative development of the Russian Federation for the period up to 2020 envisaged an increase in this indicator from 9.4% in 2009 to 20% in 2016 (and 40% in 2020). It is obvious that innovative development in our country depends much more on other reasons than the possibility of obtaining tax beneﬁts and subsidies. Traditionally, it is believed that the weakening of the national currency leads to an increase in such a component of GDP as net exports (the diﬀerence between exports and imports), as with the depreciation of the national currency, exports, becoming more proﬁtable, grow, and imports, becoming less proﬁtable, fall (as the ruble equivalent of the currency value of exported or imported goods increases). The strengthening of the national currency, on the contrary, leads to a decrease in net exports for opposite reasons (McConnell and Brue 2006). From this it follows that the depreciation of the national currency leads to an increase in GDP growth rates, and its strengthening-to their fall. It is important to note, however, that exchange rate changes aﬀect not only the value of net exports, but also other components of the corresponding GDP calculation formula (consumption, government expenditure, investment), so that the real impact of the periods of growth and decline in the exchange rate of the national monetary unit on GDP growth rates is ambiguous. As you know, the main reason for the refusal of the Bank of Russia from the strategy of currency targeting and the transition to the strategy of inﬂa‐ tion targeting, which occurred since the beginning of 2015, was the need to form longterm benchmarks for business (Shokhina 2012). But maybe the real reason for the Bank of Russia’s refusal to inﬂuence the socio-economic development of the country through the exchange rate was the lack of a real channel of inﬂuence on this development through the exchange rate? Since the exchange rate is no longer considered by the Russian state as a ﬁnancial lever of its inﬂuence on the economy, the thesis of the ambiguous depend‐ ence of economic growth on the exchange rate can not be conﬁrmed. Despite the fact that the impact of the exchange rate on the socio-economic devel‐ opment of the country is ambiguous, ﬁnancial regulators have little opportunity to inﬂu‐ ence this parameter of the ﬁnancial system. For example, one can argue that the sharp increase in the key rate by the Bank of Russia to 17% (on the night of December 16, 2014, when the ruble collapsed) led to the stabilization of the situation in the foreign exchange market. It was assumed that this measure will weaken the fall of the ruble and even strengthen it, but this did not happen and the ruble continued to depreciate (FINANSPLAY 2014). The light on the true reason for the stabilization of the situation in the Russian currency market may shed acquaintance with the Directive of the govern‐ ment of the Russian Federation of December 23, 2014 on the limit of foreign currency assets of ﬁve state-owned exporting companies, prescribing to ensure until March 1, 2015. bringing the size of their net foreign exchange assets to a level no higher than that of October 1, 2014 and the subsequent maintenance of the size of the company’s net

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foreign currency assets not higher than the speciﬁed level, in pursuance of which these state-owned exporting companies in the next two months were to sell approximately $1 billion per day! (Vesti. Economics 2014). From the weak inﬂuence of the values of the parameters of the national ﬁnancial system on the socio-economic development of the country, from the fact that they depend on the situation in the real sector of the economy and the world ﬁnancial system, it follows that the ﬁnancial system in the economy is a passive player, adapting to the external situation, and another should not be expected from the element of the distribu‐ tion sector of the economy. Thus, R. Lucas’ opinion that Finance is not an “overstressed” determinant of economic growth (Lukas 1988) is true, at least, in relation to modern Russia. The success of the state in ensuring stable socio-economic development of the country, including the formation of parameters of the ﬁnancial system, favorable for this development, depends mainly on its policy in the ﬁeld of the real sector of the economy. The tasks of the state in the ﬁeld of Finance are, ﬁrst of all, improving the quality of ﬁnancial services and improving the eﬃciency of ﬁnancial sector organiza‐ tions. As for the use of the ﬁnancial system to solve socio-economic problems, it should be of a complementary nature.

4

Conclusions/Recommendations

Successful solutions of socio-economic problems should not be relied upon if only ﬁnancial instruments were applied. In this regard, the eﬀectiveness of the “last” attempt of the Russian leadership to solve the problem of housing, and at the same time demog‐ raphy, through the development of mortgage lending by reducing the interest rate on loans to 7–8% per annum for 6 years (HOME.RF 2018) is questionable. It seems that the “key” to solving this problem lies in the real sector of the economy and is to reduce housing prices, including through their corruption component, reaching up to 50% of the cost (NEWSru.com 2013). Interesting to see, that during his tenure as Prime Minister Vladimir Putin considered the price of housing as the main factor in solving the housing problem. Thus, when solving in 2009 the problem of reduction of housing construction (by 20%) and mortgage lending (by 6 times) as a result of the 2008 crisis in order to implement the national project “Aﬀordable housing”, Vladimir Putin demanded to reduce the cost of a square meter of housing to 30 thousand rubles (Dyatlovskaya 2009). In 2012, Vladimir Putin said that the problem of housing for Russians, which was expected to be solved by 2030, would be solved, among other things, by lowering housing prices by 20–30% (NEWSru.com 2013). Herewith, at present instead of addressing the problem of housing prices, Russian oﬃcials are exacerbating the problem, in particular by trying to ban equity construction, from which experts expect housing prices to rise (TASS 2017).

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References RF Government: Order No. 1662-r of 17 November “On the Conception of long-term socioeconomic development of the Russian Federation for the period up to 2020” (2008). http:// www.consultant.ru/document/cons_doc_LAW_82134/. Accessed 08 Apr 2018 RF Government: Order No. 2043-R of 29 December “On approval of the Strategy for the development of the ﬁnancial market of the Russian Federation until 2020” (2008). http:// www.consultant.ru/document/cons_doc_LAW_83914/. Accessed 03 Apr 2018 RF Government and Central Bank: Application of 5 April №№ 1472p-P13, 01-001/1280 “On the Strategy for the development of the banking sector of the Russian Federation for the period up to 2015” (2011). http://base.garant.ru/591345/#ixzz41TVTT7hD. Accessed 03 Apr 2018 Bulin, D.: Mysteries of doubling Russia’s GDP according to Putin’s plan (2015). https:// www.bbc.com/russian/business/2015/03/150331_russia_increase_gdp_twice. Accessed 05 Apr 2018 School of Investor: Russia’s GDP over the years: 1990–2015 (2015). http://investorschool.ru/vvprossii-po-godam. Accessed 27 Mar 2018 Kravets, A.V.: Econometric model of the growth rate of U.S. GDP over the period 1965 to 2015. Internet-Journal «NAUKOVEDENIE», vol. 9, No. 2 (2017). http://naukovedenie.ru/PDF/ 21EVN217.pdf. Accessed 27 Mar 2018 McConnell, C.R., Brue, S.L.: Economics: Principles, Problems, and Policies. Irwin/McGraw-Hill, New York (2006) Drobyshevsky, S.M., Trunin, P.V., Bogachkova, A.V., Sinelnikova-Muryleva, E.V.: Eﬀect of interest rates on economic growth. Money and Credit, No. 9. pp. 29–40 (2016) Money: Central bank asked to answer for economic growth (2016). http://www.dengi43.ru/banks/ kirov/—–00161/. Accessed 10 Jan 2017 Tegin, M.: The Central bank for economic growth and unemployment is not responsible (2016). http://www.banki.ru/news/bankpress/?id=9451316. Accessed 10 Jan 2017 Arrow, K.J.: Optimal Capital Policy with Irreversible Investment, Capital and Growth. Papers in Honour of Sir John Hicks. pp. 1–19 (1968) Bertola, G., Caballero, L.J.: Irreversibility and Aggregate Investment. Rev. Econ. Stud. 61, 223– 246 (1994) Rosstat: «Fixed capital Investment in the Russian Federation by source of ﬁnancing» (2018). http://www.gks.ru/wps/wcm/connect/rosstat_main/rosstat/ru/statistics/enterprise/investment/ nonﬁnancial/. Accessed 08 Apr 2018 Inﬂationinrussia.com: «Inﬂation rate in the Russian Federation » (2018). http://ypoвeньинфляции.pф/%D1%82%D0%B0%D0%B1%D0%BB%D0%B8%D1%86%D0%B0_ %D0%B8%D0%BD%D1%84%D0%BB%D1%8F%D1%86%D0%B8%D0%B8.aspx. Accessed 27 Mar 2018 Regnum: Inﬂation will continue to decline until the end of 2017 (2017). https://regnum.ru/news/ 2350632.html. Accessed 27 Mar 2018 Migunov, D.: Stop! The slowdown in inﬂation threatens Russia with disaster (2017). https:// lenta.ru/articles/2017/10/18/inﬂation/. Accessed 27 Mar 2018 BBC: Inﬂation in Russia at a historic low: good or bad? (2017). https://www.bbc.com/russian/ news-42514091. Accessed 27 Mar 2018 Krasavina, L.N.: “Problems of reducing the inﬂation rate in Russia (based on the materials of the round table held at the Finance Academy under the Government of the Russian Federation)”, Accounting in budget and non-proﬁt organizations, No. 16 (160), pp. 11–22 (2006) Kuznetsov, E.B., et al.: National report on innovations in Russia 2016, Ministry of economic development of the Russian Federation, Open government, RBC, M (2016)

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Rosstat: The share of organizations implementing technological innovations in the total number of surveyed organizations (2017). http://www.gks.ru/wps/wcm/connect/rosstat_main/ rosstat/ru/statistics/science_and_innovations/science/. Accessed 22 Apr 2018 RF Government: Order No. No. 2227-r of December 8 “On the approval of strategy of innovative development of the Russian Federation for the period till 2020” (2011). http://www.garant.ru/ products/ipo/prime/doc/70006124/. Accessed 05 June 2017 Shokhina, E.: A Guide to the future (2012). http://expert.ru/2012/09/27/orientir-v-buduschee/. Accessed 22 Apr 2018 FINANSPLAY: What are the reasons for the fall of the ruble in December 2014? (2014). http:// ﬁnansplay.com/article/v_chem_prichiny_padeniya_kursa_rublya_v_dekabre_2014_goda. html. Accessed 27 Mar 2018 Vesti. Economy: The government has published a Directive on currency limit (2014). http:// www.vestiﬁnance.ru/articles/51276. Accessed 27 Mar 2018 Lukas, R.E.: On the mechanics of economic development. J. Monet. Econ. 22, 3–42 (1988) DOM.RF: Experts about Putin’s mortgage plans: to fear a bubble is not worth it (2018). https:// дoм.pф/2018/03/02/eksperty-ob-ipotechnyh-planah-putina-opasatsya-puzyrya-ne-stoit/. Accessed 01 Apr 2018 NEWSru.com: Putin was advised to reduce housing prices by 50% (2013). https:// realty.newsru.com/article/13Feb2012/putin50. Accessed 01 Apr 2018 Dyatlovskaya, E.: Putin set the bar on the price of housing (2009). https://www.infox.ru/news/32/ economy/realty/24932-putin-ustanovil-planku-po-cene-zila. Accessed 01 Apr 2018 TASS: How the ban on shared construction will aﬀect the cost of housing (2017). http://tass.ru/ ekonomika/4710451. Accessed 08 Apr 2018

The Current Practice of the Strategic Planning in Russian Regions: Innovative Model of Strategic Planning “Galaxy 7 × 7 × 7” of the Leontief Centre-AV Group Consortium and Experience of Its Approbation in Krasnodar Krai Konstantin V. Getmantsev1 ✉ , Daria V. Lanskaya1, Tatiana A. Myasnikova1, and Yuri I. Treshevsky2 (

)

1 Kuban State University, Krasnodar, Russia [email protected], [email protected], [email protected] 2 Voronezh State University, Voronezh, Russia [email protected]

Abstract. The technology of the strategic planning undergoes changes, instead of “traditional” strategic planning concepts of the middle of the 20th century, developers are increasingly oﬀering author’s approaches. One of these author’s methods is the strategic planning model “Galaxy”, ﬁrst used to develop the Strategy of social and economic development in Krasnodar Krai until 2030. The article analyzes the principle of the model, the peculiarities and the results of its application for the development of the region strategy, the advantages and disad‐ vantages of the model are formulated, as well as the problems Keywords: Strategic planning Regional and local socio-economic development · Regional strategy JEL Codes: R58 Regional Development Planning and Policy R12 Size and Spatial Distributions of Regional Economic Activity

At the end of 2016, the Leontief Centre-AV Group Consortium [2] starts the develop‐ ment of the Strategy of socio-economic development of Krasnodar Krai. In an eﬀort to actualize its own projects in the ﬁeld of strategic planning and the “classical” requirements for the strategy development, the Leontief Center AV-Group Consortium oﬀers the author’s method of strategic planning - the “Galaxy 7 × 7 × 7” model - Fig. 1 [12]. The methodical peculiarity of this approach is the use of a specially developed inte‐ grating scheme-the “Galaxy 7 × 7 × 7” model, which sets the logic for strategic analysis, goal-setting and building of a management system focused on increasing the competi‐ tiveness of the region and its enterprises [12]. The “Galaxy 7 × 7 × 7” model is the concretization of the more general AV Region Galaxy Model method developed by the AV Group speciﬁcally for the strategic planning of regional development. The AV Region Galaxy Model is based on the approach of

© Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 105–113, 2019. https://doi.org/10.1007/978-3-030-00102-5_10

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Fig. 1. Methodical approach to the development of the strategy for social and economic development of Krasnodar Krai. The model “Galaxy 7 × 7 × 7” [11, 12] Model “Galaxy 7 × 7 × 7” [11, 12]

such classics in the theory of interregional and global competition and territorial devel‐ opment as F. Perroux [8], M. Porter [10] and J. Schumpeter [13]. The model combines two levels of the region investigation: external, reﬂecting the competitive positions of Krasnodar Krai in relation to other regions in the context of seven dimensions of interregional competition; internal, describing the structure of six basic economic complexes (distinguishing clusters and development projects in each of them) in the context of three economic zones formed around three urban agglomerations. At the same time, according to AV-groups, seven dimensions of competition can be interpreted in relation to the region from the perspective of enterprise competition for diﬀerent resources (region-enterprise ﬁghting for competition), which makes the model a convenient tool for region competition study [12]. According to the idea of developers, the internal structure of the socio-economic complex of Krasnodar Krai, deﬁned in the “Galaxy” model, is reﬂected in the corre‐ sponding set of statistical indicators, as follows: – Krasnodar Krai as a whole; – seven economic zones; – seven basic economic complexes: four production complexes (gas and petrochemical complex, power complex, machinery and another manufacturing sector complex,

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agro-industrial complex) and two supply complexes (infrastructure and service), which are divided up to 17 and further to 60 subcomplexes and industries [12]. The approach to the strategy development proposed by the authors is built similarly. It is based on the spatial approach, the principle of which is to conduct economic zoning of the region territory, to select development zones and to study the impact of seven competition dimensions within them in the context of six basic economic complexes. Accordingly, the regional strategy is, as it were, decomposed into regional development strategies and represents their sum. So, with reference to the socio-economic develop‐ ment strategy of Krasnodar Krai, the following economic zones were deﬁned Fig. 2 [12]:

Fig. 2. Seven economic zones of Krasnodar Krai in Strategy 2030

– I Northern economic zone, including Kushchevsky, Krylovsky, Pavlovsky, Staro‐ minsky, Leningradsky, Kanevskaya, Shcherbinovsky, Yeysky; – II Central economic zone, including Krasnoarmeysky, Slavyansky, Kalininsky, Primorsko-Akhtarsky, Bryukhovetsky, Timashevsky, Korenovsky, Vyselkovsky,

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Ust-Labinsky, Krymsky, Abinsky districts. The cities of Krymsk, Slavyansk-onKuban, Timashevsk, Korenovsk, Ust-Labinsk; III Eastern economic zone, including the territories of Beloglinsky, Novopokrovsky, Tikhoretsky, Kavkazsky, Tbilissky, Gulkevichsky, Novokubansky, Kurganinsky, Uspensky districts and the city of Armavir; IV Black Sea economic zone, including the city territories of Anapa, Novorossiysk, Gelendzhik, Tuapsinsky and Temryuksky districts; V Krasnodar agglomeration; VI Piedmont economic zone, which includes the territories of Labinsky, Otrad‐ nensky, Mostovsky, Belorechensky and Apsheronsky districts; VII Sochi agglomeration.

Accordingly, among them there were selected and studied seven basic economic complexes, from the position of assessing the ability of all seven complexes to compete for resources: – – – – – – –

sanatorium and resort complex (SRC) agro-industrial complex (AIC) fuel and energy complex (FEC) a complex of social and innovative services trade, transport and logistics complex (TTLC) a complex of manufacturing sectors a complex of building industry and housing and public services [12].

Thus, the methodical approach proposed by the developers comes to identiﬁcation of the region capabilities to compete for resources (primarily investments). In this case, the region itself is considered as a corporation that produces certain resources (a terri‐ torial product) and in its turn needs other resources (energy, ﬁnance, human resources, goods, etc.) This explains the close connection between the “Galaxy” model and the national and global competition level, claimed by the AV groups. In the text of the Strategy, it is always stated that Krasnodar Krai needs to compete for positions in the global distri‐ bution of investments, tourists, migrants, etc., the region is compared with the developed regions in Europe, the USA and Asia [5]. An example of this interpretation is the analysis of competitive positions of Kras‐ nodar Krai in the context of seven competition dimensions, based on AV RCI technology [4], and also developed by the Leontief Center. An example of competitive positioning of Krasnodar Krai based on AV RCI tech‐ nology is shown in Fig. 3 [9]. The presented model “Galaxy” combines two levels of region investigation: external, reﬂecting the competitive positions of Krasnodar Krai in relation to other regions in the context of seven dimensions of interregional competition; internal, describing the struc‐ ture of seven basic economic complexes (distinguishing clusters and development projects in each of them) in the context of ﬁve economic zones formed around two urban agglomerations. At the same time, this approach is aimed at external resources attraction and region positioning on external, global markets. However, the internal problems and internal

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Fig. 3. Competitive positions of Krasnodar Krai in the system of competition indicators. Strategy 2030 materials

capabilities of the region to solve them are in fact underestimated. The main focus of the “Galaxy 7 × 7 × 7” model is to attract external sources of development, primarily investments and human resources. And this is the ﬁrst controversial methodological position. Another peculiarity of the “Galaxy 7 × 7 × 7” model is that it is based on a spatial approach to regional development planning. The investigation of economic zones follows the plan: – the selection of zones with new technological structures, preset in advance by the concept of the model “Galaxies 7 × 7 × 7” and prioritized, selection of zones with new technological structures, excluding the possible detection of local economic peculiarities; – creation of development strategies and activities for each zone, also from the concept of the task of transition to the sixth technological order (post-industrial economy); – development of strategies and a set of activities for urban agglomerations, also oriented towards the transition from industrialization to new post-industrial forms: technology cities, innovation centres, etc. Referring to Fig. 2, it becomes clear how these zones, in particular, the zones of new technological order are selected. These are urban areas where the level of telecommu‐ nication allows the implementation of new projects in the business sector - the concept of “SMART City” which Leontief Center oﬀers in all regions. Other economic zones are selected geographically, by the nature of their location, but without regard for the degree of connection among these territories, nor peculiarities of their economy. So industrial Timashevsk refers to the agrarian regions zone and agrarian Temryuksky and Yeisky districts refer to the recreation zone. And there are many such examples.

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The study of the strategic planning model “Galaxy 7 × 7 × 7” allowed to formulate a number of its disadvantages, revealed in the course of the comparative analysis of the application results in the development of the Strategy 2030 for several regions of Russia. The ﬁrst controversial issue is the fact that this approach presented as author’s is not a new one. It could be found in the model of seven competition factors by Porter [10] and Schumpeter [13], but it was originally developed for a commercial enterprise. The main result, in this case, is proﬁt and the opportunity to expand the presence in the market for certain goods and services. The region is a more complex economic and social system. Its “product” is not always portable, in addition, the objectives of regional development are, ﬁrst of all, the creation of conditions that ensure the life quality growth for the region population. Therefore, when we look at the methodology of “Galaxy 7 × 7 × 7”, the question arises: are these activities aimed at maintaining of the quality of population’s life? The focus is on the interests of large enterprises, and social development is expected to be reached if the economy develops. The second controversial issue of this approach is the practical ignoring of special factors of regional development, of the orientation toward their creation and involvement in the processes of economic activity. The model “Galaxy 7 × 7 × 7” is based on the region positioning in the external arena. At the same time, regional natural, geographic, human, technological and other capabilities are assessed only selectively in terms of searching for new models of the regional economy in order to enter foreign markets. However, the opportunities for the development of the already existing economy are ignored. The search goes precisely among the new forms, although it is possible to use the reverse approach and to combine them. With this approach, the interests and ambitions of local entrepreneurs, the regional community and even the authorities to become the part of the global economic space are ignored. Most of the local problems that are not related to competition are ignored: the state of the medical ﬁeld, the number and quality of schools, opportunities for leisure, the development of retail trade and the availability of services and goods for the popu‐ lation, etc. We can say that the interests of the region are artiﬁcially “taken out” to the global economic sphere and there they are considered in connection with the region’s capability to compete for external resources. The third and signiﬁcant drawback is the deterministic selection of the directions for the regional economy development, regardless of the analysis results and speciﬁcs, which is inherent in every region of Russia. Seven factors of development, taken into account in the “Galaxy” model, signiﬁcantly reduce the ability to consider the diversity of the regional environment. The application of the “Galaxy” neutralizes the regional speciﬁcs. The whole analysis is limited by the stereotype of the “Galaxy”. These disadvantages indicate the need to develop the tools of the “Galaxy” model. Also this emphasizes the idea that universal analysis tools give only an average result. On the one hand, the “Galaxy” needs to be developed, and on the other, there is need for the set of methods for regional environment analysis, with diﬀerent in their expres‐ sive capabilities methods.

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Apart from the “Galaxy”, there are other approaches for the regional environment factors consideration. So, in [1] the model structure of meso environment is considered: regional legisla‐ tion, regional economy speciﬁcs, regional community and human capital asset, regional resources, regional communication environment, regional market of goods and services, regional market infrastructure, small business development etc. The method MesoOT for the analysis of the regional environment is oﬀered. Within the framework of the method there were applied the scoring of factors, expert opinions and content analysis, which together increases the analysis consistency. One more remarkable peculiarity of this method is that the measurement of factors in the metric system is carried out in information units (bits). This determines the analysis objectivity and raises the reliability of the external environment study by means of the well-known intelligent system “EidosX++” [3, 7] allowing to proceed from qualitative analysis to quantitative estimates. Model structure of the meso environment (the region environment) is presented in Fig. 4 [1].

Regional communicat ive environment

The specificity of the regional economy

Small business development

Regional community and traditions REGION Intellectual human capital asset

Regional resources

Local innovative ecosystem of the region

Peculiarities and infrastructure of the regional market

Regional legislation

Fig. 4. Model structure of the meso environment (the region environment) [1]

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The solution of the identiﬁed problems consists in the need to develop the “Galaxy 7 × 7 × 7” model in order to expand the group of strategic analysis factors that maximally take into account the speciﬁcs of this particular territorial economic system. As the direction of further research in strategic management the development of the tool base of the regional economic system studies is considered. The main directions of such studies are: – development of existing analysis methods by including and developing the cognitive component; – the use of modeling complexes based on the methodology of the ontological approach; – the use of intelligent tools based on neural ensemble networks. Acknowledgments. The study was carried out with the ﬁnancial support of the Russian Foundation for Basic Research (RFBR) within the framework of the scientiﬁc project “Modelling of diﬀerentiation processes of region economic space in the conditions of regional economy transformation”.

References 1. Lanskaya, D.V., Polyakova I.A.: Method MESOOT - diagnosis of the external environment: factors, structuring and problems of automation application. The Polythematic Network Electronic Scientiﬁc Journal of the Kuban State Agrarian University (Scientiﬁc Journal of KubSAU), No. 05 (129), pp. 1268–1279. KubSUA, Krasnodar (2017). http://ej.kubagro.ru/ 2017/05/pdf/91.pdf 2. Leontief Centre: The website “Free encyclopedia”. https://ru.wikipedia.org/wiki/%D0%9B %D0%B5%D0%BE%D0%B82%D1 3. Lutsenko, E.V.: Metrization of measuring scales of various types and joint comparable quantitative processing of heterogeneous factors in system-cognitive analysis and the Eidos system. Polythematic Network Electronic Scientiﬁc Journal of the Kuban State Agrarian University (Scientiﬁc Journal of KubSAU), No. 08 (092). pp. 859–883. KubSAU, Krasnodar (2013). http://ej.kubagro.ru/2013/08/pdf/58.pdf 4. Methodology AV RCI Leontief Centre. http://av-group.ru/wp-content/uploads/2015/10/ AV_RCI_2015.pdf 5. On the work of CJSC ICSER Leontief Center: The oﬃcial website of “Leontief centre”. http:// leontief-centre.ru/ 6. On strategic planning in the Russian Federation: Federal law of 28.06.2014 No. 172-FZ 7. Orlov, A.I., Lutsenko E.V.: System Fuzzy Interval Mathematics. Monograph (Scientiﬁc Publication), 600 p. KubGAU, Krasnodar (2014). http://lc.kubagro.ru/aidos/aidos14_OL/ index.htm 8. Perroux, F.: Economic space: theory and applications. Spatial Economics, No. 2 (2007) 9. The positioning of Krasnodar Krai in the national and global economic space on the basis of seven competition indicators. http://kuban.lc-av.ru/napravleniya-konkurentsii/ 10. Porter, M.E.: Competitive advantage: Creating and Sustaining Superior Performance, 720 p. Alpina Publisher, Moscow (2008) 11. Project sites of the Strategy for social and economic development of Krasnodar Krai until 2030. http://kuban.lc-av.ru/proektnye-ploshhadki/

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12. The Strategy of Social and Economic Development of Krasnodar Krai until 2030. http:// kuban.lc-av.ru/ 13. Schumpeter, J.: The Nature and Essence of Economic Theory. Progress, Moscow (1982) 14. South Pole and Smart Kuban: What is Strategy 2030 preparing for Krasnodar Krai? https:// kuban.rbc.ru/krasnodar/28/02/2018/5a955ab79a794752e323a2a4

Contradictions in the Motivation of Top Managers of Corporation by the Method of Economic Added Value Sergey N. Yashin1(&), Egor V. Koshelev1, Victor P. Kuznetsov2, Yuliya V. Zakharova1, and Alexey A. Ivanov1 1

N.I. Lobachevsky Nizhny Novgorod State University, Nizhny Novgorod, Russian Federation {jashinsn,ekoshelev,alexey.iff}@yandex.ru 2 Minin University, Nizhny Novgorod, Russian Federation [email protected]

Abstract. Subject. The subject of the study is the problem of the possibility of applying the method of economic added value for constructive motivation of the top management of corporations. With the constructive motivation of senior executives, they work in such a way that they do not distort the projected cash flows of projects and the proﬁt indicators of the ﬁrm in order to receive appropriate remuneration for that, but solve long-term strategic issues, which allows the company to constantly increase the value of the business. Goals. The purpose of the study is to adjust the known method of economic added value in such a way that it can be used to successfully motivate top managers of the company. In this case, this method is compared with the method of net present value and the method of modiﬁed economic added value in order to bring the interests of top managers in line with the interests of the owners of the ﬁrm, for example, shareholders in the joint-stock company. Methodology. The proposed methodology consists in applying the actual indicator of the modiﬁed economic value added instead of the usual economic added value. This allows you to align priorities of top managers and owners (shareholders) with respect to which investment project from a set of available alternatives should be implemented. Results. The projected modiﬁed economic added value, like the net present value, does not in itself provide a reliable guide for the rational motivation of the top manager for the company’s long-term goals. This problem can be solved by placing top managers remuneration in dependence on the actually obtained modiﬁed economic added value by years as a result of the implementation of a speciﬁc project. In this case, the top managers of the company become constructively motivated to increase the value of the company’s business, as required by shareholders.

The article was prepared with the ﬁnancial support of the Russian Foundation for Basic Research. Grant No. 15-02-00102 a. © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 114–125, 2019. https://doi.org/10.1007/978-3-030-00102-5_11

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Conclusions. The results of the research presented by the authors can be useful to both ﬁnancial analysts and corporate owners. They will help to focus the work of top managers on achieving long-term strategic goals of companies. Keywords: Top managers

Economic added value

At present, in various studies of Russian economists, many detailed useful results have been obtained with regard to optimizing the processes of motivating staff of commercial and state organizations. However, insufﬁcient attention is paid to the rational motivation of top management in commercial ﬁrms and banks, as well as in government structures. Although the success of these structures depends primarily on the decisions of top managers with regard to business development or the activities of state organizations. Managing the motivation of hired employees - top managers - is a complex process, involving both organizational and ﬁnancial methods (V.P. Kuznetsov et al. [1]). One of the most popular ways to motivate top executives today is through so-called managerial options (Y. Brigham, L. Gapenski [2], M.O. Ivanova [3], M.M. Kirillova [4], M.A. Limitovsky [5], I.V. Snimshikova [6]). In the proposed system, the option plan serves as a part of the size of the remuneration of managers, while remuneration for it is paid when the corresponding corporate goals are achieved (M.O. Ivanova [3]). One of the main corporate goals is to increase the value of the corporation’s business (Y. Brigham, L. Gapenski [2], A. Damodaran [7], M.A. Limitovsky [5]), although sometimes in the tactical purposes of developing a company from top managers, it is primarily necessary to resolve current issues. To such it is possible to carry: the desire for maximum property at the end of the investment project or the desire for maximum annual income withdrawn by the company’s owners from business (L. Kruschwitz [8]). Sometimes it is recommended to use call options for shares of the corporation as a reward for top managers. However, this is dangerous, since managers in this case become co-owners of the company. Therefore, it is better to use settlement (phantom) options that do not involve the supply of a basic asset (M.A. Limitovsky [5], A.N. Malyugin [9]). In addition, options should be European, timed to coincide with the completion of the project, in order to avoid the actions of managers aimed at a shortterm increase in the market price of shares (M.A. Limitovsky [5]). A special place in the motivation system of top managers is non-material motivation (L.N. Levanova [9], S.N. Yashin et al. [11]). At the same time, for example, by using utility functions in calculations, it is possible to measure immaterial motivation in money by analogy with material motivation, which in turn gives certain advantages of non-material motivation of top managers in comparison with material ones (S.N. Yashin et al. [11]). In addition, as shown by statistical studies, more than half of senior executives are currently not satisﬁed with the existing methods of their ﬁnancial incentives (E.V. Pogrebnaya [12]). In some works, in order to optimize the motivation of top managers, two types of top managers of the company are primarily delineated: insiders that increase the value of the company, and insiders motivated by the growth of the company’s value (M.A. Limitovsky [13]). In this case, the second type of insider is divided by the author into: (1) partners (friends of the ﬁrm), (2) regents seeking maximum development of

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available capital by investing in any projects, and (3) saboteurs taking investment decisions to the detriment of other shareholders and the business as a whole. Proceeding from this classiﬁcation, in his work M.A. Limitovsky [13] mathematically proves that a rational insider that does not bear a liability for taking inefﬁcient projects cannot be constructively motivated. However, in this context, it is also important to assess the value of top manager for the corporation. So, for example, in the work of S.N. Yashin, Y.V. Trifonova, E.V. Kosheleva [14] assesses the motivation of top managers with the help of warrants. Obviously, this motivation, like any other, should have a certain price for the company. In this case, the price of shares on the market is adjusted, adjusted for their expected dilution, which is a consequence of the future execution of warrants. One of the methods of motivating top managers, which is used in practice, is the appointment of bonuses to company executives, depending on the results of the company’s economic added value (EVA) by years (Y.F. Brighem, J.F. Houston [15], A. Damodaran [7], M.A. Limitovsky [5], J. Roche [16]). Very often, the EVA method is opposed to the discounted cash flow (DCF) method. It is argued that the EVA method allows you to determine the value of the company in more detail by factors than the DCF method (S.V. Voronina [17], O.N. Salmanov [18]). At the same time, the evaluator has an opportunity to analyze the efﬁciency of the company’s work (E.V. Shilkova [19]). In addition, the EVA indicator serves as an indicator of the quality of management decisions and makes it possible to assess the effectiveness of both the company as a whole and its individual units or investment projects (S.G. Galevsky [20], I.V. Ivashkovskaya, E.B. Kukina, I.V. Penkina [21]). EVA also allows you to analyze and evaluate the degree of success in implementing the company’s ﬁnancial strategy aimed at increasing the company’s value and achieving ﬁnancial security (N. V. Klochkova, O.E. Ivanova [22]). In this regard, the rational management of EVA results is one of the main tasks of strategic planning for the development of corporations. So, T.I. Kozyubro [23] singles out the EVA results management factors, which include: (1) increase of proﬁtability of the company due to increase in the volume of sales of the products; (2) management of the cost of borrowed capital by reducing the interest rate due to new loans, (3) liquidation of low-proﬁtable and unproﬁtable assets, and search for new directions for capital investment. In the process of planning investment projects, top-managers of the company can receive future remuneration depending on: (1) the net proﬁt that the project will provide, (2) the net present value of the project (NPV), and (3) the economic added value (EVA). Net proﬁt is a poor measure of the effectiveness of a project, since accountants with the help of appropriate accounting methods can veil it. In addition, company executives can collude with accountants, so that they show in the reporting high values of net proﬁt. In this case, the top manager will receive an undeservedly high reward for his work. The net reduced income of the project (NPV) is also a poor measure of the performance of the top manager, since it involves the planning of future cash flows. And to predict them in favor of the head is even easier. As a result, a project that actually will bring a smaller NPV ﬁrm can be adopted. Moreover, this will contradict the interests of

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the owners of the company, for example, shareholders. And if the top manager has a personal interest in a particular project to the detriment of more proﬁtable projects for the company, then, naturally, he will strive to present this project to the owners of the corporation as the most promising for the company. Finally, the choice of the investment project takes place until the moment of implementation. In this case, the top manager’s remuneration will be tied to the NPV indicator, which is built on future projected data on the project’s cash flows, rather than the current performance indicators of the manager. In this case, it is possible to assign a future remuneration of the company’s top manager depending on the EVA indicators, which will be planned by the years for a particular investment project. This indicator is calculated by the formula EVA ¼ NOPAT WACC IC ¼ EBITð1 TÞ WACC IC, Where NOPAT - net operating proﬁt of the corporation (rub.); EBIT - proﬁt before interest and taxes (operating proﬁt) (rubles); T - income tax rate (%); WACC - weighted average cost of corporation’s capital (%); IC - invested capital (rubles). The question arises: can the NPV and EVA indicators be aligned so that they give the same result with respect to the choice of the most proﬁtable project? For an inﬁnite lifetime of the company it is possible. We will show this. Discounting EVA for the entire period of n at the rate of WACC, we get that n X

PVWACC ðEVAÞ ¼

t¼1

n X

PVWACC ðNOPATÞ

t¼1

n X

PVWACC ðWACC ICÞ:

t¼1

If we go to the limit of this amount for a period n ! 1, we get the following. 1. The present value of the company’s net operating proﬁt for an inﬁnite period of its existence is equal to the present value of future inflows of money: n X t¼1

PVWACC ðNOPATÞ ¼

n X

PVWACC ðCIFÞ;

t¼1

Where CIF - the company’s cash inflows (rubles), calculated by the formula (A. Damodaran [7], M.A. Limitovsky [5]) CIF ¼ EBITð1 TÞ þ D þ L þ DNWC; D - depreciation charges (rub.); L - liquidation value of the project (rub.); DNWC - change in net working capital (additional working capital minus changes in accounts payable) (rubles).

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In this case, we assume that the entire accumulated depreciation D reinvested in production (business), and the values of L and DNWC returned to the company at the end of each project in the same extent that the initially invested in the project. Thus, for the entire period n only the sum of the CIFs corresponding to the NOPAT value in this case changes. 2. The present value of the minimum level of incomes on invested capital (WACC IC) for an inﬁnite period of n is perpetuity (eternal rent) (A. Damodaran [7], M.A. Limitovskii [5]), and, therefore, is equal to the value of IC, that is, n X

PVWACC ðWACC ICÞ ¼

t¼1

WACC IC ¼ IC: WACC

Therefore, for an inﬁnite life of a corporation n X

PVWACC ðEVA) ¼

t¼1

n X

PVWACC ðCIFÞ IC ¼ NPV,

t¼1

Which was to be proved. Thus, in an effort to maximize EVA, top managers are trying to raise the NPV of the company for an inﬁnite period of company existence, and, consequently, cost in the market. However, often hired top managers do not associate their whole career with one or another ﬁrm or organization. After working in a management position in one company, they can move to another job. In this case, they are guided by the receipt of compensation for the period of time, while they manage a particular ﬁrm. Thus, they consider ﬁrst of all those projects that will provide corporations with high EVA performance in the near future, often at the expense of long-term strategic goals of the company. How, in this case, should the premiums be assigned to top managers, so that they accept and implement exactly those projects that are more beneﬁcial to the corporation, that is, to the owners, and not to the hired managers? To solve this problem, ﬁnanciers developed an index of the modiﬁed economic added value (M.A. Limitovsky [5], J. Roche [16]), which is calculated by the formula EVAðmÞ ¼ NOPAT

IC ; an;WACC

Where n is the lifetime of the project (years); an;WACC - discount multiplier for annuity (L. Kruschwitz [8], M.A. Limitovsky [5]) for a period of n years and a discount rate of WACC for the year that is calculated as an;WACC ¼

n X t¼1

1 1 ð1 þ WACC)n : ¼ ð1 þ WACC)t WACC

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The second term in the formula for EVA (m) is the annual equivalent annuity (Y. Brigham, L. Gapenski [2], M.A. Limitovsky [5]) for the capital invested in the project. Using EVA (m) instead of the usual EVA, it is possible to align priorities of top managers and owners (shareholders) with respect to which investment project from a set of available alternatives should be implemented. This is because EVA (m), discounted for the duration of the project, and NPV give the same result. We will show this. n X t¼1

¼

n X EVAðmÞt IC 1 ¼ NOPAT t an;WACC ð1 þ WACC)t ð1 þ WACC)t t¼1

n X t¼1

n n X NOPATt IC X 1 NOPATt IC an;WACC ¼ NPV: t t ¼ t a ð1 þ WACC) an;WACC t¼1 ð1 þ WACC) ð1 þ WACC) n;WACC t¼1

However, this EVA (m), like the NPV, in itself does not provide a reliable guide for the rational motivation of the top manager for long-term goals of the company in the form of a stable increase in market value. This is due to the fact that the formula for EVA (m) includes the net operating proﬁt of NOPAT, which again has to be predicted, as well as the cash flow needed to calculate NPV. This problem can be solved by placing top managers’ remuneration in dependence on actually received EVA (m) by years as a result of implementation of a speciﬁc investment project. For this purpose, top managers’ bonuses in the form of a prespeciﬁed percentage of annual EVA (m) can be deposited in a special bank account for the period until the end of the project. Thus, in case of successful implementation of an investment project that is beneﬁcial to the owners (shareholders) of the ﬁrm, the top manager will accumulate the largest amount of money on the deposit, and, therefore, will be constructively motivated. Let us show the rationality of the presented reasoning on a speciﬁc example. Nizhny Novgorod aircraft building plant “Sokol” - a branch of JSC “RAC” MiG “plans to reconstruct the shop for recycling of secondary materials. There are three options for this reconstruction. Cash flows by years for each of the options are presented in Table 1. Table 1. Cash flows of projects by years (RUB million) Option Year 0 Light –4 750 Average –8 250 Capital –10 750 Source: Authoring

Year 1 2 000 3 500 4 500

Year 2 2 500 4 700 5 500

Year 3 2 750 2 500 4 500

Year 4 2 500 2 500 4 000

Average cost of the company’s capital is 25% per annum. Premiums of top managers are deposited in a special bank account for a period of 4 years (i.e., before the end of the project) with an accrual of income at a rate of 12% per annum. Which project is more proﬁtable for shareholders (according to the NPV criterion), and which - to top managers (according to the criteria of EVA and EVA (m)?

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We calculate the NPV of each of the three projects:

NPVcp: ¼ 8 250 þ

3 500 4 700 2 500 2 500 þ þ þ ¼ 209; 33ðRUB millionÞ; 2 3 1; 225 1; 225 1; 225 1; 2254 4 500 5 500 4 500 4 000 þ þ þ 1; 225 1; 2252 1; 2253 1; 2254 ¼ 812; 87ðRUB millionÞ:

NPVjaP ¼ 10 750 þ

The largest NPV is planned for a lightened version of the shop’s reconstruction that is why it is the most proﬁtable for shareholders. Now calculate the EVA values by years for each of the three projects. Light version: EVA1 ¼2 000 0; 225 4 750 ¼ 931; 25 ðRUB millionÞ; EVA2 ¼2 500 0; 225 4 750 ¼ 1 431; 25 ðRUB millionÞ; EVA3 ¼2 750 0; 225 4 750 ¼ 1 681; 25 ðRUB millionÞ; EVA4 ¼2 500 0; 225 4 750 ¼ 1 431; 25 ðRUB millionÞ: Average version: EVA1 ¼3 500 0; 225 8 250 ¼ 1 643; 75 ðRUB millionÞ; EVA2 ¼4 700 0; 225 8 250 ¼ 2843; 75 ðRUB millionÞ; EVA3 ¼2 500 0; 225 8 250 ¼ 643; 75 ðRUB millionÞ; EVA4 ¼2 500 0; 225 8 250 ¼ 643; 75 ðRUB millionÞ: The capital version: EVA1 ¼4 500 0; 225 10 750 ¼ 2 081; 25 ðRUB millionÞ; EVA2 ¼5 500 0; 225 10 750 ¼ 3 081; 25 ðRUB millionÞ; EVA3 ¼4 500 0; 225 10 750 ¼ 2 081; 25 ðRUB millionÞ; EVA4 ¼4 000 0; 225 10 750 ¼ 1581; 25 ðRUB millionÞ: The largest EVA is planned for the capital variant over the years, therefore, if the premiums of top managers are put in dependence on the results of EVA, then they will choose the capital variant of the reconstruction. Obviously, in this example, for this, you do not even need to consider the amount that will accumulate on the deposit of the top manager. It will be the largest, since the EVA of the capital variant was initially larger by year. And most importantly, they are in conflict with the interests of shareholders and top managers, since according to NPV results, shareholders beneﬁt from a lighter version of the shop’s reconstruction (see Table 2).

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Table 2. Criteria of EVA and NPV projects (RUB million) Option

EVA Year 1 Year 2 Light 931.25 1 431,25 Average 1 643,75 2 843,75 Capital 2 081,25 3 081.25 Source: Authoring

Year 3 1 681,25 643.75 2 081,25

NPV Year 4 1 431,25 1 154,79 643.75 209.33 1 581,25 812.87

To align the interests of shareholders and top managers, we use EVA (m) in the calculations. We estimate annual values for each of the three projects, having previously calculated the discount multiplier, which is the same for all three projects: a4;22;5% ¼

1 1; 2254 ¼ 2; 470781: 0; 225

Light version: 4 750 ¼ 77; 53 ðRUB millionÞ; 2; 470781 4 750 EVAðmÞ2 ¼2 500 ¼ 577; 53 ðRUB millionÞ; 2; 470781 4 750 EVAðmÞ3 ¼2 750 ¼ 827; 53 ðRUB millionÞ; 2; 470781 4 750 EVAðmÞ4 ¼2 500 ¼ 577; 53 ðRUB millionÞ: 2; 470781

EVAðmÞ1 ¼2 000

Average version: 8 250 ¼ 160; 97 ðRUB millionÞ; 2; 470781 8 250 EVAðmÞ2 ¼4 700 ¼ 1 360; 97 ðRUB millionÞ; 2; 470781 8 250 EVAðmÞ3 ¼2 500 ¼ 839; 03 ðRUB millionÞ; 2; 470781 8 250 EVAðmÞ4 ¼2 500 ¼ 839; 03 ðRUB millionÞ: 2; 470781 EVAðmÞ1 ¼3 500

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The capital version: 10 750 ¼ 149; 15 ðRUB millionÞ; 2; 470781 10 750 EVAðmÞ2 ¼5 500 ¼ 1 149; 15 ðRUB millionÞ; 2; 470781 10 750 EVAðmÞ3 ¼4 500 ¼ 149; 15 ðRUB millionÞ; 2; 470781 10 750 EVAðmÞ4 ¼4 000 ¼ 350; 85 ðRUB millionÞ: 2; 470781

EVAðmÞ1 ¼4 500

The results of calculations of EVA (m) are shown in Table 3. Table 3. Criteria of EVA (m) and NPV projects (RUB million) Option

EVA (m) Year 1 Year 2 Light 77.53 577.53 Average 160.97 1 360,97 Capital 149.15 1 149,15 Source: Authoring

Year 3 827.53 –839,03 149.15

FV12% Year 4 577.53 2 337,74 –839,03 154.61 –350,85 1 467,24

NPV 1 154,79 209.33 812.87

The accumulated amount of money by the end of the 4th year on the deposit of the top manager can be calculated based on any given percentage of bonuses from EVA (m) by years. We will estimate it as 100% of EVA (m). The essence of the conclusions does not change in the end. Therefore, for example, for the average version of the reconstruction of the shop, the accumulated amount by the end of the fourth year will be FV15% ¼ ðð160; 97 1; 12 þ 1 360; 97Þ1; 12 839; 03Þ1; 12 839; 03 ¼ 160; 97 1; 123 þ 1 360; 97 1; 122 839; 03 1; 12 839; 03 ¼ 154; 61 ðRUB millionÞ:

From Table 3 it is clear that in case of realization of the facilitated version of the reconstruction, top managers will accumulate on the deposit the largest amount of their remuneration subject to 12% per annum. Thus, the priorities of the project managers do not contradict the priorities of the shareholders, since we used EVA (m) instead of EVA in calculations. In addition, with such a system of depositing premiums of top managers on a special bank account until the end of the project with the accrual of relevant revenues, top managers’ remuneration is tied to the results actually achieved by them, and not to the planned cash flow indicators, as is done, for example, according to NPV. In conclusion, we formulate the results of the study. 1. One of the methods of motivating top managers, which is used in practice, is the appointment of bonuses to company executives, depending on the results of the company’s economic value added (EVA) by years. In this regard, the rational

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3.

4.

5.

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management of EVA results is one of the main tasks of strategic planning for the development of corporations. In the general case, in the process of planning investment projects, top managers of the company can receive a future reward depending on: (1) the net proﬁt that the project will provide, (2) the net present value of the project (NPV), and (3) the economic added value (EVA). However, net proﬁt is not a successful measure of the effectiveness of the project, because with the help of appropriate accounting methods it can be artiﬁcially distorted by accountants. NPV is also not a good measure of the performance of the top manager, since it involves the planning of future cash flows, which is even easier to predict in favor of the manager. In this case, it is possible to assign a future remuneration of the company’s top manager depending on the EVA indicators, which will be planned by the years for a particular investment project. In an effort to maximize EVA, top managers are trying to raise NPV projects for the company for an inﬁnite period of ﬁrm existence, and, consequently, cost in the market. However, often hired top managers do not associate their whole career with one or another ﬁrm or organization. Therefore, they consider ﬁrst of all those projects that will provide corporations with high EVA performance in the near future, often at the expense of the long-term strategic goals of the company. To solve this problem, the ﬁnanciers developed a modiﬁed value-added value (EVA (m)) indicator. Using EVA (m) instead of the usual EVA, it is possible to align priorities of top managers and owners (shareholders) with respect to which investment project from a set of available alternatives should be implemented. However, this EVA (m), like the NPV, in itself does not provide a reliable guide for the rational motivation of the top manager for long-term goals of the company in the form of a stable increase in market value. This is due to the fact that the formula for EVA (m) includes the net operating proﬁt of NOPAT, which again has to be predicted, as well as the cash flow needed to calculate NPV. This problem can be solved by placing top managers’ remuneration in dependence on actually received EVA (m) by years as a result of implementation of a speciﬁc investment project. For this purpose, top managers’ bonuses in the form of a prespeciﬁed percentage of annual EVA (m) can be deposited in a special bank account for the period until the end of the project. Thus, in the case of successful implementation of an investment project that beneﬁts the owners (shareholders) of the ﬁrm, the head will eventually receive the largest amount of money on the deposit, and, therefore, will be constructively motivated.

The results of the research presented by the authors can be useful to both ﬁnancial analysts and corporate owners. They will help to focus the work of top managers on the achievement of long-term strategic goals of the companies, one of which is a constant increase in the value of the business of this ﬁrm.

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References 1. Kuznetsov, V.P., Troﬁmov, O.V., Frolov, V.G., Sidorenko, Y.A., Plekhova, Y.O.: Creative tools of raising the competitiveness of business on the basis of intellectual technologies of decision support. In: Communications in Computer and Information Science, vol. 754, pp. 302–316 (2017) 2. Brigham, E.F., Gapenski, L.C.: Intermediate Financial Management, 4th edn., 1122 p. The Dryden Press, Orlando (1993) 3. Ivanova, M.O.: Perfection of the compensation structure of labor of top managers of trade networks. J. Creat. Econ. 7, 100–105 (2009) 4. Kirillova, M.M., Soboleva, E.V.: Peculiarities of motivation of top managers. In: Actual Problems of Modern Science, vol. 1, pp. 75–81 (2013) 5. Limitovsky, M.A.: Investment Projects and Real Options in Emerging Markets, 527 p. Yurayt, Moscow (2004) 6. Garina, E., Kuznetsova, S., Semakhin, E., Semenov, S., Sevryukova, A.: Development of national production through integration of machine building enterprises into industrial park structures. Eur. Res. Stud. XVIII, Special Issue: 267–282 (2015) 7. Damodaran, A.: Investment Valuation: Tools and Techniques for Determining the Value of Any Asset, 993 p. Wiley, New York (2002) 8. Kruschwitz, L.: Finanzierung und investition, 563 p. R. Oldenbourg Verlag, Munchen (1999) 9. Mizikovsky, I.E., Bazhenov, A.A., Garin, A.P., Kuznetsova, S.N., Artemeva, M.V.: Basic accounting and planning aspects of the calculation of intra-factory turnover of returnable waste. Int. J. Econ. Perspect. 10(4), 340–345 (2016) 10. Kuznetsova, S.N., Romanovskaya, E.V., Potashnik, Y.S., Grechkina, N.E., Garin, A.P.: Factors determining whether industrial parks are successful or not. In: Managing Service, Education and Knowledge Management in the Knowledge Economic Era - Proceedings of the Annual International Conference on Management and Technology in Knowledge, Service, Tourism and Hospitality, SERVE 2016 4th., pp. 53–58 (2017) 11. Yashin, S.N., Koshelev, E.V., Kuptsov, A.V., Podshabyakin, D.V.: Investment Planning of Modernization of the Equipment of the Production Company: Monograph, 201 p. OOO “Printing Workshop RADONEZH”, N. Novgorod (2015) 12. Pogrebnaya, E.V.: The system of motivation of middle managers and top managers (on the example of a construction company). Leadersh. Manag. 3(2), 113–120 (2016). https://doi. org/10.18334/lim.3.2.35377 13. Limitovsky, M.A.: Reputation, qualiﬁcation and motivation as drivers of value. Russ. J. Manag. 7(2), 51–68 (2009) 14. Yashin, S.N., Trifonov, Y.V., Koshelev, E.V.: Estimation of cost of motivation of topmanagers of a corporation on the basis of warrants. Financ. Credit. 11(683), 32–42 (2016) 15. Brigham, E.F., Houston, J.F.: Fundamentals of Financial Management, 12th edn., 680 p. Gengage Learning, Mason (2009) 16. Roche, J.: The Value of Nothing: Mastering Business Valuations, 236 p. LES50NS (Publishing) Limited, London (2005) 17. Voronina, S.V.: Economic added value as a tool for managing the company’s value. In: Economics and Management, vol. 22, pp. 6–10. Vestnik SUSU (2012)

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18. Salmanov, O.N.: Economic added value and discounted cash flow: comparison of cost management methods. Serv. Russ. Abroad 9(47), 82–91 (2013). https://doi.org/10.12737/ 1851 19. Shipkova, E.V.: The method of economic added value in the assessment of business. Valuat. Issue 2, 44–52 (2012) 20. Galevsky, S.G.: Economic added value as a tool for managing the company. Notes Min. Inst. 174, 175–177 (2008)

Self-regulation in Tourism (Based on Analysis of the Status of the Association “Union of Tour Operators in the Field of Outbound Tourism ‘TURPOMOSHCH’”) Marina L. Davydova(&), Yuriy A. Bokov, Yevgeniy V. Stel, and Vladimir A. Zolotovskiy Volgograd State University, Volgograd, Russia {kmp,bokov,analitika,zolotovskiy.azi}@volsu.ru Abstract. The problem of the development of self-regulating organizations in the sphere of tourism was repeatedly raised in science, actualized in the framework of state and business practices. Self-regulation, being a means of legal regulation, primarily uses the methods, ways and means of civil law, through which subjects that implement legal capacity, independently develop a model of behavior, formalized in certain rules. In this regard, self-regulation, on the formal side, is presented as an independent and initiative activity that, on the basis of development and application of professional rules, ensures coordination and control the activities of members of organizations, as well as in the form of institutionalized organization of subjects, allows them to represent their interests in relations with authorities. At the same time, self-regulating organizations in tourism are viewed in the literature as a mechanism of lowering of the administrative pressure on entrepreneurial activity. At the same time, in regional or municipal conditions, the mechanism of self-regulation can serve as an instrument for strengthening the administrative model of tourism regulation. The purpose of the study is to determine the actual form of self-regulation in tourism on the basis of the analysis of the status of the association “Union of Tour Operators in the Field of Outbound Tourism “TURPOMOSCH” (“Tourist Help”) The authors disclosed the purpose and objectives of the association, as well as changing its status in connection with the implementation of the function to provide emergency export of tourists. During the research it was determined that the TURPOMOSHCH association completely meets essential signs of the self-regulating organization. At the same time a normative transition of “Turpomoshch” to the status of self-regulatory organization can be based on the addition of the institute of the fund of target capital with institute of a mutual insurance. At the same time, the authors came to the conclusion that in order to secure fundamentals of the social protection of population at this moment the state can’t refuse regulation of the tourist activity with transfer of these powers to self-regulating organizations. The cases of insolvency of tour operators which have become frequent in the sphere of outbound tourism conﬁrm need of the strengthening of public requirements to implementation of tourist activity in the Russian Federation. In this regard within the “Turpomoshch” organization there was an association (convergence) of methods of the public and civil-law regulation. © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 126–134, 2019. https://doi.org/10.1007/978-3-030-00102-5_12

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Keywords: Legal regulation in tourism Turpomoshch Self-regulation in tourism Public law Civil law Law regulation JEL Code: K15

K23 Z30 Z32 Z38

1 Introduction At the present stage of the development of society, the institution of self-regulation is one of the mechanisms of regulation of public relations by mixing public-legal and civil-law forms (Leskova 2012). The problem of the development of self-regulating organizations in the sphere of tourism was repeatedly raised in science, actualized in the framework of state and business practices. Self-regulation, being a means of legal regulation, primarily uses the methods, ways and means of civil law, through which subjects that implement legal capacity, independently develop a model of behavior, formalized in certain rules. In this regard, selfregulation, on the formal side, is presented as an independent and initiative activity that, on the basis of development and application of professional rules, ensures coordination and control the activities of members of organizations, as well as in the form of institutionalized organization of subjects, allows them to represent their interests in relations with authorities, etc. At the same time, self-regulating organizations in tourism are viewed in the literature as a mechanism of lowering of the administrative pressure on entrepreneurial activity (Ogneva and Nisht 2015: 4). At the same time, in regional or municipal conditions, the mechanism of self-regulation can serve as an instrument for strengthening the administrative model of tourism regulation (Zabaeva 2009: 171). Obviously, that is why scientists come to the conclusion that self-regulation is a complex legal phenomenon that requires a more speciﬁc differentiation of principles of civil law and public-law self-regulation (Chelyshev and Mikhaylov 2013: 53–54). Characteristic of public means used in self-regulation, can be carried out through the identiﬁcation of the main features of the public law method. E.G. Doronina believes that relations with the participation of self-regulating organizations are regulated on the basis of a mixed method (Dorokhina 2010: 13). Deﬁning the status of subjects, we note that membership in a self-regulating organization is voluntary, while the subject can choose which self-regulating organization he wishes to join (Zabaeva 2009: 171–173). Yu. S. Kharitonova thinks selfregulation is “ﬁrst of all relations between business entities or professional activities, a self-regulating organization and the state which is presented by its bodies” (Kharitonova 2011: 32). The purpose of this article is to determine an actual form of the self-regulation in tourism on the basis of the analysis of the association status “Union of tour operators in the ﬁeld of outbound tourism “TURPOMOSHC”.

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2 Methodology Researchers analyzed regulatory documents that determine the status and regulate selfregulatory organizations. First, normative and legal acts of a general nature were considered, on the basis of which conclusions were drawn about the qualitative characteristics and formal functions of self-regulating organizations. After that, an analysis of the TURPOMOSHC’s formation history was made, as well as the development of its legal status. As a result, factors were identiﬁed that determined the nature of the activity and the functional purpose of the association. Appraisal of the scope and conditions of participation of tour operators in the association, as well as the identiﬁcation of the social and economic role of the association, made it possible to identify its essential institutional features. Based on a comparative analysis, the status of the association of tour operators in the ﬁeld of outbound tourism was compared with the institute of self-regulation.

3 Results Taking into account the substantial part of the discourse that has developed in science, and also relying on Chap. 5 of the “Law on the basics of tourism in the Russian Federation” (Federal Law 1996), it can be supposed that the modern Russian legislator embodied the institution of self-regulation in tourism in an extremely undeﬁned form of the association “Union of tour operators in the ﬁeld of outbound tourism “Turpomoshch” (hereinafter referred to as “Turpomoshch”). The association of tour operators in the ﬁeld of outbound tourism as a special institution for the provision of emergency assistance to tourists was introduced in the “Law on Fundamentals” by a novella dated May 3, 2012. On the 24th of August it was decided to establish the association “TURPOMOSHCH”. As founders were thirty-one subjects of tourist activity. The agreement emphasizes that the Association is a nonproﬁt organization that unites legal entities operating (planning to operate) in the ﬁeld of outbound tourism and acting to provide emergency assistance to tourists. The purpose and character of the Association, which were deﬁned in the memorandum of association, fully comply with Article 11.1 “the Law on Fundamentals”, which speciﬁes the signs of the association of tour operators in the ﬁeld of outbound tourism: a non-proﬁt (corporate) organization; united all-Russian association; is based on mandatory principles for tour operators who acts in outbound tourism; purpose of establishment and the main function is providing emergency assistance to tourists. According to Part 2 of Article 11.1. “The Law on Fundamentals” the procedure of creating and acquiring the status, activities, reorganization and liquidation of the association of tour operators in the sphere of outbound tourism is established on the basis of the legislation of the Russian Federation which regulates the status of associations (unions) in the context of “tourist law”, and in accordance with the decision of the Government of the Russian Federation. The 19th of November, 2012, N 2130-r, according to decree of Government of the Russian Federation, the association “Union of tour operators in the ﬁeld of outbound tourism “TURPOMOSHCH” got a status of a union of tour operators in the ﬁeld of

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outbound tourism. Taking into account the goals and nature of the association of tour operators in the ﬁeld of outbound tourism, we note that the recognition of the Association “TURPOMOSHCH” by such uniﬁcation was based on Art. 123.8 of the Civil Code of the Russian Federation in part: an association (union) is an association of legal entities based on mandatory membership and created to represent and protect common, including professional, interests, to achieve socially useful goals, as well as other not contradicting the law and having a non-commercial nature of the objectives; the association can be represented by a self-regulatory organization aimed at coordinating the entrepreneurial activities of individuals, representing and protecting common property interests. Despite the established mandatory character of the participation of tour operators in the ﬁeld of outbound tourism in the “Association”, the principle of voluntariness is ﬁxed in determining the open character of the association (Article 11.1 of the Law on Fundamentals). The only requirement for the membership of the tour operator in the association is the payment of contributions to the reserve fund. According to the Law on Fundamentals, the reasons for terminating the membership of the tour operator in the association of tour operators in the ﬁeld of outbound tourism are: a statement of the tour operator on leaving the members of the association; non-payment of contributions to the reserve fund and the fund of personal responsibility in a timely manner and the appropriate amount; liquidation of the tour operator. In such a way, it can be concluded that “TURPOMOSHCH” as an association was created on a voluntary basis. However, its status was supplemented due to the special social characteristics of the professional goals of the association. Note that the association of tour operators in the sphere of outbound tourism in its primary and altered form as a unifying essential goal is determined by the content of the institution of the target capital fund. Each of these characteristics corresponds to speciﬁc regulatory requirements. The legal basis for the formation of the association, its goals and objectives, as well as the management system, rights and duties of members are articles 123.8-123.11 of the Civil Code of the Russian Federation. Especially it should be noted art. 123.10 of the Civil Code of the Russian Federation, “the exclusive competence of the supreme body of the association (union) is also the adoption of decisions on the procedure for determining the size and method of payment of membership fees, additional property contributions of members of the association (union) in its property and the amount of their subsidiary liability for the obligations of the association (union), provided by law or charter”. Moreover, the purpose and objectives of the “TURPOMOSHCH” are deﬁned in accordance with Articles 2-3 of the Federal Law “On the Procedure for the Formation and Use of Targeted Capital of Non-Proﬁt Organizations” (Federal Law 2006): the target capital of a non-proﬁt organization is part of the property of a non-proﬁt organization which is formed and is replenished at the expense of donations made in a certain order and for the purposes, also at the expense of unused income from trust management of the said property (Part 1, Article 2); the formation of target capital and the use of income from the target capital can be carried out for certain purposes (Part 1, Article 3). It should be noted that these normative prescriptions became the basis for the position of the RF Ministry of Finance on the procedure for recording the incomes

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of the fund of personal responsibility (letter No. 03-03-05/30792 of May 19, 2017), as well as the Administration of the Federal Tax Service fund (letter No. 16-15/077982 of May 26, 2017). At the same time, these characteristics of “TURPOMOSHCH” as an association of tour operators in the sphere of outbound tourism in the content part comply with the norms of Art. 2-3 of the Federal Law of 01.12.2007 N 315-FZ “On Self-Regulating Organizations” (Federal Law 2007) and Art. 1-3 of the Federal Law of 13.07.2015 N 223-FZ “On self-regulatory organizations in the ﬁnancial market” (Federal Law 2015). In particular, both laws deﬁne self-regulation as: “independent and proactive activities carried out by business or professional entities whose content is the development and establishment of standards and rules for the said activity, as well as monitoring compliance with the requirements of the said standards and rules”. Based on Part 3 of Art. 1 of the Federal Law of 01.12.2007 N 315-FZ “On SelfRegulating Organizations”, and also taking into account the ﬁnancial component of the activities of “Turpomoshch”, a special meaning within the framework of our topic is Federal Law No. 223-FZ of July 13, 2015 “On Self- organizations in the ﬁnancial market”. Note that according to Part 4 of Art. 3 of the Federal Law of 13.07.2015 N 223-FZ “On self-regulatory organizations in the ﬁnancial market” to the signiﬁcant features of self-regulatory organizations in the ﬁnancial market include: the uniﬁcation of a non-proﬁt organization as its members at least 26% from the total number of ﬁnancial organizations that carry out the corresponding type of activity; presence of the developed internal standards of a self-regulatory organization; presence of management bodies and specialized bodies of a self-regulatory organization1. Despite the fact that “Turpomoshch”, is not registered in the relevant registry, the association fully corresponds to the above characteristics. In particular, since membership in the association is recognized as binding for all participants in the ﬁeld of outbound tourism, the minimum threshold for participation is certainly overcome. In the structure of the association are functioning the management bodies and in the person of the director, the system of working bodies, the General meeting of the members of the Association and the special body “Supervisory Board”. Issues related to the development of rules for professional activity (developed internal standards) are within the competence of the General Assembly of the members of the Association and the Supervisory Board (Article 6-8 of the Charter of the Association “Association of Tour Operators in the ﬁeld of outbound tourism “Turpomoshch”). It should be emphasized that Art. 11.1 “The Law on Fundamentals” also refers to the development of rules of professional activity to the competence of the union. However, by virtue of the resolution of the Government of the Russian Federation of January 25, 2013 No. 43, the adoption of these rules, as well as the implementation of state supervision over the activities of the “Turpomoshch” falls within the competence of the Ministry of Culture of the Russian Federation (The Government of the Russian Federation Decree of January 25, 2013). At the same time, the Supervisory Board ensures coordination of

1

Note that, according to part 6 of Art. 3 of the Federal Law of 13.07.2015 N 223-FZ “On selfregulatory organizations in the ﬁnancial market” an obligatory condition for the recognition of a nonproﬁt organization as a self-regulating organization is the registration it in a special register.

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the rules of professional activity for the Ministry of Culture of the Russian Federation (Article 8.89 of the Charter). Thus, it seems possible to agree with the opinion of O.P. Safonov that “In fact, “Turpomoshch” is a self-regulatory organization, business makes all the decisions” (An agent registry 2018). We believe that the normative transition of “Turpomoshch” to the status of a self-regulating organization can be based on the addition of the institute of the trust fund by the institution of mutual insurance. This would allow, in the presence of state will, to register the “Association of Tour Operators in the ﬁeld of outbound tourism” in the register of self-regulated organizations in the ﬁnancial market in accordance with paragraph 1 of Part 1 of Art. 3 FZ “On self-regulatory organizations in the ﬁnancial market”. So, we have established that the initiative and voluntary membership for the “Association of Tour Operators in the ﬁeld of outbound tourism” are not typical, since there are mandatory requirements for the mandatory membership of tour operators in the ﬁeld of outbound tourism only in this association, the size and the term of payment of contributions to the reserve fund etc. Moreover, it is obvious that the very fact of the formation of the association “Tourist assistance” and the transformation of its status into an association is also connected with public legal regulation in the sphere of tourism. In order to provide the basis for social protection of the population, at this time the state cannot refuse the regulating of tourism activities with the transfer of these powers to self-regulating organizations. The cases of insolvency of tour operators that have become more frequent in the ﬁeld of outbound tourism conﬁrm the need to strengthen public-legal requirements for the implementation of tourist activities in the Russian Federation. In this regard within the framework of “Turpomoshch” there has been a convergence (convergence) of methods of public-law and civil-law regulation2. The special professional rules of the association related to its main purpose have been repeatedly introduced by state authorities. Particularly, a number of relevant acts were adopted by the Decision of the Government of the Russian Federation, the Directive of the Ministry of Culture and Rosturizm (The Ministry of Culture of Russia Order of September 01, 2015; The Ministry of Culture of Russia Order of June 06, 2016; The Ministry of Culture of Russia Order of November 11, 2016; The Ministry of Culture of Russia Order of December 14, 2016; The Ministry of Culture of Russia Order of April 20, 2017; The Rosturizm Order of February 01, 2017). At the same time, the special social importance of “emergency assistance” predetermined the need for a special regulatory deﬁnition of the procedure for rendering a non-proﬁt organization that has the status of combining tour operators in the ﬁeld of outbound tourism, emergency assistance to tourist, tourists, and an organized group of tourists (The Government of the Russian Federation Decree of February 27, 2013). However, a certain share of independence in the development and approval of professional rules is preserved3. 2

3

In the opinion of V.V. Vasilyev, as a result of the impact of the norms of legislation on the law, reflecting the objective processes of their convergence, the overall frequent-legal orientation of relations does not change, but their separate spheres acquire a public legal nature (Vasiliev 2014: 19). The decision of the Supervisory Board of the Association “Association of Tour Operators in the Field of Outbound Tourism” Tourist Information” (The resolution of the Supervisory Board of the Association “Turpomoshch” 2017).

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Note that as a priority means of public legal regulation of relations in the ﬁeld of outbound tourism, the federal legislation provides for the institution of a reserve fund and a fund of personal responsibility (“Information” of Rosturizm 2017)4. According to Art. 11.4 The Law on Fundamentals, tour operators in the ﬁeld of international (outbound) tourism to ensure ﬁnancing of expenses for the provision of emergency assistance to tourists are obliged to make contributions to the reserve fund in the order determined by the number of tourists in the ﬁeld of outbound tourism for the year. In addition, tour operators are required to make deductions for the formation of a fund of personal responsibility (Zobova et al. 2017: 62)5. The law deﬁnes the following procedure: “the amount of the annual contribution of the tour operator to the personal responsibility fund of the tour operator is equal to one percent of the total price of the tourist product in the ﬁeld of outbound tourism for the previous year”. We emphasize that the institution of the reserve fund and the fund of personal responsibility as a means of publicly legal regulation of relations in the ﬁeld of outbound tourism are imperative (Decree of the Government of the RF dated February 27, 2013, No. 162, No. 9, Article 958).

4 Conclusions Summarizing the results of the study, it should be noted that the institution of selfregulation in tourism requires a more consistent norm-setting activity. Association “Turpomoshch” certainly corresponds to the meaningful signs of self-regulating organizations. At the same time, for a number of reasons, the status of the association of tour operators in the sphere of outbound tourism contradicts the very idea of selfregulating organizations. We believe that in such capacious interdisciplinary types of entrepreneurial activity as tourism, the use of mixed forms of regulation, the uniﬁcation of public and civil principles is conditioned by the special social signiﬁcance of this activity and the social obligations of the state. We believe that in such priority areas of social relations, self-governed organizations are not acting as voluntary and independent of public interference in the professional activities of organizations of free subjects of relations, but in the form of an institutionalized mechanism that allows for more effective control over a speciﬁc, systematically organized segment of the market by the state. Obviously, the register of travel agents, designed on the information and legal basis of the association of tour operators in the ﬁeld of outbound tourism “Turpomoshch”, is called upon to fulﬁll similar functions (An agent registry 2018).

4

5

Rosturizm prepared special methodological recommendations on certain issues of the formation of these funds (“Information” of Rosturizm 2017). Only during the ﬁrst months of work, 188,017,845.37 rubles were transferred to the personal liability fund (Zobova et al. 2017: 62).

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References Chelyshev, M.Y., Mikhaylov, A.V.: Self-regulation in the system of methods of legal regulation of entrepreneurial activity. The Power of the Law. No. 1(13), pp. 53–61 (2013) Decision: Decision of the General Assembly of the Participants of the Association “Association of Tour Operators in the ﬁeld of outbound tourism” “Tourist Information”, “Regulations on the procedure for the formation and maintenance of information on Travel Agents (Register) by the Association” Association of Tour Operators in the Field of Outbound Tourism “Tourist Information”, at Ofﬁcial Internet Portal of the Association “Association tour operators in the sphere of outbound tourism” “Tourist assistance” (2018). http://www.tourpom.ru/page/ dokumenty-associacii. Accessed 9 May 2018 Dorokhina, Y.G.: Management in the system of bankruptcy: civil law and public law aspects of legal regulation: the author’s abstract of the Dissertation of Doctor of law, Moscow, 46 p. (2010) Federal Law: No. 132-FZ of November 24, “On the Basics of Tourist Activities in the Russian Federation” (amended and supplemented, effective from 01.01.2018), Collection of Legislation of the Russian Federation, 02.12.1996. N 49, Art. 5491 (1996) Federal Law: No. 275-FZ of December 30, “On the Procedure for the Formation and Use of Targeted Capital of Non-Commercial Organizations” (as amended on July 23, 2013), Collection of Legislation of the Russian Federation, 01.01.2007. N 1 (1 h), Art. 38 (2006) Federal Law: No. 315-FZ of December 01, “On Self-Regulating Organizations” (amended and supplemented, effective from 01.10.2016), Collection of Legislation of the Russian Federation, 03.12.2007. No. 49, Art. 6076 (2007) Federal Law: No 223-FZ of July 13, “On Self-Regulating Organizations in the Financial Market” (Edited on December 28, 2017), Collection of legislation of the Russian Federation, 07/20/2015. N 29 (Part I), Art. 4349 (2015) Kharitonova, Y.S.: Reflection of the management function in institutes of civil law: the author’s abstract of the Dissertation of Doctor of law, Moscow, 68 p. (2011) Leskova, Y.G.: Self-regulation of entrepreneurial relations: correlation and interaction of civillaw and public-legal elements of the legal mechanism, Contemporary law, No. 1, pp. 77–81 (2012) Ogneva, S.V., Nisht, S.A.: State regulation of the tourism industry: possible ways of development. Bulletin of the Association of Tourism and Service Universities, No. 2, vol. 9, pp. 3–13 (2015) “Information” of Rosturizm: “On some issues of application of certain provisions of the Federal Law No. 132-FZ of 24.11.1996” On the Basics of Tourism Activities in the Russian Federation (as amended by force from January 1) (2017). http://www.consultant.ru/cons/cgi/ online.cgi?req=doc&base=LAW&n=210103&ﬂd=134&dst=1000000001,0&rnd=0. 666431006898013#0. Accessed 9 May 2018 The Government of the Russian Federation Decree of February 27, No. 162: “On Approval of the Rules for the Provision of Emergency Assistance to Tourists and the Rules for Financing Expenses for the Provision of Emergency Assistance to Tourists from the Reserve Fund” (as amended on August 3, 2016), Collection of Legislation of the Russian Federation, 03/04/2013. No. 9, Art. 958 (2013) An Agent Registry: “Association of travel agencies supported the idea of creating an agent registry on the “Turpomoshch” basis” (2018). http://tourism.interfax.ru/ru/news/articles/ 29359/. Accessed 9 May 2018

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The Government of the Russian Federation Decree of January 25, No. 43: On the federal executive body authorized to exercise state supervision over the activities of tour operators and the association of tour operators in the ﬁeld of outbound tourism, Collection of Legislation of the Russian Federation, 02/04/2013. N 5, Art. 387 (2013) The Ministry of Culture of Russia Order of April 20, N 594: On approval of the order by the association of tour operators in the ﬁeld of outbound tourism to the Federal Agency for Tourism information on payments made for the purpose of reimbursing the real damage to the tourist and (or) other customer from the funds of the fund of personal responsibility of the tour operator in sphere of exit tourism (2017). http://www.pravo.gov.ru. Accessed 9 May 2018 The Ministry of Culture of Russia Order of December 14, N 2750: On approval of the requirements for reporting of the tour operator operating in the ﬁeld of outbound tourism, its composition and form, at Ofﬁcial Internet portal of legal information (2016). http://www. pravo.gov.en. Accessed 9 May 2018 The Ministry of Culture of Russia Order of June 06, N 1539: On the approval of the association of tour operators in the ﬁeld of outbound tourism to the Federal Tourism Agency notice in the form of an electronic document on the termination of membership of the tour operator in the said association (2016). http://www.pravo.gov.ru. Accessed 9 May 2018 The Ministry of Culture of Russia Order of November 11, N 2468: On the approval of the association by tour operators in the ﬁeld of outbound tourism in agreement with the Federal Agency for Tourism decision on the release of the tour operator in the ﬁeld of outbound tourism from the ﬁnancial support of the responsibility of the tour operator and payment of contributions to the personal responsibility of the tour operator for the next calendar year, at Ofﬁcial Internet portal of legal information (2016). http://www.pravo.gov.ru. Accessed 9 May 2018 The Ministry of Culture of Russia Order of September 01, No. 2323: On approval of the Administrative Regulations for the execution by the Ministry of Culture of the Russian Federation of the state function to implement state supervision over the activities of tour operators and the association of tour operators in the ﬁeld of outbound tourism (Edited on December 28, 2016) (2015). http://www.pravo.gov.ru. Accessed 9 May 2018 The Resolution of the Supervisory Board of the Association “Turpomoshch”: The Association’s Position on the Funds of Personal Responsibility of Tour Operators (2017). http://www. tourpom.ru/page/dokumenty-associacii. Accessed 9 May 2018 The Rosturizm Order of February 01, N 48-Pr-17: On the approval of the form of the decision to provide emergency assistance to tourists (tourists)” (Registered in the Ministry of Justice of Russia on April 6, 2017 No. 46275), at Ofﬁcial Internet portal of legal information (2017). http://www.pravo.gov.ru. Accessed 9 May 2018 Vasiliev, V.V.: Civil and public law: issues of unity and differentiation. Bulletin of the Tver State University, The series “Right”, No. 1, pp. 16–29 (2014) Zabaeva, M.N.: Management of the tourist potential of the region on the basis of self-regulation of organizational and economic relations of the subjects of the tourist industry. Economics of enterprises and organizations: Microeconomics, No. 7, pp. 171–177 (2009) Zobova, E.V., Yakovleva, L.F., Kosenkova, YuYu.: Financial maintenance of tour-operator activity in Russia. Socio Econ. Phenom. Process. 12(3), 58–66 (2017)

Olympic Movement in Kindergarten Alla A. Oshkina ✉ (

)

Tolyatti State University, Tolyatti, Russia [email protected]

Abstract. This article is dedicated to the issue of introduction of preschoolers to the Olympic Movement in a kindergarten. Expediency and eﬃciency of management of project activities are substantiated with a view to develop the understanding of the Olympic Movement in over-ﬁves as an initial level of intro‐ duction to the participation in the Olympic Movement. The timeliness of the topic is directly related to the promotion of sports, beginning from the tender age. The theoretical provisions were presented which convince of the opportunity and the need to manage the introduction of preschoolers to the Olympic Movement in a kindergarten. The article gives the description of work on management of project activities with preschoolers aimed at developing the understanding of the Olympic Movement. The research is of practical importance, since it allows solving urgent issues of physical and personal development of a preschooler. Keywords: Preschoolers · Promotion of sports Physical development of a preschooler · Olympic Movement · Project activities Preschool educational establishment

1

Introduction

In accordance with the “Law on Education in the Russian Federation”, preschool educa‐ tion is the ﬁrst link in the continuous education system, which determines the importance of respecting the provisions of the Concept of the state-public system of Olympic education by the preschool educational establishments. An increasingly important emphasis in the system of modern education and upbringing of children and young people is made on the teaching activities which are intended to assist in introducing them to the values of the Olympic Movement. This aspect of the work is becoming increas‐ ingly relevant in the light of sports events of global impact that have taken place in recent years in Russia. A cognitive attitude to reality is actively developed during the preschool period; in addition, the interests to the range of social phenomena beyond the personal experience of a child are formed. It is during this period that it is important to create conditions for the development of understanding of the evolution of the Olympic movement in the world in preschoolers, which will contribute to the development of enduring interest in ﬁtness and sports in children. At the same time, according the analysis of the teaching practice, in spite of the available experience in development and implementation of the Olympic-themed

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projects in the preschool educational establishments, in general, Olympic education does not yet take a proper place in the process of socialization of an over-ﬁve. A number of investigations that reveal various aspects of solving the problem of the Olympic education of preschoolers has been carried out thus far (Varfolomeyeva, Z.S., Sochevanova, E.A., Surinov, I.A., Tupichkina, E.A.). The Olympic education of preschoolers is based on the milestones of the concept of the state-public system of Olympic education that consist in the development of not only the values of Olympism, the Olympic Games, the Olympic Movement, but also the universal ideals in the rising generation; in the development of the need for justice and honesty in children; in the intensiﬁcation of the aspiration to the harmonious develop‐ ment of physical and mental capacity. The innovative search for the means leads to the recognition of the fact that eﬀective pedagogical solutions should be used in order to build an educational process based on the interests, skills and capabilities of all its parties. In our opinion, such technology is project activities. The swallowed information usually can be easily and quickly forgotten, but if the child delivers a thought himself/herself, having mastered a new knowledge with no outside help, then this thought will become his/her property” …“a bad teacher presents the truth, while a good one teaches how to ﬁnd it” (Diesterweg, F.A.) The knowledge acquired by the children in the course of project activities becomes the property of their personal experience. They were received in response to questions posed by the children themselves in the “doing” process. And the need for this knowl‐ edge is determined by the scope of activities. The children need them - hence, the chil‐ dren are interested in them. The works which analyze the essence of project activities, its problematic nature, its place in the educational process are important for this research Banasinskaya, S.K., Grashina, N.A., J. Dewey, W. Kilpatrick, Kobylianskaya, T.M., Kurmakaeva, G.Z.. Kuzina, A.Y.). However, in this research, all the potentialities of project activities and their role in the development of understanding of the Olympic Movement in over-ﬁves are understudied. The timeliness of the topic is substantiated by the contradiction between the declared need for the development of understanding of the Olympic Movement in 6–7 year-old children in various activities and under-utilization of potential of project activities in this process. The purpose of this article is to provide a theoretical justiﬁcation and experimental evidence of the possibilities of the project activities in the development of understanding of the Olympic Movement in 6–7 year-old children.

2

Description

The research was carried out at the premises of kindergartens of the Autonomous NonCommercial Organization for Preschool Education “Planeta Detstva “Lada” of the City of Tolyatti. 150 over-ﬁves participated in the experiment.

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The experimental work was carried out in three stages and included ascertaining, formative and control experiments. The ascertaining experiment is aimed at identifying the level of understanding of the Olympic Movement in 6–7 year-old children. In connection with the target goal, criteria and indicators were deﬁned: a cognitive criterion (the presence of a fundamental understanding of the Olympic Games, the understanding of the Olympic symbols, of the champions of the Olympic Games, of the sports of the Olympic Games), an emotional-relational criterion (the desire to talk about the Olympic Games, to share impressions of the competition), a behavior criterion (the aspirations of children to participate in the Olympic Games (at the level of a kinder‐ garten, a city, the ability to solve a practical problem situation in the course of preparation and conduct of the Small Olympic Games). The analysis of results of assessment tasks (a conversation “What do you know about the Olympic Games?” and “How to Become an Olympic Champion”, games: “Select correctly”, “Lay out in a certain order”, “Who is this?”, “Sports of the Olympic Games”, “Interview”, pedagogical situation “The Olympic Games in a kindergarten”) allowed the researchers to conventionally distinguish three levels of developed understanding of the Olympic Movement in 6–7 year-old children. High level (30%) – children can correctly determine the concept of an Olympic Game with no outside help: they know 4-7 Olympic symbols or mascots; they can name 4-5 champions of the Olympic Games with no outside help; preschoolers correctly lay out the sequence of the ceremony of the Olympic Games and tell about the ceremony of the Olympic Games with no outside help; they can conﬁdently name the sports of the Summer and Winter Olympic Games (5 or more titles); they show interest in the Olympic Games; they developed a stable motive of physical improvement and have an aspiration to participate in the Olympic Games. Average level (40%) – children can determine what the Olympics is with the help of an adult: they can name 2-3 Olympic symbols, they know 2-3 champions of the Olympic Games; they can lay out the sequence of the ceremony of the Olympic Games, but require a little help from an adult to explain; they can name the sports of the Summer and Winter Olympic Games (2-4 sports) with the help of an adult. They do not show any initiative to participate in the Olympic Games, they do not show any interest in motor activity; there is a material, aesthetic, and communicative motive to the participation in the Olympic Games. Low level (30%) – children cannot explain what the Olympic Games are, they do not show any interest in the Olympic Games, even with the help of an adult. A child names one of the symbols of the Olympic Games, but cannot name any mascot; he/she deﬁnes 1-2 constituent activities of the ceremony of the Olympic Games, but cannot give reasons for their answer; he/she names one of the domestic champions or cannot name a single champion, makes a muddle of the names of the sports, but knows the attributes of the sports. The results which were obtained during the ascertaining experiment allowed the researchers to arrive at the conclusion that poor results are due to the speciﬁc nature of the teaching practice:

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– there is no system of work on the development of understanding of the Olympic Movement in preschoolers and the use of ineﬀective means of development of motivation to participate in the Olympic Games; – insuﬃcient interaction in solving problems (selection of methods, forms of work, techniques, etc.) of teachers and parents; – personal preferences of preschoolers during their introduction to their preferred sports of the Olympic Movement were taken into account insuﬃciently. The analysis of theoretical provisions, the results and the data which were obtained during the ascertaining experiment of research allowed us to pass on to the formative experiment. The goal of formative experiment is to develop and test the scope and the methods of the development of understanding of the Olympic Movement in 6–7 year-old children in project activities. In our opinion, the scope of project work on the development of understanding of the Olympic Movement in 6–7 year-old children can be planned in such a way as to give children a more comprehensive understanding of the values, about the ideology of the Olympic Movement and introduction of preschoolers to the Olympic Movement in a kindergarten. The subject-matter of the Olympic Movement was initially selected for the preschoolers. Since the Olympic Movement is one of components of socialization, didactic principles distinguished by Kozlova, S.A. for deﬁning the scope of the Olympic education project were used. These principles are as follows: scientiﬁcity principle, accessibility principle, humanity principle, and activity principle. According to the theoretical research and the results of the ascertaining experiment, project work includes several stages: – saturation of types of children’s activities (play, communication, motor, productive, music and arts, reading, work activities) with the information about the Olympic Games; – management of project activities by stages (search, analytical, practical, presentation, control), development of the subjects of projects (the history of the Olympic Games; Olympic traditions, symbols, and rules; sports of the Olympic Games; Russian cham‐ pions of the Olympic Games); – inclusion of parents into project activities through the use of a variety of forms. The parents participated in the development of mini-projects; in the preparation of exhi‐ bitions, excursions, presentations, holidays; in the selection and in the search for sources of additional information on the project topics in bookshops, libraries, and Internet resources; in the making of the pages of the “Olympic Encyclopedia”. In order to deﬁne the problem, we organized a viewing of the presentation “The Olympic Games 2014”, “The Olympics 2016”, and invited the children to participate in the project. It is critically important to interest preschoolers with the work to be done. Project implementation was made possible due to the viewing of presentations by the children in order to ﬁnd out the children’s desire to participate in the project. An additional

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incentive for the forthcoming work was the motivation of preschoolers to the participation in the Small Olympic Games. The subjects of projects were deﬁned and the following projects were implemented in cooperation with children after motivation: “The hearts of the Olympic athletes”, “The History of the Olympic Games”, “Olympic traditions, symbols, and rules”, “Sports of the Olympic Games”, “Russian champions of the Olympic Games”. Little issues were covered and addressed within each project; besides, they evolved into mini-projects of parents and children. For example, the project “The History of the Olympic Games” includes mini-projects “Olympic Games in ancient Greece”, “Myths and legends about famous ancient heroes”, “Pierre de Coubertin and the revival of the Olympic Games”. The project “Olympic traditions, symbols, and rules” included the mini-projects “Cere‐ mony of the Olympic Games”, “Olympic symbols”, “Fair Play” - sports honor code. The main methods of implementation of the scope of project “The History of the Olympic Games” were as follows: – conversations: “Olympic Games in ancient Greece”, “Heroes of the ancient Hellas”, conversations about renowned athletes: “Milo of Croton – the ﬁrst strong man of Hellas”, “Heroic deed of Polydamas of Skotoussa”; – reading imaginative literature: myths “The Legend of Zeus”, “The Myth of Hercules”, “Pelops”, reading poems: “The Olympics”, “What is the Olympics”; – viewing of the artwork for the myths, a series of pictures of Ancient Olympia, the mountains of Olympia; – making creative stories: “Friendship of sportsmen”, “How the Olympic Mishka made friends”; – drawing competition on the topic “The History of the Olympic Games”. During this project, the children got acquainted with Pierre de Coubertin. Having made a story based on facts, but in a form that is intelligible for preschoolers, about how the Olympic Games were forbidden, about the merits of this man in terms of revival of the Olympic Games, about his famous phrase: “O Sport, You Are Peace!”, which became a catch phrase among the Olympic athletes. Through the explanation of the meaning of words we tried to make the children realize that sport is our constant companion in life, our sincere and loyal friend. Sport gives joy to your spirit and body. The joy of movement is the joy of life! At this stage, we included action-oriented games like: “Who’s faster?”, “Who’s higher?”, etc. It is important that children experienced the joy of movement as much as possible. And in order to make preschoolers understand the phrase: “The Olympics – you are the ambassador of peace,” it is worth explaining that people across continents and oceans reach out to each other with the words: “Hello, friend!”. Children were invited to make joint creative stories about friendship in the Olympic Games which helped preschoolers to realize the true value of friendship. The following topics of creative stories were used: “Friendship of sportsmen”, “How the Olympic Mishka made friends”. The following activities were carried out during the work over project “Olympic traditions, symbols, and rules”:

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– didactic games: “Lay out correctly” (procedure for the ceremony of the Olympic Games), “Name the mascot”, “Olympic symbols”, “Olympic navigator”, “Two symbols – spot 10 diﬀerences”; – quiz “Give a prompt answer”; – creativity competitions: “Olympian orator”, “Sports and arts compositions”, “Olympic sportswear show”, appliqué work “Olympic awards”. The implementation of the project “Sports of the Olympic Games” began with the organization of the exhibition “Our Sports Achievements”, where photographs, merit certiﬁcates, diplomas, and medals of children who were involved in sports were presented; they told about the features of various sports, about their achievements, how a diploma in a particular sport was obtained. The work on the project was done in 3 subgroups: the ﬁrst subgroup collected information, artwork, newspaper clippings, and postcards about summer sports; the second group prepared pantomimic sketches: “Bobsleigh”, “Biathlon”, “Ice Hockey”, pictures about sports; the third subgroup of preschoolers collected information about winter sports included in the Olympic Games. In order to implement the project “Russian champions of the Olympic Games”, an excursion to the sports complex “Olympus” was arranged, where preschoolers visited training sessions and saw the athletic training in various sports. We selected possible topics for mini-projects and suggested them to preschoolers: “Evgenii Pliushchenko”, “Alexey Nemov”, “Lidiya Skoblikova”, “Anna Kournikova”, “Lyasan Utiasheva.” The children made a story about the Russian Champions and compiled a portfolio about each of them. The ﬁnal event was a participation of children in the Small Olympic Games, organ‐ ized in a kindergarten. Based on the interest of children and their inclinations, the chil‐ dren participated in various competitions included in the winter Olympics: hockey, sledding, skiing, biathlon, etc. Findings. The control experiment was carried out after the formative experiment, which was aimed at analyzing the dynamic pattern of the level of formedness of under‐ standing of the Olympic Movement in preschoolers. Positive dynamics was an obvious result; an increased level of introduction of children to the world of sports was noted; it was established that the children were very interested in various sports and have increased pursuance of motor activities which the children give their personal preference to. The obtained results conﬁrm the usefulness of the work and the eﬀectiveness of the use of the project activities in the process of the development of understanding of the Olympic Movement in 6–7 year-old children.

3

Conclusions

Project activities are a special kind of intellectual and creative activity; a set of techni‐ ques and operations of mastering a certain area of practical or theoretical knowledge, of a particular activity; a method of achieving the didactic goal through the elaboration of a problem (technology), which should result in a quite real and tangible practical result,

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executed in one way or another. The project activities become an eﬀective means of the development of understanding of the Olympic Movement in 6–7 year-old children.

References 1. Banasinskaya, S.K., Grashina, N.A.: The project activities in the set of means of the Olympic education of over-ﬁves. Prioritetnye Napravleniya Razvitiya Nauki i Obrazovaniya (Priority Directions for the Development of Science and Education), No. 3 (6), pp. 55–57 (2015) 2. Kurmakaeva, G.Z.: Pedagogical assessment of the Olympic education of children: toolkit development experience. Sovremennye Problemy Nauki i Obrazovaniya (Contemporary Issues of Science and Education), No. 6, p. 837 (2014) 3. Kobylianskaya, T.M., Kurmakaeva, G.Z.: Project activities as a basis of the development of prerequisites for the search and exploratory activity in the preschoolers at the initial stage of education. Voprosy Doshkolnoy Pedagogiki (Preschool Pedagogics Issues), No. 2 (8), pp. 92– 95 (2017) 4. Kuzina, A.Y.: Development of the cognition interest to the history of the objective world in project activities in over-ﬁves: synopsis of a thesis … of Candidate of pedagogic sciences: 13.00.07, Saint Petersburg (2009) 5. Sochevanova, E.A.: Olympic education of preschoolers in the context of Federal State Preschool Education Standard. Doshkolnaya Pedagogika (Preschool Pedagogics), No. 1 (106), pp. 36–42 (2015) 6. Surinov, I.A., Kurmakaeva, G.Z.: Special aspects of assessment of the Olympic education of over-ﬁves. V Mire Nauchnykh Otkrytiy (In a World of Scientiﬁc Discoveries), No. 3.1 (51), pp. 579–588 (2014) 7. Tupichkina, E.A.: What the Olympic education of over-ﬁves should be like? Nachalnaya Shkola Plius Do I Posle (Preschool Plus Before and After), No. 12, pp. 36–41 (2013)

Labor Activity of the EAEU Migrants in Moscow Tatiana N. Yudina(&), Yuri N. Mazaev, Tatiana V. Fomicheva, Irina V. Dolgorukova, and Tatiana N. Bormotova Russian State Social University, Moscow, Russia [email protected], [email protected], [email protected], [email protected], [email protected]

Abstract. The present article analyzes the issues that migrants from the EAEU countries deal with during their labour activity in Moscow. Principally, attention is paid to questions such as: who are labour migrants from EUEU countries, what is their social and demographic mix, specializations and employment area of labour migrants, reason for moving, labour mobility and prospectives of labour activity in Moscow. The study was carried out in October–November 2017 in Moscow by Uniﬁed center for study of social and sociopolitical processes of Eurasian integration of Institute for sociopolitical studies of Russian Academy of sciences and Sociology Department of Russian State Social University. During study we managed to ﬁnd out opinion of labour migrants from the EAEU state members on conditions created by Moscow government in terms of fulﬁllment of regulatory documents of the Eurasian Union on provision of free movement of labour force and labour efﬁciency of employees, point out the issues solutions for which are dependent on Moscow authorities and the Eurasian Union. Simultaneously, we conducted an analysis of macroeconomic statistical performances (cross-border transfers of physical entities). Keywords: Labour migrants Specializations of employment Labour and professional mobility Satisfaction from scope and labour conditions Adaptational search JEL Classiﬁcation Codes: J 110

J 150

1 Introduction With the establishment of the Eurasian Economic Union the citizens of Armenia, Kyrgyzstan, Kazakhstan and Belarus much more easily accessed job places in Russia. The rights of citizens in these states have been considerably expanded in the course of their labor activity at the territory of Russia. Now they don’t need a labour permit in the Russian Federation. Labor migrants from EAEU are given the opportunity to work in Russia, not only in terms of employment contract, but also under a civil law one, which signiﬁcantly expands the scope of their possible employment.

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The EAEU citizens working in Russia under employment contracts from January 1, 2017 can make free compulsory medical insurance policies (Order of the Russian Ministry of Health, 2016). An important step in this direction was the development of a system where work experience in any state of the EAEU will be counted when pension accounting (Rosstat demographic projection till 2035). There are other preferences. This is a mutual recognition of diplomas for almost all specialties, except several types of activities, in particular medical, legal, pedagogical and pharmaceutical, and the application of national regimes in matters of social security. It means that, for example, social insurance for labor migrants and members of their families is carried out under the same conditions and in the same manner as for citizens of states providing jobs. The problem of taxation had also been resolved. In Russia, income of the EAEU citizens working under the contract is taxed at the resident rate. If earlier they deducted 30% during the ﬁrst 183 days of work, now they immediately pay only 13% (Petrov 2018). Such a loyal policy towards the citizens of the EAEU member states is already affecting a migration flow from these countries to Russia. According to the Institute of Social and Economic Problems of Population of the Russian Academy of Sciences, in January–April 2017 in Russia, a number of foreign citizens from EAEU member states registered for migration exceeded 2 million people. About a third of them (over 800 thousand people) were citizens of the Kyrgyz Republic, citizens of the Republic of Armenia - 27%, the Republic of Kazakhstan - 23% and the Republic of Belarus - 15% (Eurasian Economic Commission report 2016). The policy influences on the change in the volume of foreign money transfers, which is an important factor for maintaining stability in many countries. According to the Central Bank of Russia, in 2016 the amount of money transfers to the EAEU member countries (Kyrgyzstan and Kazakhstan) increased (Cross-border transfers of physical entities 2018). In accordance with all forecasts, migration flows to Russia from the EAEU countries are only expected to heighten (Prospects of integration in the labor market, 2018). The tension in labor markets of the EAEU countries is featured by unemployment rate for one vacant position. These performances vary signiﬁcantly from country to country: in Armenia, per one vacant position at the employment agency maximum number of unemployed is 37 people (as of the end of June 2015), in Kyrgyzstan is 10 people, in Kazakhstan is 5 people, in Belarus is 2 people. In Russia, per 1385.6 vacant positions only 973.9 unemployed people are registered in the employment agency, i.e. less than one person per job position (Commonwealth of Independent States in 2015 2016). If you take all unemployed by the ILO method, the load on the labor market will be greater by several times (Topilin 2018). Migrants from the EAEU countries primarily attract developed regions, large cities with a high standard of living, but also a high population density. This causes difﬁculties in the labor activity of migrants, requires serious efforts of adaptation, especially those who came from a small town and village.

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2 Methodology The results of sociological survey “Free movement of labor force and labor efﬁciency of EAEU migrants in Moscow” was an empirical basis for analysis. The analysis touched upon 511 questionnaires of respondents from four the EAEU countries (Belarus-149 people, Armenia-123 people, Kyrgyzstan-121 people, Kazakhstan-118 people). According to a specially developed author’s methodology, data on the social portrait of labor migrants, employment specializations, conditions, intensity and payment of labor, prospects of labor activity was collected and analyzed using the procedure of descriptive statistics in the technique of individual in-person standardized interview. The respondents were selected by the snowball method from labor migrants working at Moscow enterprises. Without expressing a high level of data representativeness, nonetheless, study outcomes allow making reliable and well-founded conclusions on the scope and labour conditions of the EAEU migrants at the local level.

3 Outcomes 3.1

Social Portrait of the EAEU Labour Migrants Working in Moscow

The results of research showed that the majority (more than 60%) of labor migrants in Moscow region from all analyzed sending states at the moment of study are in active working age from 18 to 33 years and are represented mostly by men (Table 1). Table 1. Distribution of labor migrants by sex composition and age (in percent of the number of respondents by sending states, No = 511) Age of labour migrants (years completed) 18–33 34–49 50 and older 67.8 31.5 0.7 69.9 27.6 2.4 67.7 32.3 0 66.1 28.8 5.1 67.9 30.1 2.0

Sending state

Sex

Belarus Armenia Kyrgyzstan Kazakhstan In total due to sampling frame

Male 59.1 68.3 64.5 61.0 63.0

Female 40.9 31.7 34.7 39.0 36.8

An overwhelming majority (88.9%) of labour migrants arrive to Moscow region from urban settlements of resident country, and 60–70% from large cities: capitals, cities of republic and regional subordination (Table 2). A signiﬁcant part of responded migrants, both men and women, have a higher education (21.8%) or a specialized secondary education (38.9%). About a quarter of respondents have a general secondary education.

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Table 2. Distribution of labor migrants by place of residence in sending state (in percent of the number of respondents by sending state, No = 511) Sending state

Belarus Armenia Kyrgyzstan Kazakhstan In total due to sampling frame

Type of settlement in sending state City of oblast, Metropolitan, republic krai, regional subordination center 47.0 32.2 36.6 37.6 39.7 20.8 35.2 33.7 39.6 31.1

City of regional subordination 12.1 10.9 24.6 25.2 18.2

Rural settlement 8.7 14.9 14.9 5.9 11.1

The data of survey showed that an individual, as a rule, seasonal migration generally prevails. Mostly, people arriving to Moscow in search of job are either nonfamily (single/unmarried) people or immigrants whose families stayed at home. Couples and full families make up an insigniﬁcant part of labor migrants (Fig. 1).

Alone

51

Wife and children stayed in home country

17.7

Arrived with wife (husband) and children

14.4

Arrived only with wife (husband). Children stayed in home country

8.6

Other

8.3 0

10

20

30

40

50

60

Fig. 1. Distribution of answers to the question “Had you arrived to Moscow in search of job alone or with family? (in percent of the total number of respondents, No = 511)

Most migrants (86%) of the EAEU member states are fluent in Russian spoken language, about a third (34%) speaks Russian very well. This is due to the fact that 32% of respondents studied Russian either at home (at school, secondary educational institution, higher educational institution) or in Russia. Professional activity of the EAEU labor migrants working in Moscow. A comparative analysis of job place of labour migrants before moving to Moscow with their job place in Moscow at the moment of study showed that, mainly migrants ﬁnd job in the area of economic activity where they worked at home. Deviations are

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observed only in agriculture, where half of migrant agricultural workers are not involved in this type of production activity in Moscow region, employed in other areas of economy. Less part of migrants in Moscow, in relation to the employment at home, also is working in manufacturing industry and education. On the contrary, in trade, construction and transport industry a number of labour migrants is greater than in the employment system in their country. Obviously, these imbalances are mainly due to the peculiarities of Moscow labor market, on the one hand, and, to some extent, the peculiarities of migrant labor motivation. Trade, construction and transport industry are prevailing by Moscow employment rate. Thus, it is more likely possible to say that the personnel in trade, construction and transport industry is replenished not only by specialized migrant specialists from the relevant area of activity, but also by employees in agriculture, manufacturing industry, education (Table 3). Table 3. Distribution of answers to the question: “In what area of economic activity have you been working at home and in what area are you currently working in Moscow?” (in percent of the total number of respondents, No = 511) Job in country of origin before arrival to Moscow 9.1 15.2 9.3 5.7 21.1 6.1 4.9

Area of economic activity Present job in Moscow Manufacturing industry 7.0 Construction industry 16.7 Transport industry 11.8 Agriculture 2.8 Trade 25.8 Education 4.9 Healthcare 6.1

It is noteworthy that after moving to Moscow labor migrants speciﬁcally change their ofﬁcial status. If an approximately equal number of migrants keeps employer’s status before and after moving, then employees and self-employed workers are partially moved to the group of department managers and company heads. Obviously that such status “diffusion” is due to the fact that this part of migrants in the trade and construction industry individually initiatively or corporately (clannishly) heads primary labor collectives (Table 4). 3.2

Reasons for Moving of Labour Migrants from the EAEU Countries to Moscow in Search of Job

Considering the reasons that labor migrants use for explaining their moving to Moscow, it is necessary to stress that leading of them, along with many latent ones (not mentioned in this study), are the “lack of life prospects” and “low salary” at home. And this may sound strange, a miserable percentage is for migrants who motivate their moving by “lack of job places” at home (Table 5).

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Table 4. Distribution of answers to the question “What is your job position at home and after your arrival to Moscow?” (In percent of the total number of respondents No = 511) Job in the country of origin before arrival to Moscow 58.5 19.9 2.3 1.6 10.8 6.9

Job position

Present job in Moscow Worker 59.1 Ofﬁce worker 17.7 Department Manager 7.5 Head of the company 3.8 Self-employed 8.1 Other 3.8

Table 5. Distribution of answers to the question “What was the main reason for your moving to Russia/Moscow in search of job?” (In percent of the total number of respondents, No = 511) Sending state of labour migrants Belarus Armenia Kyrgyzstan Kazakhstan In whole due to sampling

Reason for moving to Moscow Absence of Low Absence of job wages prospectives 3.4 22.8 33.6 2.4 28.5 30.9 5.0 24.0 30.6 2.5 24.6 39.8 3.3 25.0 33.7

Other reasons 40.2 38.2 40.4 33.1 38.0

It can be seen that this hierarchy of reasons is typical for migrants from all sending countries under study. The observed deviations in performances by countries of migrants arrival, we would likely attribute to statistical errors of observation, rather than to signiﬁcant features of motivation for labor migration. 3.3

Satisfaction from the Job of the EAEU Migrants in Moscow

The survey displayed that a prevailing majority of respondents (about 90%) believes that their job in Moscow matches to their knowledge, abilities and skills, and half of them are absolutely sure of it (Fig. 2). Moreover, almost the same number of respondents (84%) says that their job at Moscow enterprises matches to their educational level (Fig. 3). As a result, 87.3% of labor migrants working in Moscow are mostly satisﬁed with their job, 47.5% of them are completely. Thus, it can be concluded that the process of labor adaptation of migrants is implemented successfully. The data of survey on movement of labor force in Moscow labor market over the past ﬁve years may serve an additional conﬁrmation (Fig. 4).

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Да

50.1

В основном да

39.7

В основном нет

8.6

Нет

1.6 0

10

20

30

40

50

60

Fig. 2. Distribution of answers to the question “Do you think that your job in Moscow now matches to your knowledge, abilities and skills?” (In percent of the total number of respondents, No = 511)

Yes 44

Mainly yes 40.1

Mainly no 9.3

No 6.6 0

5

10

15

20

25

30

35

40

45

50

Fig. 3. Distribution of answers to the question “Do you think that your job in Moscow now matches to your level of education” (in percent of the total number of respondents, No = 511)

As you can see, within ﬁve years only a small number of migrants changed their job place. At the same time, the greatest intensity in changing a job place is observed over a time period of three to ﬁve years. A detailed analysis of migrant labor activity allowed revealing combined satisfactions with the scope and labour conditions (Table 6). The index of satisfaction with the scope and labour conditions (see Table 6) was calculated as the difference between the sum of positive and negative estimates of labor

Labor Activity of the EAEU Migrants in Moscow

90

149

84.3

80

74.2

70.2 70 60 50 40 30

23 18.2

20 11.2 10 0 During last year

During recent three years During recent five years Yes

No

Fig. 4. Distribution of answer to the question “Have you had to change your job place the past one, three, ﬁve years of living in Moscow?” (In percent of the total number of respondents, No = 511) Table 6. Satisfaction of migrants working in Moscow from the scope and labour conditions Features of labour activity Index of satisfaction from scope and labour conditions Labour conditions 0.83 Convenient work schedule 0.82 Labour payment 0.78 Scope of work 0.75

activity features, correlated with the total number of respondents. The index varies from “–1” to “+1”, where “–1” is an absolute dissatisfaction, “+1” is an absolute satisfaction. Most migrants said that labour conditions in Moscow are convenient. More than a third of them are unconditionally satisﬁed with job in all aspects. At the same time, it should be noted a certain differentiation of estimates. So, lower satisfaction rates are related to scope and labour payment. The percentage of employees who are dissatisﬁed with some aspects of their job is in the range of 13% - “scope of work”, up to 8–9% “labour conditions” and “work schedule”, respectively. 3.4

Adaptive Search of Job Place

It is quite obvious that in the process of labor adaptation, migrants try to ﬁnd such a niche of activity where fulﬁlled job would bring maximum (optimal) satisfaction and would meet the realization of their situational needs.

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The results of survey clearly show that peculiar trend of horizontal mobility of migrants is the movement of labor resource from manufacturing areas of activity to the social service sector and, ﬁrst of all, to trade, where a signiﬁcant positive balance takes place (+15.9%) due to an essential outflow of labor from construction and manufacturing industry (Table 7). Table 7. Distribution of answers to the question: “In what area of economic activity in Moscow have you been working before moving to another place and where are you currently working?” (In percent of the number of respondents who changed jobs) Before changing job Area of economic activity 25.0 Manufacturing industry 32.8 Construction industry 14.4 Transport industry 7.2 Agriculture 8.9 Trade 1.1 Education 2.8 Healthcare 7.8 Other

After changing job Mobility balance 9.4 –15.6 20.6 –11.6 11.1 –3.3 2.2 –5.0 23.9 +15.9 5.6 +4.5 4.4 +1.6 22.8 +15.0

Interesting, but not fully understandable phenomenon is a dispersive movement (15%) of labor migrants into latent areas of labor activity. A signiﬁcant number of respondents refused to specify the place of their labor migration. Probably, it is connected with illegal labor or individual (free) activity. As for vertical mobility, a signiﬁcant change in ofﬁcial (status) structure occurs in the working environment. Their positive balance is +28.6%. This increase is reached, to a certain extent, by flowing horizontal mobility of migrants from “leaders” (7.8%) and, it seems to us, from “self-employed population” (individual entrepreneurs) (Table 8). Table 8. Distribution of answers to the question: What is your job position before changing and after?” (In percent of the number of respondents who changed their job place) Before changing job Job position After changing job Mobility balance 42.4 Worker 71.0 +28.6 11.3 Ofﬁce worker 15.5 +4.2 10.8 Department Manager 3.5 –7.3 0.9 Head of the company 0.4 –0.5 19.5 Self-employed 4.8 –14.7 15.1 Other 4.8 –10.3

Simultaneous analysis of data containing trends in horizontal and vertical mobility of labor migrants in Moscow labor market enables concluding that, on the one hand, there is a growing demand for personnel, and vacant positions are opened for

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unqualiﬁed workers, primarily in trade. On the other hand, area for self-employed population is getting narrow. Along with the above noted conclusions, it is necessary to stress that the main thing for successful inclusion of migrants in labor activity is the elimination of all adaptation issues at initial stage of job.

4 Discussion Today it is already obvious that the lack of labor force, especially in Moscow, requires its replenishment by attracting labor migrants from other countries. The solution of this problem served as the basis for a lot of scientiﬁc researches for present and subsequent years (Migration and demographic crisis in Russia 2010; Zaionchkovskaya et al. 2011; Vorobyova 2011; Tyuryukanova 2011). Acquaintance with the results of similar studies suggests that our local research has sufﬁciently reliable data reflecting objective trends in labor migration area. This is also important because it helps to get rid of the widespread misconceptions of labor migrants in terms of “information hunger”. At the same time, it does not fully reveal the problems of their adaptation to Moscow labor market. Despite the widespread stereotype that mainly rural residents in search of job go to Russia, the study conﬁrms earlier data that among migrants from EAEU member states there are more visitors from capitals and large cities than from rural areas. Typical migrants are young married men, half of whom are with secondary specialized or higher education. Once again, it is conﬁrmed that a huge number of migrants ﬁnd job in trade, construction industry, area of communal and social services. The number of employed in household is increasing. On the contrary, the outflow of labor force is proper to agriculture, manufacturing and construction industry. The conclusions about flowing vertical mobility of labor migrants have been cemented. The situation for employees working in attractive and competitive areas (trade, household) is practically stable. Manufacturing and construction industry is nondemanded in the Moscow labor market and, as a result, they are losing potential. Not only restricted professional knowledge and skills that migrants possessed before moving to Moscow, but also, as you can judge upon comparable data, education and qualiﬁcation of the employee are not in demand today in Moscow and Russian labor market as a whole (Mukomel 2017).

5 Conclusions The results of survey repeatedly conﬁrm that the main employment area of labor migrants from the EAEU countries in Moscow is trade, social and communal services. The arrival to Moscow in search of job is mainly due to the lack of prospects for living at home and a low salary. Social mobility of migrants in Moscow labor market is carried out both in horizontal and vertical plane. At the same time, the intensity of displacements is low and one can speak about the relative stability of the personnel structure. The overwhelming

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majority of respondents, in spite of the existing trend of flowing labor mobility, is satisﬁed with the scope and job conditions and believe that fulﬁlled job meet their knowledge, educational level, abilities and skills. The main transfers are carried out from manufacturing to non-manufacturing areas for replenishment of workers personnel. At the same time, remarked employment differentiation of migrants, vertical mobility, and the satisfaction with scope and job conditions witnesses that the process of migrants’ adaptation in the labor market is not unsuccessful.Commentary to the Article1. The EAEU was established on the basis of the Customs Union of Eurasian Economic Community (EEC) for cementing economies of countries-participants, modernization and increasing their competitive performance in international market. The contract on its establishment is signed on May 29, 2014 and became effective on January 1st, 2015. The members became Russia, Armenia, Belarus, Kazakhstan and Kyrgyzstan. Administrative bodies of EAEU are Supreme Eurasian Economic Council and Eurasian Economic Commission.2. The contract draft is revised in Eurasian Economic Commission according to innerstate agreement and prepared to be sent to EAEU members for innerstate procedures required for its signing. Report of Eurasian Economic Commission “Barriers, derogations and restrictions of Eurasian Economic Union, 2016.3. Data is provided by the Head of the Laboratory for migration researches of the Institute of social and economic issues of population by E.S. Krasinets in terms of scientiﬁc and methodological seminar of Analytical administration of the Federation Council Central Ofﬁce on the topic “Processes in migration area: prospectives in terms of Eurasian integration” held on May 15, 2017.

References Vorobyova, O.D.: Labour market and migration. Migration barometer in the Russian Federation. Series of special reports (papers). “New Eurasia” fund, Moscow (2011) Rosstat demographic projection till 2035. http://www.gks.ru/wps/wcm/connect/rosstat_main/ rosstat/ru/statistics/population/demography/. Accessed 27 June 2017 Eurasian Economic Commission report: Barriers, derogations and restrictions of Eurasian Economic Union (2016) Zaionchovskaya, Z.A., Tyuryukanova, E.V., Florinskaya, Y.F.: Labour migration: how to move further. Migration barometer in the Russian Federation. Series of special papers. “New Eurasia” fund, Moscow (2011) Zaionchovskaya, Z.A., Tyuryukanova, E.V. (eds.): Migration and Demographic Crisis in Russia. MAKS, Moscow (2010) Vorob’yova, O.D., Topilin, A.V. (eds.): Migration of Population: Theory and Policy: Textbook. Economic Education, Moscow (2012) Mukomel V.I.: Migrants at the Russian labour market: employment, mobility, intensity and renumeration for labour. Federal scientiﬁc and research sociological center of Russian Academy of Sciences (FSRSC of the RAS), vol. 14, No. 6. Statistics and Economics, Moscow (2017) Petrov, A.: Migration counts (2018). https://rg.ru/2017/01/12/trudovye-migranty-iz-kirgiziipoluchat-pensii-za-rabotu-v-rossii.html. Accessed 15 May 2018

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Prospectives for integration in labour market and the EAEU plans for development of free movement till 2025. http://russiancouncil.ru/analytics-and-comments/analytics/svobodaperemeshcheniya-trudovykh-resursov-v-eaes-k-2025-godu-/. Accessed 15 May 2018 Order by Ministry for Healthcare of Russia dated 27.10.2016 г. No. 803н: On amendments to Regulations of obligatory medical insurance approved by the order of Ministry for Healthcare and social development of the Russian Federation dated 28.02.2011 No. 158н, with the purpose of implementation of provisions of Contract on the Eurasian Economic Union signed in Astana on 29 May 2014. http://www.consultant.ru/document/cons_doc_LAW_209307/. Accessed 15 May 2018 Estimated population of the Russian Federation till 2025: Statistical Bulletin. Federal Service of State Statistics, Moscow (2008) Eurasian Economic Commission: Barriers, derogations and restrictions of Eurasian Economic Union (2016). http://docplayer.ru/47204458-Barery-izyatiya-i-ogranicheniya-evraziyskogoekonomicheskogo-soyuza.html. Accessed 15 May 2018 Processes in migration area and prospectives of Eurasian integration: regional experience. To the meeting of Integration club of the Federation Council Chairman of the Russian Federation Assembly dated 20 June 2017. Analytical Vestnik No. 19 (676), Federation Council of Russian Federal Assembly (2017) Commonwealth of Independent States in 2015: Statistical collection/Interstate Statistical Committee, Moscow (2016) Topilin, A.V.: Migration and general labour market of the EAEU: challenges and integration ways (2018). https://creativeconomy.ru/lib/38076. Accessed 15 May 2018 Cross-border transfers of natural persons (residents and non-residents): Macroeconomic ﬁnancial statistics. Website of the Russian Federation Central Bank (2018). http://www.cbr.ru/ analytics/print.aspx?ﬁle=rem.htm. Accessed 15 May 2018 Tyuryukanova, E.V. (ed.): Women-Migrants from the CIS Countries in Russia. MAKS Press, Moscow (2011) Tyuryukanova, E.V.: Labour migrants from the CIS countries in Russia: labour exploitation and obligatory labour. Obligatory labour in modern Russia: unregulated migration and human trafﬁcking. International Labour Bureau, Geneva (2006) Florinskaya, Y., Mkrtchyan, N.: Migration in Russia: old trends, new issues. Monitoring of economic situation in Russia. Trends and challenges of social and economic development. No. 19 (37), December 2016. http://iep.ru/ﬁles/RePEc/gai/monreo/monreo-2016-37-786.pdf. Accessed 15 May 2018

Agricultural Products’ Quality Aleksei V. Bogoviz ✉ (

)

, Elena I. Semenova , and Julia V. Ragulina

Federal State Budgetary Scientiﬁc Institution “Federal Research Center of Agrarian Economy and Social Development of Rural Areas – All Russian Research Institute of Agricultural Economics”, Moscow, Russia [email protected], [email protected], [email protected]

Abstract. The purpose of the article is to substantiate the top-priority value of the quality of agricultural products for modern economic systems and to deter‐ mine the key problems and to develop the concept of increasing the quality of agricultural products in modern Russia. For that, the methods of regression and correlation analysis are used; the authors determine dependencies between the quality of agricultural products and quantitative and qualitative characteristics of modern economic systems. The indicator of quality of agricultural products is index of agricultural products according to the World Bank. Quantitative indica‐ tors include the share of the AIC in the total volume of export according to the International Independent Institute of Agrarian Policy and the share of added value of agriculture in the structures of GDP according to the World Bank. Qual‐ itative indicators are the index of national food security according to the Econo‐ mist Intelligence Unit and the index of health according to the World Health Organization, the United Nations Population Division, and the World Bank. The research objects are the USA, India, Brazil, China, Canada, Indonesia, and Russia. The research is performed on the basis of the 2017 data. The authors come to the conclusion that quality of agricultural products is an important factor of provision of national food security and population’s health. The Russian strategy of devel‐ opment of agriculture and regulation of markets of agricultural products, which focuses on achievement of target indicators of quantitative indicators, inevitable leads to reduction of the quality of agricultural products. In order to achieve simultaneous target values with provision of high quality of agricultural products, a concept is developed – it is aimed at usage of the possibilities of transition to the AIC 4.0. Keywords: Quality of agricultural products · Food security · Population’s health AIC 4.0 · Modern Russia

1

Introduction

In the conditions of intensive globalization and increasing global competition at all levels and in all aspects of functioning and development of modern economic systems, their attention is focused on achievement of the target level of the values of quantitative indicators, while qualitative characteristics of socio-economic phenomena and processes are moved to the background. This is caused by the fact that, ﬁrstly,

© Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 154–160, 2019. https://doi.org/10.1007/978-3-030-00102-5_15

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international rankings compare countries between each other according to the values of quantitative indicators for achievement of maximum compatibility of data and objec‐ tivity of compiled rankings. Secondly, quantitative characteristics (GDP, GDP per capita, etc.) determine the level and rate of development of economic systems. Under the inﬂuence of these reasons, priorities in the agro-industrial complex (AIC) are assigned to quantitative indicators. Agriculture is viewed as a method of accelerating economic growth and increase of export. Striving to increase the values of quantitative indicators of the AIC development (volume of production, labor eﬃciency, etc.), the values of qualitative indicators of the AIC (good value, ecological security of products, etc.) aggravate. The working hypothesis of the research is that quality of agricultural products largely determines the level of national food security and the level of population’s health – so it should be taken into account during development and implementation of strategies of development of the AIC of modern economic systems. The purpose of the article is to substantiate the top-priority value of quality of agricultural products for modern economic systems, by determining the role of quality of agricultural products in forma‐ tion of quantitative and qualitative indicators of modern economic systems, and to determine the key problems and to develop the concept of raising the quality of agri‐ cultural products in modern Russia.

2

Materials and Method

The performed literature overview on the selected topic showed that the role and meaning of the AIC and agriculture are studied in a lot of works of such scholars as Bogoviz et al. (2018a, b, c, d, e, f), Garina et al. (2018), Lurie and Brekken (2017), Morozova and Litvinova (2014), Popkova et al. (2018a), Popkova et al. (2018b), and Troyanskaya et al. (2017). However, in the existing publications the main attention is paid to quantitative indi‐ cators, while the issues of measuring and increase of quality of agricultural products and its value for modern economic systems remain poorly studied. The oﬀered hypothesis is veriﬁed in this work with the help of the methods of regression and correlation analysis; the authors determine dependencies between the quality of agricultural products (x) and quantitative (y) and qualitative (y) characteristics of modern economic systems. The indicator of quality of agricultural products is the index of agricultural products according to the World Bank, which includes plant breeding index, variety registration index, and seed quality control index. Quantitative indicators are the share of the AIC in the total volume of export according to the International Independent Institute of Agrarian Policy and the share of added value of agriculture in the structure of GDP according to the World Bank. Qual‐ itative indicators are the index of national food security according to the Economist Intelligence Unit and health index according to the World Health Organization, the United Nations Population Division, and the World Bank. The research objects include the USA, India, Brazil, China, Canada, Indonesia, and Russia. The research is performed on the basis of data for 2017, which are shown in Table 1.

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Table 1. Quantitative and qualitative indicators of modern economic systems and the index of agricultural entrepreneurship in 2017. Country

Index of agricultural entrepreneurship, points of 100 (position) USA 85.4 (5) India 66.60 (21) Brazil 69.5 (35) China 68.3 (41) Canada 83.9 (9) Indonesia 42.3 (73) Russia 68.41 (18)

Share of the AIC in the total volume of export, %

Added value Index of Health index, of agriculture, national food points of 100 % of GDP security, point (position) of 100 (position) 1.05 89.0 (1) 78.25 (34) 17.4 50.9 (68) 28.21 (103) 5.5 67.4 (36) 54.29 (70) 8.6 64.2 (42) 58.03 (55) 1.52 84.2 (7) 89.53 (17) 14.0 46.7 (74) 38.39 (90) 4.7 63.8 (43) 33.76 (97)

9 12 37 4 13 22 6

Source: compiled by the authors based on: World Bank (2018a), International Independent Institute of Agrarian Policy (2018), World Bank (2018b), Economist Intelligence Unit (2018), World Health Organization, United Nations Population Division, World Bank (2018).

3

Results

40 35 30 25 20 15 10 5 0

20 y = -0.2342x + 30.922 R² = 0.0847

15 y = 0.0594x + 2.7541 R² = 0.0155

10 5 0

0

50

100

0

50

100

Index of agricultural entrepreneurship (quality of agricultural products 100

100

60 40 y = 0.9933x - 2.1394 R² = 0.8134

20

)

y = 1.1686x - 26.52 R² = 0.5191

80

80

Health index

Food security

Added value of agricultural economy

Share of the AIC in export

The results of the performed analysis are proved by regression curves (Fig. 1).

60 40 20 0

0 0

20

40

60

80

100

0

20

40

60

80

100

Index of agricultural entrepreneurship (quality of agricultural products)

Fig. 1. Regression curves that reﬂect dependence of quantitative and qualitative indicators of modern economic systems on the index of agricultural entrepreneurship in 2017. Source: calculated by the authors.

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As is seen from Fig. 1, increase of the value of the index of agricultural entrepre‐ neurship by 1 point leads to reduction of the share of the AIC in the total volume of export of modern economic systems by 0.23% (correlation – 8.47%), growth of the share of added value of agriculture in the structure of GDP – by 0.06% (correlation 1.55%), and growth of the value of the index of national food security – by 0.99 points (corre‐ lation %), and growth of the value of the health index – by 1.17 points (correlation 81.34%). Therefore, the quality of agricultural products largely determines such qualitative characteristics of modern economic systems as the level of national food security and population’s health, but does not inﬂuence their quantitative characteristics – economic growth and volume of export. As a result, for gaining economic proﬁts related to acceleration of the rate of economic growth and increase of export by means of agricultural products, the National program of development of agriculture regulation of markets of agricultural products, resources, and food for 2013–2020, adopted by the Decree of the Government dated July 14, 2012, No. 717, the main attention is paid to quantitative indicators of develop‐ ment of the AIC: increase of crop yield, authomatization, reduction of prices (increase of accessibility), application of resource-saving technologies, increase of the terms of storage of agricultural products, etc., and the issues of provision of a certain quality of agricultural products are not viewed and no speciﬁc practical measures are envisaged (Government of the RF 2018b). In addition to this, the performed deep logical analysis allowed determining the following problems of provision of high quality of agricultural products in modern Russia: – low level of investments into modernization of agriculture, which leads to reduction of its global competitiveness and impossibility of provision of high quality of agri‐ cultural products: the volume of investments into the ﬁxed capital in Russia’s agri‐ culture in 2017 constituted RUB 611.2 billion (0.65% of GDP) (Federal State Statis‐ tics Service 2018b); at that, the volume of ﬁnancing of the state program of devel‐ opment of agriculture of the RF in 2017 constituted RUB 243 billion (0.26% of GDP) (Government of the RF 2018a); – insuﬃcient monitoring and control of quality of agricultural products, absence of strict standards of quality of agricultural products and the system of certiﬁcation of its quality, which does not allow guaranteeing certain quality of agricultural products or forming the culture of consumption of agricultural products of high quality. Favorable conditions for solving all determined problems are created by the current modernization of the Russian agriculture, which is accompanied by the technological revolution, related to transition to Industry 4.0; thus, there open possibilities for transfer of the Russian agricultural entrepreneurship to a new technological mode - AIC 4.0. For that, we developed the following concept, which is to ensure the usage of these possi‐ bilities in the interests of increase of quality of agricultural products in modern Russia (Fig. 2).

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state investments

Formation of culture of consumption of agricultural products

online monitoring, control, and certification with the help of blockchain technologies

Domestic and foreign investors private investments

Agricultural entrepreneurship Internet of things drone 2

drone 1 sensor 1

sensor 2

…

drone n sensor 3 … sensor n

Consumers of agricultural products certified agricultural products of guaranteed quality

production of agricultural goods

High and strict standards of quality of agricultural products in the aspect of its food security and ecological security

Fig. 2. The concept of increase of quality of agricultural products in modern Russia in the conditions of transition to AIC 4.0. Source: compiled by the authors.

As is seen from Fig. 2, the oﬀered concept envisages that agricultural entrepreneur‐ ship should be based on high standards of quality of agricultural products in the aspect of its food value and ecological security (absence of GMO). Organization of production of agricultural products should be automatized on the basis of the technology of Internet of things, with the help of which artiﬁcial intellect will control the production process, determining its actual characteristics with high precision with the help of the system of sensors and drones. As a result, certiﬁed agricultural products of guaranteed quality will be manufac‐ tured. The whole production and distribution process will be transparent due to online monitoring, control, and certiﬁcation with the help of blockchain technologies. At that, the key tasks of the state are using state investments for modernization of agriculture, stimulation of inﬂow of private investments into this process, and formation of the culture of consumption of agricultural products – primarily, the value of high-quality products.

4

Conclusions

Thus, the working hypothesis of the research is correct – quality of agricultural products is an important factor of provision of national food security and population’s health. The applied Russian strategy of development of agriculture and regulation of the markets of agricultural products, which emphasizes achievement of the target values of quantitative indicators, inevitable leads to reduction of quality of agricultural products. In order to achieve simultaneous target values with provision of high quality (food value and ecological security) of agricultural products, the authors’ concept is

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developed, oriented at usage of the possibilities of transition to the AIC 4.0. Due to almost full authomatization of the distribution process in agriculture in the conditions of the AIC 4.0, transparency and control over this process are achieved – which allows guaranteeing certain quality of agricultural products and conducting its certiﬁcation.

References Bogoviz, A.V., Alekseev, A.N., Chepik, D.A.: Improvement of the economic mechanism of state support for innovational development of the Russian agro-industrial complex in the conditions of import substitution. In: Advances in Intelligent Systems and Computing, vol. 622, pp. 555– 561 (2018a) Bogoviz, A.V., Bugai, Y.A., Osipov, V.S.: Import substitution in the agro-industrial complex in the interests of provision of food security: option or necessity? In: Advances in Intelligent Systems and Computing, vol. 622, pp. 37–43 (2018b) Bogoviz, A.V., Lobova, S.V., Bugai, Y.A.: Eﬀective import substitution in the agro-industrial complex: competition or monopoly? In: Advances in Intelligent Systems and Computing, vol. 622, pp. 30–36 (2018c) Bogoviz, A.V., Lobova, S.V., Ragulina, Y.V., Alekseev, A.N.: A critical review of Russia’s energy eﬃciency policies in agriculture. Int. J. Energy Econ. Policy 8(3), 67–75 (2018d) Bogoviz, A.V., Taranov, P.M., Shuvaev, A.V.: Innovational tools for provision of food security through state support for the agro-industrial complex in the conditions of digital economy. In: Advances in Intelligent Systems and Computing, vol. 622, pp. 659–665 (2018e) Bogoviz, A.V., Tufetulov, A.M., Chepik, D.A.: The mechanism of activation of the process of import substitution in the agro-industrial complex for provision of food security. In: Advances in Intelligent Systems and Computing, vol. 622, pp. 71–76 (2018f) Economist Intelligence Unit: The Global Food Security Index (2018). http://foodsecurity index.eiu.com/. Accessed 09 Aug 2018 Garina, E.P., Garin, A.P., Kuznetsov, V.P., Popkova, E.G., Potashnik, Y.S.: Comparison of approaches to development of industrial production in the context of the development of a complex product. In: Advances in Intelligent Systems and Computing, vol. 622, pp. 422–431 (2018) Lurie, S., Brekken, C.A.: The role of local agriculture in the new natural resource economy (NNRE) for rural economic development. Renew. Agric. Food Syst. 2(1), 1–11 (2017) Morozova, I.A., Litvinova, T.N.: Russian market of agricultural equipment: challenges and opportunities. Asian Soc. Sci. 10(23), 68–77 (2014) Popkova, E.G., Bogoviz, A.V., Lobova, S.V., Romanova, T.F.: The essence of the processes of economic growth of socio-economic systems. Stud. Syst. Decis. Control 135, 123–130 (2018a) Popkova, E.G., Bogoviz, A.V., Ragulina, Y.V., Alekseev, A.N.: Perspective model of activation of economic growth in modern Russia. Stud. Syst. Decis. Control 135, 171–177 (2018b) Troyanskaya, M.A., Ostrovskiy, V.I., Litvinova, T.N., Matkovskaya, Y.S., Bogoviz, A.V.: Possibilities and perspectives for activation of sales in the agricultural machinery market within sectorial development of Russian and European economies. In: Contributions to Economics, pp. 473–480 (2017). ISBN 978-3-319-60695-8 World Bank: Agriculture, value added (% of GDP) (2018a). https://data.worldbank.org/indicator/ NV.AGR.TOTL.ZS?view=chart&year_high_desc=false. Accessed 09 Aug 2018 World Bank: Enabling the Business of Agriculture (2018b). http://eba.worldbank.org/data/ exploreeconomies/russian-federation/2017. Accessed 09 Aug 2018

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World Health Organization, United Nations Population Division, World Bank: The World’s Healthiest Countries (2018). https://www.kelownanow.com/news/news/National_News/ 17/03/20/2017_healthiest_country_index/. Accessed 09 Aug 2018 International Independent Institute of Agrarian Policy: Dynamics of food export in the world (2018). http://мниaп.pф/analytics/Dinamika-eksporta-prodovolstvia-v-mire/. Accessed 09 Aug 2018 Government of the RF: State program of development of agriculture and regulation of markets of agricultural products, resources, and food for 2013–2020, adopted by the Decree of the Government dated July 14, 2012, No. 717 (2018a). http://government.ru/programs/208/ events/. Accessed 09 Aug 2018 Government of the RF: Volume of ﬁnancing of the state program of development of agriculture of the RF in 2017 (2018b). http://www.ng.ru/economics/2017-09-06/1_7067_farmer.html. Accessed 09 Aug 2018 Federal State Statistics Service: Russia in numbers: short statistical bulletin (2018b). http:// www.gks.ru/bgd/regl/b17_11/Main.htm. Accessed 09 Aug 2018

Traﬃc Safety as a Factor of Competitiveness of Economic System and a Reason for Increase of Diﬀerentiation of Developed and Developing Countries: Management on the Basis of New ICT Vladimir A. Zelikov ✉ , Yuriy V. Strukov, Vera V. Razgonyeva, Ruslan A. Korablev, and Alexander Y. Artemov (

)

Voronezh State University of Forestry and Technologies named after G.F. Morozov, Voronezh, Russia [email protected], [email protected], [email protected], [email protected], [email protected]

Abstract. The purpose of the article is to determine the inﬂuence of traﬃc safety on transport infrastructure and competitiveness of economic system in view of developed and developing countries of the world and to develop the concept of managing traﬃc safety based on the new ICT in the interests of reduction of diﬀerentiation of developed and developing countries and uniﬁcation of the global transport infrastructure. The methodology of the research is based on regression analysis, which is used for determining regression dependence between traﬃc safety, which indicator is death rate from vehicle accidents according to the World Health Organization, (x), transport infrastructure index (y1), and index of global competitiveness of the countries (y2) according to the World Economic Forum. The research is performed in view of developed and developing countries, which have the ﬁrst and the least positions in the international ranking of traﬃc safety. The developed countries include Malta, the Netherlands, Switzerland, Norway, and Sweden, and developing countries include Kazakhstan, Russia, Kyrgyzstan, Lithuania, and Montenegro. It is substantiated that absence of consideration of such factor as traﬃc safety does not allow for full and precise evaluation of development of transport infrastructure. Application of new information and communication technologies to managing traﬃc safety allows improving trans‐ port infrastructure and thus increasing competitiveness of the economic system. For that, the authors’ concept of managing traﬃc safety on the basis of new ICT in the interests of diﬀerentiation of developed and developing countries and uniﬁcation of the global transport infrastructure is developed. Keywords: Traﬃc safety · Competitiveness of economic system Diﬀerentiation of developed and developing countries · Traﬃc control New information and communication technologies

© Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 161–166, 2019. https://doi.org/10.1007/978-3-030-00102-5_16

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Introduction

The global transport system is the most important link that uniﬁed all elements of the global economy. Heterogeneity of this system, caused by the diﬀerent level of its devel‐ opment in diﬀerent countries, causes their diﬀerentiation according to this criterion. When building the global business networks and selecting trade partners, entrepreneurial structures, pay attention to the level of development of transport infrastructure of alter‐ native territories of their location. In the traditional treatment, the following factors are distinguished in transport infra‐ structure: accessibility of various types of transport, determined by length of car roads and railroads and geographical peculiarities (speciﬁcs of location of water objects and air space), cost of their usage, quality of transportation, which includes the probability of product damage. According to our hypothesis, the list of these factors is not complete, and absence of such factor as traﬃc safety does not allow for full and precise evaluation of the level of development of transport infrastructure – as when selecting a place for tourism and residence, a person strives for safety, and accidence level is one of the main business risks, leading to damage or loss of the product. Application of new information and communication technologies to management of traﬃc safety allows improving transport infrastructure and thus raising competitiveness of economic system. The purpose of the article is to verify the oﬀered hypothesis through determining the inﬂuence of traﬃc safety on transport infrastructure and competitiveness of economic system in view of developed and developing countries of the world and to develop the concept of managing traﬃc safety based on new ICT in the interests of reducing diﬀer‐ entiation of developed and developing countries and uniﬁcation of the global transport infrastructure.

2

Materials and Method

The research object is safety of car traﬃc. This problem and means of solving it are studied in the works (Fernandes and Neves 2018; Wang et al. 2018; Lee et al. 2018; Haj-Salem et al. 2018; Yuan et al. 2018; Gao et al. 2018; Ghadban et al. 2018). The factors of competitiveness of modern economic systems and reasons for increase of diﬀerentiation of developed and developing countries, among which the level of development of transport infrastructure is very important, are studied in Neubauer and Schauer (2018), Guijarro-Rodríguez et al. (2018), Brito et al. (2018), Popkova et al. (2015), Bogoviz et al. (2016), Parygin et al. (2015). Content analysis of these scientiﬁc works of modern scholars showed that they pay insuﬃcient attention to the issues of managing traﬃc safety based on new ICT; thus, these issues should be further studied. The methodology of the research is based on the method of regression analysis – which is used for determining regression dependence between traﬃc safety, which indi‐ cator is death rate from vehicle accidents according to the World Health Organization

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(x), index of transport infrastructure (y1), and index of global competitiveness of coun‐ tries of the world (y2) according to the World Economic Forum. The research is performed in view of developed and developing countries, which have the ﬁrst and the least positions in the international ranking of traﬃc safety. The developed countries include Malta, the Netherlands, Switzerland, Norway, and Sweden, and developing countries include Kazakhstan, Russia, Kyrgyzstan, Lithuania, and Montenegro. The data are given in Table 1. Table 1. Statistics of the indicators of traﬃc safety, development of transport infrastructure, and competitiveness of developed and developing countries in 2016. Category

Category’s countries

Developed

Malta Netherlands Switzerland Norway Sweden Kazakhstan Russia Kyrgyzstan Lithuania Montenegro

Developing

Number of Index of transport deaths from infrastructure vehicle Points (1–7) Position accidents per (1–137) 100,000 people 3.4 4.8 4.9 5.0 5.2 30.6 25.2 22.8 22.4 20.4

4.8 6.4 3.2 5.0 5.6 4.2 4.9 3.0 4.7 4.2

42 3 105 34 19 68 36 109 47 70

Index of global competitiveness Points (1–6) Position (1–137)

4.6 5.7 3.4 5.4 5.5 4.3 4.6 3.9 4.6 4.1

37 4 122 11 7 57 38 102 41 77

Source: compiled by the authors based on: World Health Organization (2016), World Economic Forum (2017).

3

Results

Based on the data from Table 1, we compiled regression curve that reﬂects dependence of the values of transport infrastructure index and global competitiveness index on traﬃc safety (Fig. 1). As is seen from Fig. 1, traﬃc safety is by 14.55% determined by the level of devel‐ opment of transport infrastructure and by 16.30% – the level of global competitiveness of countries. Reduction of death rate from vehicle accidents per 100,000 people (increase of the level of traﬃc safety) stimulates increase of the index of transport infrastructure by 0.036 points, and the index of global competitiveness – by 0.028 points. As is seen from Table 1, traﬃc safety in developed countries is by six times higher than in developing countries. That’s why application of this criterion for distinguishing the categories of countries is justiﬁed. This means that traﬃc safety is one of the factors of competitiveness of economic system and a reason for increase of diﬀerentiation of developed and developing countries. For provision of the most favorable inﬂuence of this factor on competitiveness of economic systems, reduction of diﬀerentiation of developed and developing countries

V. A. Zelikov et al. 7

Index of global competitiveness

Index of transport infrastructure

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6 5 4 3

y = -0.0365x + 5.1277 R² = 0.1455

2 1 0 0

10

20 30 Traffic safety

6 5 4 y = -0.028x + 5.0149 R² = 0.163

3 2 1 0

40

0

10

20 30 Traffic safety

40

Fig. 1. Regression curve that reﬂects dependence of the values of the transport infrastructure index and the global competitiveness index on traﬃc safety. Source: compiled by the authors.

Entrepreneurship

electronic routing

State video control and automatic fines

New ICT

automatic control of transport Transporters

Optimization of micro-level management: improvement of the process of decision making on traffic

electronic feedback

tracking electronic transport chips

Optimization of macro- and mesolevel management: expansion of possibilities in the sphere of monitoring and control

and interested parties

Fig. 2. The concept of managing traﬃc safety based on new ICT in the interests of reduction of diﬀerentiation of developed and developing countries and uniﬁcation of the global transport infrastructure. Source: compiled by the authors.

as to the level of development of transport infrastructure, and uniﬁcation in the global scale, the authors recommend using new ICT according to the oﬀered concept (Fig. 2). Figure 1 shows that new ICT allow optimizing the management of traﬃc safety at all levels (italics). Optimization at the micro-level of management envisages improve‐ ment of the process of decision making on road traﬃc. At this level, transporters (subjects of management) conduct electronic routing, which envisages application of Internet technologies for analysis of traﬃc situation and automatic routing in view of traﬃc, road works, etc. This allows reducing the number of accidents in traﬃc jams. Despite the fact that these accidents lead to traumas and death, they reduce traﬃc safety and thus are interests in the aspect of its management. This level also includes automatic vehicle control (auto pilot). This allows managing “human factor” and preventing accidents caused by it.

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The developed concept also envisages electronic feedback between transporters and interested parties (representatives of civil society, public organizations, individuals, etc.) and public authorities. Within this feedback, public authorities are informed on the current problems with road surface. This allows supporting road surface in the proper state, according to the existing international norms and standards and preventing the accidents caused by low quality of road surface. Optimization of macro- and meso-level management is related to expansion of possibilities in the sphere of monitoring and control of traﬃc. Management subjects at this level are entrepreneurship and state. Entrepreneurship conducts remote control with the help of tracking online transport chips (e.g., GPS), which are equipped to the trans‐ port vehicles. This allows preventing violation of set routes and traﬃc rules by trans‐ porters. The state conducts automatic video control via the installed cameras and automatic ﬁnes for traﬃc rules violations. Thus allows – with minimum federal authorities and returned expenditures of the state budget – for highly-eﬀective systemic control over traﬃc safety. Double control over activities of transporters (from entrepreneurs and from the state) allows eliminating the interest and attempts of violation of traﬃc rules, which are the main cause of lack of safety. As a result, due to application of new ICT, it is possible to level disproportions in the level of development of transport infrastructure and traﬃc in developed and developing countries and to unify the global transport infrastructure.

4

Conclusions

It could be concluded that the developed authors’ concept sets application of new ICT at the basis of managing traﬃc safety in the interests of reducing diﬀerentiation of developed and developing countries and uniﬁcation of the global transport infrastruc‐ ture. It combines application of existing and popular managerial technologies that are based on new ICT – automatic video control, electronic chips for tracking on transport vehicles, electronic routing, and electronic feedback. However, despite the fact that in a lot of countries these technologies are already applied in practice, in developing countries they are still being approbated and require improvement, possessing perspectives for further development. Within the oﬀered model, innovational managerial technologies are envisaged: auto pilots of transport vehicles, which exist only in test versions. These technologies reﬂect future perspectives of expansion of application of new ICT for managing traﬃc safety. Despite the seeming simplicity and perfection of the presented concept of managing traﬃc safety based on new ICT for reduction of diﬀerentiation of developed and devel‐ oping countries and uniﬁcation of the global transport infrastructure, its practical imple‐ mentation is accompanied with serious problems, The main ones are high cost and underdevelopment of new ICT – which does not allow for full implementation of their potential in the sphere of traﬃc optimization. These problems should be solved in further scientiﬁc studies in this sphere.

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References World Health Organization: The European report on the state on traﬃc safety. For safe roads and healthy transport alternatives (2016). http://www.euro.who.int/__data/assets/pdf_ﬁle/ 0010/111151/E92789R.pdf. Accessed 21 Jan 2018 World Economic Forum: The Global Competitiveness Report (2017). http://www3.weforum.org/ docs/GCR2017-2018/05FullReport/TheGlobalCompetitivenessReport2017–2018.pdf. Accessed 21 Jan 2018 Bogoviz, A.V., Ragulina, Y.V., Lobova, S.V., Zhukov, B.M., Stepanova, O.M.: Services infrastructure forming in the process of transport logistics stock movement. Int. Rev. Manag. Mark. 6(6), 278–283 (2016) Brito, J., Castellanos-Nieves, D., Expósito, A., Moreno, J.A.: Soft computing methods in transport and logistics. Stud. Fuzziness Soft Comput. 360, 45–61 (2018) Neubauer, M., Schauer, O.: Human factors in the design of automated transport logistics. In: Advances in Intelligent Systems and Computing, vol. 597, pp. 1145–1156 (2018) Parygin, D., Sadovnikova, N., Kravets, A., Gnedkova, E.: Cognitive and ontological modeling for decision support in the tasks of the urban transportation system development management. In: 6th International Conference on Information, Intelligence, Systems and Applications (IISA), Corfu, pp. 1–5 (2015) Popkova, E.G., Yurev, V., Stepicheva, O., Denisov, N.: Transformation and concentration of intellectual capital as a factor of economic growth in the modern economy. Reg. Sect. Econ. Stud. 15(1), 53–60 (2015) Fernandes, A., Neves, J.: Sensitivity of traﬃc safety to the pavement and road environment conditions using driving simulations. J. Transp. Saf. Secur. 10(1–2), 88–104 (2018) Wang, L., Abdel-Aty, M., Wang, X., Yu, R.: Analysis and comparison of safety models using average daily, average hourly, and microscopic traﬃc. Accid. Anal. Prev. 111, 271–279 (2018) Lee, C., So, J., Ma, J.: Evaluation of countermeasures for red light running by traﬃc simulator– based surrogate safety measures. Traﬃc Inj. Prev. 19(1), 1–8 (2018) Haj-Salem, H., Farhi, N., Lebacque, J.P., Bhouri, N.: Development of coordinated ramp-metering based on multi-objective nonlinear optimization functions: traﬃc and safety. In: Advances in Intelligent Systems and Computing, vol. 572, pp. 334–354 (2018) Yuan, Q., Yang, H., Liu, Y.: Information security impacts future traﬃc safety of intelligent vehicle. In: Lecture Notes in Electrical Engineering, vol. 456, pp. 731–738 (2018) Gao, T., Wang, W., Li, M.: Study on the establishment of vulnerability source evaluation model for the road traﬃc safety. In: Lecture Notes in Electrical Engineering, vol. 419, pp. 339–347 (2018) Ghadban, N.R., Abdella, G.M., Al-Khalifa, K.N., Hamouda, A.M., Abdur-Rouf, K.B.: A real case-based study exploring inﬂuence of human age and gender on drivers’ behavior and traﬃc safety. In: Advances in Intelligent Systems and Computing, vol. 597, pp. 807–816 (2018)

Digital Currency in the Development of Payment Systems on the Bitcoin Platform Elena N. Egorova ✉ , Irina V. Mukhomorova, and Anton I. Mosalev (

)

Russian State Social University, Moscow, Russia [email protected], [email protected], [email protected]

Abstract. In modern conditions, the signiﬁcant growth rate is based on the digital economy development and technological leadership. In order to increase human, intellectual and technological advantages in the digital economy, it is necessary to act in areas of systemic importance. The digital economy is the sale of goods and services based on digital electronic technologies. This is the economy of services where the seller or service provider and the consumer practically do not meet in person. Most transactions are made via the Internet. The digital currency is just a variation, a derivative tool, one of the types of blockchain system - the technology of decentralized data storage, the chain of transaction blocks, built according to certain rules and providing absolute protec‐ tion against changes. One of the integral infrastructural elements of the digital economy is electronic money, which appeared as the result of the long evolution of diﬀerent money types. Currently, ﬁat money is keeping the leading position in the sphere of ﬁnancial processes implementation. It is struggling to satisfy the needs of the owners. However, it is obvious that traditional paper currency is no longer able to cope with its tasks next to the growing economy in the virtual world. Thus, only digital means are able to completely replace them. Keywords: Digital currency · Cryptocurrency · Bitcoin JEL Classiﬁcation Codes: G14 · G15 · G17

1

Introduction

In Russia, the digital economy has already been developing for a long time and it is forming at a fairly rapid pace. First of all, we are talking about the e-commerce market, or simply about online stores. Internet connectivity in Russia at the end of 2016 exceeded 70%. Russia is the leader in Europe in terms of the number of Internet users (84 million people). In 2016, the Russian Internet market grew by 21% up to 920 billion rubles. This is against the background of the decline in Russian GDP by 0.2%. Not every market has such growth rates. Moreover, the entire world economy in 2016 grew only by 2.6%. The main indicator in this area is the so-called bitcoin - a virtual payment system that involves an exchange, using rather than monetary means, but simply data from various ﬁnancial institutions. © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 167–175, 2019. https://doi.org/10.1007/978-3-030-00102-5_17

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Bitcoin rate, like any digital or any another currency, is determined solely by oﬀer and demand. Digital currencies are mainly used for transaction settlements. Demand for them, as well as their rate, to a great extent, depends on the readiness of economic entities to recognize these settlement funds. It is necessary to pay great attention to the terms of transactions. When payments are made in digital currencies, the commission is usually either not charged at all, or amounts some percent part of the standard banking commis‐ sions. Supporters of digital money make a hypothesis concerning the bootstrapping of cryptocurrencies and the use of the innovative technology in the banking sector and state organizations (Tepper 2016). In the last few years, serious progress has been made in this respect. Many large international networks began to accept payment for their goods and services in bitcoins. A number of states recognized bitcoin as oﬃcial means of payment. It became possible to pay taxes and make other payments to the budget in certain cryptocurrencies. This brought beneﬁts - taxes became being paid much more intensively. According to Bloom‐ berg agency, lately, no traditional currency has been growing so steadily. At the same time, cryptocurrency exchange rates tend to ﬂuctuate considerably. The main reason for this is that the governments of several countries are expecting the legal‐ ization of cyber currency (Dmitrieva 2016). The material value of the digital currency increases every year, taking the right from ﬁduciary monetary units to be called inﬂation-resistant title signs. Bitcoin recognition, increasing number of adherents, network expansion and infrastructure improvement are the factors that are beneﬁcial to the growth of its exchange rate. Development prospects of electronic money are very promising. This area represents a wide ﬁeld since it aﬀects many spheres of life of each individual, as well as business structures (from small enterprises to large corporations) (Krolevetsky 2011).

2

Materials and Methods

2.1 Qualitative Research Thanks to the development of information and computer technology, ﬁnancial and other types of assets trading became commonplace. Traders (currency speculators) apply analysis methods, combining them with insider information and using a wide range of ﬁnancial instruments. Digital currencies, which appeared only 7–8 years ago, opened new horizons in the sphere of ﬁnancial assets trading. Due to high volatility indicators, alternative monetary units formed into an incomparable exchange instrument for ﬁnan‐ cial assets trading and Bitcoin is oﬀ the scale. The speculative market of alternative monetary units demonstrates incredible growth rates. More and more network users are joining the community of cryptocurrency traders, studying not only the basics of trade but also the behavioural factors of a particular digital currency. Today there are two trade directions in this sector:

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1. Speculation of cryptocurrencies with suﬃcient market capitalization solely (Bitcoin, Ethereum (https://bankcomat.com/news/eﬁrium-ocherednoj-kandidat-na-postsamoj-populjarnoj-cifrovoj-valjuty.html), Litecoin (https://bankcomat.com/wiki/ litecoin.html), Monero, Zcash (https://bankcomat.com/news/tehnologija-zcash-eeosobennosti-i-sfera-primenenija.html), Dogecoin and others). 2. Speculative operations involving digital currencies and ﬁduciary monetary units (Popper 2016). Service Bitcoinwisdom.com, in this case, acts as an analytical tool to forecast the growth or decline in cryptocurrency rate. In other words, this resource is more intended to help precisely cryptocurrency traders who do not work with ﬁduciary title signs. Figure 1 shows the most popular answers to the question about the forecast of the bitcoin rate in 2016, which was posed to ordinary network users. As you can see, at that moment many people were mistaken, few expected high growth of bitcoin. The same thing could happen again in 2017.

Fig. 1. Users predictions about the forecast of the bitcoin value in 2016.

It has been suggested that bitcoin will become more stable as the market develops and new spheres of applications appear. Consequently, in 2017 the average rate will be 900-1,400 USD. At the same time, some experts believe that bitcoin can grow to 2000 USD. However, these predictions turned out to be incorrect (Fig. 2).

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Fig. 2. The actual bitcoin value in September 2016–February 2017

At the beginning of 2016, the bitcoin rate declined, on average, the rate was at the level of 355–380 USD. In January 2016, Mike Hern, one of BitcoinCore’s top devel‐ opers, left the platform. The publication of his article caused exchange rate drop by as much as 50 (up to 374 USD). In March 2016, the Cabinet of Japan recognizes bitcoin as one of the varieties of virtual currency, which can be used to pay for goods and services as ordinary money. In the same month, the largest online trading platform in South Africa, Bidorbuy, began to pay in cryptocurrency. Despite such signiﬁcant expansion of bitcoin distribution, during February and March 2016 its rate did not change much and stayed within 395–415 USD. During April, bitcoin rate gradually increased to 451– 454 USD, and practically did not change. In early May, the cost of cryptocurrency declined by 10–15 dollars. Throughout the whole of May, the rate was steadily increasing, and by the 30th it had reached 600 USD. Thus, in less than a month, bitcoin grew for more than 150 USD. By this time, the total amount of currency capitalization exceeded 30 billion USD. The reason for such rapid leap of bitcoin value is not fully clear. At that point, ﬁnancial experts noted that the rate started to grow after the increase in the volume of cryptocur‐ rency purchases in the Chinese market. By the end of May, investors from the Middle Kingdom started to buy bitcoins for 570 USD and more. According to the research, from January to May 2016, the volume of transactions for cryptocurrency purchase and sale with yuans increased by more than 15%. Until the middle of the month, bitcoin rate was constantly increasing. By June 13, it had reached 722 USD. After that, it dropped by more than a hundred to 603–605 USD. During July, bitcoin was gradually falling. Since the beginning of August, its rate continued to decline and by the middle of the month, it reached the mark of 579 USD. Almost the whole of September, the currency value did not change. Though, compared to August, bitcoin gained an average of about 40 USD. After that, its price was about 600 USD.

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In October, the bitcoin rate against the major world currencies was gradually increasing. In November, its value increased even more. In just two autumn months, the cryptocurrency grew from 600 to 780 USD. Many experts attribute this to the value fall of the Chinese yuan against the US dollar. In the ﬁrst month of winter, bitcoin was constantly growing. By December 23, it reached the mark of 950 USD, but at the end of December to early January fell by a hundred. Most likely, this was due to low activity in the ﬁnancial market during the New Year and Christmas holidays, after which the rate of the cryptocurrency exceeded the 1,000 USD mark. USD From February to June 2017, the bitcoin rate skyrocketed swiftly from 950 to 2,900USD. Since July it receded from its maximum and rapidly declined to 2,000–2050 USD. On September 2, 2017, the rate of the cryptocurrency for 10 min was 5,013 USD. On the Chinese exchange OKCoin, the value reached 5,149 USD. By 10:25 Moscow time, bitcoin fell in price to 4,788 USD. Since the beginning of 2017, the bitcoin rate has risen almost ﬁve-fold due to demand in Asia, and also because of ICO (Initial coin oﬀering), where calculations are often made precisely in this cryptocurrency. 2.2 Methodological Approach In total there can be produced 21,000,000 bitcoins and not one more. This is a clear limit, which their number will gradually reach. At the beginning of 2014, there are about 12,000,000 BTC, at the beginning of 2017, 16,000,000. The fair price of bitcoins is detached from the market sentiment and is calculated solely on the basis of fundamental analysis. We shall consider the period until 2060 because by this time the number of bitcoins produced will come close to the maximum possible 21 million. The reward for the block will be negligibly small in relation to the present, having crossed the mark in three decimal places. Calculations are carried out in two ways: by analyzing the weight value of bitcoin in the global ﬁnancial system. As a consequence, we will try to estimate the potential demand for it as a means of calculation, and also apply the second method: targeting the cost of one cryptocurrency unit production, which will continue till 2140. Let us consider one of the ways - analysis of the weight value of bitcoin in the global ﬁnancial system. Now the global volume of funds is estimated at 81 trillion USD. Taking into account past periods, the forecast of growth of world GDP is at the level of 2.1% per year. Extrapolating the current values for 2060, we get:

81 ∗ 1.02143 = 197.9 trillion USD. We take into account the shadow economy, which volume is about 33% of world GDP or 81 * 0.33 = 26.73 trillion USD. We shall use the coeﬃcient 1.021.

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By 2060, the volume of the shadow economy will be: 26.73 ∗ 1.02143 = 65.33 trillion USD.

The amount of ﬁnance in investment funds is now about 36 trillion USD. By 2060, it will be approximately equal to: 36 ∗ 1.02143 = 88 trillion USD.

Here we shall add the extrapolated value of the amount of venture investments by 2060 and get 88.5 trillion USD. Naturally, all ﬁnancial transactions will never be conducted in the cryptocurrencies alone. With an expert method, we give them 3% and take the discount factor equal to 0.03. Emission is limited to a value of 21 million. It is possible to calculate the approx‐ imate bitcoin price by 2060: (197.9 + 65.33 + 88.5)∕0.000021 ∗ 0.03 = 502471 USD.

It should be considered that the cryptocurrency market is constantly evolving, and the volume of bitcoin among the common digital currency can decline. Let us suppose that the share of bitcoin capitalization will account for about 50% of all cryptocurrencies, so we will get the ﬁnal price: 502,471 * 0,5 = 251,235 USD. These calculations are not a standard of accuracy but are only probabilistic in nature. Even in order to achieve the above-mentioned value in 3% of global turnover, largescale public recognition of cryptocurrency, state legalization, ease of use and investor conﬁdence will be required.

3

Results

The regulation of cryptocurrency business remains a subject of discussion, and also at the state level. However, corresponding legal and regulatory framework is not suﬃ‐ ciently developed at the moment, therefore each fact of cryptocurrency relations emer‐ gence should be considered individually. As regards the prospects for the digital currency, the market is conﬁdent of its further growth. One of the ﬁrst investors of Snapchat, Jeremy Lew, believes that by 2030 the cost of bitcoin will reach 500,000 USD. In the meantime, the creator of McAfee antivirus, John McAfee, gives for this three years. If we talk about the reasons for the phenomenal bitcoin rate increase, it rises due to strong Asian demand, and also because of ICO, where calculations often made in bitcoins. Previously, the oﬀering data was almost unregulated. However, The U.S. Securities and Exchange Commission (SEC) announced that they would now be subject to the rules of securities placement. Regulatory tightening did not lead to the cooling of the sector. Since January 2017, according to Smith & Crown ICO, start-ups raised 1.33 billion USD. After 2 weeks (September 7, 2017) virtual currency ExioCoin ICO is expected. As noted by Bloom‐ berg, this would be the ﬁrst sovereign cryptocurrency, later it would also become known

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which state produces it. According to the news agency, this is “one of the richest coun‐ tries in per capita income” (Miers et al. 2013). The Bank of China began testing a prototype of its own digital currency. The ECB, together with the Japanese regulator, initiated the creation of a common project for the use of a distributed registry in the market infrastructure. Meanwhile, the Dutch Central Bank has already created its own cryptocurrency, which is still used domestically. As for the Russian Central Bank, in 2016 it presented a prototype based on the technology of distributed registers - masterchain (Zayernyuk et al. 2016).

4

Discussion

Now there are certain steps towards the legalization of cryptocurrencies, and the number of people who know, use and invest in crypto-currencies is increasing exponentially. Some people believe in bright future for crypto-currencies, others consider them a soap bubble. Nevertheless, only bitcoin, which capitalization is comparable to well-known world companies, has already become a powerful tool, which has to be considered by the largest ﬁnancial players. It is impossible to predict the future. Nevertheless, ignoring the global current trend of universal cryptocurrency distribution, we face a risk not only to lag behind the world but also, perhaps, to miss the best investment in our life. There are several factors that have positive impact on the implementation of projects in the ﬁeld of electronic currency: • • • • •

Increase in the incomes of citizens. The expanding circle of Internet users by means of computer and other gadgets. Growth in the volume of payment for advertising services. Performing a large number of micropayments. The desire for comfort and time-saving.

If you objectively look at the prospects for the electronic money development, you can say with conﬁdence that its future is optimistic. The potential inherent in it shows the opportunity to become a mean for global payment interaction. It is possible to ignore or deny the role of state regulation, perhaps it will disappear in due course as an unnec‐ essary element. However, at this stage, it seems more feasible that a part of some func‐ tions can be controlled by the state, and the rest is completely at the disposal of individual users. One can agree with this concept or deny it, argue and discuss what is happening at the present time. After all, the fourth stage of electronic money development is the most essential and signiﬁcant. The level of development that has been achieved in the ﬁeld of electronic payment systems, where electronic money is the main element, requires special attention. After all, it is enormously popular among hundreds of millions of users. Many types of electronic money and payment systems have been created. Based on the accumulated number of new qualities, functions, tools, this stage is coming to the end. Soon we will be on the threshold of a new stage. It is likely that this will be a transition to global money.

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Conclusions

Despite the fact that attempts to introduce digital currency have been made since the advent of the Internet, the practical use of coins to this day is negligible. In addition to the fact that many users are distrustful of this payment method, the distribution is also constrained by the ban on cryptocurrency in some countries. For example, Russia and China imposed restrictions on its use. However, it should be considered that bitcoins are already being used as a means of payment all over the world. Therefore, it is very diﬃcult to really prohibit the use of electronic money. If we follow the dynamics of development, we can notice its positive value, because digital money has a number of undeniable advantages. At the same time, anonymity and lack of control make the cryptocurrency very attractive to the criminal underworld. Therefore, it is quite possible that some states may not like this distribution. High market speculation and high risks undermine trust to cryptocurrency (Antonopoulos 2014). In various countries the attitude to cryptocurrencies is diﬀerent. The European Union regards them as a contractual means of payment, that is, as a service. Japan promotes the integration of digital currency into the traditional banking system. They fully recog‐ nize cryptocurrency as oﬃcial means (Pshenichnikov 2015). There are also countries that have banned the use of digital money. For example, Bolivia and Bangladesh. As for the statements of The Central Bank of Russia regarding bitcoins, they only conﬁrm that Russia has not yet decided how to deal with this phenomenon. At this point, the country is alert to it. Digital money is not allowed, and not prohibited. Cryptocurrencies are considered to be promising both for Russia and for the world as a whole. And this, in spite of the fact that today bitcoin as a means of payment in the Russian Federation is not popular, and many people are much more likely to pay rubles than strange bitcoins.

References Antonopoulos, A.: Mastering Bitcoin: Unlocking Digital Cryptocurrencies (2014) Crosby, M., Nachiappan Pattanayak P., Verma S., Kalyanaraman, V.: BlockChain Technology. Beyond Bitcoin. Sutardja Center for Entrepreneurship & Technology Technical report. http://scet.berkeley.edu/wp-content/uploads/BlockchainPaper.pdf Der, B., Polak, P., Masri, M.: Investigation on the value relevance of accounting information: evidence from incorporated companies in the Singapore capital market. Invest. Manag. Financ. Innov. 13(3), 9–21 (2016) Dmitrieva, M.A.: Interest rate risk and foreign exchange risk management practice in Russian non-ﬁnancial companies. J. New Econ. Assoc. 2(30), 129–159 (2016) Tapscott, D., Tapscott, A.: Blockchain Revolution: How the Technology Behind Bitcoin is Changing Money, Business, and the World (2016) Ethereum Isn’t a Blockchain. http://thebtcsg.com/blog/2017/8/8/ethereum-isnt-a-blockchain Greenspan, G.: Why Many Smart Contract Use Cases Are Simply Impossible (2016). https:// www.coindesk.com/three-smart-contract-misconceptions/

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Krolevetsky, V.E.: Transformation of views on the nature and functions of money. J. IN-ZAKON. 6(49), 44–50 (2011) Meshkova, T., Moiseyev, E.: Foresight applications to the analysis of global value chains. Foresight STI Gov. 10(1), 69–82 (2016) Miers, I., Garman, C., Green, M. Rubin, A.: Zerocoin: anonymous distributed e-cash from bitcoin. In: Proceedings of the 2013 IEEE Symposium on Security and Privacy, SP 2013, pp. 397–411. IEEE Computer Society, Washington, DC (2013) Nakamoto, S.: Bitcoin: a peer-to-peer electronic cash system. https://bitcoin.org/bitcoin.pdf Popper, N.: Digital gold: an incredible story of bitcoin, p. 358 (2016) Pshenichnikov, V.V.: The Debate about the need for a single world currency under the conditions of globalization and multipolarity of the modern world. Sci. Tech. Bull. St. Petersburg State Polytech. Univ. Econ. Sci. 2(216), 7–17 (2015). https://doi.org/10.5862/je.216.1 Tepper, A.: Bitcoin – money for all (2016) Zaernuk, V.M., Mukhomorova, I.V., Egorova, E.N.: Methodological approaches to identifying parameters of optimum business locations in the regions of the Russian Federation. J. Appl. Econ. Sci. 11(7), 1319–1328 (2016) Zayernyuk, V.M., Nazarova, Z.M., Mukhomorova, I.V., Egorova, E.N., Leonova, V.P.: Modern banking sector in Russia: Trends of development, control and supervision//Indian. J. Sci. Technol. 9(42), 104308 (2016)

Social Consequences of the Impact of Information Technologies on the Values of Modern Youth in the Conditions of the Global Financial and Economic Crisis Mariana Y. Lokova1 ✉ , Marina N. Khanova1, Gyuldzhan K. Azamatova1, Albina O. Vindizheva1, and Natalya N. Reshetnikova2 (

)

1

Kabardino-Balkarian State University, Nalchik, Russia [email protected], [email protected], [email protected], [email protected] 2 Rostov State University of Economics, Rostov-on-Don, Russia [email protected] Abstract. The development of information technology and information society actualizes Internet addiction as a social problem in the frame of ﬁnancial-econom‐ ical crisis. The purpose of this study is to study the problem of Internet addiction and the social consequences of its impact on the value system of modern young people especially in the frame of ﬁnancial-economical crisis. The presented anal‐ ysis is essential for a well-founded understanding of the manifestations of various kinds of dependence of modern youth and the social consequences of the phenom‐ enon under consideration, as well as the methods of working with them. Keywords: Youth · Information society · The Internet · Dependence · Values Needs · Alienation · Social protest · Prevention · Financial-economical crisis

Informatization and computerization of society is one of the most important processes of present-day Russia. Transition to information-oriented society has an irreversible impact on all areas of society. This is primarily knowledge and technologies based on it, acceleration of technical advance, expanded access to information resources via the Internet, as well as technological improvement and distribution around the world. Opportunities for new activities open up, while the information and technological envi‐ ronment as such contains the potential danger of deformations in the structure of person‐ ality and the ways of its social integration. In this regard, there is reason to assume that the development of information technologies in our modern age has both constructive and deconstructive consequences for a person. Information is an instrument and resource used for various purposes, and cannot be treated as an absolute value. Information inﬂuence can motivate a person to behave contrary to his/her own interests, block the availability of productive activities, and lead to social deformation in extreme cases. Many people love virtual space so much that they started substituting reality by the Internet where they spend most of the time. The process of functioning of conscious‐ nesses is gradually disrupted, and the cognitive functions are consequently decreased. © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 176–182, 2019. https://doi.org/10.1007/978-3-030-00102-5_18

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Scientists came to the conclusion that propensity for virtual world can be equated with smoking, alcoholism and drug addiction. The Internet has made such a strong change in the structure of communication that “personality” has turned out to be knocked out of its core. Today, the rate of exchange of messages and information is so high that people do not have time to develop their personal point of view, to individualize themselves, although a person could form personality in himself/herself before. In our opinion, Zasurskiy, I. commented on this phenomenon to the very point: “Communication has acquired a random nature, in which people act as an impersonal force” [5]. After all, excessive use of information technol‐ ogies by young people leads to escape from reality to virtual world. Eventually, young people acquire an irresistible attraction to the Internet, which hinders the cultural and spiritual development of a person, leads to a restriction of interests, and deprives them of healthy social needs. The constantly growing computerization of Russian society has made relevant a relatively new social problem - Internet addiction. There is a transformation of values and value-conscious hierarchy; the traditional values are related to norms and ideals. The virtual world creates a value of selection of knowledge which is important for everyday life, knowledge that is in demand in a fastchanging world. In psychological dictionary, the term “addiction” (literally meaning inclination, habitude) is deﬁned as an obsessional need to perform certain actions despite adverse medical, psychological or social consequences. Addiction is deﬁned as a subject’s pathological propensity for anything. The prevalence of Internet addiction in our modern age conﬁrms the need to reveal the addicted persons, to study the socio-psychological characteristics of personality and to develop eﬀective preventive measures. People started to bring up the issue of Internet addiction since the 90s of the XX century. The Internet was quite homogeneous at that time. The information space has signiﬁcantly expanded since then. We began to observe such phenomena as Internet addiction to games, communication, Internet experience, etc. among young people. Websites with an anti-citizenship orientation appeared in the information ﬁeld under consideration, which have a signiﬁcant propagandistic impact of extremist orientation on young people, supported by veriﬁed and perfectly scientiﬁc technologies of neurolinguistic programming that make a young person fully addicted (materially and spiri‐ tually) to their authorities, while parents and relatives are losing authority and alienation occurs. In particular, the analysis of the Nalchik events of October 2005, when armed young people attacked the law enforcement agencies of the Republic and there were injured persons among the civilians, showed that society was confronted “with a frantic extreme adherence to beliefs imputed by emissaries and implicated in total rejection of established power and order in the Republic” [7]. Internet addiction of young people as a social problem of modern communication in the public space has raised new interest in the scientiﬁc sphere, causing certain concerns of the academic community. A great number of foreign research studies is dedicated to this type of addiction; they present its description from the perspective of psychology, sociology, and philosophy (K. Young and I. Goldberg, J. Suler, M. Orzak, M. Griﬁggs, S. Stern, R. Davis, J. Grohol, J. Morahan-Martin, M. Fenishel). They investigated the diagnostic criteria, physical and psychological symptoms characteristic of Internet

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addiction, investigated the cognitive and behavioral model of the pathological use of the Internet, and examined the possibilities of the development of Internet addiction on the basis of other forms of addictive behavior. However, these researches are unlikely to contribute to a signiﬁcant clariﬁcation of their speciﬁcs with respect to the modern Russian young people. Hence, the domestic experience is of paramount importance for our research. They started to delve into the problem of Internet addiction in Russia as late as a couple of decades ago. During this time, the scientists developed proprietary criteria for this addiction, investigated peculiar properties of personality of Internet-addicted users, studied the cultural features of the users of the Russian-speaking Internet. These are Russian scientists: Voiskunskiy, A.E., Mendelevich, V.D., Zhychkina, A.E., Yegorov, A.Y., Kuznetsova, Y.M. and Chudova, N.V., Lisetskiy, K.S., Loskutova, V.A., Radio nova M.S., and Spirkina, T.S. [1–4, 6, 8, 9, 12, 13]. At the same time, to date, there are no educational programs and recommendations in the academic literature that would systematize the information on the types of preventive and therapeutical work with young people that are addicted to social networks. Moreover, preventive measures, in our opinion, should be designed taking into account the speciﬁcs of diﬀerent regions. The analysis of social consequences will allow identifying the main determinants of Internet addiction of young people and determining the methods of working with them. The article is aimed at studying the social consequences of the impact of information technology on the value system of modern young people. The provisions and conclusions of informatization theory and value-conscious adap‐ tation form theoretical and methodological basis of research. The essence of the meth‐ odology of this research lies in a complex approach which allows implementing the possibilities of combining the systemic, axiological and person-centered approaches. Theoretical and practical signiﬁcance of research lies in the fact that its results will allow us to gain a better understanding of the degree of inﬂuence of the Internet on the value settings of young people. The results that were identiﬁed during the analysis, as well as special aspects of procedural nature of Internet addiction, its main dominants will improve the development of eﬀective preventive measures of health-improving inﬂuence on the value world of the younger generation. For the purpose of this research, we used a test methodology developed by Kimberley Yang and adapted by the Russian researcher Loskutova, V.A. 99 of young people from the Kabardino-Balkarian Republic aged 16–20 years took part in the test. For a more detailed clariﬁcation of the results of research, we will place emphasis on the answers to some of the questions in the questionnaire: thus, to the question “How often do you ﬁnd that you have lingered on the web longer than you intended to?” 18.8% of respond‐ ents answered “in very rare cases”, 35.6% - “sometimes”, 25.7% - “often”, 7.9% - “very often”, 9.9% - “always”. Real communication with their peers is replaced by entertain‐ ment in the Internet “in very rare cases” - 46.5%, “sometimes” - 27.7%, “often” - 13.8%, “very often” - 6.9%, “always” - 2.9% of respondents. The percentage of answers to the question “How often is your academic performance or success in any activity aﬀected due to the use of the Internet?” was as follows: “in very rare cases” - 58.4% of respond‐ ents, “sometimes” - 28.7% of respondents, “often” - 7.9% of respondents, “very often” - 2.9% of respondents. Depression and bad mood when not online was experienced “in

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very rare cases” by 70.2% of respondents, “sometimes” - by 15.8% of respondents, “often” - by 5.9% of respondents, “very often” - 3.9% of respondents, “always” - 1.9% of respondents. Moreover, they are trying to conceal the duration of their stay in the Internet: “in very rare cases” - 61.3%, “sometimes” - 27.7%, “often” - 2.9%, “very often” - 5.9% of respondents. In general, the results of our research have shown that only 14.8% of respondents are aware of the presence of certain problems associated with excessive enthusiasm about the Internet. At present, the disapproval on the part of the elders due to excessive use of gadgets can be observed everywhere in the media, schools, universities, and even more so in families. It is fair to assume that young people who are aware of their own addiction to social networks can conceal this fact as they realize that they will be subject to disapproval. Every personality has its own peculiar value settings – weak/strong, approved/disap‐ proved by the particular social institutions. The existing and clearly deﬁned value settings are only manifested as the dominants of consciousnesses in an intelligent and mature person. As the experience of previous decades has shown, prohibitions cannot change anything. Young people are always severe on various imposed authorities and ideals; this attitude is initially transformed into a hidden and then into a public social protest over time. In our opinion, Internet addiction of young people can be investigated with various degree of delving into the heart of the problem. It should be pointed out that in our research we analyze a social and philosophical aspect of relation to the fact that young people prefer virtual world over real world in the entire aggregate of their social and personal commitments. It is this process of socio-philosophical analysis that leads to the need for clariﬁcation of the ontologistic basis of all kinds of social protest. The central category of such analysis, in our opinion, is the category of “alienation” ﬁrst put forward by Hegel, as a result of disidentiﬁcation of the existence of the spirit and consciousnesses of the subject comprehending this existence. Alienation constantly appears as the central problem of the successful implementation of the frustration of personal hopes. Diﬀer‐ entiation occurs for the living existence of an individual, which increases the remon‐ strative value-conscious choices of young people. It is a factor of economic insecurity for most of them. Therefore, an important task of social and philosophical analysis is the timely detection of the direction of vectors of its development [7]. All social problems of the modern era to a greater or lesser degree deal with family, are reﬂected in its well-being, ability to fulﬁll its numerous functions. If the family constellation is broken, psychological tension and conﬂicts in the intra-familial relations arise; the parents are not able to manage the parenting of children, to instill the positive qualities in them necessary for the formation of a productive member of society. Neglect of the interests of modern young people leads to a disdainful mood in the young environment. To a large extent, this circumstance has resulted in the detachment and social apathy of most of young people, which contributes to the formation of unco‐ operative behavior, depression, and the diﬃcult adaptation in the society. We can observe the major refocusing of the value world of a young person. Children born at the turn of the XX and XXI centuries are the generation for which digital technologies is a natural habitat; they are the so-called “millenials”. They learned

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to use the tablet before reading and writing; communication in virtual space is their way of communicating with the world, so these young people can be easily manipulated by the experts in the psychology of information communication. The “death groups” have gained universal currency over the recent years; there you can order your own death under the pictures with the whales ﬂoating in the ocean and supplemented with hashtags “blue whale”, “wake me up at 4.20 a.m.”, “I’m game”, “quiet house”. Alexander Milkus in his article “New” Death Groups “in the Internet:” Blue Whales “Instigate the Children to Commit Suicide” points out that “when the wave of” suicide games “subsides - and it will deﬁnitely subside - something diﬀerent will emerge, something similarly exciting and thrilling due to proximity of danger” [10]. The range of problems within the scope of social preventive measures for prevention of negative consequences of the inﬂuence of the Internet on the modern society continues to be relevant. The resolution of the outlined range of issues allows us to formulate several provi‐ sions that, in our opinion, generally cover the process of development of Internet addic‐ tion of young people. First of all, this is the relationship within the family. The formation of a personality, the molding of a character occurs in childhood and adolescence. In families where the relations of children and parents are characterized by indifference, insincerity, adoles‐ cents can barely master positive social experience and early lose the need for communi‐ cation with their parents. It is at this stage where the value system emerges that is detri‐ mental for further development under the influence of unfavorable factors. There is another side – hyperprotection, the so-called “motherly love” can bring a lot of suffering and grief to parents, children, and society in general [11, p. 16]. Hyperprotection in child‐ hood contributes to the emergence of infantile and diffident people, incapable of making decisions and be responsible for their actions. Any initiative, as well as the desire for independence, is not only suppressed, but also ignored and punished. Hyperprotection is a destructive force that is able to break any relations between people; difficulties in communication with the surrounding world, communication with people, their frequent conflicts with others. As a result, this influence results in formation of a personality that is characterized by reduced feeling of inherent value and affected identity. Psychological support of young people, and ﬁrst of all, support of parents and the whole family is required. Harmony in the family allows the child to develop in a harmo‐ nious manner. It is in the family that the child receives assistance in social adaptation, he/she develops conﬁdence in success in achievement of the desired goals. In addition, it is important for the young person to be given the right of self-selection. By the time he/she grows up, he/she will already know and adequately assess his/her own strength, and this means the right selection of profession and well formed value system. In our opinion, an essential factor which inﬂuences the development of Internet addiction is the “trend” which the society and especially the young people are exposed to. An active involvement in the web space seems to be trendy and edgy. It’s just a way to be like everyone, not to be behind the age, which is perceived by modern youth as a norm. Therefore, it is worth assuming that such a small percentage of young people recognizing the problem of Internet addiction identiﬁed during the questionnaire survey,

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bears evidence not of the absence of problem as such, but rather of the nature of their perception. In the conditions of educational institutions, it is necessary to take timely measures to prevent the Internet addiction of students and schoolchildren. Preventive measures should be primarily aimed at the development of a conscious attitude towards the use of informational ﬂow by young people with a view to reducing the amount of time they spend in the Internet. It is necessary to provide knowledge about the mechanisms of the impact of the Internet on a person, about social consequences of development of Internet addiction, along with adequate control over the information available in the Internet. The solution to the issue of prohibition of websites developed by representatives of destructive sects, recognized as destructive and dangerous [17] and revealed as a result of such control, seems relevant at the same time. Personal fulﬁllment of a young person in the vital processes has a dominant role for this category. Also, the social characteristics of young people are inﬂuenced by leisure. However, during the socioeconomic crisis there is a discrepancy between leisure needs, interests and objective opportunities for their implementation, which characterizes the lifestyle of young people and can contribute to the emergence of certain deformations, including Internet addiction [16]. In order to increase the eﬀectiveness of interpersonal interaction of young people, to increase the level of sociability, self-esteem and tolerance to stress, as well as reduced degree of addiction and social isolation, it is necessary to present every young person an opportunity to actively manifest himself/herself, his/her initiative in various kinds of leisure activities and entertainment. Both the content and the form of leisure activities of young people are very important and must necessarily meet the needs and interests of young people. The oﬀered classes and entertainment activities should be diverse and interesting, should be entertaining and unobtrusive in their nature; only then they will be smoothly perceived by young men and girls [14]. Thus, the foundation of the stability of society are the value settings both of an individual personality and of various social groups. The globalization and informatiza‐ tion taking place in contemporary world actualize the problems of young people. These problems are interrelated and proceed from objective processes. Modern young people witness major changes aﬀecting all life spheres of the society, inﬂuencing the entire way of life of a modern person. Young people make their living on the basis of core values and value system. When we analyze the value system of modern young people, we need to actualize the highly-eﬀective behavioral strategies and personal resources, resultative goal-setting skills, the formation of a focus on the successful achievement of the desired goals [15, p. 542]. Of course, at all historical stages, young people played an important role in the exis‐ tence and development of mankind. Therefore, the value world of young people will always be the subject of intense dispute between the authors, since it faces the future, always vivid, always changing, always unique. The conducted research opens the pros‐ pects of further study of a problem of Internet addiction and the entire value system of modern young people. The next round of analysis will allow penetrating deeper into the structures of value consciousness of young people. The authors of this article do not

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close the topic, but invite us to continue the dialogue about the ways and prospects for the development of the value world of young people in the modern society.

References 1. Van, Sh.L., Voiskunskiy, A.E., Mitina, O.V., Karpukhina, A.I.: Relation of the stream experience to the psychological dependability on computer games. Psychol. J. Higher School Econ. 8(4), 73 (2011) 2. Voiskunskiy, A.E.: Concepts of addiction and physical presence in the context of behavior in the Internet. http://www.medpsy.ru/mprj/archiv_global/2015_4_33/nomer07.php 3. Yegorov, A.Y.: Internet addiction. Addictology Guide. Rech Publishing House, Saint Petersburg (2007) 4. Zhychkina, A.E.: Internet addiction scale of A. Zhychkina. (Electronic resource). http:// ﬂogiston.ru/articles/netpsy/addiction 5. Zasurskiy, I.: The system of C pupils will be demolished. http://nooregistry.ru/news/sistematroechnikov-budet-snesena 6. Kotova, S.A.: Axiological problems of information-oriented society. Text of research article in sociology, pp. 43–44. KiberLeninka Electronic Library. https://cyberleninka.ru/article/n/ aksiologicheskie-problemy-informatsionnogo-obschestva 7. Lokova, M.Y.: Structural transformation of value system of young people in upgrading Russian society, thesis of Candidate of Philosophical Sciences, p. 87, 01 March 2007 8. Loskutova, V.A.: Internet addiction as a form of non-chemical substance dependence disorders. Text: synopsis of a thesis of Candidate of Medical Science. Novosibirsk State Medical Academy. Novosibirsk, 20 p., 13 April 2004 9. Loskutova, V.A.: Internet addiction - pathology of the XXI century? Text. Issues of mental medicine and ecology, No. 1. pp. 11–13 (2000) 10. Milkus, A.: New “Death Groups” in the Internet: “Blue Whales” Instigate the Children to Commit Suicide”. https://www.stav.kp.ru/daily/26642.7/3660934/ 11. Nekrasov, A.: Motherly Love. Amrita M Publishing House (2007) 12. Addictology Guide. Under the editorship of Prof. Mendelevich, V.D. Rech Publishing House, Saint Petersburg (2007) 13. Chudova, N.V.: Peculiar properties of the self-image of the “resident” of the Internet. http:// www.psitest.ru/pub/i-zavisimost.html 14. Kumykov, A.M., Shogenov, M.Z., Chemaev, N.A., Shogenova, F.Z., Reshetnikova, N.N.: Informal patterns of civil society and social stability at a local level. Espacios. 2017. T. 38. No. 57, p. 28 (2017) 15. Smagina, N.N., Magomedov, M.G., Buklanov, D.A.: Sustainable Competitive Advantage of the International Business Tourism on the Regional Level Overcoming Uncertainty of Institutional Environment as a Tool of Global Crisis Management Editors: Popkova, Elena G., pp. 541–548 (2017) 16. Vereshchagina, A.V., Gaﬁatulina, N.K., Kumykov, A.M., Stepanov, O.V., Samygin, S.I.: Gender analysis of social health of students. Review of European Studies, vol. 7, No. 7 (2015) 17. Volkov, Y.G., Khunagov, R.D., Kumykov, A.M., Magomedov, M.G., Krotov, D.V.: Sociology of the future: humanization of sociological thought. Int. J. Environ. Sci. Educ. 7(7), 9586–9597 (2016)

Factors of Socio-Economic Development of Rural Regions in the Area of Influence of City Agglomerations Maria A. Bitarova1(&), Konstantin V. Getmantsev1, Elena V. Ilyasova1, Ekaterina M. Krylova1, and Yuri I. Treshchevsky2 1 Kuban State University, Krasnodar, Russia [email protected], [email protected], [email protected], [email protected] 2 Voronezh State University, Voronezh, Russia [email protected]

Abstract. The authors study the factors that determine the character and direction of development of rural regions that are parts of an agglomeration. By the example of the Krasnodar city agglomeration, the processes of deformation of economy and social sphere of rural regions of the agglomeration are shown and quantitative and qualitative characteristics of forming tendencies of development of rural territories under the influence of agglomeration processes are given. Keywords: Regional development Factors of development of regional economy Agglomeration

Regional economic space

JEL Classiﬁcation Codes: R10 general R12 size and spatial distributions of regional economic activity R58 regional development planning and policy

Over the recent years, there has been information in the Russian mass media on the forming Krasnodar city agglomeration. The information was contradictory, with different structure of agglomeration and the number of its residents, structure of economy, etc. The thing is that the ofﬁcial notion “Krasnodar city agglomeration” is not established in the Krai laws, so it is necessary to deﬁne the Krasnodar agglomeration and its scale. For that, let us use the approach offered by G.M. Lappo, P.M. Polyanaya, and T.I. Selivanova. The researchers see the main criteria of distinguishing the limits of city agglomerations as the presence of city core with at least 250,000 people, presence of at least 2 communities around the core, circular migration, transport accessibility (1.5 h), and high development of the city infrastructure [4]. A. Neshchadin and A. Prilepin supplement this list with such factors as availability of houses in suburbs; free lands around the city; developed network of car roads; existing production connections; territories with recreation potential [8].

© Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 183–194, 2019. https://doi.org/10.1007/978-3-030-00102-5_19

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However, for determining the criterion of agglomeration, transport accessibility is used. From these positions, the structure of the territories of the Krasnodar city agglomeration is the following (Table 1) [3]. The Krasnodar city agglomeration is peculiar for the fact that its development is related to direction of two main transport highways: M-4 “Don”, M-25, A-146, and M-21. Another peculiarity of the Krasnodar city agglomeration is combination of one large city (Krasnodar) and several rural districts: Dinsky, Ust-Labinsky, Seversky, and Krasnoarmeysky. Goryachy Klyuch has a status of a city, but is actually a rural community [3]. Table 1. The main indicators that characterize the Krasnodar city agglomeration. Territory (municipal entity)

Area, square m

Krasnodar – core 841.4 of the agglomeration

Population, thousand people

Transport accessibility, Krasnodar, km

861.2

–

Dinsky district

1,352.0 131.0

Krasnoarmeysky district

1,897.7 103.5

Seversky district

2,122.0 115.1

Ust-Labinsky district

1,130.0 112.2

Goryachy Klyuch

1,755.6 59.3

Short characteristics of other criteria

– Houses in suburbs, free land around the city; – citizens’ business on rural territories 30 km; Federal highway Transit flows; labor migration district-city, “Don”; two regional purchase of real estate by roads; three railroads citizens, placement of city’s companies in the district 70 km Citizens’ business in the district; labor migration; purchase of real estate in border territories; construction of summer cottages Transit flows; Labor 30 km, federal highway migration district - city; “Pavlovskaya – purchase of real estate in the Novorossiysk”; railroad Krasnodar - Novorossiysk district by urban dwellers; placement of city companies in the district; tourism, leisure 59 km; federal highway; Transit flows; labor railroad branch migration district – city’ purchase of property in the district by urban dwellers; placement of city companies in the district 60 km; federal highway; Resort city; labor migration; railroad branch purchase of real estate by urban dwellers; placement of hotel business companies in the city

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Thus, the Krasnodar city agglomeration has only one core of development – Krasnodar – other municipalities creates belts of the agglomeration. The research object for studying influence of agglomeration on development of rural territories is Seversky district of Krasnodar Krai, which is a part of the Krasnodar city agglomeration. Ofﬁcial information, which characterizes Seversky district, describes it as an average rural district of Krasnodar Krai, located in south-western part of the region on the left bank of the Kuban river, on the north-western side of the Main Caucasus Ridge. The territory is 211, 000 hectares. Climate is moderately humid, with the average volume of precipitations - 700–800 mm. Population – 117,833 [12]. Seversky district is closely connected to the city with flows of labor migrations, business economic ties, tourist flows, placement of city companies in the district, and purchase of real estate property in the district by city dwellers. Natural resources – oil, natural gas, nonmetallic materials, clay, and mineral water. Seversky district is an industrial region and has a multi-proﬁle industrial potential. In the structure of economy, 90% account for processing productions, including 80.4% for production of oil products. Also, the district produces brick, construction nonmetallic materials, oil industrial equipment, products of forest and timber processing industry, and products of food industry [3]. Agriculture is also very developed. The spheres of agriculture include plant growing and growing of wheat, buckwheat, sunflower, etc. Seversky district in the Krasnodar city agglomeration should be assessed from determining the factor of transport accessibility. Evaluation of distance and travel time from communities in view of administrative centers of Seversky district to Krasnodar was performed based on the data of the website https://www.rudorogi.ru/. The most distant communities include Plancheskaya Shchel – 112 км (3 h 17 min); Tkhamakha – 148 km (3 h 47 min); Mirny – 117 km (3 h 25 min); Ubinskaya – 142 km (3 h 12 min); Derbentskaya – 157 km (4 h+) [11]. It would be wrong to state that the whole Seversky district is a part of the Krasnodar city agglomeration. There are certain areas in the district that are involved in the agglomeration processes to a larger or lesser extent. Thus, Seversky district could be conventionally divided into three such areas, which are influenced by the city agglomeration differently; 1st area – communities that are near Krasnodar and on the federal highway A-146 (Krasnodar-Novorossiysk). These include communities of Aﬁpsky, Ilsky, and Chernomorsky urban settlements. Travel time to Krasnodar – 1 h. 2nd area consists of communities of Lvovsky, Smolensky, Azovsky, and Kaluga rural settlements. They are 80 km from the highway Krasnodar-Novorossiysk, but have good commute to the city. 3rd area – the area of conventional agglomeration – consists of the communities that are remote from the highway Krasnodar-Novorossiysk; they have problems with regular transport and travel time. These are settlements of Mikhaylovsky, Grigoryevsky, and Shabanovsky settlements. Travel time to Krasnodar – 1.5 h. One of the most important consequences of territory’s entering the area of influence of the agglomeration is changes in the system of settlement. The place of settlement has

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been related to three preconditions: place of application of labor, convenience of the territory for life, and possibility of convenient movement [5]. Seversky district, being a part of the Krasnodar city agglomeration, inevitable faces the changes in the system of settlement. The general idea on changes in the system of settlement is given in Table 2 [12]. For a vivid idea of changes, let us study three periods over the recent twenty years.

Table 2. Changes in the system of population of Seversky district. Settlements

Years 1996

Aﬁpsky urban locality Aﬁpsky 18,412 Vodokachka 287 Vostochny 517 Kovalenko 387 Kosharsky 78 Neftekachka 114 Ilsky urban locality Ilsky 16,805 Derbentsky 1,022 Chernomorsky urban locality Chernomorsky 6,265 Oktyabrsky 914 Karsky 218 Novopetrovsky 1,026 Vesely 508 Kipyachy 318 Sputnik 128 Azovsky rural settlement Azovsky 2,308 Ubinsky 307 Grigoryevsky rural settlement Grigoryevsky 963 Stavropolsky 1,352 Kaluga rural settlement Kaluzhskaya 1,678 Chibiy 214 Lvovskoe rural settlement Lvovskoe 4,247 Krasny 255 Novoivanovsky 289

2006

2016

19,324 227 449 412 22 82

20,114 129 340 641 13 56

18,715 24,944 712 634 6,912 1,372 243 815 412 257 522

7,205 1,857 214 419 316 127 712

2,714 511

3,874 452

1,087 1,105

1,247 815

1,815 52

1,925 30

4,732 5,171 211 179 265 210 (continued)

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Table 2. (continued) Settlements

Years 1996 2006 Peschany 315 187 Stefanovsky 285 244 Aleksandrovskoe rural settlement Mikhaylovskoe 2,057 1,862 Aleksandrovsky 87 34 Ananyevsky 627 415 Novodmitrievskoe rural settlement Novodmitrievskaya 4,283 5,472 Shuvaev 1,072 825 Oazis 612 583 Novy 286 207 Severskoe rural settlement Severskaya 21,568 22,085 Bonchkovsky 638 758 Bondarenko 415 388 Volikov 127 95 Naumenkov 392 312 Novoalekseevsky 128 214 Svobodny 94 107 8 Marta 393 358 Predgorny 316 385 Smolenskoe rural settlement Krepostnaya 3,107 3,248 Smolenskaya 3,987 3,875 Mirny 482 468 Plancheskaya Shchel 312 344 Shabanovskoe rural settlement Shabanovskoe 422 458 Tkhamakha 397 355

2016 65 236 1,775 15 325 5,718 512 487 377 24,812 816 311 87 247 319 112 415 317 3,057 4,218 412 328 412 308

Positive dynamics of growth of the number of population of large settlements should be noted – especially, administrative centers of rural and city settlements of Seversky district. At the same time, population of small settlements decreases. At that, the closer the settlement to Krasnodar, the more positive the dynamics of its population. These are Aﬁpsky, Vodokachka, Vostochny, and Novodmitrievskaya. Almost all “alpine” settlements: Shabanovskoy, Tkhamakha, Mirny, Plancheskaya Shchel and Chibit lose their population. The only exceptions are Azovskaya and Ubinskaya.

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All changes in the system of population of Seversky district repeat a well-known fact: rural population goes front he periphery to the center, and from the center – to cities. However, this is only partially true for Seversky district. Here the population goes not to Severskaya station but to several large cities on the federal highway Krasnodar-Novorossiysk; the settlements that are closes to Krasnodar grow very quickly. This shows that population does not leave Seversky district but just moves to more convenient communities, thus creating “rural” dormitory suburbs of Krasnodar. Another important tendency is positive balance of migration. According to the administration of Seversky district, the number of district’s population has been growing over the recent years largely due to inflow of new residents (Table 3) [6]. Table 3. Dynamics of population of Seversky district. Indicator Constant population, people Natural increase rate (+)/decrease (−) of population Migration increase rate (+)/decrease (−) of population, people

2011 113,094

2012 114,394

2013 115,149

2014 116,261

2015 117,073

2016 117,833

−278

−314

−87

−104

−117

−218

+827

+986

+668

+1008

+695

+542

Table 3 shows that with relatively stable indicators of natural growth of population, factual growth at the level of 2% per year is ensured by migration flow. It is possible to suppose that a part of the migration flow accounts for residents. Thus, there are two processes: the ﬁrst is related to the practice of townshifting, when part of the citizens who are tired to city noise sell their apartments and move to cheaper urban areas. The second process is related to conscious choice of urban areas as a place of residence due to ﬁnancial reasons and impossibility to continue living in a city. Geographical and transport proximity to Krasnodary should have caused changes in the district’s economy. In certain cases, such changes have a slight character and are determined by preservation of traditional agrarian specialization of the district – in other cases they are more vivid and are related to re-orientation of a par of district’s economy to the needs of the city agglomeration. There are three main directions of such changes. Firstly, changes in the structure of lands of Seversky district – in particular, reduction of agricultural land and increase of the share of settlements’ lands that are used for commerce. Seversky district is peculiar for reduction – though, insigniﬁcant – of the volumes of agricultural production (Table 4) [10].

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Table 4. Change of the number of agricultural companies of all forms of property and crop areas in Seversky district in 2012–2016. Indicators Number of agricultural organizations Farms Personal subsidiary plots Crop areas for all crop cultures in all households and farms, thousand hectares

Years 2012 9 369 718 38.3

2013 9 361 683 35.8

2014 8 354 677 30.7

2015 7 348 682 32.4

2016 7 346 684 31.7

These data show that the number of economic subjects have been reducing over recent ﬁve years. This is peculiar for large husbandries, as well as medium and small forms [9]. At the same time, crop areas reduced from 38.3 thousand hectares to 31.7 thousand hectares. That is, 6.6 thousand hectares are taken from the turnover [10]. On the opposite, areas of settlements increase (Table 5) [14]. Table 5. Change of the structure of lands of Seversky district in 2012-2016, hectares. Indicators Land of settlements Land of agriculture Land of special purpose Land of protected natural territories Land of forest fund Land of water fund Land of state reserve

Years 2012 2,911.15 65,982.4 135.85 0

2013 3,196.6 65,696.95 135.3 0

2014 3,581.6 65,311.95 132 0

2015 3,780.7 65,112.85 116.6 0

2016 4,085.4 64,808.15 234.85 0

101,649.9 7,218.35 3,210.35

101,395.8 7,226.6 3,210.35

101,264.9 7,228.25 3,210.35

100,986.6 7,228.25 3,210.35

100,884.9 7,267.85 3,210.35

The data show that only settlement land areas grow, while other categories remain unchanged or reduce. At that, growth takes place by means of agricultural land and forest fund. At the same time, it is possible to see that the settlements’ areas grow in proportion to reduction to crop areas (agricultural land). This process could be explained by two reasons. The ﬁrst one is that households of the district that had mapping registration as personal subsidiary plots are being re-registered. This situation appeared in early 2000’s when a lot of land owners set the category of their land as private subsidiary plot, for the purpose of tax optimization. As of now, these households are registered as individual housing construction and production activities. The second process is related to withdrawal of a part of land of agricultural purpose for the needs of quickly growing communities – within Severskaya, Ilsky, and Aﬁpsky, and their change for the needs of construction commerce, and industrial production (Table 6) [14].

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Table 6. Change of the types of allowed usage of lands of Seversky (according to the new classiﬁed – order No. 709), hectares. Type of allowed usage

Allowed usage

1.0 2.0 3.0

Agriculture Residential construction Public usage of capital construction objects Entrepreneurship Recreation Production activities Transport Defense and security Activities on special protection and study of nature Forestry Water objects General use of territory

4.0 5.0 6.0 7.0 8.0 9.0 10.0 11.0 12.0

Years 2014 5,344.8 1,814 27

2015 4,877 1,819 24

2016 4,949 1,823 22

418 75 1,387 12 2 4

507 82 1,437 15 2 4

522 84 1,487 17 2 4

814 27 148

812 28 147

815 28 145

The above data show that such types of allowed usage as “Residential construction”, “Entrepreneurship”, “Recreation”, and “Production activities” increase – at that, this increase is seen against the background of reduction of agricultural land. On the whole for the district, this situation is related to mass transfer of land plots for the needs of business: commercial trade and production of industrial goods (Table 7). Table 7. Indicators of production of goods and services in view of the main spheres of Seversky district’s economy. Indicators and measuring units Number of working industrial companies Volumes of industrial products, RUB million Number of agricultural organizations Agricultural products, RUB million Number of existing construction organizations Volumes of work performed according to construction contracts, RUB million Number of retail companies Retail turnover, RUB million

Years 2013 68 3,457 9 1,172 8 317

2014 72 3,872 8 1,187 6 509

2015 77 4,012 7 1,214 6 719

2016 85 4,271 7 1,107 7 798

147 1,148

152 1,364

158 1,683

166 1,934

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The above data show that industry, construction, and trade develop very quickly. At that, while industry is presented by the sphere of oil and chemistry, which are oriented at the needs of the whole region, two other spheres are related to positioning of the district in the Krasnodar city agglomeration. This is primarily construction of houses for citizens and for those preferring to reside in suburbs. Accordingly, construction of new residential blocks leads to appearance of stores and companies of the service sphere. The second direction in development of economy of Seversky district, which characterizes the influence of the agglomeration processes, is appearance of the companies that are oriented at the market of Krasnodar. Such companies appear primarily in the sphere of agricultural processing and production of food products. One of such companies is Il Agricultural Company LLC [7]. Ilsk Sausage Factory is a successful meat processing enterprise of the South of Russia, equipped with new technological equipment. The factory produces more than 80 types of products: sausage, dry sausage, and delicacies. Distribution of the stores of the Il company in Krasnodar Krai is shown in Table 8 [7]. Table 8. Trading area of Il in Krasnodar Krai. 2013 Seversky district 3 Krasnodar 4 Anapa 1 Novorossiysk 0

2014 3 5 1 0

2015 3 8 1 1

2016 3 9 1 1

The above data show that Il orients at the market of Krasnodar. Seversky district has only three stores, which are located along the federal highway “KrasnodarNovorossiysk” A – 146, with two stores in Novorossiysk and Anapa. Besides, only the Krasnodar branch increases the number of stores. The third direction of change of the district economy is appearance of the companies in Seversky district that were located in Krasnodar. For example, in 2014, a factory for production of plastic windows opened in Aﬁpsky. The company’s website - http://krasnodar.okna-kpi.ru/ - states that the company works in Krasnodar, with the central ofﬁce registered at 269 Severnaya St., Krasnodar, 350027, city phone number +7 (861) 201-22-21, but the production address is 17 Kryzhevnaya St., Aﬁpsky. Before 2014, the company “KPI-okna” had had factory capacities in Krasnodar [2]. Thus, it is an example of simple movement of industrial production from Krasnodar to Seversky district. Another example is the company “Plastmass-uzor” LLC – production of plastic items – has been located before 2015 at 14 Vostochny St., Krasnodar. In 2015, the company changed registration – now it is 2 Lenina St., Chernomorsky, Seversky district, Krasnodar Krai. The data on the change of the company’s registration could be found at http://actez.ru/company/4728275 [1].

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Another example is Faber Farma LLC, which earlier was registered in Krasnodar at 12 Dlinnaya St.; it moved the production to Seversky district. In 2012, Spets-Avia moved its production from to Seversky District as well [1]. The reasons for movement of companies from Krasnodar to Seversky district include accessibility of land resources, availability of objects of production purpose, necessary infrastructure, low rent prices, relative distance to the city (important for polluting productions), accessibility of energy, and simplicity of connection to the electric grid, and positive attitude from residents and authorities. In most cases, the reason of movement of productions from Krasnodar to Seversky district is economic. Table 9 shows comparison of the cost of rent in Krasnodar and Seversky district. Table 9. Comparison of cost of rent of 1 sq.m. in Krasnodar and Severskaya, 2017, RUB. Ofﬁce

Public use Free use premises premises Krasnodar 200–3,000 2,500–7,000 200–1,000 Severskaya 100–1,000 1,500–3,000 100–1,500

Production premises 1,000–3,000 1,000–2,000

Storage facilities 1,500–3,200 250–1,500

Trade facilities 500–7,000 600–2,000

The above data show that the rent cost is lower in Seversky by 30–40%, as compared to Krasnodar. At the same time, for the most popular directions the rent cost is the same. An important factor of selection of Seversky district by entrepreneurs is high accessibility of rent objects. For example, in Krasnodar the average waiting period constitutes 6–7 months. It is possible to conclude that Seversky district has a lot of city companies, while the rates and volume of movement of urban production to the district are low. It could be explained by the fact that Krasnodar has good conditions for entrepreneurs or by the crisis or other reasons. Goods transport accessibility of Seversky district for Krasnodar residents, together with diversity of landscapes and nature, led to the fact that Seversky started turning into the area of urban recreation. It is possible to distinguish several directions of development of this process. Firstly, development of construction of summer cottages. Starting from 1963, dacha cooperatives have been created in Seversky district. These cooperatives are peculiar for the fact that they have been created for residents of Krasnodar. An important factor of development of dacha settlements is their proximity to settlements of Seversky district. After the perestroika, in early 1990’s, these cooperatives lost their agricultural specialization and became recreation areas (Table 10). Proximity to Krasnodar and low prices for land led to growth of residential construction in Seversk region. Recently, Seversky district became peculiar for development of week-end tourism. Table 11 shows statistics of growth of the hotel sphere companies of Seversky district [10].

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Table 10. Volume of constructed residence in view of rural and urban settlements of Seversky district, thousand sq.m. No. 1 2 3 4 5 6 7 8 9 10 11 12

Settlement Aﬁpskoe Oskoe Chernomorskoe Azoskoe Grigoryevskoe Kaluzhskoe Lvovskoe Aleksandrovskoe Novodmitrievskoe Severskoe Smolenskoe Shabanovskoe

2014 8.4 5.7 0.7 2.7 1.3 2.1 0.8 n/a 1.2 5.1 2.3 1.7

2015 5.6 3.8 1.8 3.1 1.8 2.5 0.5 0.3 1.8 7.7 2.5 1.2

2016 7.8 4.4 1.7 2.3 0.7 2.4 1.2 0.6 1.3 8.2 2.1 1.1

Table 11. Number of beds in all types of accommodation in Seversky district. No. 1 2 3 4 5

Establishment Sanatoria for adults Sanatoria for children Recreation centers Youth camps, hotels Motels, campings

2013 – – 1 14 17

2014 – – 1 18 17

2015 – – 1 21 17

2016 – – 1 22 18

The number of hotels grows due to servicing the transit flow and development of “week-end” tourism. On the whole, the district positions itself as an area of active recreation and family retreat. Acknowledgments. The research was performed with ﬁnancial support from the RFFR within the project “Modeling the processes of differentiation of economic space of region in the conditions of regional economy transformation”.

References 1. Information on change of registration data of legal entities. Website “Actez – Catalog of legal entities”. http://actez.ru/company/4728275 2. KPI-Okna. Ofﬁcial website of KPI. http://krasnodar.okna-kpi.ru/. Accessed 3. Lavrova, T.G.: Krasnodar city agglomeration: development and management. Contours of global transformations: politics, economics, law, No. 5, pp. 80–89 (2015) 4. Lappo, G.M., Polyan, P.M., Selivanova, T.I. Agglomerations in Russia in the 21st century. City agglomerations of Russia. Demoscope 2010. No. 407. pp. 137–152 (2010)

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5. Leksin, V.N.: City agglomerations and the system of settlement: hopes and dangers. Infra-M, 277 p. (2011) 6. Migration in Seversky district of Krasnodar Krai. Materials of the migration center of Seversk district of Krasnodar Krai. http://www.sevadm.ru/2013/10/29/migracija.html. Accessed 7. Meat factory Ilsky. Ofﬁcial website. http://ilkombinat.ru/. Accessed 8. Neshchadin, A.A., Prilepin, A.M.: City agglomerations as a tool of dynamic socio-economic development of Russia’s regions. Information website of expert groups for work on “Strategy 2020” (2011). http://2020strategy.ru/g12/documents/32581727.html. Accessed 9. Ofﬁcial website of administration of Seversky district of Krasnodar Krai. http://www. sevadm.ru/. Accessed 10. Districts and cities of Krasnodar Krai: Statistical bulletin, p. 311. Federal State Statistics Sevice, Krasnodar (2017) 11. Calculation of distance between cities. Website “RUdorogi”. E-source: https://www. rudorogi.ru/ 12. Seversky district. Website “Free encyclopedia ‘Wikipedia’”. https://ru.wikipedia.org/wiki/% D0%A1%D0%B5%D0%B2%D0%B5%D1%80%D1%81%D0%BA%D0%B8%D0%B9_% D1%80%D0%B0%D0%B9%D0%BE%D0%BD. Accessed 13. Cost of rental of commercial premises. Website “Avito.ru”. http://avito.ru/comp/12712id. Accessed 14. Explication of lands of Seversky district. Materials of administration of Seversky district. Archive. Case No. 12/2016-n

Constructing Regional Social Inclusion: Foundations of Sociological Analysis Tatiana N. Yudina ✉ , Irina V. Dolgorukova, Egor Y. Kireev, Tatiana M. Bormotova, and Tatyana V. Fomicheva (

)

Russian State Social University, Moscow, Russia {judinatn,dolgorukovaiv,kireeveou,bormotovatm, fomichevatn}@rgsu.net

Abstract. The authors oﬀer an interpretation of regional social inclusion as one of the most important indicators of population’s living standards. The purpose of the work is to analyze the main sociological approaches to constructing regional social inclusion. The main components of constructing social inclusion at the regional level are distinguished and the model of regional social inclusion is oﬀered. Migration is viewed as a dynamic factor of constructing regional inclu‐ sion. Studying the problems and models of formation of regional social inclusion allows developing the main priorities of long-term strategy of social inclusion of the Russian society on the whole and its connection to the general strategy of socio-economic development of Russia. Based on the performed work, it is concluded that for the purpose of stimulating social inclusion, the measures of public authorities should be conducted at the level of local and regional commun‐ ities. Regional subjects should make eﬀorts for strengthening social inclusion and provision of sustainable development. Keywords: Regional inclusion · Constructing · Sociological analysis · Migration Socio-economic development · Indicator of living standards JEL Classiﬁcation Codes: Z13 · Z18

1

Introduction

The issues of social inclusion are paid a lot of attention as a direction of work in the conditions of globalization. Development of the idea of constructing social inclusion as a multi-aspect phenom‐ enon envisages not only inclusion and participation of everybody in economic, social, cultural, and political life but also a sense of solidarity and belonging to society, based on eﬀective usage of civil rights and democracy and directly related to the history of formation and development of social policy on the whole. The policy of social inclusion is based on striving of society to increase of living standard and overcoming all manifestations of inequality. At present, this notion is expanded, and achievement of social inclusion is based on management of diversity. As a matter of fact, economic situation, social protection, social safety, and

© Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 195–202, 2019. https://doi.org/10.1007/978-3-030-00102-5_20

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acknowledgment of personality need management, which leads to creation of a program approach. The purpose of this approach is to overcome tension, discrimination, and social conﬂicts. At that, economic and social development is one thing. Sustainable development depends on eﬀective management, which pays close attention to harmo‐ nization of relations among population. In multi-cultural societies, social inclusion acquires a special importance in the context of the necessity for tolerant attitude, support for diversity, and respect to diﬀerent cultures. The central role is given to acknowledgment of diversity. For increasing the level of social inclusion, it is necessary to build the policy in view of the concept of diversity management. Migration processes are a decisive factor of regional development in the modern world. According to UN experts, total number of migrants constituted 213.9 million by 2010. In 2005–2010, it grew by 10% (Yudina et al. 2015). Inﬂuence of migration is manifested at all levels of regional development and creates two problems: ﬁrstly, inte‐ gration of immigrants into hosting regional community and access of newcomers to rights and possibilities; secondly, the problem of growth of multiculturalism. Migration processes and attitude towards immigrants is an important criterion and task of Europe for the future. Thus, the value of regional social inclusion is predetermined by the fact that it is the basic condition of stable economic development of speciﬁc region and its eﬀective inclusion into development of community on the whole. It ensures social stability, which, on the one hand, allows reacting to regional challenges, and, on the other hand, developing preventive solutions to actual economic and social problems of the region. In regional education, which is peculiar for high level of social inclusion, innovations develop quicker and technological breakthroughs take place in developing spheres of regional economies. Recently, a lot of developing regions of Europe and Asia have been peculiar for necessity for improving the strategy of social inclusion. This is caused by new chal‐ lenges, which appear in the conditions of complex processes of globalization – e.g., the problems of migration of work force and competition between regions’ economies and within them.

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Methodology

Sociological explanations of the state, based on social inclusion, are as follows: • works of T. Marshall (the issue of provision of minimum social support for partici‐ pation in society’s life); • the functional approach of T. Parsons (social policy as a means of solving social conﬂicts), with social solidarity to viewed as the main condition of social inclusion. • the Marxist theory (state of general well-being as a tool of capitalistic social relations) (Yarskaya 2003). • Theory of “Third way” of E. Giddens (Policy of acknowledgment of competition in the globalizing world and its further consideration as a basis of socially solid society).

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Regional model of social inclusion is based on the following general methodological principles: • complexity – importance of analysis and consideration of all aspects of the research object; • systemacity – establishment of causal connections between the object’s aspects; • science – using adequate methodology; • objectivity – authenticity and veriﬁability of information; • variability – ﬁnding several options of overcoming crisis situations; • correspondence to state interests and provision of social eﬀect. In analysis of migration as the most important factor of social inclusion, the approach developed by the “group of high level” “On the path to active, just, and socially solid Europe” was used (Bohnke 2005). It envisages analysis of a wide specter of factors that determine the level of regional social inclusion in society - from development of democ‐ racy, functioning of economy, ﬁghting social rejection and poverty, and creation of the atmosphere of solidarity (e.g., via developed mechanisms of just distribution of national wealth from higher class to middle class and lower class), development of mechanisms of adaptation of immigrants, protection of vulnerable social groups in the region to provision of equal access to culture and education. Special attention should be paid to the issues of formation of regional social inclusion, related to increase of risks of social inequality, processes of globalization, ageing, poverty, and weakening of inter-genera‐ tion ties.

3

Results

3.1 The Concept of Sociological Study of the Problems of Constructing the Regional Social Inclusion During development of a complex methodology of studying the problems of constructing social inclusion of region, it is necessary to take into account speciﬁcs of these processes that establish the notions “social inclusion” and “social development of region” (Yudina 2013). The procedure of diagnostics of region’s social inclusion could have several stages. At the ﬁrst stage, all eﬀorts are aimed at description of the real state of social inclusion in the region. Expertise of the region’s state is performed on the basis of objective data on the level of social inclusion and subjective evaluations by the region’s residents of the level of coordination of behavior of regional community’s members in the main spheres of activities. The purpose of the second type is to analyze the proper state of social inclusion in the region. At the third stage, comparison of objective and subjective indicators with proper ones is performed – which allows determining the level of region’s social inclusion. As a result, the level of diﬀerence between the proper or real states of regional social inclusion is determined. For each stage, indicators are developed – which ﬁx the level of regional social inclusion. On the whole, diagnostics of social inclusion of region allows ensuring adoption of long-term and coordinated decisions on provision of well-being of all members,

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minimization of disproportions in region’s development, avoiding marginalization of people and stimulating harmonization of diﬀerences in achievement of well-being by all its members. 3.2 The Main Factors of Constructing the Regional Model of Social Inclusion The conceptual basis of studying the problems of social inclusion in region is based on understanding inclusion as a means of uniﬁcation of integration processes within the administrative and territorial education, further development of economy, legal state, and civil society. It is envisaged that regional subjects stimulate increase of social inclu‐ sion. The main directions of such stimulation are as follows: – provision of guarantees for achievement of the corresponding level of social protec‐ tion; – stimulation in the sphere of employment, professional training, and protection of workers’ rights; – provision of eﬀective protection of the most vulnerable groups of population; – stimulating the equality of possibilities during employment; – ﬁghting social rejection and discrimination; – strengthening of cooperation in the issues of migration. The level of social inclusion could be measures. Socially solid society is the one characterized by the possibility of implementing social rights and peculiar for social responsibility, developed possibilities of social dialog, and high level of social security. Analysis of the problems of social inclusion should take place in view of studying the main components and criteria of social inclusion of population (Table 1) Table 1. Components and indicators of social inclusion. Component Justice, economic well-being

Indicator Mobility (social/geographic), inequality in distribution of incomes, sustainable poverty Self-esteem and acknowledgment of diversity People feeling discrimination against them Participation in public life Citizens’ participating in democratic processes Sense of belonging Levels of conﬁdence (institutional, level of conﬁdence in future, others) General responsibility Coverage and scale of social and civil dialog

At the national level, these indicators reﬂect the main principles of social inclusion: justice, self-esteem, sense of belonging to society, acknowledgment of diversity, and certain general responsibility. At the level of local community, measuring social inclusion requires development of eﬀective measures of social policy. Development of these indicators is done by coor‐ dinating actions of the main interested parties.

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3.3 Migration as the Most Important Factor of Constructing the Regional Inclusion The other factors that determine dynamics of the process of constructing social inclusion include migration. This dynamic social phenomenon is the decisive factor of socioeconomic development of regions of the modern world. Six out of ten immigrants live in developed countries, and seven out of hundred international immigrants are refugees. Half of all international immigrants are women. 75% of all international immigrants are concentrated in 29 countries. According to 2010 estimates, the number of countries with population above 1 million, in which international immigrants accounted for more than 10% of population, constitutes 38. Due to immigration, in 2005–2010 the number of population of developed countries was growing by 2.2% per year, and population of developing countries was decreasing by 0.5%. In North America, population in 2005–2010 grew by means of international immigrants by 1.2 million people annually, and Europe’s population – by 1.3 million. In all large regions of the world there was intensive growth of population by means of migration ﬂows. In South Europe, migration ﬂow exceeded by 4.9% per year the value of the USA (3.3%) and North America (3.6%) (Osadchaya et al. 2016). Priority of formation of social inclusion in region requires targeted regional policy in the sphere of regulation of migration ﬂows and attitude of people to immigrants. The largest international organizations oﬀered general principles of such social policy. For example, UN recommendations postulate development of regional migration policy, which would reﬂect such aspects as reunion of families, role of migration ﬂows in economic growth and development of region, provision of refuge, stimulation of regu‐ lated and prevention of unregulated migration, protection of refugees, responsibilities and rights of immigrants, integration of immigrants, and restoration of their civil status (Global Commission on International Migration 2005). Europe has no common position as to the rights provided to immigrants or their integration into society. Access of “newcomers” to social services, rights, and freedoms is one of the points of collision and emergence of social contradictions in European societies. A popular reaction to such discussions is protection of “national resources” and national culture (Tanatova et al. 2017). Integration of immigrants into the hosting society was and is a serious challenge for most regions. This is proved by the fact that integration of ethnic minorities and immigrants who came as a part of earlier immigra‐ tion wave has not ended. In a lot of regions of Europe, expat communities are being formed. Social, economic, ethnic, and even confessional factors have a role of potential or real sources of inequality and discrimination of people. There are a lot of reasons that determine the fact that in European societies integration of immigrants and national minorities is diﬃcult, but the main reason is interconnection between dominating models of citizenship and state. Modern Europe consists of a lot of national states. European communities have a long way to integration of immigrants before them, despite the adopted constitutional principles, international responsibilities, and eﬀorts for prevention of discrimination of labor immigrants. Integration of immigrants into the hosting regional society is thus the most important factor of constructing the regional inclusion.

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Discussion

Implementation of the concept of social inclusion cannot be conducted all over the state. Localization of territory is the main condition for reaching the purpose. Diﬀerent coun‐ tries have diﬀerent models of local territories. Thus, in order to achieve social inclusion of society, it is necessary to reduce the level of disproportions in development of regions. Of course establishment of social inclusion is possible only with establishment of strong social ties between people and real possibility for them to use their rights and readiness to perform voluntary obliga‐ tions. The necessity for evaluating the level of social inclusion in the regional view on the basis of complex analysis of its state, which considers all aspects of living activities, is obvious. Development of the methodology of sociological analysis should be formed in view of regional speciﬁcs of socio-economic, political, and cultural aspects. As for migration processes as a factor of constructing the regional inclusion, it should be noted that experts in the sphere of international immigration discuss a range of issues that require close attention and development of sustainable migration policy. Let us dwell on the most important ones. Thus, according to the expert community, negative eﬀects from migration processes in the states of origin and state of destination of immigrants could be lowered with the help of special programs that set formal procedures during entrance and the procedure that simpliﬁes acquisition of all social and civil rights of immigrants. At that, the formal procedures and criteria for incoming immigrants should be brought to correspondence with international human rights (International Migration Report 2015). Thus, it is necessary to note a position reﬂected in the recommendations of the Committee of ministries of members of the Council of Europe No. CM/Rec(2007)10 “On co-development and immigrants working in favor of development in the countries of their origin”. The notion “co-development” is treated as activities in the sphere of economic, cultural, social, or political development in the country of origin, which is based on consensus between organizations, private and public partners, immigrants in the states of origin and states of destination. It is deﬁnes that immigrants have to respect and know laws, values, principles, and customs of the hosting state, which, in its turn, should respect culture, religion, and customs of legal immigrants. For the purpose of supporting legal turnover and integration of legal immigrants, especially legal labor immigrants and their families, experts oﬀer the hosting states considering the possibility of provision to legal immigrants of political and civil rights and liberties. At that, it is oﬀered to organize the processes of stimulating adaptation of children of immigrants who arrived for a long term, creating the same conditions for professional training and receipt of education that are provided to citizens of this country and stimulate their doing business. Article 10 of the Convention of children rights and all generally acknowledged documents postulate that all states – and, primarily, hosting states – have to acknowledge the top-priority signiﬁcance of reunion of families and stimulate inclusion of the corresponding provisions into their internal legislative acts for protecting families of legal immigrants.

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Conclusions/Recommendations

Regional inclusion is one of the decisive and stabilizing factors of formation of social and territorial inclusion. The main conditions of achieving social inclusion are as follows: – providing citizens with conditions for creation of decent living standards and selfimplementation; – establishing and supporting living standards; – eﬀective system of social protection and ﬁghting social exclusion and discrimination; – supporting socially signiﬁcant professions and employees (scholars, teachers, etc.); – development of social entrepreneurship; – supporting middle class as a basis of social inclusion; – reducing diﬀerentiation in regional development; – increasing the level of development of local self-administration as a basis of partic‐ ipative democracy; – accessibility of qualitative education. Practical actions from public authorities, which stimulate social inclusion, should start from local and regional communities, cities and regions of Russia. The conceptual basis of studying the problems of social inclusion in region is founded in understanding inclusion as a means of unifying integration processes within administrative and territorial education in view of the vector of development of economy, legal state, and civil society. Regional subjects should stimulate strengthening of social inclusion. As a result of consideration of immigration process as the most important factor of constructing social inclusion, it is possible to conclude that this factor should be taken into account not only by regions that accept immigrants but also by regions of immi‐ grants’ origin. There are a lot of crossing points: cooperation between regions with excess of labor resources and regions with lack of labor resources and ﬁghting human trade and illegal immigration, as well as studying mutual inﬂuence between immigration and other social problems. Bilateral and multi-sided agreements may serve strengthening of inter-regional connections and development of regional inclusion in various spheres. It is necessary to note the positive eﬀect that may be brought by partnership between the corresponding departments of economically developed countries and states of immi‐ grants’ origin. It is mostly true for the sphere of formation of social institutes of devel‐ opment of labor capital. The “co-development” approach comes to the foreground, according to which large inﬂuence on formation of regional inclusion is performed by interaction between unions of immigrants and cooperation between states of origin of immigrants and hosting countries. It is necessary to create long-term regional strategies of social inclusion in the sphere of integration of immigrants and connection to the general strategy of socio-economic development of country on the whole. Inclusion is required by any society for over‐ coming the existing and new challenges caused by immigration.

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References Klimanov, V.V.: Regional systems and regional development (2003) Fedotova, V.G.: Social state and market. Free thought – 21st century, No. 7, p. 82 (2002) Yudina, T.N.: Regional social inclusion as the indicator of Russians’ living standards: sociological measure. Scientiﬁc notes of ZabSU. Series: Philosophy, sociology, culture science, and social work, No. 4(51) (2013) Yarskaya, V.N.: Social policy, social state, and social management: issues of analysis. JISP, No. 1 (2003) Bohnke, P.: First European Quality of Life Survey: Life Satisfaction, happiness and Sense of Belonging, European Foundation for the Improvement of Living and Working Conditions. Oﬃce for Oﬃcial Publications of the European Communities, Luxembourg (2005) Bollen, K.A., Hoyle, R.H.: Perceived cohesion: a conceptual and empirical examination. Soc. Forces 69, 479–504 (1990) Ethnic Diversity and Social Cohesion Merlin Schaeﬀer, Wissenschaftszentrum Berlin für Sozialforschung, Germany. ISBN: 978-1-4094-6938-4 Global Commission on International Migration: Migration in an Interconnected World: New Directions for Action, New York, UN (2005) International Migration Report, New York (2015). http://www.un.org/en/development/desa/ population/migration/publications/migrationreport/docs/MigrationReport. Accessed 24 June 2017 Osadchaya, G., Yudina, T.: Migration processes and russia’s migration policy: from the newly independent states to the Eurasian economic union, East European Studies Budapest, pp. 34– 52 (2016) Tanatova, D.K., Yudina, T.N., Dolgorukova, I.V.: Models of public health management in the countries of central and eastern Europe and Russia: a comparative analysis, Economic and Social Development Book of Proceedings. Varazdin Development and Entrepreneurship Agency, Russian State Social University, pp. 446–454 (2017) Yudina, T.N., Osadchaya, G.I., Leskova, I.V., Dolgorukova, I.V., Kireev, E.Y.: The eurasian economic union: migration risks. Mediterr. J. Soc. Sci. 6(4), 451–457 (2015)

Financial Infrastructure of the Modern Economy

The Model of Managing the Development of Agricultural Machinery Market Infrastructure on the Basis of Public-Private Monitoring Irina Morozova1 ✉ , Tatiana Litvinova2, Ivan A. Mordvintsev3, and Olga V. Konina1 (

)

1

Volgograd State Technical University, Volgograd, Russian Federation [email protected] 2 Volgograd State Agrarian University, Volgograd, Russian Federation [email protected] 3 Volgograd State University, Volgograd, Russia [email protected]

Abstract. The purpose of the article is to develop a model of managing the development of agricultural machinery market infrastructure on the basis of public-private monitoring on the basis of modern Russia. In order to determine the need in development of agricultural machinery market infrastructure in modern Russia, the authors use time series analysis, with the help of which they study dynamics of the change of volume of investments into the ﬁxed capital and their share in the structure of turnover of the companies involved in the sphere of agricultural machinery manufacture. The authors determine mismatch of the quantity and quality of infrastructural provision and the needs of domestic entre‐ preneurship in the agricultural machinery market. For solving this problem, it is recommended to implement the system of public-private monitoring, which supposes involvement of interested representatives into the processes of managing the development of agricultural machinery market infrastructure. The tasks of this monitoring are formulated in connection to distinguished components of the agricultural machinery market infrastructure. Keywords: Managing the infrastructure development Agricultural machinery market · Public-private monitoring

1

Introduction

The problems of provision of national food security have grown in a lot of modern countries due to the global ﬁnancial crisis which has passed into the stage of stagnation. Due to that, government of the countries that do not specialize on agriculture have performed steps for development of agricultural production. One of the initial and most important steps is development of agricultural machinery market that provides machines and equipment for agriculture. Over the decades of stability of the global economic system, both these markets were paid insuﬃcient attention in the countries that did not specialize in agriculture, as according to the Theory of relative advantages and the principle of international division © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 205–212, 2019. https://doi.org/10.1007/978-3-030-00102-5_21

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of labor it was more proﬁtable to import agricultural products and agricultural machi‐ nery. Destruction of international economic relations led to impossibility to found on import of such strategically important products and caused the necessity for developing their import substitution. A key condition of the key realization of the policy of import substitution in the agricultural machinery market is development of infrastructure, which in most countries that do not specialize in agriculture, is characterized by strong moral and physical aging and deﬁcit. According to our hypothesis, in order to achieve high eﬀectiveness of managing the development of agricultural machinery market infrastructure, it is neces‐ sary to involve representatives of the public into its conduct. The purpose of the article is to develop the model of managing the development of agricultural machinery market infrastructure on the basis of public-private monitoring by the example of modern Russia.

2

Materials and Method

For determining the need for development of agricultural machinery market infrastruc‐ ture in modern Russia, the method of time series analysis is used, with the help of which dynamics of the change of volume of investments in ﬁxed capital and their share in the structure of the turnover of companies involved in the sphere of agricultural machinery production are studied (Fig. 1). 5526.3

6000 5000 4000

3489

3872

4675.6 4216.7

3094 3000 2000 1000

1464.3

Investments into fixed capital, RUB billion Share of investments into fixed capital in the turnover structure, %

851.2 271.6 43.9 112.6 176.5 186.8 218.5 233.4 251.4

0 2000 2005 2011 2012 2013 2014 2015 2016 Fig. 1. Dynamics of change of the volume of investments in ﬁxed capital and their share in the structure of turnover of companies involved in the sphere of agricultural machinery production in 2000–2016. Source: compiled by the authors on the basis of (Federal State Statistics Service 2016)

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Discussion

In this work, infrastructure of agricultural machinery market is treated as totality of interconnected structures that ensure functioning and development of companies that work on this market. We distinguished the following main components of agricultural machinery market infrastructure: • • • • • • •

institutional infrastructure; material and technical infrastructure; transport and logistics infrastructure; human infrastructure; information infrastructure; ﬁnancial infrastructure; innovational infrastructure.

The sense and structure of agricultural machinery market infrastructure are viewed in detail in the materials of research of (Bogoviz and Mezhov 2015), (Przhedetskaya and Akopova 2015), (Kusakina et al. 2016), (Sadovnikova et al. 2013), (Morozova et al. 2017), (Popova et al. 2015), (Enikeeva et al. 2015), (Menshchikova and Tribunskaya 2015), (Janowitz 2014). (Cakula et al. 2013), (Bernardes 2015), (Garthwaite et al. 2015), (Grouiez 2012), (He 2015), (Bannikova et al. 2015), (Jacknowitz et al. 2015), (Maitra and Rao 2015), (Medernach and Burnod 2013), (Popkova et al. 2015a), (Popkova et al. 2015b).

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Results

In the analytical report on development of agricultural machinery market (Butov 2016) and the Strategy of development of agricultural machine building until 2020 (RosAgroMash 2011), it is noted that infrastructural provision of the modern Russian agricultural machinery market is at a low level of development. The main argument in favor of this statement is growth of investments of the companies that work in this market into fixed capital. According to the oﬃcial statistics, provided by the Federal State Statistics Service and presented in Fig. 1, the volume of investments into ﬁxed capital of the companies in the Russian agricultural machinery market grew by 6.5 times in 2016 (RUB 5,526.3 billion) as compared to 2000 (RUB 851.2 billion). Their share in the structure of compa‐ nies’ turnover in the Russian agricultural machinery market also grew by 6 times, constituting 271.6% in 2016, as compared to 43.9% in 2000. This shows mismatch between the quantity and quality of infrastructural provision and the needs of domestic entrepreneurship in agricultural machinery market. For solving this problem, we recommend to implement the system of public-private moni‐ toring, which supposes involvement of interested parties into the process of managing the development of agricultural machinery market infrastructure. The tasks of this monitoring are formulated in connection to the distinguished components of agricultural machinery market infrastructure.

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In the sphere of institutional infrastructure, the sense of public-private monitoring of managing the development of agricultural machinery market infrastructure consists in determining the possibilities and perspectives for improvement of the normative and legal provision. It main tasks are as follows: • critical analysis of existing normative and legal provision of development of agri‐ cultural machinery market infrastructure; • preparation of recommendations for its improvement; • providing the prepared recommendations to legislative bodies of public authorities at the federal and regional levels and substantiation of the necessity for their appli‐ cation in practice. In the sphere of material and technical infrastructure, the logic of public-private monitoring of managing the development of agricultural machinery market infrastruc‐ ture consists in solving the problems related to the material and technical infrastructure. Its tasks are brought down to the following: • establishing cooperation between companies that work in the Russian agricultural machinery market; • determining the key problems of companies that work in the Russian agricultural machinery market, related to the material and technical infrastructure; • determining the methods of solving the distinguished problems and providing them to legislative bodies of public authorities at the federal and regional levels. In the sphere of transport and logistics infrastructure, the main sense of public-private monitoring of managing the development of agricultural machinery market infrastruc‐ ture consists in collection of full, precise, and topical information on the state of transport and logistics infrastructure and its drawbacks. Its main tasks include the following: • collection of evidences that conﬁrm the negative state of transport and logistics infrastructure; • providing these evidences to legislative bodies of public authorities at the federal and regional levels; • control over targeted spending of assets received in the course of collection of trans‐ port tax on improvement of the state of transport and logistics infrastructure. In the sphere of human infrastructure, the sense of public-private monitoring of managing the development of agricultural machinery market infrastructure is manifested in mediation between companies that work in agricultural machinery market and univer‐ sities that train specialists for them. Its tasks are as follows: • determining contradictions in the educational market and labor market in the sphere of agricultural machinery; • determining the possibilities and perspectives of elimination of these contradictions; • consultations with universities and companies that work in agricultural machinery market for establishing the balance between demand and oﬀer of human infrastruc‐ ture.

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In the sphere of information infrastructure, the logic of public-private monitoring of managing the development of agricultural machinery market infrastructure is based on elimination of the information deﬁcit. Its main tasks are as follows: • developing cooperation with companies that work in the agricultural market; • determining their needs for agricultural machinery; • informing companies that work in agricultural machinery market on the current state of demand for their products. In the sphere of ﬁnancial infrastructure, the sense of public-private monitoring of managing the development of agricultural machinery market infrastructure is manifested in stimulating the development of ﬁnancial establishments that provide leasing, credit, and investment resources for the companies of this market. Its tasks are as follows: • determining the volume and character of the needs of companies that work in agri‐ cultural machinery market for ﬁnancial resources; • development of potential schemes for implementation by ﬁnancial establishments and the state in the interests of provision of necessary ﬁnancial resources to the companies that work in agricultural machinery market; • establishing cooperation with ﬁnancial establishments and oﬀering these schemes to them and to the state. In the sphere of innovational infrastructure, the logic of public-private monitoring of managing the development of agricultural machinery market infrastructure consists in control over this market’s companies’ provision with innovations by domestic univer‐ sities. The sense of the tasks is brought down to the following: • determining the perspective directions of innovational development of companies that work in agricultural machinery market; • analysis of ratio of imported and domestic innovations that are implemented by companies that work in agricultural machinery market; • informing R&D institutes on existing needs for created innovations in the interests of full satisfaction of internal demand for them. Based on the oﬀered recommendations, we compiled the model of managing the development of agricultural machinery market infrastructure on the basis of publicprivate monitoring (Fig. 2). As is seen from Fig. 2, using public-private monitoring ensures reduction of expen‐ ditures by means of using voluntary initiatives of the public and increase of eﬃciency of managing the development of agricultural machinery market infrastructure by means of involving the parties interested in achievement of the eﬀect.

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Inovational infrastructure

stimulating the development of financial establishments that Financial infrastructure

Institutional infrastructure

solving the problems related to the material and technical infrastructure

Material and technical infrastructure

Tool: public-private monitoring for the collection of components of agricultural information on the state machinery market of Transport and infrastructure logistics infrastructure

providing financial resources for companies of this market Information infrastructure eliminating information deficit in agricultural machinery market

Human infrastructure

transport and logistics infrastructure and its drawbacks

mediation between the companies that work in agricultural machinery market and universities that train specialists for them

Result: reduction of expenditures by means of using voluntary initiatives or representatives of the public and increase of efficiency of managing the development of agricultural machinery market infrastructure by means of involvement of the parties interested in achievement of the effect

Fig. 2. Model of managing the development of agricultural machinery market infrastructure on the basis of public-private monitoring Source: compiled by the authors

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Conclusions

It should be concluded that the developed model of managing the development of agri‐ cultural machinery market infrastructure on the basis of public-private monitoring supposes consideration of monitoring not as external independent control over the results but as direct participation of interested parties in the process of management. Due to that, the conducted monitoring allows evaluating the eﬀectiveness of managing the development of agricultural machinery market infrastructure and increasing it, solving the appearing problems in the course of management. The oﬀered model showed expedience of attracting interested representatives of the public to the process of managing the development of agricultural machinery market infrastructure. This ensures development of civil society and allows minimizing the managerial expenditures. However, it should be acknowledged that this model has

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fundamental character, and its implementation in economic practice of modern Russia and other countries requires more detailed elaboration. Adaptation of the developed model to the speciﬁcs of real economic systems is a perspective direction for continu‐ ation of this scientiﬁc research.

References Bannikova, N.V., Baydakov, A.N., Vaytsekhovskaya, S.S.: Identiﬁcation of strategic alternatives in agribusiness. Mod. Appl. Sci. 9(4), 344–353 (2015) Bernardes, J.A.: New frontiers of capital in the Brazilian Cerrado: the dynamics and contradictions of the expansion of agrobusiness in the central-west region. Scripta Nova, 19 (2015) Bogoviz, A., Mezhov, S.: Models and tools for research of innovation processes. Mod. Appl. Sci. 9(3), 159–172 (2015) Cakula, S., Jakobsone, A., Motejlek, J.: Virtual business support infrastructure for entrepreneurs. Procedia Comput. Sci. 25, 281–288 (2013) Enikeeva, L.A., Stelmashonok, E.V., Stelmashonok, V.L.: Modeling of information protection system of business processes infrastructure on an industrial plant. Int. Bus. Manag. 10(3), 315– 319 (2015) Garthwaite, K.A., Collins, P.J., Bambra, C.: Food for thought: an ethnographic study of negotiating ill health and food insecurity in a UK foodbank. Soc. Sci. Med. 132(1), 38–44 (2015) Grouiez, P.: Des kolkhozes à l’agrobusiness en Russie. Etudes Rurales 190(2), 49–62 (2012) He, J.: Chinese public policy on ﬁsheries subsidies: Reconciling trade, environmental and food security stakes. Mar. Policy 56(1), 106–116 (2015) Jacknowitz, A., Morrissey, T., Brannegan, A.: Food insecurity across the ﬁrst ﬁve years: triggers of onset and exit. Child Youth Serv. Rev. 53(1), 24–33 (2015) Janowitz, M.: Sustainable infrastructure - from business case to investment. In: ICSI 2014: Creating Infrastructure for a Sustainable World - Proceedings of the 2014 International Conference on Sustainable Infrastructure, pp. 786–794 (2014) Kusakina, O.N., Bannikova, N.V., Morkovina, S.S., Litvinova, T.N.: State stimulation of development of small entrepreneurship in developing countries. Eur. Res. Stud. J. 19(2 Special Issue), 276–284 (2016) Maitra, C., Rao, D.S.P.: Poverty-food security nexus: evidence from a survey of urban slum dwellers in Kolkata. Source World Dev. 72(1), 308–325 (2015) Medernach, K., Burnod, P.: Unexpected changes in a Madagascan land system through agribusiness. Etudes Rural. 191(1), 63–76 (2013) Menshchikova, V.I., Tribunskaya, U.G.: Improvement of the infrastructure support system for business activities in diﬀerent types of regions. Actual Probl. Econ. 163(1), 270–275 (2015) Morozova, I.A., Litvinova, T.N., Sycheva, A.V.: Transnational cluster initiatives in business as a top-priority direction of maximization of economic growth in Asian countries. Contributions to Economics, (9783319454610), pp. 113–119 (2017) Popkova, E.G., Abramov, S.A., Ermolina, L.V., Gandin, E.V.: Strategic eﬀectiveness evaluation as integral part of the modern enterprise management. Asian Soc. Sci. 11(20), 16–21 (2015a) Popova, L., Popova, S.A., Dugina, T.A., Korobeynikov, D.A., Korobeynikova, O.M.: Cluster policy in agrarian sphere in implementation of concept of economic growth. Eur. Res. Stud. J. 18(Special Issue), 27–36 (2015)

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Przhedetskaya, N., Akopova, E.: Institutional designing of continuous education in Russia under the conditions of neo-economy and globalization. Reg. Sect. Econ. Stud. 15(2), 115–122 (2015) Sadovnikova, N., Parygin, D., Gnedkova, E., Kravets, A., Kizim, A., Ukustov, S.: Scenario forecasting of sustainable urban development based on cognitive model. In: Proceedings of the IADIS International Conference ICT, Society and Human Beings 2013, Proceedings of the IADIS International Conference e-Commerce 2013, pp. 115–119 (2013) Butov, A.M.: Agricultural machinery market (2016). https://dcenter.hse.ru/data/2016/12/29/ 1114670197/Pынoк%20agricultural%20мaшин%202016.pdf. Accessed 24 Aug 2017 Popkova, E.G., Chechina, O.S., Abramov, S.A.: Problem of the human capital quality reducing in conditions of educational uniﬁcation. Mediterr. J. Soc. Sci. 6(3), 95–100 (2015b) RosAgroMash: Strategy of development of agricultural machine building of Russia until 2020 (2011). http://www.rosagromash.ru/attachments/Development%20Strategy.doc. Accessed 24 Aug 2017 Federal State Statistics Service: Russia in numbers. Federal State Statistics Service, Moscowa (2016)

Institutional Frameworks of Place Marketing in Russia: Barriers and New Possibilities Yulia I. Dubova1 ✉ , Vyacheslav V. Golikov2, Zhanna V. Gornostaeva3, and Vladimir Zhidkov4 (

)

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3

Volgograd State Technical University, Volgograd, Russia [email protected] 2 Volgograd State Agrarian University, Volgograd, Russia Institute of Service Sphere and Entrepreneurship (branch) of Don State Technical University, Shakhty, Russia [email protected] 4 Don State Technical University, Rostov-on-Don, Russia [email protected]

Abstract. The purpose of the work is to study the institutional frameworks of place marketing in the Russian economy and to determine the main barriers on the path of its development and possibilities for activation of marketing activity at the level of regional economy in modern Russia. The information and analytical materials include the strategies of socio-economic development of Russia’s regions (as analogs of the strategies of place marketing) and the data of the Global Competitiveness Report of the Russian Federation for 2016–2017 according to the World Economic Forum. The methodology of this work is based on the method of logical analysis, analysis of causal connections, structural & functional, systemic, and problem analysis, as well as synthesis, induction, deduction, and formalization. As a result of the research, the authors came to the conclusion that despite a high level of regionalization and completion of market reformation of economy, the level of competition at the level of regions and intensity of place marketing are low in Russia due to strong institutional barriers. An algorithm of institutionalization of place marketing in modern Russia is oﬀered in order to increase it. Keywords: Institutional frameworks · Place marketing · Regional competition Russia’s regions

1

Introduction

In the conditions of market economy, the concept of marketing becomes the main one at all levels of economic system. Like companies conduct marketing activities, regions also develop and implement place marketing. Like companies, modern regions compete for resources, including material, ﬁnancial, and human, and sales markets, using the marketing tools. However, marketing activities at the territorial level has their speciﬁcs. In particular, the product is not separate goods and services but the whole regions which consumers © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 213–218, 2019. https://doi.org/10.1007/978-3-030-00102-5_22

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are not only external but also internal interested parties (citizens and business structures). This causes high complexity of place marketing as compared to usual marketing practice at the level of companies. Due to this, in a lot of countries with developing market economy, regions were not able to quickly adapt to new conditions – unlike companies – and to start large-scale marketing activities. In this regard, experience of modern Russia is interesting, as it is a country with transitional economy that is characterized by high level of regionalization which theoretically supposes a high level of competition at the level of regions and intensity of place marketing. Our hypothesis consists in the fact that in practice it is diﬀerent, and marketing activities for modern Russian regions is a new phenomenon. The purpose of the work is to study the institutional frameworks of place marketing in the Russian economy and to determine the main barriers on the path of its development and possibilities for acti‐ vation of marketing activities at the level of regional economy in modern Russia.

2

Materials and Method

The information and analytical materials of the research include the strategies of socioeconomic development of Russia’s regions (as analogs of the strategies of place marketing) and the data of the Global Competitiveness Report of the RF for 2016–2017 according to the World Economic Forum. For the research, we selected the following indicators: • indicator of competition as a basis of marketing: intensity of territorial competition (6.01 Intensity of local competition); • indicator of institutional provision of economy: institutions (1st pillar: Institutions). Due to lack of oﬃcial statistical and analytical information in the sphere of place marketing in Russia, the methodology of this work does not include the methods of statistical analysis but is based on the method of logical analysis, analysis of causal connections, structural & functional and problem analysis, as well as synthesis, induc‐ tion, deduction, and formalization.

3

Discussion

Institutional aspects of place marketing are studied in multiple works of such authors as (Akopov 2013), (Kravets et al. 2014), (Laghzaoui and Abakouy 2015), (Popkova 2014), (Popkova et al. 2013), (Skiter et al. 2015), (Pozdnyakova et al. 2015), and (Romanova et al. 2015). However, despite a large number of existing studies on this topic, it is not suﬃciently elaborated from the practical point of view. Thus, the perspec‐ tives of overcoming the problems of place marketing are not that clear. This is a precon‐ dition for further research in this scientiﬁc sphere.

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Results

According to the Global Competitiveness Report of the modern Russia’s economy, it is peculiar for a low level of territorial competition (5 points out of 6, 81st place out of 136 according to the indicator 6.01 Intensity of local competition) and institutional provision for the economic system (3.6 points out of 6, 88th position out of 136 according to the indicator 1st pillar: Institutions). Analysis of strategies of socio-economic development of Russia’s regions showed that they have little in common with the strategies of place marketing. The key task, formulated in these strategies, is improvement of indicators of socio-economic devel‐ opment and acceleration of the rate of economic growth – i.e., improvement of the situation as compared to the previous period. The tasks in marketing strategies suppose increase of competitiveness, i.e., improve‐ ment of the situation as compared to rivals. The tools that are applied for managing of territories’ development are of the regulatory (main tool: preferences for regional companies), not marketing (advertising, branding, PR, etc.) character. On the basis of detailed study, we distinguish ﬁve institutional barriers on the path of development of place marketing in modern Russia. The ﬁrst barrier – low level of involvement of Russian territories into the processes of global competition. Despite the formal openness of economy, modern Russia continues to use the protectionism measures. Due to this, Russia’s regions are not fully involved into such processes as international movement of production factors. As the risk of migration and resource drain (and, accordingly, involvement of new citizens, business structures, and resources) is minimal, the necessity for realization of place marketing disappears. The second barrier is the low level of internal (national) competition of the Russian territories. Distribution of national resources (assets of co-ﬁnancing of regional devel‐ opment from the federal budget) is not performed on the competitive basis. Moreover, competitive regions are considered subsidized and receive a lot of resources. This does not create competition among the Russian regions and makes place marketing inexpe‐ dient. Without natural market stimuli, its conduct is inexpedient. The third barrier is lack of interest and incompetence of territorial authorities in the issues of place marketing. Lack of knowledge, skills, and experience of place marketing, as well as lack of the corresponding criterion in assessment of the quality of regional authorities’ work during HR decisions making at higher level of public authorities make it impossible for them to participate in implementation of place marketing. The fourth barrier is underdevelopment of the institutional environment for imple‐ mentation of place marketing. The normative and legal provision of place marketing in modern Russia is not suﬃciently developed. In particular, there are not clear recom‐ mendations for development and implementation of regions’ marketing strategies and assessment of their eﬀectiveness. Uncertainty of the institutional environment compli‐ cates the process of place marketing. Fifth barrier – underdevelopment of culture of place marketing in Russia. Lack of information on experience and successful examples of development and implementation of strategies in the sphere of place marketing, as well as norms and values of its

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implementation, is a reason for underdevelopment of informal institutional provision of this process. With development of market processes in economy of modern Russia new possi‐ bilities for overcoming these barriers appear. For their implementation, the following recommendations are oﬀered. Firstly, it is necessary to strengthen the normative and legal foundation of place marketing. It is necessary to adopt a federal law that would regulate the activities of Russian regions in the sphere of place marketing and to make amendments into other laws. Secondly, it is necessary to prepare managerial personnel for implementation of place marketing. It is necessary to form the required competences by training and to establish success of place marketing as a criterion of their work. Thirdly, it is important to create conditions for exchange of experience in the sphere of place marketing. It is necessary to develop eﬀective communications between Russian regions on the issues of place marketing. Fourthly, it is necessary to stimulate internal competition of regions by setting the requirements to successfulness of place marketing during distribution of territorial resources. Fifthly, it is necessary to create conditions for external competition of regions. The protectionist measures should be canceled and replaced by the mechanism of free competition in the conditions of open regional economy. For complex and successive implementation of the above recommendations, we oﬀer to use the specially developed

Strengthening of the normative and legal basis of territorial marketing Training of managerial personnel for implementation of place marketing Creation of conditions for exchange of experience in the sphere of place marketing

Is institutional provision of place marketing formed? Stimulation of internal competition among regions

Creation of conditions for external competition among regions Reduction of regions’ competitiveness

Increase of disproportions

Growth of marketing activity of regions What is the result?

What is the result?

Growth of regions’ marketing activity Monitoring and control over place marketing in modern Russia

Fig. 1. Algorithm of institutionalization of place marketing in modern Russia Source: compiled by the authors

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algorithm of institutionalization of place marketing in modern Russia, which is shown in Fig. 1. As is seen from Fig. 1, the measures of federal government for institutionalization of place marketing in modern Russia are brought down to institutional provision (strengthening of the normative and legal basis, preparation of managerial personnel, and creation of conditions of exchange of experience). Only after veriﬁcation of comple‐ tion of this process, it is recommended to start the stage of creating the competitive environment which makes Russian regions conduct place marketing. The ﬁnal stage is federal monitoring and control over place marketing in modern Russia.

5

Conclusions

It should be concluded that the institutional frameworks of place marketing in Russia should not be viewed as barriers only. They rather determine peculiarities of its imple‐ mentation that are to be taken into account during adapting this practice to the Russian economic conditions. In this regard, the oﬀered algorithm of institutionalization of place marketing in modern Russia could be useful. Institutional problems are not the only barriers on the path of development of place marketing in Russia. They also include the deﬁcit of managerial personnel in regions that appeared after the wave of their reduction, low level of development of civil society and cooperation of entrepreneurship, due to which population and business cannot inﬂuence the management of region’s economy, etc. Studying these factors and the search for the means of highly eﬀective management of them in the interests of devel‐ opment of place marketing in Russia should be done in further research.

References Akopov, S.E.: Development of the integration process within the territorial marketing of eurasecparticipating countries. World Appl. Sci. J. 28(7), 955–961 (2013) Kravets, A., Shcherbakov, M., Kultsova, M., Iijima, T.: Knowledge-based software engineering. 11th Joint Conference, JCKBSE 2014, Volgograd, Russia, 17–20 September, 2014. Proceedings (2014). Communications in Computer and Information Science. CCIS, vol. 466, pp. 56–81 (2014). vol. 24(1) Laghzaoui, F., Abakouy, M.: Territorial marketing practices in Morocco: Study of the experience in the city of Tangier. (Pratiques du marketing territorial au maroc: Etude de l’expérience de la ville de tanger). In: Proceedings of the 25th International Business Information Management Association Conference - Innovation Vision 2020: From Regional Development Sustainability to Global Economic Growth, IBIMA 2015, pp. 3379–3397 (2015) Popkova, E.G.: New prospects of economic growth in context of underdevelopment whirlpools phenomena. Appl. Econ. Int. Dev. 14(1), 5–25 (2014) Popkova, E.G., Shakhovskaya, L.S., Romanova, M.K., Dubova, Y.I.: Bases of transition of the territory to sustainable development: Modern city. World Appl. Sci. J. 23(11), 1499–1507 (2013) Pozdnyakova, U.A., Dubova, Y.I., Nadtochiy, I.I., (…), Rogachev, A.F., Golikov, V.V.: Scientiﬁc development of socio-ethical construction of ecological marketing. Mediterr. J. Soc. Sci. 6(5S1), 278–281 (2015)

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Romanova, N.A., Brachun, T.A., Dmitrieva, E.A.: Modern city positioning case study as a tool of territorial marketing: Magadan. Russ., Mediterr. J. Soc. Sci. 6(4), 245–249 (2015) Skiter, N., Semenychev, V., Litvinova, T.N.: Model of economic growth in Russia under conditions of integration into the world economy. Appl. Econ. Int. Dev. 15(2), 63–70 (2015) World Economic Forum. The Global Competitiveness Report 2016–2017. http://www3.weforum.org/ docs/GCR2016-2017/05FullReport/TheGlobalCompetitivenessReport2016-2017_FINAL.pdf. Accessed 28 August 2017

Directions of Perspective Development of Innovational Infrastructure of Russian Regions Larisa L. Alekhina1(&), Margarita N. Burtseva1, Anna G. Savina1, Svetlana A. Ilminskaya2, and Irina V. Skobliakova3 1 Orel State University of Economics and Trade, Orel, Russia [email protected], [email protected], [email protected] 2 Financial University Under the Government of the Russian Federation, Orel Branch, Moscow, Russia [email protected] 3 Orel State University, Orel, Russia [email protected]

Abstract. Existing problems of regional innovational economy are often caused by absence and/or incorrect management of the objects of innovational infrastructure. Ineffective measures within strategic programs of development and absence of the federal concepts for supporting the objects of innovational infrastructure do not allow concentrating efforts on the processes of transformation of regional environment in favor of technologization and informatization of society. Topicality of perspective development of innovational infrastructure determines signiﬁcance of this process for increasing competitiveness of Russia’s regions. The purpose of this research is to consider periodization and to develop certain directions of development of innovational infrastructure in the regions of the RF. In order to achieve this goal, it is necessary to solve certain tasks: study the main types of innovational infrastructure that are used in the theoretical aspect of the announced research; determine peculiarities of the system of initiation of “model development” of innovational infrastructure in foreign countries; determine the key moments of creation and consecutive development of the Russian regional innovational infrastructure; form toppriority directions of perspective development of innovational infrastructure of the regions of the RF. The methodological tools include the following methods: grouping, concentration, classiﬁcation, analysis, synthesis, and scenario periodization. Further development of this topic could be related to analysis and evaluation of international experience of implementing the perspective directions for development of innovational infrastructure of Russian regions. Keywords: Infrastructure Innovations Region Technological centers Top-priority directions

Business incubators

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1 Introduction The industrial infrastructure that remained from the post-Soviet past does not allow reaching the planned growth in the age of knowledge economy and technologies. High need for creation and development of innovational infrastructure sets new tasks before the state and regions, which are aimed at development of top-priority directions in this sphere. The existing business incubators, technological parks, and clusters are prototypes of innovational infrastructure. At that, the problem of ﬁnancing and development of these objects as independence elements of innovational economy does not allow dividing the process of formation of a new paradigm of development in the subjects of the RF into stages. This thesis is substantiated by the following ideas. Firstly, ageing of production funds and scientiﬁc infrastructure does not stimulate modernization and implementation of innovational elements of effective management into economic activities of regions of depressive development. Secondly, implementation of ineffective subsidizing measures for attraction of investments for construction of innovational infrastructure postpones the process of shifting the development of territorial economies in favor of the technological model of innovational functioning of regional environment. Thirdly, absence of normative elaboration of the aspect of development of the innovational infrastructure objects in the regions of the RF leads to imbalance and underrun of these territories from socio-economic indicators of the leading subjects. These circumstances directly and indirectly influence socio-economic development of the subjects of the RF, also influencing different spheres of functioning of territorial economies. According to the determined problems, we deem it possible to form and conduct research on the topic of development of innovational infrastructure in the regions of the RF. The purpose of the research is to consider the process of periodization and to develop the directions of development of innovational infrastructure in regions of the RF. In order to achieve this goal, it is necessary to solve the following tasks: – consider the main types of innovational infrastructure that are used in the theoretical aspect of the announced research; – determine peculiarities of the system of initiation of “model development” of innovational infrastructure in foreign countries; – determine key aspects of creation and consecutive development of Russian regional innovational infrastructure; – form top-priority directions of perspective development of innovational infrastructure of regions of the RF. The methodology of the research includes grouping and concentration of peculiar elements of the system, classiﬁcation of differentiated systems, analysis and synthesis, scenario periodization, and selective distinguishing of peculiar qualities of the research object.

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2 The Main Types of Innovational Infrastructure That Are Used in the Theoretical Aspect of the Announced Research The issue of classiﬁcation of innovational infrastructure is studied in a lot of scientiﬁc works of Russia and foreign authors (Hendrick 1994; Yang et al. 2016; Stroeva et al. 2015). The key element is the principle of grouping of directions of development of the scientiﬁc object. Based on generalization of information, ﬁve key blocks of regional objects of innovational infrastructure are formed: 1. Objects of production direction (Balco and Greguš 2014; Simonova et al. 2017) reflect the accumulated potential of the elements of technological organization that include the centers of innovational and scientiﬁc development (industrial cluster, technological cluster, business incubator, center of transfer of technologies, engineering center, industrial associative associations). 2. Objects of expert direction deal with activities for provision of consulting and other supporting services within technological interaction between the subjects of regional infrastructure (information and consultation centers, centers of transformation technologies). 3. Objects of information and analytical direction (Kashitsyna and Berkovich 2014) are platform structures that allow adapting the existing information to the conditions of external environment and participating in the process of interaction within these generic systems (technological platforms, information platforms, intellectual platforms, analytical centers, statistical centers, and monitoring centers). 4. Objects of venture direction determine the process tools in the sphere of redistribution and increase of investment capital within innovational and scientiﬁc development of the regional infrastructure objects (banks and credit organizations (investment capital), venture funds, individual investors, investment groups). 5. Objects of educational direction form within their activities methodological preconditions of standardized professional qualities that are required for development of regional innovational infrastructure (universities, R&D centers and institutes, construction bureaus with innovational orientation). The main types of objects, which are formed on the basis of scientiﬁc literature, allow systematizing experience of development of regional innovational infrastructure in the countries of European, Asian, and American economic space.

3 The System of Initiation of “Model Development” of Innovational Infrastructure in Foreign Countries The system of initiation of “model development” in foreign countries is brought down to determining the object characteristics, participants of development, and models and tools that are used in the process of development of innovational infrastructure. The process of initiation of “model development” of innovational infrastructure is built on the basis of top-priority directions in the sphere of innovational policy, namely:

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– creation of innovational products for production sector (Menshchikova 2013); – transforming knowledge and technologies into new ideas and commercialized products (Shebeko 2016); – reproduction of personnel, which creates and develops innovational infrastructure (Kasarda and Rondinelli 1998). Let us generalize experience of “model development” of innovational infrastructure based on formation of adjacent country models: American, Asian, and European. The American model of “model development” of innovational infrastructure is formed under the influence of integrated innovational processes that take place in the USA. The key objects of innovational infrastructure in the American model are R&D parks and incubators. These objects are of top-priority for provision of innovational and technological development of the USA. Unlike the Russian system of management and development of innovational infrastructure, the main role of participants of ﬁnancing belongs to the federal government, universities, colleges, and industrial and production corporations. Based on the models of “transfer of experience” and “technological interaction’, these participants create and develop projects within transformation of innovational infrastructure according to the conditions of the modern competitive environment. Transformation is the initial stage in support for innovational objects by means of programs, grants, and strategies in the sphere of innovational changes and centers of commercialization of technological products. The Asian model of “model development” is based on constant update (пwith the help of implementation of new projects) of the innovational infrastructure. The key objects of innovational infrastructure are cities-technological parks and brain cities. The top-priority concept of development of the innovational infrastructure is the precondition for creation of “cities of future” or the strategy “today is better than tomorrow” (Maier 2013). The system of ﬁnancing of these programs is built on interaction between high-tech business, which commercializes technologies within the created innovational environment, and state as a participant of innovational interrelations. As a result, the model of initiation of “model development” of innovational infrastructure is brought down to formation of “useful effect turnover” – i.e., the system of relations in which each participant implements the planned initiatives. The tools of this system are not aimed at application of ﬁnancial accumulation of assets in the objects of innovational infrastructure. Top-priority attention in this issue is paid to creation of the institutes of development, namely geographical centers of transfer technologies and companies under the direction of scientiﬁc society. The European model of “model development” of innovational infrastructure is observed in such countries as Belgium, the UK, Italy, the Netherlands, and France. This model is based on differentiated innovational infrastructural objects (technological parks and fundamental structures of regional economy). The presented objects are formed under the influence of cross-integration connections within the EU. The key investors within creation of innovational infrastructure are the European Investment Fund and commercial companies. On the whole, the European model is built on the basis of replacement of innovational technologies according to the programs of “correction of priorities” and “overtaking innovations”. It could be noted that the European model is a prototype of the American system of management and development of

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innovational infrastructure. Within the European model, innovational plans are developed and quasi-companies are created, which are oriented at market needs and consist of scientiﬁc groups. The presented models of initiation of “model development” of innovational infrastructure have similar and differentiated peculiarities. The European model of initiation is similar to the American one. Despite this, the European model has the features of the Asian system, related to the process of ﬁnancing of innovational infrastructure. At that, the dominating position of the American model makes the representatives of the Asian economic space to move towards creation of a unique system of development of the objects of innovational and technological activities. The process of development of regional innovational infrastructure is completely different in the Russian economy. Figure 1 shows scenario periodization of directions of development of innovational infrastructure in the regions of the RF.

Creation of technological parks and business incubators

Formation of the model of regional innovational infrastructure (RII)

Conclusion of agreements on financial support for RII

1990-1995

Transformation of certain RII into centers of transfer of technologies Creation of the system of quick commercialization of innovations

Preparation of personnel for servicing RII

1996-2000 Selective support

Formation of federal and regional programs of development of RII

Creation of expert centers for innovational activities of RII

Provision of consulting support for innovational projects

2001-2005

Implementation of subsidizing measures within development of RII

Implementation of road maps of development of RII

Creation of data bases of experts within venture and technological funds

RII’s entering information platforms of the National Technological Initiative

Mass distribution of concepts and ideas of RII

2006-2010

System of non-correlation measures

2011-2017 Long-term initiatives

Fig. 1. Scenario periodization of directions of development of innovational infrastructure in the regions of the RF.

4 The Key Aspects of Creation and Progressive Development of Russian Regional Innovational Infrastructure Scenario periodization of the directions of development of innovational infrastructure in regions of the RF has ﬁve time periods. The orthodox scenarios of these stages are the concepts that are the main ones in the state innovational policy of the country: – selective support for the objects of innovational infrastructure (1990-2000) – the process of selective ﬁnancing and development of project directions in the sphere of construction of regional innovational infrastructure;

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– system of non-correlation measures (2001-2010) – implementation of directions of innovational activities that are not structured and not related to each other; – formation of long-term initiatives (2011-2017) – development of long-term directions of development of regional innovational infrastructure in the aspect of full transformation and modernization of innovational policy of the subjects of the RF. Despite the duration of the scenario lag, stage-by-stage development of innovational infrastructure in the regions of the RF was performed in the course of ﬁve-year period. Let us view these periods, distinguishing the peculiarities of development of innovational infrastructure in the regions of the RF. Stage 1. Creation (1990-1995). This stage reflects fundamental directions for creation of the objects of regional innovational infrastructure, which consists in: – implementation of investment plans for construction of technological parks and business incubators; – formation of the model of regional innovational infrastructure; – conclusion of agreements on ﬁnancial support for regional innovational infrastructure. Stage 2. Provision (1996-2000). In continuation of the ﬁrst stage, the process of provision includes formation of the system of preparation of personnel for servicing regional innovational infrastructure, creation of the model of quick commercialization of innovations and determination of top-priority plans of transformation of certain regional objects of innovational infrastructure into the centers of transfer of technologies. Stage 3. Institutionalization of the process (2001-2005). In this period, under the control of the state structures, institutes and normative & legal basis for regulation and development of the objects of regional innovational infrastructure are formed. The measures of institutionalization of the process of development of the infrastructure objects include formation of federal and regional programs, creation of expert centers of innovational activities, and provision of consulting support for innovational projects. Stage 4. Improvement (2006-2010). In its essence, the process of development of regional objects of innovational infrastructure was started at the stage of improvement in early 2006. This stage put before the public authorities the issue of the necessity for providing the regional investors with subsidies during formation of new algorithms for interaction between state and business. Based on this, road maps were implemented into the system of state planning as information & analytical tools of implementation of short-term and long-term strategy of territory’s development. The ideas of creation and modernization of innovational infrastructure were reflected in all regional programs for stimulation in development of innovational activities of the subjects of the RF. Stage 5. Re-orientation. The ﬁnal stage of development of innovational infrastructure in the recent years is related to the process of re-orientation of tasks in favor of technologization of innovational objects. Based on this task, data bases of experts within venture and technological funds are created and project elements of development of innovational infrastructure are reflected in the strategy of the National Technological Initiative. At that, formation of new approaches to improvement of regional innovational infrastructure does not allow for deep change in public conscience in favor

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of importance of perspectiveo development of this direction. Based on this thesis, it is possible to distinguish certain directions of development of innovational infrastructure of Russia’s regions, which are of top-priority importance.

5 Top-Priority Directions of Perspective Development of Innovational Infrastructure of Russia’s Regions Top-priority directions of perspective development of innovational infrastructure of Russia’s regions are formed on the basis of the system of algorithmic actions. The system of algorithmic actions envisages the plan of actions with stage-by-stage direction within the process of studying the scientiﬁc objects. Top-priority directions of perspective development of innovational infrastructure of Russia’s regions include ﬁve key measures that reflect managerial & analytical and legal aspects of the studied issue. I. Preparation of the federal program for usage and integration of regional agents for development of innovational infrastructure. The measures within this program are based on attraction of the main agents of regional economy for support in development of innovational infrastructure. The agents are various subjects of sectorial directions of the regional system of interrelations. For example, it for development of scientiﬁc centers with innovational production, it is expedient to use industrial companies, R&D centers in the sphere of solving the problems of industrial production, and other subjects of small and medium business. In this program, it is necessary to provide the algorithm of actions that will allow – on the basis of compromises and mutual interests – to form the system of development and commercialization of products within regional innovational infrastructure. II. Implementation of projects for development of regional innovational infrastructure within student graduation works. The presented direction is closely related to the attempt of the Ministry of Science and Education of the RF and certain large federal universities (e.g., Financial University with the Government of the RF) to implement the elements of project management into the system of state ﬁnal attestation. Very often, the tool of project management is used at the chairs with practical experience of implementation of state and business studies within research order. According the fact that most universities partially function in the innovational environment, there emerged the issue of implementation of project management for development of these infrastructural objects. Subjects of educational environment that receive scientiﬁc services via application of innovational infrastructure must have a choice of specialties. Having selected the project mechanism, a student must be freed of preparation of graduate qualiﬁcation work on another topic. III. Creation of information platform “Innovational experience”. Within this event, the key aspect is development of the information platform on transfer of experience in the sphere of development and management of the objects of innovational environment. Based on digitization and intellectualization of

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information space, the role of Internetized platforms for development of regional and innovational societies within national and international network platforms grows. Development of the information platform “Innovational experience” will allow for online consideration and analysis of the best global and Russian practices for development, transformation, and modernization of the objects of regional innovational infrastructure. IV. Allocation of articles of the subject of the RF for order of innovational products for development of the objects of regional innovational infrastructure. Financial support within regional budgets could be built not on the basis of direct subsidies for supporting the functioning of the objects of innovational infrastructure but through regional order for innovational products. Firstly, this mechanism will allow for more effective tracking of spent ﬁnancial assets for these articles of the regional budget. Secondly, providing the objects of innovational infrastructure with regional order will form preconditions for development and communicative interaction between business structures within innovational activities. V. Creation of the model of management of regional innovational infrastructure (PERT, PATTERN). The key measure for development of the objects of regional innovational infrastructure is creation of the management model that would include stage-by-stage mechanism of implementation of this process. Imitation of this model should be performed with the method Program Evaluation Review Technique, which allows – on the basis of Gant diagrams and quantitative criteria of mathematical substantiation – implementing management of the studied object. The above top-priority directions of perspective development of innovational infrastructure of Russia’s regions are systemic components of the single process of functioning of structural objects within innovational environment. Gradual shift of directions from program provision to project management allows achieving planned results within development of innovational infrastructure. At that, gradation of toppriority directions and their informatization on the basis of developed platform will created a precedent in usage of digital technologies that are aimed at solving regional problems.

6 Conclusions The topic of generic classiﬁcation of the objects of innovational infrastructure has a lot of proprietary divisions. They key principle of grouping and differentiation of generic objects is distinguishing the signiﬁcance of innovational and technological initiative of innovational infrastructure in the aspect of region’s development. In this article, classiﬁcation of innovational infrastructure was performed on the basis of distinguishing the key directions of top-priority functioning of objects that allowed determining their different characteristics (production, expert, information and analytical, venture, and educational). Based on analysis of the system of initiation of “model development”, structural models were determined, which are of top-priority value for functioning and

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development of innovational infrastructure in foreign countries: American, Asian, and European. The presented models of initiation of “model development” of innovational infrastructure have similar and different peculiarities. The European model of initiation is similar to the American one. Despite this, the European model has the qualities of the Asian model, related to the process of ﬁnancing of development of innovational infrastructure. At that, the dominating position of the American model makes the Asian model to move towards creation of a unique system of development of the objects of innovational and technological activities. Development of the Russian market of innovational infrastructure is seen according to periodization, in which peculiarities of this process are scenarios and stages. It is established that development of regional innovational infrastructure in the RF took place on the basis of selective support for the objects of innovational infrastructure and the system of non-correlation measures and formation of long-term initiatives. These scenarios are seen according to the key periods of transformation of innovational market – namely, creation, provision, institutionalization, improvement, and reorientation of the process of development of regional infrastructure. Despite the intensive development of the issue of perspective functioning of innovational infrastructure in the regions of the RF, certain normative and information problems of regulation of these objects remain unsolved. According to the authors, it is necessary to pay attention to such directions of development as preparation of the federal program for usage and integration of regional agents for development of innovational infrastructure, implementation of projects within student graduation works, creation of information platform “Innovational experience”, allocation of articles of the regional budget for orders of innovational products, and imitation of the model of management of regional innovational infrastructure (PERT, PATTERN).

References Balco, P., Greguš, M.: The implementation of innovative services in education by using cloud infrastructure and their economic aspects. Glob. J. Flex. Syst. Manag. 15(1), 69–76 (2014) Hendrick, R.: An information infrastructure for innovative management of government. Public Adm. Rev. 54(6), 543–550 (1994) Kasarda, J.D., Rondinelli, D.A.: Innovative infrastructure agile manufactures. Sloan Manag. Rev. 39(2), 73–82 (1998) Kashitsyna, T., Berkovich, M.: Strategic development of the innovative infrastructure of region. Asian Soc. Sci. 10(21), 145–151 (2014) Maier, L.: Innovation incubators-entities of support of small and medium-sized enterprises’ competitiveness in the modern economy. Economie si Sociologie: Revista TeoreticoStiintiﬁca, No. 2, pp. 67–86 (2013) Menshchikova, V.: Innovative development of the region: key directions of improvement of innovative infrastructure. In: Economy Modernization: New Challenges and Innovative Practice: Conference Proceedings, pp. 65–67. Scope Academic House B&M Publishing (2013) Shebeko, K.K.: Innovative infrastructure of scientiﬁc-industrial cluster. Economics and Baks No. 2, pp. 97–101 (2016)

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Simonova, E.V., Lyapina, I.R., Kovanova, E.S., Eldyaeva, N.A., Sibirskaya, E.V.: Characteristics of interaction between small innovational and large business for the purpose of increase of their competitiveness. In: Popkova, E.G. (ed.) Russia and the European Union, Development and Perspectives, pp. 407–413. Springer International Publishing, AG (2017) Stroeva, O., Lyapina, I., Konobeeva, E., Konobeeva, O.: Effectiveness of management of innovative activities in regional socio-economic systems. Eur. Res. Stud. XVIII, 59–72 (2015) Yang, T., Long, R., Li, W., Rehman, S.U.R.: Innovative application of the public-private partnership model to electric vehicle charging infrastructure in China. Sustainability 8(8), 738 (2016)

Strategic Goals of Socio-Economic Development of Regions in the Conditions of Economic and Financial Limitations Elena V. Endovitskaya(&), Igor E. Risin, and Yuri I. Treshchevsky Voronezh State University, Voronezh, Russia [email protected], [email protected], [email protected]

Abstract. The authors study the content and structure of strategic goals of Russia’s regions in the conditions of economic and ﬁnancial limitation of the 2010’s. The global and Russian experience of strategic planning show the necessity for setting the system of goals that correspond to internal parameters and external conditions of socio-economic systems. At that, the goals must have quantitative characteristics. The authors study goal settings of a range of regions of the Russian Federation and substantiate and approbate – by the example of Voronezh Oblast – the theoretical and methodological approach to formation of the system of interconnected indicators that reflect achievement of the set strategic goals of region’s socio-economic development. As a result of the research, the content of strategic goals of socio-economic development of Voronezh Oblast is offered and the indicators of their achievement are determined. Keywords: Strategic goals Indicators

Socio-economic development of region

GEL Classiﬁcation Codes: R 58 R 58

R 59

1 Introduction The state of socio-economic systems is subject to high risks, caused by quick changes in the global and national ﬁnancial systems. The most mobile part of economy – ﬁnances – is subject to such changes, as it contains subjects of different institutional nature: public authorities of various levels, large business, small and medium business, individuals. This completely changes the conditions of competition in ﬁnancial markets as compared to other sectors of economy. For example, as for industrial sphere, it is impossible to enter production without large own capital (except for separate examples of working in completely new directions of production in the sphere of information technologies). Even in this case, the effective “new idea” has to be supported by large investors who see the possibility of its implementation in real processes. The situation is different in the ﬁnancial sphere – banking structure that are interested in attracting assets from economic subjects that are not aware of regularities of functioning of ﬁnancial tools, create high demand through mass media and aggressive advertising. As a result, demand for certain ﬁnancial tools grows very © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 229–235, 2019. https://doi.org/10.1007/978-3-030-00102-5_24

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quickly. There appears a situation, which is known in Russia as “ﬁnancial pyramid” – it is built due to initiative of large “players” of the markets and it is supported by a lot of ﬁnancially weak and incompetent subjects. Due to their large number, a ﬁnancial machine is formed with low level of provision with material, labor, intellectual, and other resources. Limitations in this case are presented not by the state of ﬁnancial tools but by insufﬁciency of their limitation. On the other hand, vectors of action of ﬁnancial tools – due to their high mobility – change under the influence of the factors of economic, social, and political character. As to regions of Russia, the problem consists in the wide specter of emerging ﬁnancial and economic limitations that are related to the regime of sanctions and counter-sanctions; reduction of prices for traditional export products; change of volumes and structure of import; new spatial and functional priorities of investment policy of the state.

2 Discussion One of the problems of strategic development of Russia’s regions is high level of their differentiation according to economic, social, and institutional parameters (Treshchevsky et al. 2017; Risin et al. 2017); (Sazonov et al. 2013; Popkova et al. 2018a, 2018b; Treshchevsky et al. 2018). Low predictability of the level of influence of new ﬁnancial and other limitations on economy and social sphere of regions requires formation of tough basis of socio-economic policy, based on the strategy of region’s socio-economic development. In the conditions of ﬁnancial and economic limitations to formation of strategies of regions, it is necessary to set additional requirements. Based on theoretical studies and practice of development of strategies of the regional level, we offer the main provisions of the theoretical and methodological approach to substantiating the goals of region’s socio-economic development: – region’s mission should reflect its functional speciﬁcs; – general goal of the new strategy should ensure succession and update of goals of the implemented strategy of socio-economic development of the region until 2020; – goals of subjects of management of various levels should take into account diversity of preferences of various institutional groups of the region (Endovitsky et al. 2017); – number of priorities in the economic, social, and spatial aspects should be limited (in our opinion – down to one priority in economy, social sphere, and organization of space); – goals should be determined quantitatively (in the usual conditions, goals could be reflected not only by quantitative indicators but also qualitative characteristics); – narrow list of goals is necessary – those that are critical for preserving stability of region’s socio-economic system; – it is important to ensure orientation at invariant (common for Russian regions) goals, deﬁned in the program documents of the public authorities of the RF: the Strategy of national security of the RF; Message of the President to the Federal Assembly of the RF dated March 1, 2018; the Project of the Concept of spatial development of the RF. – social goals are oriented at support for poorly protected social groups of population, development of education and healthcare.

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3 Strategic Goals of Socio-Economic Development of Russia’s Regions In the enlarged form, strategic goals of region’s socio-economic development are determined by the example of Voronezh Oblast. 3.1

Systematization of the Goals that Are Set in the Program Documents of the Federal Center

The data presented in Table 1 allow stating the following: – goals in the documents of the Federal Center are oriented at achievement of similar but, mostly, various goals that are determined by speciﬁcs of the initial document; – each goal has a lot of variants of quantitative expression; – quantitative expression of goals, formulate in a range of documents (in this case – “Concept of the strategy of spatial development”), is difﬁcult. Table 1. Strategic goals that are set by the Federal Center of the RF (selection). “Strategy of National Security of the RF”

Development of human potential Reduction of the level of social and material inequality of population Provision of economy’s transition to a new level of technological development Russia’s entering the leaders as to the volume of GDP Increase of social mobility, quality of general, professional, and higher education, and its accessibility for all categories of citizens Development of fundamental scientiﬁc studies Increase of life span Reduction of the level of disability and death rate Increase of the number of population

“May” Decrees of the President of the RF (2012), the Message of the President to the Federal Assembly of the RF Increase of rates and provision of sustainability of economic growth Increase of real income of population Preservation and strengthening of population’s health Increase of birth rate Increase of life span Improvement of population’s housing conditions Increase of accessibility of housing and quality of housing and utilities services Growth of the volume of high-tech medical help; liquidation of school buildings that are in critical condition;

The project of the Concept of spatial development of the RF

Creation of spatial environment that is favorable for human’s life activities Increase of competitiveness of the Russian economy based on its innovational modernization in view of modern factors of placement of production forces Maximum opening of regional and local socioeconomic potential Minimization of spatial transaction costs for economic subjects, supporting their mobility

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The above provisions require unambiguous deﬁnition of goals in strategic documents of the regions of the RF, which is usually in practice (Table 2). Table 2. Strategic goals of Russia’s regions (regions with the high level of elaboration of strategic documents). Regions of the RF Vologda Oblast

Kamchatka Krai Krasnoyarsk Krai

Republic of Bashkortostan Republic of Sakha (Yakutia)

St. Petersburg

Tambov Oblast

Khabarovsk Krai

Strategic goals Implementing the policy of population saving by preserving demographic potential and development of human capital by means of competitiveness of the sphere and formation of the space of human’s development Formation of conditions for sustainable socio-economic development of the Krai by means of optimal usage of territory’s unique resources Provision of high quality of population’s living standards and region’s attractiveness for residing on the basis of effective development of regional economy Competitive region with sustainable economy and developed social infrastructure, which is among top-10 Russia’s regions Leader of the Far East and Arctic area of the RF, comfortable and safe for realization of human capital, this republic has unique nature potential and is a “magnet for technologies” for life in the conditions of low temperatures and wide territories Provision of stable improvement of living standards of urban citizens on the basis of provision of sustainable economic growth with usage of the results of innovational and technological activities and increase of global competitiveness of St. Petersburg Leadership in population’s satisfaction with quality of life and environment on the basis of new industrialization, social modernization, full digitization, and effective state management Turning Khabarovsk Krai into the central growth pole of the Far East, which is the leader in the sphere of mutually determined growth of human capital, innovational economy, spatial organization, and international cooperation

The authors think that formulation of the general goal, which does not require speciﬁc quantitative expression, is justiﬁed. However, it should contain all components that characterize basic vectors of region’s development, which further on will be assessed quantitatively. 3.2

Strategic Goals of Region’s Socio-Economic Development (by the Example of Voronezh Oblast)

In the process of formation of the system of region’s strategic goals, it is necessary to ensure their succession. According to this requirement, two components are important for Voronezh Oblast: formation of favorable environment for living activities of human and development of entrepreneurship (set in the Strategy-2020).

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These goals are for a new time period (until 2035). For example, the list of strategic goals of Voronezh Oblast should include: – achieving leadership positions of the region in the Central Federal District as to the level of development of human capital and population’s living standards, reduction of socio-economic inequality; – achievement of indicators of dynamics of development of Voronezh Oblast’s economy, which are higher than average Russian indicators. It should be noted that succession envisages emergence of new goals. As to conditions of ﬁnancial and economic limitations, rational spatial conﬁguration is important, which allows ensuring economy of resources. Hence the new goal for regions – effective placement of productive forces, which is speciﬁc for the regions, their groups, and business structures (Vertakova et al. 2016). Appearance of such goal has to ensure economic growth, which is necessary in any conditions of socio-economic development (Popkova et al. 2018a, 2018b; Parakhina et al. 2017). A new goal for Voronezh Oblast is polycentric spatial development, which ensures creation of infrastructural basis that ensures effective specialization of municipal entities and preservation of their production potential (Makarov et al. 2017). This component of the strategy could be expressed by quantitative indicators that reflect the level of inter-municipal differences and are signiﬁcant from the point of view of region’s population. At the same time, it is necessary to note weak compatibility of the indicators of the country’s regions – because their measuring is difﬁcult due to different functional and spatial localization, complexities of measuring of parameters of socioeconomic development of municipal entities of the country. Table 3. The system of indicators of socio-economic development of Voronezh Oblast in the long-term. Goals 1. Achievement of leadership positions of Voronezh Oblast in the Central Federal District as to the level of human capital development and population’s living standards. Reduction of socio-economic inequality

Indicators 1. General birth rate (per thousand) 2. Expected life span (years) 3. Dynamics of real money income of population (interest to previous year) 4. Share of population with money incomes that are lower than the subsistence level (%) 5. Unemployment rate in full labor market (according to the methodology of International Labor Organization, %) 6. Total area of residential premises per 1 resident (m2) 7. Provision of pre-school children with places in pre-school educational establishments (per 100 children) 8. Share of expenditures in GRP for healthcare, education, and culture (%) 9. Index of physical volume of nature protection expenditures (continued)

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Goals 2. Supporting the dynamics of development of economy that exceeds the average Russian indicators and increase of its competitiveness. Strengthening of region’s positions in the global economic space

3. Provision of polycentric development of region’s economy

Indicators 10. GRP per capita (RUB per capita) 11. Volume of investments into ﬁxed capital (RUB million) 12. Index of labor efﬁciency according to basic types of activities (% to the previous year) 13. Growth of products for the basic types of activities per year (%) 14. Turnover of small and medium companies per year (RUB million) 15. Share of products of high-tech and sciencedriven spheres in GRP (%) 16. Volume of direct foreign investments ($ million) 17. Volume of export ($ million) Coefﬁcients of inter-municipal differences according to the indicators: 18. Provision with housing fund (m2 per capita) 19. Volume of investments into ﬁxed capital per capita (RUB million) 20. Coefﬁcient of natural growth (per thousand) 21. Coefﬁcient of migration growth (per thousand) 22. Monthly average wages (RUB) 23. Beginning of operation of residential premises by means of all ﬁnancing sources (m2)

As to the above three strategic goal, the strategy should contain the minimum set of indicators, which allow for easy determination of the level of goals’ achievement. For Voronezh Oblast, it is possible to offer the following set of indicators, which reflects three basic components of region’s development – human potential, economy, and organization of space. The offered system of indicators that are important for Voronezh Oblast is presented in Table 3.

4 Conclusions The performed analysis of strategic documents of the federal and regional levels showed that they are mostly oriented at achievement of qualitative indicators. Financial and economic limitations require formation of the system of strategic goals of regions’ development, which require unambiguous treatment of various economic processes. The set of strategic indicators, which characterize economic and social goals, could be

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uniﬁed according to the country’s regions. The block of indicators, which reflect the state and perspectives of spatial development, is individual as of now. Comparison of regions is complicated due to speciﬁcs of the state of their production forces. For the regions of the Central Federal District, it is possible to offer the indicators that characterize inter-municipal differences in the level of wages, provision with residential premises, investments into production and residential construction, and natural and immigration growth of population.

References Treshchevsky, Y., Nikitina, L., Litovkin, M., Mayorova, V.: Results of Innovational Activities of Russian Regions in View of the Types of Economic Culture. Russia and the European Union Development and Perspectives Part of the series Contributions to Economics. Book. Contributions to Economics, pp. 47–53 (2017) Risin, I.E., Treshchevsky, Y.I., Tabachnikova, M.B., Franovskaya, G.N.: Public Authorities and Business on the Possibilities of Region’s Development. In: Popkova, E. (ed.) Overcoming Uncertainty of Institutional Environment as a Tool of Global Crisis Management. Contributions to Economics, pp. 55–62. Springer, Cham (2017) Sazonov, S.P., Lukyanova, A.V., Popkova, E.G.: The ﬁnancial budgeting governance in transitive economies. World Appl. Sci. J. 23(11), 1538–1547 (2013) Popkova, E.G., Bogoviz, A.V., Pozdnyakova, U.A., Przhedetskaya, N.V.: Speciﬁcs of economic growth of developing countries. Stud. Syst., Decis. Control 135, 139–146 (2018a) Treshchevsky, Y.I., Voronin, V.P., Tabachnikova, M.B., Franovskaya, G.N.: Economic and statistical analysis in evaluating the perspectives of structural changes of regions’ economy. In: Advances in Intelligent Systems and Computing, pp. 521–529. Springer International Publishing AG; Cham (2018) Endovitsky, D.A., Tabachnikova, M.B., Treshchevsky, Y.I.: Analysis of the economic optimism of the institutional groups and socio-economic systems. ASERS J. Adv. Res. Law Econ. VII (6, 28), 1745–1752 (2017) Vertakova, Y., Risin, I., Treshchevsky, Yu.: The methodical approach to the evaluation and development of clustering conditions of socio-economic space. In: Proceeding of the 27th International Business Information Management Association Conference – Innovation Management and Education Excellence Vision 2020: from Regional Development Sustainability to Global Economic Growth, IBIMA 2016 (2016) Popkova, E.G., Bogoviz, A.V., Ragulina, Y.V., Alekseev, A.N. Perspective model of activation of economic growth in modern Russia. Stud. Syst. Decis. Control 135, 171–177 (2018b) Parakhina, V.N., Ustaev, R.M., Boris, O.A., Maximenko, L.S., Belousov, I.N.: Study of tendencies of formation and evaluation of hr innovational potential of the regions of the Russian Federation. In: Popkova, E.G. (ed.) Overcoming Uncertainty of Institutional Environment as a Tool of Global Crisis Management, pp. 295–301. Springer International Publishing AG (2017) (Ser. Contributions to Economics) Makarov, E.I., Nikolaeva, Yu.R., Shubina, E.A., Golikova, G.V.: Impact of Risks on Stable and Safe Functioning of Transport and Logistics Cluster of the Transit Region (E-source). Russia and the European Union, Development and Perspectives. Popkova, E.G. (ed.), pp. 321–326. Springer International Publishing AG (2017). (Ser. Contributions to Economics)

Global Information Space: A Non-linear Approach Nelli I. Morozova ✉ , Olga S. Buryakova, Natalia Z. Aliyeva, and Elena B. Ivushkina (

)

Don State Technical University, Rostov-on-Don, Russia [email protected], [email protected], [email protected], [email protected]

Abstract. The study of the trends in the formation of the global digital space and the identiﬁcation of threats and dangers of its development from the point of view of a nonlinear approach suggests that, on the one hand, the global digital space serves the interests of humanization, partnership, the formation of a post‐ industrial society on the whole earth, on the other hand, it introduces a new world order, forms representations about the unstable conﬂict-like self-organizing digital space (Ivushkina et al. 2017). The geopolitical dimension of the global digital space and the convergence-integration processes taking place in it in the context of cardinal global changes in the world can bring a non-linear under‐ standing of the modern society. To do this, it is necessary to identify the theoret‐ ical, methodological and conceptual aspects of modernization trends, the contra‐ dictoriness of the world dynamics and the formation of a global digital space that play a dual role: both development triggers and destabilizing factors for the formation of a global non-linear information society that take place in the modern global world and paradigmatically - categorical grid of information knowledge. The global digital space in the context of the non-linear approach requires the analysis of threats to information impacts of the global digital space and its dangers in the sphere of public, mass, national consciousness, as well as threats to the identity and lifestyle of a person in the global digital space. Keywords: Global digital space · Non-linear approach Contradictory world dynamics · Dangers and threats

1

Introduction

The global society enters the digital age via the processes of globalization, wide imple‐ mentation of information and communication technologies into all spheres of human activities, and quick expansion of the information space. Its inﬂuence is changing the information and communication reality, basic peculiarities and regularities of economy, society, and culture, its structure and identity of individuals. Digital media environment is an important part of the global digital space. Dynamics of development and estab‐ lishment of the global digital space are determined by domination of new technological revolution. Establishment of digital space is related to inclusion into it of the whole totality of network and computer technologies, as well as Internet resources. Development of digital space takes place according to the main technological trends, which include © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 236–240, 2019. https://doi.org/10.1007/978-3-030-00102-5_25

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development of telecommunication infrastructure, new computer, network, and mobile technologies, and implementation of technological innovations into complex sociotechnical systems. Such emerging global digital space determines the new information picture of the world, in which information becomes not only the driver of technical and social development, but the main characteristics of material systems and their interac‐ tion. However, together with the above positive characteristics of the global digital space, it also leads to global changes of the modern society, new threats, and inter-civilization contradictions. They include information wars, cyberterrorism, and information neocolonialism. More developed civilizations use information threats and try to ideologi‐ cally subdue weaker civilizations and set a new world order. Thus, the global digital space serves the interests of humanization, partnership, and establishment of postindustrial society in the whole world, but, on the other hand, it sets a new world order and forms ideas of unstable conﬂict self-organizing digital space, which makes it impor‐ tant to study this phenomenon in a new non-linear approach.

2

Theoretical Basis of the Research

The theoretical and methodological basis of the research includes the works of the scholars who studied ideological, general theoretical, and methodological problems of genesis and establishment of the global digital space. In particular, trends and risks of development of digital space are studied in the works of M.R. Arpentyeva, S.M. Bray‐ chevsky, V.A. Ilganaeva, V.P. Kolomiets, S.L. Urazova, N.O. Punchenko, L.A. Pronina, and E.I. Yaroslavtseva. Philosophical understanding of non-linear nature and synergy of the world and recon‐ sideration of the existing ideas of the world, society, and the global digital environment create synergetic non-linear ideology, which is presented in the works of V.I. Arshinov, K.K. Delokarov, S.P. Kapitsa, S.P. Kurdyumov, E.N. Knyazeva, A.P. Nazaretyan, G.G. Malinetsky, D.S. Chernavsky, etc. Analysis of the problem of reconsideration of the existing opinions on the global digital space from the point of view of the non-linear approach creates the idea of the mechanisms with the help of which digital environment becomes a moving force of transformations of social development – which is studied in the works of O.V. Syun‐ tyurenko, O.N. Yanitsky, and C. Beck. Despite the existing theoretical and methodological basis, it is necessary to note the absence of the generalizing research on the presented topic. The purpose of this article is to conﬁrm the oﬀered hypothesis that the methods that are based on synergy and nonlinearity allow presenting a new understanding of digital space, which will allow recon‐ sidering the current changes in the age of globalization. This problem was treatment of the global digital space, its nature, establishment, and solution in the unstable world. It is possible to oﬀer using the possibilities and means of philosophy of knowledge for considering gnoseological aspects of the problems of the global digital space.

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Existence of information space in time is determined by existence of humanity. The current changes are predetermined by communication means, methods of storing and provision of information, and level of its accessibility. The notion “digital space” is related to the notion “information space”. It is “largely identical to the global treatment of information space, deﬁned by the Strategy of development of information society as totality of information resources, created by subjects of information environment, inter‐ action of such subjects and their information systems, and the necessary information infrastructure” (Ovchinsky 2017). It is possible to say that “digital space is a metaphor, which characterizes the space of distribution of signals in any managing systems. It is obvious that digital environment (space) acquired a completely new quality with appearance of the Internet, based on information technologies and computational equipment” (Ovchinsky 2017). Digital environment is determined by digital technologies, which work with discrete signals, unlike analog technologies with continuous signals. Computational digital equipment uses digital technologies in computers, robototronics, radio, telecommunication devices, etc. The modern world is called digital world, which converges digital environment, digital technologies, digital society, digital state, and its citizens (Ovchinsky 2017). Year 2017 characterizes the decisive phase of digital revolution with the following factors: – Internet connection for each second person in the world; – implementation of completely new, breakthrough technologies (digital platform, digital eco-system, 3D-print, robotization, “Internet of things”); – total connection and emergence of digital interconnected world. These include digital platforms, digital eco-systems, deep analysis of big data, tech‐ nologies of “Industry 4.0” - 3D print, robototronics, and Internet of Things. As was mentioned in conceptual documents of the leaders of the digital world, the most impor‐ tant criterion of the country’s transition into the digital world is total connection, inte‐ gration of personal devices (multi-functional items), public networks, corporate networks, and government infrastructures into single whole – digital interconnected world. This interconnection is called convergence, which is applied at all levels of knowl‐ edge, technologies, and society. In a wide sense, “convergence is treated as growing and transforming interaction between scientiﬁc disciplines, technologies, societies, and spheres of human activities for achieving compatibility and integration. Convergence is important for information society, and analysis of social consequences of convergence allows solving the problems that cannot be solved by disciplinary sciences and allows creating new technologies and knowledge” (Baksansky 2014). At that, “various terrorist and extremist organizations widely use the mechanisms of information inﬂuence on individual, group, and public conscience for the purpose of increase of national and social tension, ethnic and religious hate, and propaganda of extremist ideology, and involvement of new participants with terrorist activities” (Beck 2016). Digital interconnected world increases the risks and threats proportionally and exponentially. This fact requires cardinal changes of approach to national digital security and cyber security as the main construct of digital security.

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Philosophy of science pays attention to change of the type of scientiﬁc rationality and way of thinking, change of paradigm of modern knowledge from classical to postclassical, possibility of using them for understanding the global digital space in totality of socio-humanitarian and natural factors. Scientiﬁc and methodological results of using non-linear ideas in this case is related to peculiarities of digital systems as open, complex, self-developing, and non-linear objects that change the nature of social and mass communications and to peculiarities of the processes that take place in them (branching, etc.). Complexity and non-linear character of formation of digital space lead to its special behavior, based on sensitivity to initial conditions, as a result of which crisis or cata‐ strophic development of the process in response to a slight initial inﬂuence is possible (Zayats 2017).

3

Methods and Objects of the Research

The theoretical and methodological basis of the research includes the works of foreign and Russian scholars. The research allows determining the common regularities of development of ideas on the global digital space and tracking transformation of its idea in the historical context. The methodological basis is the systemic approach, which orients the research at opening the integrity of the objects, determining multiple types of connections of complex object, and bringing them down to one theoretical picture. The systemic approach allows seeing the global digital space as a complex system in which elements of information and psychological convergence are connected. Consideration of the global problems, caused by its development, led to necessity for using the methods of the structural and functional approach. The tools of determining the speciﬁcs of the selected object include the comparativehistorical and comparative methods, which allow determining and comparing the levels in development of the studied object, determining historical parallels, and analyzing peculiarities of classical and modern concepts of convergence.

4

Research Results

The performed studies of development of the non-linear approach to the global digital space could be presented in the form of the following provisions. Studying the tendencies of formation of the global digital space and determining threats and dangers to its development from the point of view of the non-linear approach shows that on the one hand, the global digital space serves the interests of humanization, partnership, and establishment of post-industrial society in the world, and, on the other hand, introduces a new world order and forms ideas of unstable conﬂict self-organizing digital space. The tendencies of establishment of the global digital space and contra‐ diction of the world dynamics have a double role: as triggers of development and as destabilizing factors of formation of the global non-linear information society that take

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place in the unstable global world and in the paradigm-categorial grid of information knowledge. The received results allow showing cardinal changes in information and digital thinking in favor of non-linearity, in which realization of priorities of convergence and synergy comes to the foreground of the global digital society, which results in recon‐ sideration of the nature of digital inﬂuences on human and society. Apart from the above technological factor, which determines the new approach to digital society, there’s also a political factor. It is necessary to consider the threats of information inﬂuences of the global digital space and its danger in the sphere of public, mass, and national conscience, and threats to identity and way of human life in the global digital space. In all times, communication means and information space have been important tactical and strategic resources of power relations and a push for conﬂicts and wars. The concept of digital space is inﬂuenced also by the economic factor. The notion of information product is the process of objectiﬁcation of information and the object of intensive business. Thus, digital space develops with three factors: technological progress, political relation, and market.

5

Conclusions

The article presents theoretical & methodological and conceptual aspects of tendencies of modernization, contradiction of the global dynamics and establishment of the global digital space, which have a double role: triggers of development and destabilizing factors of formation of the global non-linear information society, which take place in unstable global world and in the paradigm and categorical grid of information knowledge. Acknowledgments. The reported study was funded by RFBR according to the research project No. 18-314-00009.

References Ivushkina, E.B., Zayats, Z.V., Buryakova, O.S., Alieva, N.Z.: Information and psychological convergence: methodology of creation. In: Contributions to Economics, pp. 39–45 (2017). http://doi.org/10.1007/978-3-319-60696-5_6 Ovchinsky, V.S.: Digital world of the 21st century (2017). http://www.oboznik.ru/?p=56731 Baksansky, O.E.: Convergence of knowledge, technologies, and society: beyond convergent technologies. Philos. Cult. 7(79), 1061–1067 (2014) Beck, C.: Web of resistance: Deleuzian digital space and hacktivism. J. Cult. Res. 20, 1–16 (2016)

Economic Efﬁciency of Using the Electric Grid Complex: Problems of Reserves of Network Power and Development of Intelligent Technologies Olga Danilova(&) and Irina Belayeva Financial University under the Government of the Russian Federation, Moscow, Russia [email protected], [email protected]

Abstract. The key problems in the functioning of the Russian electric power industry are reliability, safety, quality and availability of electricity, environmental impact. Here we aim to: (1) to discuss the results of the reformation and prospects of the electric power industry development and (2) analyze the results of the simpliﬁed approach of technological connection of consumers to the network infrastructure. As a tool for increasing the responsibility for the reservation of extra capacity it is proposed to introduce a fee for services in transfer of electric energy on the basis of the amount of maximum power of the appliance. Payment by users is not fully used reserves of capacity will optimize existing network infrastructure to eliminate the construction of networks, rational load of the substation. The solution of the problem is proposed to be carried out on the basis of a differentiated approach and the formation of a mechanism for payment of unused capacity reserve taking into account the operational redistribution of electricity between consumers. The electric power industry needs a full-scale modernization, replacement of economically inefﬁcient obsolete equipment with innovative, supporting the principle of Smart Grid intelligent energy systems. Transition of power engineering to digital technologies is the only possible way of improvement of quality and reliability of power supply and the solution of ﬁnancial and economic problems of a network complex without growth of tariffs and additional load on consumers. Keywords: Electricity reform Tariff setting in the electricity sector Economic system Smart grids JEL Classiﬁcation Codes: L94

P42 P47

1 Introduction The aim of the energy policy pursued in Russia is to create an innovative and efﬁcient energy sector of the national economy, ensuring energy security and sustainable industrial growth, increase the quality of life of the population, and strengthen the country’s foreign economic position. The growth of industrial production, which began in Russia in 2017 and continues in 2018, signiﬁcantly increased the requirements for © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 241–250, 2019. https://doi.org/10.1007/978-3-030-00102-5_26

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energy information security, flexibility and reliability of the entire electric grid complex (Belayeva 2014). The development and regulation of the electric grid economy of the country is carried out in accordance with a set of measures deﬁned in 1992 to reform the power industry and the formation of a competitive market for electricity (capacity). Over the years of reformation, more than a hundred and ﬁfty legislative acts have been adopted on restructuring, privatization and streamlining the rules of operation of energy companies in the market environment, considerable experience has been accumulated with consumers of energy resources and services of energy companies (Aleshina 2016). In 2009, The Energy strategy of Russia for the period up to 2030 was adopted, approved by the order of The Government of the Russian Federation No. 1715-R of 13.11.2009, The General scheme of placement of electric power facilities until 2035, The State program “Energy Efﬁciency and Energy Development”. However, the unresolved task of reforming-the liberalization of the electricity market and increased competition, which should result in lower electricity tariffs for consumers, leads the industry to the opposite effects. The mechanism of competition between producers for contracts with consumers announced by the reformers does not work, and a signiﬁcant increase in the network component in the ﬁnal price of electricity is the reason for the steady growth of tariffs, a factor hindering the development of the entire national economy. The result of the reformation of the electric power industry was the deterioration of all technical and economic indicators: increased speciﬁc fuel consumption for electricity production, in the generation and power grid economy decreased utilization of installed capacity, increased loss of electricity for its transmission, signiﬁcantly increased the number of production personnel (respectively, labor costs), the cost of construction of energy facilities has increased not only with the pre-reform period, but also in comparison with analogs of construction of power facilities by the leading foreign construction companies (Aleshina 2014). On average, the share of the network component in the price of electricity for consumers reaches 50%, which is signiﬁcantly higher than the prices prevailing in the world. In the regions, the situation is even worse: the cost of electricity for consumers due to the network component in the prices of the wholesale market grows from 1.5 to 3 times. Given that the cost of gas, which accounts for more than 60% of thermal power plants in Russia, is below the world level, this price structure indicates the extremely low efﬁciency of the entire electrical industry. The uncontrolled growth of the number of territorial grid companies receiving regardless of the volume of services rendered as part of the “boiler” tariff based on the provision of the necessary gross revenue also contributed to the growth of electricity tariffs. These negative changes have led to an increase in the costs of all economic agents to pay for electricity (Danilova 2014). According to Russian experts, the amount of ﬁnancial resources diverted from the ﬁnancial turnover of the real sector enterprises as a result of the growth of electricity tariffs amounted to at least 550 billion rubles a year, including only due to cross-subsidization of the population and consumers equated to them by almost 300 billion rubles. Currently, the total maximum capacity of consumers with a maximum capacity of not less than 670 kW connected to the electrical networks of distribution subsidiaries of PJSC «ROSSETI» is 87 GW and is used by consumers at about 44%. Inefﬁcient use of

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capacity occurs against the background of a chronic lack of investment in the power grid complex, signiﬁcant physical and technological deterioration of electrical networks. The average technical level of installed equipment in electrical distribution networks corresponds to the equipment that was used in developed countries 25–30 years ago in a number of parameters. In fact, 50% of distribution electric networks have developed their normative term, and 75% – two normative term. The total wear of distribution networks has reached 70%, of main electric networks – about 50%, which is much higher than in other countries with the same territory, where the wear indicator is 27– 44%. The investment program of PJSC “FSK EES” («Federal grid company EES») for the period 2016–2020 25% of the funds will be allocated for the implementation of technological connection of consumers, 29% of the funds for the development of electrical networks and 46% of the funds for modernization of ﬁxed assets. Investment programs of electric grid facilities of subsidiaries of PJSC “FSK EES” provide for modernization (renovation) of electric grid facilities in 2017–2026. in the amount of 495.7 billion rubles, and for the period 2021–2026 – 329.5 billion rubles. The main source of ﬁnancing for these programs should be own funds (depreciation and proﬁt) – 64%, attracted funds – 15%, the fee for technological connection – 9%, budget ﬁnancing, additional equity issue – 2%, other sources – 10%. The construction and maintenance of excess capacity requires appropriate operating and investment costs, to which network organizations allocate funds intended for the modernization and renovation of electrical networks. Taking into account the above, the purpose of this article is to develop a clear coordinated strategy for the development of the electric power industry. Special attention is paid to the need for the introduction of digital technologies in the power grid infrastructure, the development of intelligent control systems, the formation of automated data centers, the development of intelligent metering systems of electric energy.

2 Materials and Methods 2.1

Descriptive Analysis

A serious problem in reforming the Russian electric power industry since 2005 has been the availability of technological connection of consumers to electric networks in the regions. In order to solve the problem in 2015 at the legislative level, a number of signiﬁcant changes aimed at simplifying the procedures of technological connection were introduced: the number of administrative approval procedures and the connection time (up to 90 days) decreased, the cost of accession for preferential categories of consumers decreased, 50% of the investment component was excluded from the fee for technical connection. According to the Federal Law on modiﬁcation of Article 23.2 of the Federal Law “On the Electric Power Industry” the payment for construction of objects of the power grid economy performed within technical accession of the power accepting devices with the maximum power to 150 kW is not levied. Construction of distribution networks from existing power grid facilities to the applicant’s site for connection is made entirely at the expense of the network company. As a result,

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according to the Ministry of energy of Russia, if 5 years ago, according to the criterion of accessibility of the electric grid infrastructure in the world Bank’s DoingBusiness rating, Russia took almost the last 184 place, in 2017 Russia entered the top ten countries in this indicator (Lyubimova 2015). Along with the positive result of simpliﬁcation of the order of technical connection, the problem of optimization of network capacity reserves has sharply escalated. Every year the power company receives more than 500 thousand applications for new connection to electric networks. In accordance with the acts of technological connection in 2009–2016, the increase in the maximum capacity was 65 GW. Power generation by power plants of the Uniﬁed energy system of Russia in 2016 amounted to 59,576.3 million kWh, including thermal power plants – 59,324.0 million kWh., nuclear power plants - 252.3 million kWh. The structure of power generation by types of power plants of the Uniﬁed power system of Russia in 2016 is shown in Fig. 1.

Thermal power plant 58,6%

Power plants of industrial enterprises; 5,7%

Hydroelectric, wind farm, solar power plant 17,0%

Nuclear power plants 18,7% Fig. 1. Structure of power generation by types of power plants EES of Russia.

However, in practice, the connection of new consumers was not accompanied by a proportional increase in power consumption. Over the years of reforms in the electricity sector in the whole country, the useful power consumption has not increased by 1 kW-h. at the same time, the installed capacity of power plants has increased so much that more than 30 million kW of generation have been unclaimed (there are over the necessary reserves). Table 1 presents data on reserve capacities in the regions of the Russian Federation (the sample includes only entities with more than ﬁfty largest consumers of electricity). The dynamics of real energy consumption was twice lower than the increase in capacity and the average for the Russian Federation is 58%, which indicates a low utilization of network capacity introduced during this period. In 2015, the non-performance of obligations on the part of applicants for the supply of capacities amounted to more than 10 GWh in the whole country, which is 38% of the total amount of reserved but unclaimed network capacity. The connection of new consumers in the regions is not accompanied by a comparable increase in power

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Table 1. Reserves of network capacity in consumers with Pmax over 3 MW, for 2016. Subject Russian Federation 1. 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18. 19 20 21 22 23 24 25 26 27

Number of consumers

Tyumen region 80 Belgorod region 61 Kaluga region 62 Vladimir region 70 Omsk region 68 Moscow region 396 Perm region 61 Moscow 258 Samara region 80 Sverdlovsk region 181 Kirov region 50 Krasnodar region 122 Tula region 63 Ryazan region 55 Kemerovo region 68 Chelyabinsk region 113 Voronezh region 66 Altai territory 58 Saint-Petersburg 158 Orenburg region 57 Nizhny Novgorod region 115 Volgograd region 103 Chuvash Republic 50 Rostov region 121 Tver region 83 Krasnodar region 96 The remaining 38 1,053 subjects 28 Total 3,748

Electricities thousand kWh 36,226,163 7,627,078 982,772 1,940,008 3,238,991 3,143,956 8,003,835 3,819,295 6,424,396 12,282,534 2,132,445 2,235,663 1,755,980 1,847,718 1,837,353 9,003,518 2,502,657 981,017 2,767,104 4,537,990 5,120,870 3,738,274 1,495,703 2,035,914 1,199,107 1,773,101 63,643,209 192,296,651

P Fact. mW

Pmax. mW

4,389.3 6,406.7 990.5 1,485.6 229.9 440.7 297.0 571.7 616.9 1,256.9 2,035.4 4,228.4 1,635.5 3,489.1 848.9 1,834.8 876.3 1,942.9 2,026.0 4,550.3 319.7 750.3 473.8 1,238.2 350.8 924.7 263.5 740.1 408.3 1,203.9 1,643.3 4,922.9 421.4 1,302.1 181.2 589.3 324.2 1,054.6 631.5 2,091.1 748.7 2,776.9 626.3 2,427.1 244.1 957.2 445.3 1,923.8 195.4 954.1 323.5 1,698.8 21,546.7 51,762.2

Share of provision, % 31 33 48 48 51 52 53 54 55 55 57 62 62 64 66 67 68 69 69 70 73 74 74 77 80 81 53

29,893.6 71,856.8 58%

consumption, which indicates that the newly joined consumers do not use the requested value of the maximum power of 100%. For example, according to PJSC «Interregional distribution grid company of the North – West» and «Vologdaenergo» , in 2012–2016 in this region the average load of newly introduced power centers with voltage of 35 kV and above did not exceed 45%. This problem is typical for almost all regions of Russia. 2.2

Control Mechanism

The implementation of the state program to encourage consumers to join the electric grid has led to an overestimation and often irresponsible increase in the demand for new connections. According to the tariff setting in the electric power industry

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established by the Russian tariff system, the cost of services in transfer of electric energy does not depend on size of the maximum power declared within implementation of technology accession to the network organization, and is deﬁned only by the actual volumes of consumption. Networked organizations bear the additional burden and ﬁnancial costs of building and maintaining facilities that are not actually used. The increase in costs for the design, construction and reconstruction of power grid facilities and the operation of unloaded power grids leads to an increase in tariffs for consumers. Unreasonable forecasts lead to the construction of additional generating capacities that are operated underutilized and do not provide economic efﬁciency of investment. As a result, the investment component accounted for in tariffs for services is spent by network organizations not for its intended purpose - not for the modernization of existing electrical networks, but for activities on technological connection. Redundancy of excessive demand leads to increased capital investment, increased maintenance costs and maintenance of electrical networks in constant readiness to provide consumers with the full amount of declared maximum capacity. For example, in 2016 the volume of investment funds spent by the branch of PJSC «Interregional distribution grid company of Center» - «Kurskenergo» for technological connection amounted to 64% of the targeted investment of resources, and in 2017, the volume of these funds amounted to 58%. In 2014 – 2016 the amount of funds a branch of the PJSC «Interregional distribution grid company of the South» - «Astrakhanenergo» for the accession of the new regional consumers - the construction and reconstruction of substations and power lines, accounted for more than 60% of the investment program of the branch. For the purpose of rational use by consumers of the maximum power the Ministry of energy of the Russian Federation developed the mechanism of economic responsibility of consumers for use of incomplete volume of the declared capacities. The implementation of the proposed mechanism should ensure fair payment by consumers of all network capacity, including the reserved one (Kutovoy 2015). Payment of the reserved maximum power shall be made by the consumers having the maximum power of the power accepting devices not less than 670 kW. Tariffs for transmission services will be set for consumers with hourly electricity metering. Compensation of the corresponding expenses to owners of the reserved capacities is provided at observance of the following conditions: • the monthly actual capacity of the consumer in the preceding calendar year shall not exceed the maximum capacity by more than 60%; • actual capacity for the current calendar year shall also not exceed 60% of maximum capacity; • the amount of the maximum capacity to be paid for shall be determined as the difference between the maximum capacity and the actual capacity and the rate of payment, which shall gradually increase from 0.05 to 0.5 over a period of three years; • the fee for the reserved maximum capacity shall be determined by the rate for the maintenance of electric networks of the two-exhibition rate for services in transfer of the electric power differentially on voltage levels;

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• consumers from block stations for which the external network serves as a backup power source must pay 50% of the actual own power consumption, thereby compensating network organizations for the maintenance of networks. Implementation of the fair pricing mechanism should lead to the rejection of the use of excess maximum capacity and the fair distribution of its payment among consumers. The introduction of the charge for the reserved maximum capacity includes a mechanism in a single step, according to which deductions from revenue in tariff regulation should be applied to network organizations in case of insufﬁcient load of power centers. For individual network organizations fee for the unused maximum power can lead to a decrease in the necessary gross revenue to 10%. This is a fairly high ﬁgure. Therefore, currently the decision a “phased transition” to paying major consumers of underutilized reserve capacity (discussing the period of 5 years). Over the years, it is planned to carry out a full-scale modernization of the Russian power grid, replace the equipment with a fundamentally new, innovative, development and introduction of digital technologies, an intelligent electricity metering system. 2.3

Management Tool

Replacement of technically and morally outdated and already economically inefﬁcient infrastructure of the uniﬁed power system is an objective necessity for further development not only of the electric industry, but also of the entire national economy. Modern Supervisory control systems using existing Automated control system of technological process and SCADA TRACE MODE (High-tech Russian software system for process automation) cannot flexibly respond to emerging situational changes, which leads to failures and fan outages of network segments with appropriate ﬁnancial, technical, material and other consequences (Spiridonov 2014). In recent years, speciﬁc measures for the transition of energy to digital technologies have been regularly reviewed at the government level. The implementation of a national project to develop an intelligent energy system in Russia will reduce infrastructure costs and create conditions for expanding investments not only in the energy sector, but also in other industries. A fairly new direction of energy modernization is the implementation of the national technology initiative (EnergyNet) project aimed at the introduction of Smart Grids technology with modern control and management devices in distribution networks. EnergyNet-the concept is quite extensive, uniting several large blocks in the ﬁeld of electric power infrastructure. In addition to creating smart distribution networks, the EnergyNet project includes intelligent distribution power (solar panels, wind turbines, heat pumps, drives) and digital consumer services (flexible power consumption, transportation, etc.). Smart Grid includes a wide range of technological processes, modern information and communication technologies, innovative equipment and applications designed for the transmission of electricity from the manufacturer to the consumer. The intellectual network represents set of the consumers of software and hardware connected to generating sources and electro installations and information and analytical and control systems providing reliable and qualitative transfer of electric energy from sources to the

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receiver at the necessary time and in the necessary quantity. New principles, technology transfer and process control allow to combine at the technological level of consumers and producers of electricity in a single intelligent automated system. The main objectives of the introduction of such a system is: • ensuring high quality and reliability of power supply through the introduction of remote monitoring of equipment operation; • the ability of the power system to self-recovery as soon as possible after emergency shutdowns; • high resistance to physical and informational attacks; • integration of all types of energy generation and storage, use of communication and information technologies; • active involvement of electricity consumers in network management. A key characteristic of the smart grid lies in its ability automatically to prevent (reduce) the continuous supply of electricity, to solve the problem of quality management of power supply and control of accidents. It should be emphasized that the main safety requirement of Smart Grids technology is to prevent the risk of cascading failures. In order for the “smart” network to work, it is necessary to form the so - called power clusters – a single information and technological space of individual territories, which include enterprises of generation and transportation of energy, companies engaged in engineering, energy services, energy engineering and instrument-making enterprises, educational organizations. Intelligent processing of data coming from the network components, based on the Smart Grid technology platform, will optimize the use of electricity, improve the reliability and efﬁciency of energy systems, reduce energy losses, reduce resource costs, solve environmental problems, improve the quality of life of the population.

3 Results According to SAP expert estimates, the potential for GDP growth associated with the development of digital electricity will amount to 200 billion rubles, of which 100 billion rubles – in the electricity networks. As a result of the digital transformation of the network business, the proﬁt growth of energy companies will be 4.3% of the current indicators. The main risks associated with the introduction of an intellectual power grid are connected, ﬁrstly, with a high cyber danger, which is due to the complex architecture of information and communication networks. Therefore, in the conceptual development of Smart Grid, considerable attention should be paid to ensuring cybersecurity, including the conﬁdentiality, integrity and completeness of all information systems. Secondly, the security risks are related to the prevention of cascading failures. World and Russian practice shows that the main problems associated with the spread of Smart Grid technology are: a signiﬁcant number of consumers who have different requirements for the quality of electrical energy; the lack of reliable energy storage; signiﬁcant ﬁnancial resources necessary for the implementation and operation of the system, the lack of standards and regulations; the lack of motivation by the management of the generating

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companies because the purpose of the implementation of the system – the energy savings and the earnings depend on the volume of sold electric energy (Chebanov et al. 2015). Despite these problems, the “smart grids” allow you to increase the capacity of overhead power lines and power supply reliability by 30%; to distribute the load curve due to power grid energy storage more power by 25–30%; to reduce the area that is covered by the grid facility due to the innovative materials and construction technologies; to reduce losses of electricity during its transmission by 25%, which will lead to savings 34–35 billion kWh per year and reduce the amount of fuel burned and emissions of carbon dioxide into the atmosphere.

4 Conclusions As a result of the provision of beneﬁts to certain categories of electricity consumers in the regions of Russia, the demand for connection to electric networks has signiﬁcantly increased. However, the increase in the number of new consumers did not result in a comparable increase in power consumption. The increase in the demand for electricity connections was not due to the activation of market mechanisms, but only to the measures of state support for the creation of new electrical facilities. Network organizations spend money not only on the creation of the necessary network infrastructure to consumers, but also on the maintenance of already built electrical networks, to maintain their readiness to issue to consumers the full amount of the declared maximum capacity, deﬁned in the documents on technological connection. The source of funding for excess capacity is investment and operating funds that network organizations divert from the modernization and renovation of electrical networks. The solution to this problem may be the introduction of economic responsibility of consumers for reserving maximum capacity. A promising direction for solving the accumulated problems may be the introduction of an intelligent electricity metering system. Intelligent accounting will completely change the stereotypes of technological connection, as without digital authorization and binding to the metering device, the consumer will not be able to use the services of the network. Installation of electricity meters will allow consumers to access hourly consumption schedules, optimize the cost of electricity through the use of different tariffs. State bodies, in turn, will have the opportunity to monitor the reliability and quality of services, reliability of electricity balances for tariff regulation.

References State Program “Energy Efﬁciency and Energy Development” approved by the Government of the Russian Federation 29.05.2015 (№ 3384p-P9). http://i.cons-systems.ru/u/8c/0a55a8bcc311e4 aca5fbaefc9347ae. Accessed 22 Apr 2018 The strategy of the electric grid complex, approved by the Order of the government of the Russian Federation № 511-R (2013). http://www.rosseti.ru/. Accessed 22 Apr 2018 Aleshina, E.V.: Modern practice and problems of reforming infrastructure holdings in Russia. J. Manag. Sci. Modern World 2(1), 218–220 (2016)

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Aleshina, E.V.: Problems and prospects of development of electric grid business Russian Railways holding. Bulletin of Samara state University of Economics, No. 3(113), pp. 36–40 (2014) Belayeva, I: Socially responsible activities of the state and business. In: Proceedings of the International Multidisciplinary Scientiﬁc Conferences on Social Sciences and Arts (SGEM 2014), Albena, Bulgaria, 01 September 2010, pp. 357–363 (2014) Danilova, O.: Substainable development of territories of presence big business. In: Proceedings of the International Multidisciplinary Scientiﬁc Conferences on Social Sciences and Arts (SGEM 2014), Albena, Bulgaria, Sep 01.10.2014, pp. 373–380 (2014) Information about the availability of the network infrastructure of the branch PJSC «Interregional distribution grid company of the North – West» and «Vologdaenergo» for technological connection. http://www.invest35.ru/assets/ﬁles/docs/1_6____.pdf. Accessed 20 Apr 2018 Kutovoy, G.P.: Formation of forms and methods of state regulation of electric power industry during reforms of economic relations and privatization. Analytical review, Annex to the magazine «Energetik» , No. 12 (2015) Lyubimova, N.G.: Long-term supply of reliable and affordable power supply to consumers. Bulletin of the University, No. 10, pp. 76–79 (2015) The main provisions of the concept of the national project of the intellectual energy system of Russia. The Ministry of energy of Russia. Research Institute of the Russian Academy of Economics (2016) Report on the functioning of the EES of Russia. http://www.so-ups.ru/ Spiridonov, V.V.: Intellectual technologies in electric power systems proceedings of the International Conference “Applied research and technology”. MIT, Moscow, «VTU», pp. 51–53 (2014) Chebanov, K.A., Karamyan, O.Y., Solov’eva, Z.A.: The Result of the power industry reform in Russia. Technological development of the Russian fuel and energy complex under the influence of economic sanctions. Journal Modern problems of science and education, No. 5 (2015) Expert-Ural. It’s time to digitize the network. http://www.acexpert.ru/. Accessed 20 Apr 2018

Effectiveness of Financial Support for the Resource Base of Innovative Development in Regions During Crisis Sergey A. Grachev(&), Marina A. Gundorova, Oleg A. Donichev, Denis Y. Fraymovich, and Maria I. Zakirova Vladimir State University named after Alexander Grigorievich and Nikolai Grigorievich Stoletovs, Vladimir, Russia [email protected], [email protected], [email protected], [email protected]

Abstract. Overcoming the crisis consequences in the Russian economy objectively depends on the speed of introducing the latest technologies and equipment into the economy. The transfer of production equipment to an innovative type of development requires use of modern information systems, all types of resources, materials, and better human capital. However, the key criterion in the success of the innovative development of the regions is the effectiveness of ﬁnancial security. This is the subject of this article. The analysis of the effectiveness of innovation ﬁnancing of innovative activity by regions of two federal districts: Central and North-Western, which in fact are the leading districts in the country and account for the bulk of the produced innovative products and the gross regional product. Calculations were made based on data from ofﬁcial statistical compilations. The performed researches showed that in this period many regions of the listed districts achieved the maximum results of the cost effectiveness for technological innovations for the analyzed period. However, the general trend of changing the values of efﬁciency, starting from 2012, does not allow characterizing as rapidly growing. Keywords: Efﬁciency of ﬁnancing Innovation Overcoming the crisis Knowledge economy JEL Classiﬁcation Codes: G01

Regional economy

R10 O30

1 Introduction The need to overcome the lag in the country’s socio-economic development over recent years has been caused by the global ﬁnancial crisis and the sanctions of Western countries, as well as the consequent sharp restriction of the flow of investment and loans from foreign banks into Russia. The problems are activation of own reserves, additional resource sources for activating innovative activities in the economy, ensuring the process of import substitution, introducing the latest equipment, modern technological processes and information management regimes for the output of products. © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 251–259, 2019. https://doi.org/10.1007/978-3-030-00102-5_27

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A detailed resource reorganization of regional economic systems is to be based on the use and development of information and communication technologies for their introduction into the production environment, replacement of resource-intensive production processes and the use of materials with better properties that determine the optimal parameters of technological methods. That will allow the output of products of a fundamentally higher consumer level. The scientists of the ﬁnancial university under the government of the Russian Federation, in this regard, and also assessing the barriers that impede the innovative development of the Russian economy, among the main ones, they call ﬁnancing that does not meet the requirements of time. They believe that it is the structure of ﬁnancing that can show the degree of public interest in innovation, and economic growth is impossible without increasing of investments. This does not happen yet, it means that the organizational and ﬁnancial basis for increasing innovation activity has not yet been created. In addition, the improvement of the process of ﬁnancial and legal support for the implementation of innovations related to the transition of the economy to an innovative socially oriented model of development requires an increase in the profitability of investments in innovation and the widespread use of alternative sources of ﬁnancing (Shestak 2017). In turn, scientists of the St. Petersburg branch of the Financial University argue that the government plays an important role in innovative production. The government, as a rule, incurs expenses associated with the innovation process, pursuing a certain tax and amortization policy, allocating subsidies, loans, creating compensation funds, and assisting in the retraining of personnel. To ﬁnance this process of modernization of depressed industries, the funds of efﬁcient companies are attracted with a compensation mechanism that provides the creation of competitive funds jointly with the government funds. The value of assets is paid by organizations curtailing production in crisis sectors (Yakovleva and Kozlovskaya 2016). Foreign authors (Wessner 2009) write the similar experience and actions of the authorities, which stimulate the innovation process in their territories. Meanwhile, according to experts from the Institute of Economics of the Russian Academy of Sciences, despite the fact that the main tools used to support innovation in the most advanced regions of Russia are close to the practice of Western countries, until they provide a systemic effect, a critical mass of innovative development institutions is not formed. The missing link is mainly the mechanisms of ﬁnancial support for innovative enterprises, and stimulation of the flow of innovative projects (Lenchuk 2013). Representatives of the Higher School of Economics, arguing that the innovative activity of enterprises is systematically reduced in the country. The notion of the role of the government as an active participant in the innovation process in modern conditions requires taking into account differences in the interests of structural units, both in the state management of innovations, and in science and business, which may contradict each other. The low share of the innovative sector means its weakness both in terms of creating new innovative products and their distribution. The consequence of this situation is the low return on costs in the industries that create innovations, and increasing dependence on foreign trade and the activities of TNC. The share of innovation costs and the share of innovative products are approximately equal: They received as much they spent (Kiseleva and Fonotov 2013).

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About similar problems, say foreign scientists researching the development of innovations in Russia. In particular, they note that the situation in the issues of innovative development of the economy has been changing for a long time only slightly. Innovation is still weak demand. There is a preferential purchase of ﬁnished equipment abroad, instead of promoting and implementing own development (Sulekh 2008; Satell 2017). The next major problem, which, along with insufﬁcient funding, impedes the innovative development of the economy is, in the opinion of the Institute of Economics of the Russian Academy of Sciences, an acute shortage of specialists and workers capable of solving innovative tasks. We need new approaches to the level of professional training, and to ensure a new quality of the workforce, it is necessary to build up the country’s personnel potential by highly educated technical specialists, scientists, engineers and highly qualiﬁed workers whose primary function is the intellectual provision of the modernization policy through the development of new scientiﬁc directions, the development of competitive technologies, construction industrial enterprises and the organization of new productions. It is necessary to involve technocrats in the government, forming new technocratic elite (Lenchuk 2017). In this direction, scientists at the St. Petersburg University believe that, in relation to the conditions and speciﬁcs of the economic development of our country, the most important component of innovation policy should be the state support of R & D ﬁrms (not only those in which the government has a signiﬁcant share in the capital but also private). The emphasis that has been recently made on stimulating innovative entrepreneurship in the face of small ﬁrms being created is certainly useful. But to solve the key tasks outlined in the main state documents of Russia’s innovative development, it is necessary to strengthen the promotion of innovation activities of large companies that are the basis for the development of the national economy, as well as seriously reduce the overall economic conditions. All this should lead to an increase in the demand for innovations, including those offered by small businesses (Motovilov 2014). Meanwhile, experts of the ﬁnancial university under the government of the Russian Federation believe that for the development of innovative activity in the economy, not only funding is needed. At the macro level, innovation activity is influenced by: the presence of external challenges and the development strategy of the country, in which regulatory and legal support, the nation’s intellect, the optimal combination of market levers of self-regulation with state regulation are deﬁned as integral parts. At the micro level, innovation activity is affected by the availability of a modern production base, organizational structures for enterprise management, the degree of development of economic democracy, the number of advanced enterprises, the introduction of new forms and wage systems, effective innovative management, competitive conditions, the implementation of innovation policy. At the same time, each phase of the innovation process requires speciﬁc support: the formation of educational programs and the payment of costs for the education of employees, the formation of personnel and the payment for work, evaluation and protection of the results of intellectual activity, payment for work premises, materials and warehouse, advertising and PR companies, etc. (Shestak 2017). An important place in this activity, according to Penza scientists, belongs to development institutions. Analysis of the activities of regional development institutes in ﬁve regions of the Volga Federal District showed that industrial parks and technoparks

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of regions can rightly be called growth points. In general, as of the beginning of 2017, 33 industrial parks operated on the territory of 11 subjects of the district. The volume of investments from budgets of all levels for their creation and development amounted to RUB 59 billion, the amount of tax deductions of residents is RUB 77 billion. It is no accident that, according to ofﬁcial statistics, about a quarter of the gross regional product of the Privolzhsky Federal District falls on high-tech and science intensive industries (Bondarenko et al. 2018).

2 Methodology After ﬁnishing the theoretical examination of the provisions of ﬁnancial support innovative development of regions, we move on to the analysis of the effectiveness of the processes of innovation in the regions of Central and North-Western Federal District. Issues related to the analysis of the effectiveness of innovation in the regional context, in the last decade in the scientiﬁc environment are being revealed very actively. At the same time, in order to identify the location of the territories in terms of the level of high-tech development, researchers are offered a wide range of methodological approaches, often involving fundamentally different indicative characteristics and estimation algorithms. It must be acknowledged that to date, the interest in both quantitative monitoring procedures is increasing both from developers and practitioners (in educational, research and power structures) that can apply developed models for ranking and grouping regions at different levels of development of ﬁnancial, personnel, material and non-material resources. In addition, practically free access of researchers to the databases published by state statistical bodies generates the relevance of the application of accurate assessment methods in the analysis of the functioning of regions. So, for example, in the work of domestic researchers from Mordovia State University named after N.P. Ogareva to evaluate the effectiveness of the regional innovation system proposed four functional blocks of indicators: ﬁnancial and economic, scientiﬁcinnovative, information-communication and educational (Kormishkina and Koloskov 2017). In turn, for each factor i in a speciﬁc block on the basis of ofﬁcial Rosstat data using the formula of linear scaling (Glisin and Kalyuzhny 2011). (Which has recently become extremely widespread), a dimensionless indicator Ii (1) is calculated: Ii ¼

xi xmin i ; xmax i xmin i

ð1Þ

Where xi is the actual value of the indicator i; xmin i and xmax i - minimum and maximum values of indicators i in the analyzed sample (regions). The resulting index, which characterizes the efﬁciency of the processes occurring within each of the four blocks, is proposed to be determined using the average of the arithmetic mean. The effectiveness of the innovation system of the region as a whole the index of the “knowledge economy” (KSI), - according to the authors of the methodology, can also be estimated on the basis of the calculation of the arithmetic mean of the resulting indicators of functional blocks. Naturally, the higher the ﬁnal

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score, the more actively innovative processes develop in the constituent entity of the Federation, and vice versa. An essential advantage of the above methodical approach is the obtaining of relative indicators, always in the interval from 0 to 1. Furthermore, the algorithmdeveloped action does not exclude the possibility of analyzing the “knowledge economy” as the indexes for different periods and across selected regions for comparing them with each other, as has been demonstrated by the authors. Attention is drawn to a very representative set of 26 factors on which research is carried out. At the same time, in this method there is no justiﬁcation for using the average arithmetic value for searching the index of the “knowledge economy”. This approach, in fact, means that all indicators and processes for all functional blocks have equal factors and play the same role in the formation of an innovative management system. However, this assumption is very controversial. In addition, the ranking of the constituent entities on clusters based on KSI values refers exclusively to the selected period of time (year) and does not take into account the dynamic component, that is, the possible transformation of regions from one classiﬁcation group to another when their ﬁnal index change. Nevertheless, the considered approach is quite relevant and contributes to the methodology of diagnostics of the “knowledge economy” of the territories. Based on the above, solving the problem of determining the degree of expediency of development of ﬁnancial resources in innovation activity, it is proposed to calculate the overall cost effectiveness for technological innovations (ETI) by using the following formula (2): ETI j; t ¼

V j; t ; ETI j; t 1

ð2Þ

Where V - the volume of innovative goods, works, services (million rubles); ETI - costs of technological innovation, i.e. actual costs associated with the implementation of various types of innovation activities performed on a regional scale (million rubles). They include current and capital costs. At the same time, as can be seen from the formula (2), it was suggested to take into account the chain reaction of investments (in the development of new technologies) for the results to estimate the indicator of the overall cost effectiveness for innovation activity. In this connection, expenses ETI are taken for a period ðt 1Þ preceding the phase of achieving ðtÞ certain volumes of improved products or services. In the framework of this article, based on the application of formula (2), it seems reasonable to analyze the effectiveness of ﬁnancing innovative activity by regions of the two Federal Districts: Central and North-Western region, which, in fact, set a rhythm of the life of the whole country. The largest agglomerations in the population Moscow and St. Petersburg - act as the main territories in their districts and even in the state, concentrating huge personnel, scientiﬁc and technical, investment, educational and cultural capital. Nevertheless, they are the objects of endless scientiﬁc discussions about the rationality of allocating signiﬁcant resources to the detriment of other regions of the Federation. Often, these territorial entities, when carrying out economic and statistical calculations, are referred to as “anomalies” and do not take into account in

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the samples, taking into account the absolute results of their functioning: GRP, investment size, number of small enterprises, number of employees, etc. But the performed analysis will be more correct and objective when correlating relative indicators.

3 Results Calculations of the effectiveness of ﬁnancing innovative activity were carried out for 2000–2016 based on ofﬁcial statistics. Table 1 shows a fragment of the calculation, including the average and current (for the period 2016) values of the indicated indicators in the context of the selected regions. Table 1. Efﬁciency of innovation ﬁnancing on the territories of the Russian Federation for 2000–2016. Regions

ETI Current (for 2016) Average (for 2000–2016 years)

The Russian Federation as a whole Central Federal District in general Belgorod region Bryansk region Vladimir region Voronezh region Ivanovo region Kaluga region Kostroma region Kursk region Lipetsk region Moscow region Oryol region Ryazan region Smolensk region Tambov region Tver region Tula region Yaroslavl region Moscow North-West Federal District in general Karelia Republic Komi Republic Arhangelsk region Vologda region Kaliningrad region Leningrad region Murmansk region Novgorod region Pskov region Saint Petersburg

3.63 4.08 23.57 20.64 2.13 2.74 0.92 1.20 5.36 24.16 6.81 2.66 2.14 2.97 1.52 2.44 4.94 5.74 4.13 4.79 3.84 3.69 14.95 1.33 41.34 0.93 1.63 3.20 3.13 5.58 3.92

3.87 3.95 11.33 11.93 4.85 4.68 4.78 4.83 7.75 3.82 11.76 8.02 7.45 3.96 4.47 4.54 7.00 3.62 3.22 3.06 3.82 2.90 8.15 2.90 15.46 10.55 1.75 3.14 5.11 5.70 3.93

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The results of calculations show that the maximum efﬁciency of innovation activity in 2016 among the regions of the Central Federal District was achieved by the Kursk region (24.16 rubles), and in the Vologda region (41.34 rubles.). The lowest ﬁgures in the analyzed districts are shown by Ivanovo region (0.92 rubles.) and Kaliningrad area (0.93 rubles). Turning to the consideration of the average results over ETI a 17-year time interval, the leading region- Bryansk region (11.93 rubles) and the territory with a minimum return in the form of innovative products per 1 ruble of enclosed in improving the technology of ﬁnancial resources - in Moscow (3.06 rubles). This underlines the fact of extremely irrational development and inefﬁcient control of huge investments in absolute terms, oriented to high-tech development, in the main megapolis of the country. In the North Western Federal District, a clear superiority in terms of average efﬁciency was again recorded for the Vologda region (15.46 rubles), and the minimum value for the Leningrad region (1.75 rubles). The schedule of changes in the analyzed indicators ETI from 2000 to 2016. for the RF, CFD and NWFO as a whole, as well as Moscow and St. Petersburg are shown in Fig. 1.

Fig. 1. The dynamics of changes in indicators ETI from 2000 to 2016 on the territories of the Russian Federation

The presented diagram gives grounds to assert that leading subjects and districts of the Russian Federation demonstrate practically identical trajectories of efﬁciency of development of ﬁnancial resources for innovative activity, but within different limits of values. For example, the indicators for the country as a whole (marked in Fig. 1) fluctuate in the range from “2.95” to “5.43” rubles, and in St. Petersburg - from “1.23” up to “8.30” rubles. Very high values for 2000 appealed to the worsening of the situation until 2005. In the period, 2006–2008 most of the territories of the Russian Federation achieved signiﬁcant improvements in results, but as can be seen from the graph, the global ﬁnancial crisis did not allow the subjects to develop the former “speed”, which inevitably led in 2008–2010. To the stagnation of the achieved indicators ETI . At the same time, a deﬁnite “surge” in efﬁciency and hope for improvement was introduced

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by 2011. In this period, many regions achieved maximum, or close to them results, for the analyzed 17-year time interval. But the general trend of changing values ETI , starting from 2012, does not allow it to be characterized as rapidly growing, but, on the contrary, it forces us to assert about the amplitude interpreting the inertial and “belated” entry of the country into the sixth technological order and mastering the “knowledge economy”.

4 Conclusions The performed diagnostics of the levels of efﬁciency of ﬁnancing innovative activity over a long period of time across the territories of the Russian Federation form prerequisites for strengthening control over the quality and reliability of fundamental research, as well as intensifying monitoring of the transformation of new developments and design solutions into the real sector of the economy. It should be noted that the key influence on the dynamics of development and generation of innovative knowledge in the regions is provided by motivating and institutional factors. At the same time, being practically inseparable from each other, they completely depend on the degree of attractiveness of the conditions initiated by the state for the development of entrepreneurship, launch of venture projects, the establishment of the functioning of research divisions of private companies, and the total involvement of human capital in a reproductive economic system. The presented technique can be applied in educational processes of universities and in activity of proﬁle institutions that study trends and prospects for socio-economic development of regions. Also in fundamental work on the analysis of the effectiveness of ﬁnancing innovation in a crisis period and in design and control of territorial strategic programs by the authorized services of the authorities.

References Shestak, V.P., Tyutyunik, I.G.: Financial and legal support of innovative activity. Finance: Theor. Pract. 21(6), 118–127 (2017) Yakovleva, E.A., Kozlovskaya, E.A.: Innovative development of the economy (the concept of import substitution). Bulletin of the Financial University, No. 6, pp. 54–62 (2016) Wessner, C.W.: Understanding Research, Science and Technology Parks. www.nap.edu/catalog/ 12546.html Lenchuk, E.B.: Formation of innovative infrastructure in the Russian regions. Bulletin of the Institute of Economics, Russian Academy of Sciences, No. 5, pp. 76–91 (2013) Kiseleva, V.V., Fonotov, A.G.: Structural problems of development of the national innovation system of the Russian Federation: Technological potential of industries. Innovations, No. 6, pp. 48–53 (2013) Sulekh, C.J.: Who Needs Innovations? (2008). http://triplehelixinstitute.org/sites/default/ﬁles/ uploaded/documents/summit2008/THX_Summit08_Sunday_7_Jain.pdf. (circulation date 20. 03.2018) Satell, G.: The 4 Types of Innovation and the Problems They Solve (2017). http://hbr.org/2017/ 06/the-4-types-of-innovation-and-the-problems-they-solve?referrat=03758&cm_vc=rr_page. top_right. (circulation date 20.03.2018)

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Lenchuk, E.B.: Formation of personnel potential for innovative economy. The economic revival of Russia, No. 1, pp. 22–26 (2017) Motovilov, O.V.: Analysis of the development of the national innovation system and measures to support it. Innovations, No. 7, pp. 34–38 (2014) Shestak, V.P.: Stimulating ﬁnancing of innovation activity. Finance Theor. Pract. 21(5), 40–49 (2017) Bondarenko, V.V., Chakaev, R.R., Leskina, O.N., Tanina, M.A., Yudina, V.A., Kharitonova, T. V.: The role of regional development institutions in enhancing the innovation potential of the subjects of the russian federation. Reg. Econ. Theor. Pract. 16(1), 83–100 (2018) Kormishkina, L.A., Koloskov, D.A.: Innovative approaches to the formation of investment policy instruments from the point of view of the paradigm of neo-industrial development. Economic and social changes: facts, trends, forecast, T. 10. No. 6, pp. 226–228 (2017) Glisin, F., Kalyuzhny, V.: Monitoring of regional innovation systems. Economist, No. 6, pp. 21–22 (2011) Regions of Russia. Socio-economic indicators. 2017, p. 1150. Rosstat (2017) Federal State Statistics Service. http://www.gks.ru/wps/wcm/connect/rosstat_main/rosstat/en/ statistics/publications/catalog/. (circulation date 15.03.2018)

Contents of the Third Age University in Russia: Prospects of Development Inna Vysotskaya ✉ , Tamara Yovanovich, Natalya Prom, Olga Toporkova, and Oxana Evtushenko (

)

Volgograd State Technical University, Volgograd, Russia [email protected]

Abstract. This article oﬀers an analysis of the work of the Third Age Universities in Germany and Russia, in particular, the content aspect of their educational programs. The aim of this social institution is to improve the life quality of the elderly. The article identiﬁes the problems that arose due to outdated approaches to solving this issue. In Russia these problems are the interdepartmental disunity of institutions, insuﬃcient awareness of the training possibilities for third-aged people, absence of professional direction in education and insuﬃcient consider‐ ation of the elderly peculiarities when drawing up educational programs. Wellplanned content of education at the Third Age University solves an important social task, helping the elderly to navigate in modern life, adequately respond to changes taking place in society and meet the needs for communication, exchange of experience and self-realization. The result of this work presented is the elab‐ oration of a measure system to develop the content aspect of the U3A in Russia that takes into account the needs and interests of the elderly, the needs of society and the experience of a U3A in Germany. Keywords: University of the Third Age · Content of education · Elderly Educational programs · Professional education · Social education JEL Classiﬁcation Code: Z13

1

Introduction

Aging of a person entails not only changes in the state of his/her health, but also a certain reorientation of vital interests, needs and changes in social and family status. At the same time, in the demographic picture of modern European society there is a general tendency of aging of the population, on the one hand, and an increase in life expectancy, on the other. For example, in Germany it is 79.1, in France 81.0, in Britain 78.8. In Russia for the past 10 years, this indicator has increased by 5.1 (in 2006 the indicator was 66.7) and is 71.8 (Federal State Statistics Service 2012). To improve the quality of people’s life of this age group, special educational programs have been created. In this regard, of special interest is supplementary education, the so-called “University of the Third Age” (U3A), whose importance in the life of the elderly has been growing in recent years both in Europe and in Russia (Inter-settlement rayon library 2016).

© Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 260–272, 2019. https://doi.org/10.1007/978-3-030-00102-5_28

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The purpose of this study is to identify problems in the work of the U3A in Russia, based on the absence or insuﬃcient consideration of such an important factor as the content of teaching and the principles of its formation, and develop general recommen‐ dations for the creation of modern educational programs for the U3A. For this purpose, the following tasks are to be solved: – to consider theoretical approaches to the educational content organization at the U3A; – highlight the main areas in the content of educational work for the elderly in modern Germany and Russia; – reveal tendencies of the content aspect development in the U3A in Russia; – identify the drawbacks of the content of work with the third age in the Russian educational system; and – justify the possibility of using German experience to improve the pedagogical system, taking into account Russian national characteristics. 1.1 Historical Background The ﬁrst attempt to solve the problem of the elderly socialization in the educational area was the opening of the ﬁrst institute for retired professionals in New York in 1962. Later, similar institutions appeared in France, Germany and other Western countries. The emergence and development of the U3As served as a kind of educational systems reac‐ tion to demographic changes in society and reﬂected the need to use the professional, cultural and social potential of the elderly (Vysotskaya 2015; Vysotskaya 2016). In Russia the society «Znanie» established the first open People’s U3A only in 1996. Now, this project is a part of the state program, designed to improve the skills, information and training of the elderly. It unites people of different social and mate‐ rial status and different professions. Any non-working pensioner can become a student of the University and attend different faculties and events that interest him. As a rule, such universities are opened on the basis of social protection institutions. The social-educational project “University of the Third Age” is being implemented in many municipalities of the Moscow region, St. Petersburg and the Leningrad region, Stavropol, Krasnoyarsk and some other regions of Russia. Many of its partic‐ ipants have already become active volunteers of the project in their municipal districts (Vysotskaya 2015; Vysotskaya 2016). 1.2 Modern Features of the University of the Third Age The U3A in the modern world is a new form of work with the elderly, which includes the organization of educational and training courses, creative workshops and course training in various programs. The main goal of the project is to create conditions for changing the elderly’s behavior stereotype and attitude towards the life, i.e. avoiding a passive, consumer attitude and forming a new model of personal behavior by involving the elderly in the educational process, developing and implementing socially signiﬁcant projects and increasing their participation in public life (Inter-settlement rayon library of Kirishi 2016; Vysotskaya 2015).

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The work of these institutions represents a great practical experience in training of the elderly, which, however, requires a thorough study from the point of view of the scientiﬁc and theoretical foundations of pedagogical support for people at this age. The matters that need to be addressed ﬁrstly are the content, forms and methods of teaching at a U3A. This article oﬀers a problem discussion of the teaching content at the U3A in Russia and the ways to solve them.

2

Methodology

To systematize the practical experience in organizing of the elderly education at the U3A in Germany and Russia, theoretical and practical works of the leading German and Russian experts (Eierdanz 1992; Fülgraf 1985; Kade 2001; Stadelhofer 2000; Becker 2004; Vallraven 2000; Schäuble 1995; Siebert 2008; Müller 1997; Kohli 1985; Kono‐ nigina 2008; Agapova 2001; Gromkova 2004; Ermolaeva 2002; Vershlovskiy 2012 and others) were considered. The following documentary sources have been carefully studied: (a) Documents and reports of the German Bundestag (2000–2015) (Bundestag; Bunde‐ sausbildungsförderungsgesetz; Bundesministerium); (b) Reports of state bodies and commissions of Germany (2000–2015) (Berufsbil‐ dungsbericht; Interim results; eLearning Program; Katholische Bundesarbeitsge‐ meinschaft); (c) Statistical almanacs of the Bundesministerium für Bildung und Forschung; Gruner + Jahr - Märkte + Tendenzen: Studienreisen, G + J Marktanalyse, Hamburg (1998; 1999); National Institute for Statistics, Survey of Equipment and Information and Communication Technologies in Household (2006); (d) Russian journals, pedagogical periodicals “New Znanie” (2000–2015); “Accredi‐ tation in Education” (2000–2015); “The Academic Gazette. Herald of St. Peters‐ burg “(2010–2015), as well as European journals “Hess. Blätter f. Volksbildung» (2010–2015); “Weiterbildung” (2010–2015); “International Journal of Environ‐ mental and Science Education” (2010–2015), etc., which allowed to carry out a comparative analysis and highlight the most priority areas for the content devel‐ opment of education of the third age people in Germany and Russia. The German state web sites and web pages of Russian educational institutions of additional adult education contributed to obtaining reliable data on the current devel‐ opment of the content of education of the U3A in Germany and Russia. A comparative analysis of the training content made it possible to compare the various meaningful directions of the elderly education in Germany and Russia.

3

Results

We consider the content of education as a pedagogically adapted system of knowledge, skills and experience of creative activity and emotional-volitional attitudes, the assim‐ ilation of which must ensure the formation of a fully developed personality, ready to

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preserve and develop the material and spiritual culture of society (Bim-Bud 2006). In other words, the content of education is what a student must learn as a result of training. The system of additional education for the elderly is successfully functioning in Germany, which is conditioned by an integrated approach that takes into account similar experiences in the USA, France, Japan, Spain (Bowling and Iliﬀe 2011; Hebestreit 2008; Mota-Pinto et al. 2010; Greenﬁeld and Marks 2004) and other countries. In this regard, we see the importance of developing foreign experience for the disclosure, comparison and implementation of the most successful theoretical approaches and tech‐ nologies of education in Russian education, taking into account the content, types and forms of adult education in realizing their own potential and traditions. The pedagogical experience of working with the elderly in Germany is of particular interest, because there this direction in education is speciﬁc in terms of the theoretical foundations devel‐ opment of working with the elderly and the forms and content diversity (Vysotskaya 2016). The analysis of German experience in the program development for the U3A showed that with an adequate working out the content, forms and appropriate methods of work, the elderly manifest themselves as permanent participants and activists in the educa‐ tional programs preparation and implementation, being also assistants for the instructors of additional education institutions for seniors. In many organizations, the elderly are members of public councils, also organizers, who share their experience with the younger generation. Unfortunately, the Russian indicators of the elderly population’s activity are inferior to the European ones (Vysotskaya 2015). 3.1 Classiﬁcation of the Educational Activities Content of the University of the Third Age In German pedagogy there are a number of classiﬁcation approaches to the educational activities content of a U3A. Of greatest interest, in our opinion, are the developments of the researchers (Kade 1997; Eierdanz 1992; and Schäuble 1995), which most clearly reﬂected the content direction for the elderly and gave us grounds for excreting own classiﬁcation of the educational content of the elderly. Kade’s classiﬁcation is based on the principle of educational ﬁeld, which made it possible to distinguish the following educational ﬁelds: (a) biography ﬁeld, providing for work with professional and personal experiences of students with their subsequent application in new conditions (vocational education: pedagogy, medicine, computer literacy, etc.); (b) educational ﬁeld of everyday life that oﬀers ways to overcome the problems of everyday life through active lifestyles (health, psychology, tourism, health swim‐ ming, gymnastics, etc.); (c) educational ﬁeld of creativity that promotes self-expression and the cultural content exchange with others (civil rights, local studies, music, literature, needlework, etc.); (d) educational ﬁeld of productivity, which is a social direction, including voluntary work (social activities) (Kade 1997).

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The positive side of this classiﬁcation is that it clearly tracks and divides the interests of older people. However, we believe that the educational ﬁeld of everyday life and the ﬁeld of creativity should be combined, as they both reﬂect the need of the elderly person actively and fruitfully to spend their free time to improve physical or psychological health. Eierdantz (1992) proposed a more detailed classiﬁcation of educational programs of the U3A. He identiﬁed six areas on the basis of interest topics to the elderly: (1) elderly education as the transfer of knowledge about old age, aging and preparation for aging; (2) conversational circles with a communicative component, i.e. for working out and increasing the communication skill (for example, teaching foreign languages); (3) educational proposals covering topics that are especially interesting and specially designed for the elderly (topics on civil rights, health, local lore and others); (4) general education program; (5) elderly training the for post-professional activities; and (6) polit‐ ical education. There are many substantive areas in Eierdanz’s classiﬁcation, but there is no clear basis for separating the content directions, there are also activities and thematic direc‐ tions in the classiﬁcation. Schäuble (1995) subdivided out-of-university educational programs for pensioners according to their thematic principle. It highlights (1) traditional education for the elderly on the themes of culture and creativity, in music, vocal, literary and other circles, health, legal knowledge, local history topics that are oﬀered in clubs of the elderly, shelters, voluntary associations and churches; (2) proposals that aim to communicate information or knowledge; themes on civil rights, health, history, social innovations and political events, implemented by enterprises, people’s institutions, universities, academies and free entrepreneurs working in the ﬁeld of the elderly education, are oﬀered primarily for people of preretirement age, as well as for the active part of the elderly. (3) a “practical start” which corresponds to the proposals on teaching new technologies and handling new household appliances, new digital technology, a computer and the Internet. (4) proposals based on professional and life experience, interpreted in relation to the new conditions; computer literacy, nurses and nannies training for the purpose of further employment; (5) “new beginning” associated with the experience, in which through education directed at experienced impressions of the events, reinforces self-consciousness and the meaning of life. This classiﬁcation reﬂects a detailed picture of the most popular content areas in the training of the elderly. 3.2 The Main Areas in the Educational Work Content for the Elderly in Modern Germany The analysis of university websites, where training of older people is organized, and the disciplines presented at the U3A in Germany, made it possible to identify three main

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educational areas in the content of educational work for the elderly people that are most developed at the present stage (Vysotskaya 2015). The most common is a vocational education aimed at mastering practical skills, continuing professional activities, as well as technical education related to the development of the information society, important for any profession. In Germany, it is important to obtain certiﬁcates that give the oppor‐ tunity to realize their professional experience in connection with new activities in the post-professional period of life. The second on demand is social education, which is implemented through everyday life and the surrounding world. In this context, a public education is seen, based on the voluntary activity of the elderly in self-organized political and social representations. In Germany, the task of including the elderly into society is largely done through their participation in volunteer work (Kade 1997; Ahmadpour and Djavad Saghaﬁ 2017). The analysis of programs of German U3A showed that the least popular is personal education, which is implemented within the framework of cultural and creative educa‐ tion. Leisure activities, which imply cultural and creative approaches in the elderly education, unite many diﬀerent aspects of a person’s life into a single whole and form a clearer picture of the reality surrounding him (Bollnow 1962; Forchheimer 1994). Analysis of theoretical and practical experience of European and Russian specialists (Fülgraf 1985; Stadelhofer 2000; Vallraven et al. 2000; Kohli 1985; Kononigina 2008; Agapova and Kononygina 2001; Gromkova 2001; Ermolaeva 2001; Vershlovsky 2012) showed that the interests of the elderly have conditioned the content distribution in educational institutions. These ﬁelds reﬂect the trends in the development of modern third-generation education in Germany, where the professional content direction has found the most intensive development, since it enables using rich experience of the elderly in relation to a new life situation. In addition, the elderly themselves want to be active participants in the life of society, as noted in the statistics data, obtained by researchers. There is also a tendency to expand and deepen the speciﬁcs of the content areas (Vysotskaya 2015). 3.3 The Educational Content of the University of the Third Age in Russia Taking into account the demanded areas of interest, the development trends of modern education and the most developed areas in the educational work of the U3A, when studying the content of education for the elderly, we studied the experience of practical work in Russia. In the course of surveys concerning the most popular areas of interests of the elderly in Russia, Kononigina (2008) identiﬁed the following main interests of older people in the subject areas: 68% of respondents were interested in topics about health and medical knowledge; 53% in legal knowledge; and 38% wanted to study foreign languages (Kononigina 2008). These data are reﬂected in the content directions, which are currently being devel‐ oped in the educational institutions of Russia. The most popular is the social direction, since the emphasis is on the social component of the educational content and social activity, and this is the most accessible way of self-realization for the elderly, oﬀered by social institutions in Russia (Vershlovsky 2008; Gromkova 2005; Ermolaeva 2011;

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Kononygina 2006). The social part of education has developed in the context of social changes and the demands that society makes on people living in it. The second most significant direction in Russia is cultural and creative educa‐ tion, which is the content of leisure activities (Vysotskaya 2015; Vershlovsky 2008; Kononygina 2006). Working with the elderly includes help in getting an adequate idea of old age as the time for disclosure of creative forces and abilities, adaptation to new social roles, style and way of life. At the same time, conditions are created for the manifestation and use of the knowledge and experience of the elderly. The cultural and creative direction is associated with creative development, which stim‐ ulates older adults to participate in educational projects. Creativity has a special impact on the lives of the elderly (Bollnow 1962; Stadelhofer 2015; Kohli 1985). Creative activity of elderly was studied by Kononigina (2008), Gromkova (2004), Vershlovsky (2012) and others. These researchers emphasized that the kind of activity contributes to the psyche improvement, inner world development and personal ties expansion for communication. So, institutions offering educational programs to older people in Russia, public organizations, social assistance centers and social services are mostly directed to socio-patriotic work or leisure time organ‐ ization for the elderly, which refers to the social and cultural-creative content. The third most important direction is the vocational and technical content, since the U3A in Russia has not yet become as widespread as in Germany, where the U3A work at all major universities and adult educational institutions. In Russia, there is no correlation between the U3A and existing educational institutions, which makes it difficult to develop a professional component of the educational content of the elderly (Vysotskaya 2015). However, there is an urgent need for this direction devel‐ opment in Russia due to the retirement and working age increase, changes in the scientific and technical sphere of work, etc. 3.4 Diﬃculties in Educational Work with the Elderly in Russia A comparative analysis of the programs of supplementary education institutions for the elderly in Russia has revealed a number of problems. (1) The analysis of the information posted on the Internet sites of U3A, as well as theoretical and practical works of gerontologists in Russia showed that the system of additional education for people of the third age is at the stage of institutional development. Russian specialists working with the elderly at the institutions of this type (Konnonigina is the chairman of the board of the Oryol regional public organ‐ ization of the society “Znanie” in Russia (Kononigina 2008; Kononigina 2006); Vershlovsky is a specialist in the ﬁeld of continuing adult education (Vershlovsky 2012; Vershlovsky 2008); Gromkova is a specialist in professional personnel retraining (Gromkova 2004; Gromkova 2005), etc.) noted that there is an interde‐ partmental disunity of institutions, since there is no documentary and methodolog‐ ical component that would unite the work of these organizations. The system of U3A in Germany is established and organically introduced as a general education system, being a practical embodiment of the idea of education throughout not only

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the life of a person, but also in the social and production structure of the German society (Vysotskaya 2015). The reason for this situation in the educational system for the elderly in Russia was the historical events that caused state restructuring and disintegration of the old educational system. A positive inﬂuence on the educational system is also determined by the reform of education that is being progressively implemented in Russia. It is aimed at comprehensive improvement of the system and raising it to the international standard of education. Dozens of national univer‐ sities, U3As and public organizations (University of the III age in the day care unit in the State Library of the CSC “Kurkino”; University of the third age ITMO; University “Silver age” St. Petersburg; University of the third age in Kazan; University of the third age on the basis of the State Treasury Center “Zhulebino”; LKKSSON Lermontovsky Complex Center for Social Services for the Population of the Stavropol Territory), which are engaged in the education of the elderly, have recently appeared in Russia. This fact indicates a growing interest of the society and the state to education of people at the third age and, ﬁrst of all, to its content. Being very popular in Russia, national universities provide many alternative oppor‐ tunities for the educational needs implementation of the elderly. The disunity of educational institutions is a consequence of the lack of experience exchange, which is a necessary condition for the institutionalization development for the elderly. Insuﬃcient awareness of the training possibilities for the third age people and prac‐ tical experience of educational centers for this age group. Some elderly people receive information from friends and acquaintances, but not from the media. Whereas in Germany there is a good information system backed by the government and advertising agencies. Social and cultural-creative directions in the educational content of the elderly are widely spread in Russia. However, the professional direction remains without due attention, since vocational education requires the appropriate teaching staﬀ and additional equipment, which leads to considerable costs. Educational programs in Russia do not always take into account the peculiarities of older people, the methods of teaching are not thoroughly studied, and there is no professional staﬀ to work with the elderly. Because of the insuﬃcient number of specialists to work with the elderly in Russia, the topical problem for the educational content development is the professional educators training for the U3A or preparing the elderly for work in additional education institutions as instructors. In Germany there is a fruitful system of animators, training masters, who in turn work with volunteers, including trainees themselves (Becker et al. 2004; Siebert 2008; Müller and Papenkort 1997; Eierdanz 1990; Kade 2001). In Russia this system of workers and the involvement of volunteers are still emerging (Kononigina 2008; Ermolaeva 2008; Gromkova 2004; Ermolaeva 2011; Kononigina 2006).

The additional education of the elderly contributes to the formation of a new value system and an aging culture that meets the requirements of a modern democratic society. The received system characteristic of the content, forms and methods of education of the U3A in Germany allows comprehending more deeply the patterns and tendencies of the improving additional education process in Russia.

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Discussion

4.1 Trends in the Educational Content for the Elderly in Russia The analysis of program content in a number of U3As in Russia made it possible to single out the following trends in the content aspect development. (1) The most developed content areas in Russia are social and cultural-creative, because there is accumulated experience of domestic specialists in the ﬁeld of additional adult education, used in working with the elderly. However, according to many Russian experts, there is an urgent need to develop programs directly for the elderly, taking into account their contemporary interests, needs and speciﬁc age (Agapova and Kononygina 2001; Kononigina 2008; Gromkova 2004; Vershlovsky 2012; Ermolaeva 2011; Kononigina 2006). (2) In the ﬁeld of vocational and technical content, programs are developed on indi‐ vidual subjects: computer literacy, digital technologies and foreign languages. However, this direction largely in the Russian practice is related to leisure activities, since it has no professional application of the knowledge gained so far. In this regard, the Russian U3A requires further study. An example is the education of elderly people in Germany; where there is a certiﬁcation system of the received vocational education by the elderly and the employment system for the certiﬁed people of the third age. (3) There is an expansion and deepening of the content of all educational areas due to scientiﬁc and technical development. This is evidenced by the variety of projects that have emerged in Russia in the last decade. (4) The system of additional adult education in Russia seeks to systematize educational institutions for the elderly in Russia, to specify the goals and objectives of each institution, to determine the content of education and, in accordance with it, the forms and methods of working with people of the third age, which increases the interest of the elderly to learning. 4.2 The System of Measures for the Content Aspect Development of the University of Third Age in Russia The search conducted enabled us to work out a set of measures, essential for development of the U3A in Russia. (1) It is necessary to stimulate the development and implementation of innovative educational programs for the elderly aimed at increasing the competitiveness of older citizens in the sphere of employment through mastering modern technologies and improving the material well-being of this socially unprotected category of the population. (2) Contact improvement and development, experience exchange not only at the regional but also at the federal and international levels will signiﬁcantly expand and improve this educational area, strengthen interuniversity contacts and exchange of experience in working with the elderly, cooperation of universities with

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enterprises, institutions for raising qualiﬁcations, trade unions and manufacturing enterprises. It is necessary to provide counseling to the elderly on educational opportunities and the impact of education on people, to ensure the wide dissemination of information to older people on the issues of education in social work institutions with the elderly, through publication in electronic and print media. To expand the horizons of older adults, meet their cognitive needs better and take into account individual characteristics, it is important to expand the educational programs content and increase the range of educational services for vocational training. Since there is an urgent need for Russian pensioners to continue working, it is important to develop such forms of educational services as preparation at preretirement age for post-professional activities that promotes the more active inte‐ gration of older adults into social, economic and political life through their partic‐ ipation in public associations. The practice of functioning of national U3As is expanding by opening branches in Russian cities on the basis of public educational organizations and social protection of the population. Taking into account the experience accumulated in Germany can contribute to the optimization of their work. It is necessary to improve the conditions for the professional development of specialists in adult education and expand their range of activities, including the education of older adults. Programs should take into account the needs of older people and the speciﬁcs of their education. In the future, it is important to form a training system for the older people education. The experience of German U3A, ensuring a gradual transition from pre-retirement to post-professional, people’s opportunities and interests implementation, the forms and work methods diversity, is a valuable source of enrichment, deepening and expanding the theory and practice of education for older people. To continuously monitor the experience of educational institutions for the elderly in assessing the quality of educational programs for them and to stimulate research on this issue. To promote the creation of a permanent system for the experience exchange among organizations, specialists, participants in the educational process from the regions in implementing educational programs for the elderly.

It is assumed that the implementation of the results of the research proposed into the sphere of additional education of the elderly in Russia will lead to an increase in the eﬀectiveness of institutions of this kind, which is reﬂected in the increased attendance of U3A courses in Russia and the students’ satisfaction in the learning process. Ulti‐ mately, studying at the U3A helps to alleviate social and psychological tensions.

5

Conclusions

The result of this work is the elaboration of a measure system to develop the content aspect of the U3A in Russia that takes into account the needs and interests of the elderly, the needs of society and the experience of a U3A in Germany. Thus, properly structured

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content of education at the U3A solves an important social task, helping the elderly person to navigate in modern life and adequately respond to its changes. The study has identiﬁed three main educational areas in the content of educational work for the elderly, the most developed at the present stage, which have been used as the basis for the classiﬁcation applied to the education of third age people: social, cultural, creative and vocational ﬁelds of education. To the development trends, we have attributed the inten‐ sive development of the social content direction, the expansion and deepening of the content of all educational directions in general, the systematization and speciﬁcation of the goals and objectives of each institution, and, accordingly, the deﬁnition of the educational content.

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Information Hindrances and Communication Barriers in Project Interactions Marianna S. Santalova1(&), Elvira P. Lesnikova2, Svetlana N. Nechaeva2, Alla V. Borshcheva1, and Olga G. Charykova3 1

3

Moscow Institute of Economics, Moscow, Russia [email protected], [email protected] 2 Voronezh Branch of the Plekhanov Russian Economic University, Voronezh, Russia [email protected], [email protected] Federal State Budget Scientiﬁc Institution “Scientiﬁc Research Institute of Economics and Organization of Agroindustrial Complex of Central Chernozem Region of the Russian Federation”, Voronezh, Russia [email protected]

Abstract. The article considers information interference and communication barriers in the project interactions of a commercial enterprise: distortion and loss of information, its lack in feedback channels; ﬁlters are identiﬁed through which the “Project Manager - Executor” information passes through the investigated enterprise (in terms of importance); a pragmatic ﬁlter was used in the way of ofﬁcial information from the source to the recipient, which showed that two main reasons prevent the use of such information, as the managers of the investigated commercial enterprise point out: “lack of time and high workload with current problems”. It is proved that distortion of messages, information overloads and unsatisfactory structure of the organization are barriers to effective organizational communications, including in project management. A general scheme for assessing the social and economic efﬁciency of communications in project management is presented. A model of communication management by processes for the project of a commercial enterprise was developed. Keywords: Information interference of communication Communication barriers Project management Social and economic efﬁciency of communications in projects Model of project communications management

1 Introduction Interference in communicative interaction has long attracted the attention of researchers. E. Rogers and R. Agarwala Rogers identiﬁed four main problems: (1) information overload, (2) distortion and loss of information, (3) lack of information in the channels of negative feedback, (4) low speed of information flows.

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Information overload is the state of an individual (employee) or a system in which the information coming to them cannot be processed and used, which leads to disruptions in the communication process, a decrease in its effectiveness. Distortions and loss of information are quite common phenomena. Distortion is such transfer of information, in which its meaning is distorted. Loss is the loss of all or part of a message. In addition, there is a lack of information in the feedback channels. The communication system tends to distort information in direction that increases the likelihood of receiving rewards and reduces the likelihood of receiving punishment. As a result, the project manager has a distorted or completely wrong idea of what is going on below. Negative feedback from the lower levels should be encouraged by the project manager. Special channels of such feedback should be provided. It is also recommended to use informal contacts as another possible channel for feedback.

2 Materials and Methods In the process of research, methods of logical-semantic modeling, structural-functional, comparative and situational analysis, grouping of empirical data are used. The collection of primary sociological information was carried out through the study of documents, oral and expert interviews (managers). The empirical base of the research is the project activity of “GMZ” Liskinsky “- a network subsidiary of the largest holding in Russia of the “Dominant” Group. The enterprise being investigated - “GMZ” Liskinsky “- which produces dairy products, has regulatory and legal provisions in accordance with the current legal acts. The enterprise has introduced and certiﬁed: – – – – –

Quality management system according to ISO 9000 standards; HACCP security system according to ISO 22000 standards; environmental management system according to ISO 14000 standards; Occupational Safety and Health Management System ISO 18000; accreditation system for laboratories ISO 17000.

All projects are initiated and implemented according to the PMI PMBOK standards. At GMZ Liskinsky, a complex communication data flow has been formed, which considerably exceeds the regulations of the PMBOK standards adopted for the enterprise, and as a consequence, this flow is characterized by chaotic and duplicative functions of the project. The formal structure of the organization creates certain obstacles in the way of the communication flow, therefore, such interference in communicative interaction as a low speed of information flows is very often manifested [1]. In the course of the sociological survey conducted by the managers of the organization, it was clariﬁed how often they encountered the problems of communicative interaction identiﬁed above. Judging by the data obtained (Fig. 1), more often in the studied one they face problems of distortion and loss of information (76%), and its lack in feedback channels (63%).

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Fig. 1. Comparative evaluation of organizational communication problems

F.I. Sharkov classiﬁes communication interferences by character: 1. Technical interference - obstacles to a passing signal, when the source of such interference is the communication channel itself. Such interference can cover the communication channel completely or partially, distorting information or truncating (shortening) it. 2. Psychological hindrances - are related to the relationship between the communicator and the recipient, their relationship to each other, to the methods, content and form of communication. 3. Psychophysiological interference - arise due to sensory abilities, peculiarities of human perception, ability of the sender/receiver to remember and process information. 4. Social hindrances - are due to social norms, prohibitions, restrictions in obtaining information due to the belonging of communicants to different social groups. 5. Cultural-national interference - due to differences in traditions, norms, values, evaluation of various forms of communication, reaction to information received because of the belonging of communicants to different ethnic (religious, etc.) groups [2, p. 312]. Using the research data of A. Totskoy and the linear model of the communication process of Yu. Vorontsov [3], including class, social and personal-individual ﬁlters, semantic ﬁelds and ﬁelds of communication environment, let us single out the ﬁlters through which the information on the investigated enterprise (in terms of importance) is going: (1) a physical ﬁlter for receiving information associated with the speciﬁc characteristics of the channel of its transmission and possible distortions at the same time (clauses, reservations, electrical interference of communication and other technical inaccuracies in the interaction);

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(2) a semantic ﬁlter of interpretation of information, related to its “understanding/misunderstanding”; (3) an axiological ﬁlter of information evaluation, related to an adequate/inadequate assessment of its value; (4) a pragmatic ﬁlter for the use of information associated with the recipient’s decision on its application/non-use in connection with utility/uselessness for solving the assigned tasks (Fig. 2).

Fig. 2. Filters when information passes through the information channel “Project Manager Recipient”

In each organization there are both general and speciﬁc reasons for inadequate perception and understanding of information. This may be insufﬁcient competence and qualiﬁcation of the recipients of information; distrust to the communication channel; mistrust of the source of information. But even with adequate perception and understanding of the transmitted information message, there is no conﬁdence in the effectiveness of communicative interaction. After all, it is still necessary to correctly assess the importance of information and use it correctly. Thus, in the organization under study, during an oral interview, 12 managers were asked to answer the question: are subordinates and responsible persons in the holding companies always correctly assessed the content and signiﬁcance of the information transmitted to them. 73% of the respondents answered positively that it is quite a high level and testiﬁes, ﬁrstly, about the optimistic assessment of managers, about the abilities of their subordinates to correctly assess information, and secondly, the high level of technological and organizational compliance of the work performed by the communicants. A pragmatic ﬁlter deserves special attention in the way of ofﬁcial information from the source to the receiver. The use of such information is hindered, as the managers of GMZ Liskinsky point out, two main reasons: “lack of time and high workload with current problems” (58%).

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Communication barriers also interfere with successful communication. Barriers of communication are obstacles in obtaining information transmitted through the channels of communication, and in its understanding. Communication barriers exist at macro and micro levels. To the macroblocks include complication of information, language barrier, overload or malfunction of information networks. Microbearers are associated with both the personal qualities of the sender/recipient of information, and with organizational problems. Microbloggers include: misunderstanding of information due to inability to explain it, verbalize it, misunderstanding on the part of the recipient because of low qualiﬁcation, non-perception of information due to the multivalued interpretation, the relationship of the addressee to the sender and vice versa. The presence or absence of barriers in the communication channels is checked by comparing the information at the input and output of the communication channel, which is checked by feedback. For example, J. Podguretsky considers among the communicative barriers: differences in perception, language differences, noise, emotions, discrepancy between verbal and non-verbal messages, distrust. M.H. Meskon, F. Hedouri and M. Albert share barriers of interpersonal and organizational communication and refer to them perceptual, semantic, non-verbal, bad feedback, inability to listen [3, p. 34; 5]. A. Totskaya proposed the following classiﬁcation of barriers to interpersonal and organizational communication [4]: (1) Perceptual-interpretational barriers: “presumption of reciprocity”, “assumption of similarity,” negative asymmetry of initial self-esteem, “intragroup favoritism”, “ignoring the information value of” the unheard, “status errors, dispositional errors”, predisposition in favor of one’s self, false uniqueness, arrogance. (2) semantic barriers: poorly formulated message, differences in the interpretation of symbols, falsiﬁcation errors; (3) instrumental barriers: non-verbal obstacles, regime barriers, physical barriers; (4) emotional barriers: premature evaluation, emotional incompatibility; (5) procedural barriers: inability to listen, loss of information in communication cycles. Distortion of messages, information overloads and unsatisfactory structure of the organization are barriers to effective organizational communications, including in project management. Under effective communication in this study, we mean communication aimed at achieving enterprise goals, characterized by a high level of socioeconomic efﬁciency, the cost of which should be lower than the resulting effect [7, 8]. We will present a general scheme for assessing the social and economic efﬁciency of communications, consisting of ﬁve stages [9, p. 34] (Fig. 3). At the ﬁrst stage, the external and internal environment of the enterprise is evaluated. The existing interrelations of the enterprise are analyzed in accordance with the speciﬁcs of the activity, identifying the communication needs that can help in the implementation of the project and the achievement of the objectives of the enterprise. At the second stage, the method of research of the communicative system for enterprises and the communicative technologies used in the project implementation are chosen. To do this, we often apply the method of peer review, which allows us to conduct a multifaceted analysis of enterprise communications, both in the management team and the project team, which will give the most adequate assessment.

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1. Determination of needs and specifics of the organization

2. Choice of research methods

3. Diagnostics of organizational communications

4. Interpreting of results

If communication is not effective

5. Determining the effectiveness of the communication system Fig. 3. General scheme for assessing the socio-economic efﬁciency of communications in project management.

At the stage of diagnostics of organizational communications, problems in the communication sphere and in the management of communications are revealed. In the opinion of many authors, the main criteria for assessing the effectiveness of communications were identiﬁed [10, 11]. – number of communication channels; – infrastructure of the communication space and its characteristics: integrity, adequacy of the environment, flexibility, the possibility of monitoring and adjusting; – satisfaction of information needs of interested persons and organizations; – balance between vertical, horizontal and diagonal communications within the organization, between documented (formal) information and verbal means; – speed of information transfer; – quality of information support (relevance, accessibility, sufﬁciency, level of implementation); – state of the socio-psychological climate in the team (communicative culture, the availability and implementation of communicative standards, the level of communicative competence of staff) [12]; – Organizational participation (from Latin: introducing the individual to the whole, the effort of top managers to expand the capabilities of individuals or groups of lower status, so that they have more weight in the speciﬁc activity of the organization, in our case, in project management); – feedback efﬁciency.

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1 AT THE INITIALIZATION OF THE PROJECT INPUTS

OUTPUTS

1 Sectoral market monitoring and forecast 2 SNW- and SWOT-analysis of the characteriscs of the organizaon 3 Assessment of the availability of ﬁnancial resources

INSTRUMENTS AND METHODS 1 Communicaon technologies 2 Methods and means of communicaon in the external and internal environment

1 Decision of founders to iniate a project 2 Decision of the founders on the integraon of the project communicaon system into the enterprise communicaon environment 3 Formaon of the project team

4 Stakeholder Loyalty Evaluaon

2 AT THE STAGE OF THE PROJECT PLANNING INPUTS 1 Project Management Plan 2 Financial constraints on the management of communicaons

INSTRUMENTS AND METHODS

OUTPUTS

1 Register of requirements for a communicaons management system

1 Communicaons Management Plan

2 Communicaon technologies

2 Adjust project documents

3 Enterprise Communicaon System

3 Informaon and sociological communicaon model

4 Idenﬁcaon and analysis of stakeholders

4 Methods and means of communicaon

3 Formaon of the informaon base of the project (informaon expectaons)

3 AT THE PERFORMANCE OF THE PROJECT

OUTPUTS 1 Formed communicaons

INSTRUMENTS AND METHODS INPUTS 1 Communicaon management plan for the project

1 Informaon and sociological communicaon model 2 Project communicaon management system

2 Communicaon system and informaon base of the enterprise

3 Communicaon skills

3 Stakeholder Monitoring

5 Performers' reports on the current state of the project

4 Methods and means of communicaon

2 Adjustment of project documents and the Communicaon Management Plan 3 Correcve acons 4 Informaonal interacon with stakeholders to prevent problems and break down barriers 5 Replenishment of the project informaon base with reliable and mely informaon

4 AT THE STAGE OF PROJECT MONITORING OUTPUTS INSTRUMENTS AND METHODS INPUTS 1 Communicaon management plan for the project 2 Project Communicaons 3 Interim results

1 Project Communicaon Management System 2 Performer Reports 3 An intrinsic esmate 4 External evaluaon of the eﬀecveness of the project by the founders' experts

1 Data on results achieved and eﬀects 2 Register of recommendaons for adjusng the project 3 Correcng project documents and the Communicaons Management Plan 4 Updang the project informaon base

5 AT THE END OF THE COMPLETION OF THE PROJECT OUTPUTS INSTRUMENTS AND METHODS INPUTS 1 Communicaon management plan for the project 2 Informaon on intermediate and ﬁnal results of project implementaon

1 Project Communicaon Management System 2 Project Team Report 3 Acceptance of the project 4 External evaluaon of the eﬀecveness of the project by the founders' experts

1 Report on results achieved and eﬀects project, incl. communicaons management 2 Updang the company's informaon base and archive 3 Increase in experience in project management, incl. in communicaons management

Fig. 4. Recommended model of communications management on the processes of the project “GMZ Liskinsky”

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At the fourth stage, the results are interpreted. This gives an opportunity to assess the existing communication problems of the enterprise, as well as their relevance to the needs and objectives of both the project and the organization (network interaction) in general. On the basis of the conducted diagnostics of organizational communications, as well as their interpretation make a conclusion about the quality and effectiveness of the communication system of the project. If the customer and the project sponsor are satisﬁed with the high quality of communications, the conclusion is made about an effective system for managing communications of the enterprise. If negative feedback/results are received, they return to the stage at which problems arose, that is, they repeat the choice of the research methodology.

3 Results On the base of ISO 21500:2012 Guidance on project management and PMBOK standards [13, 14] we developed and implemented model for managing process communications for the project of GMZ Liskinsky (Fig. 4). In the ﬁeld of project management for a communicatively cultural project manager, it is important to pay attention to the satisfaction of the four communication needs of the project team members: (1) (2) (3) (4)

the need for brieﬁng, regulations, the standards of action; feedback needs based on performance; the need for timely news and information; the need for social support.

The requirements for social communication should be reflected in the document “Communications Management Plan”.

4 Discussion The topic was discussed in the Voronezh branch of the Plekhanov Economic University, at the enterprise “GMZ Liskinsky”, where a model of communication management for project processes was introduced, in the Autonomous non-commercial organization of additional professional education “Alfa-Russ”. Acknowledgments. The communication management model of the project was implemented at the enterprise “GMZ Liskinsky”.

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References 1. Santalova, M.S., Lesnikova, E.A., Chudakova, E.A.: Expert models for evaluation of innovative entrepreneurial projects. Asian Soc. Sci. 11(20), 119–126 (2015) 2. Sharkov, F.I.: Communicology: The Fundamentals of Communication Theory, 4th edn., 488 p. Dashkov and K, Moscow (2017) 3. Podguretsky, Yu.: Paradigms of Modern Social Communication, 183 p. Izd-vo MGU, Moscow (2000) 4. Totskaya, I.V.: Social and technological model of communications management in the organization [Electronic resource], Author’s abstract. diss. сand. sociologist. sciences on spec. 22.00.08, 186 p. Belgorod (2009) 5. Mescón M.X., Meskon, M.X., Albert, M., Hedouri, F.: Fundamentals of Management, 3rd edn., 672 p. ID Williams Ltd., Moscow (2012). (Translated From English) 6. Lassuel, G.: Communicative process and its structure. Modern Problems of Social Communication, 342 p, St. Petersburg (1996) 7. Prokhorov, V.V.: Communication in Business [Electronic resource]. Electron. ed. http:// www.subscribe.ru. Accessed 02 Jan 2018 8. Reznik, S.D.: Management. Book 4. Managing Human Potential in Socio-Economic Systems: Monograph. SRC INFRA-M, 319 p. (2014) 9. Moiseeva, G.V., Skopin, O.V.: Communication as a key competence of the project manager [Electronic resource]. Modern Management Technologies, 11(11). - Electron. ed. http:// sovman.ru/article/1104. Accessed 20 Dec 2017 10. Akinshin, V.M.: Project approach to the implementation of the concept of sustainable development in the company: monograph. INFRA-M, 264 p. (2015) 11. Santalova, M.S.: Strategic analysis of commercial organization. Science and Technology 3, 117 (2015) 12. Santalova, M.S., Didenko, S.S.: Innovative approach to management assessment of personnel. Eur. Soc. Sci. J. 1–2, 86–90 (2015) 13. ISO 21500:2012 Guidance on project management 14. A Guide to the Project Management Body of Knowledge, USA: Project Management Institute, Inc., p. 310 (2013)

Conditions of the Internationalization of Chinese Yuan: Changes for Five Years Inna V. Kudryashova(&) Volgograd State University, Volgograd, Russia [email protected]

Abstract. The implementation by the People’s Republic of China (PRC) of the measures concerning the development of the sphere and the scale of the international use of its national currency provided the inclusion of the yuan since October 2016 together with the US dollar, euro, pound sterling and Japanese yen into the basket of currencies (Special Drawing Rights). In the article on the basis of the theoretical justiﬁcation of the necessity of creation of all economic, institutional and organizational conditions of the internationalization of a currency factors that allowed achieving the contemporary level of the international use of the Chinese monetary unit as standard of value, unit of account and reserve currency are analyzed. The reasons contributing to the increase of the international status of the yuan in 2010–2015 are characterized. The determinants impeding the future growth of the demand for the national currency of China from the part of non-residents are discovered. Keywords: World currency Currency internationalization Chinese yuan Convertibility Financial market International reserves Exchange rates JEL Classiﬁcation: F31

F33

1 Introduction The instability of the exchange rates of basic international currencies over the last decade on the one hand and also the impossibility of use of advantages when the national currency becomes a world currency on the other hand determined in many respects the aspiration of many countries to the internationalization of their national monetary units. The People’s Republic of China (PRC) started the practical implementation concerning the increase of the international status of its currency during the period of the global economic crisis of 2008–2009. Although in 2010 the ﬁrst application of China was rejected, in November 2015 the IMF took a positive decision about the inclusion of the yuan into the list of currencies in the basket of the SDR. In the article on the basis of the analysis of the conditions of the increase of the international status of the yuan the factors contributing to its internationalization are characterized. The reasons constraining the widening of the spheres and the scale of its use by non-residents are revealed.

© Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 282–293, 2019. https://doi.org/10.1007/978-3-030-00102-5_30

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2 Literature Review The process of the widening of the international functions of a currency, its transformation into a world currency is complicated and is a multistage process, the result of this is the growth of the conﬁdence to the monetary unit beyond the country issuer. At the same time the formation and clear manifestation of the advantages of the use of this currency as a standard of value, a unit of account and a store of value in comparison with currencies of other countries is taking place. The conclusions made on the basis of the existing research show that the achievement of such a position is possible under deﬁnite conditions which characterize the sustainability of the country within the international currency and ﬁnancial system and the opportunity of the implementation of different transaction using its national currency. The basic macroeconomic condition of the internationalization of the functions of a monetary unit is the growth of its issuer weight in the world GDP. This weight is expected to be substantial, considerably higher than that of other countries and the economy is supposed to be an open one and play an important role in the international trade. The former Chairman of the Federal Reserve A. Greenspan (2001) pays attention to the fact that economic agents are disposed at choosing among all others the currency of country which has a sustainable, competitive, vibrant economy and is reliable in international trade and ﬁnance. Chinn and Frankel (2005) ﬁnd that in the course of the increase of the international status, the currency of the country which has the largest weight in the world production, international trade and ﬁnance has a considerable natural advantage respective to other currencies. The Russian researchers Narkevich and Trunin (2012) prove that the volume of the economy of the country issuer and its weight in the world trade is a condition for the internationalization of the national currency. Indeed in order to single out from national monies one currency for the use as a world currency there should be an objective necessity in it from the part of non residents. In other words there should be a considerable and stable international demand for the monetary unit of the country or groups of counties issuing it. It is possible to provide this by means of the achievement of a large share in the world production and at the same time to be a large world exporter. Consequently monetary units of countries with small volumes of the GNP and of the export of goods and services cannot act as a world currency as the demand for them in foreign markets is not expected to be considerable. Another condition providing the internationalization of a currency is a recognizable, flexible regulation by government and the availability of a developed ﬁnancial market in the country issuer or group of countries issuers. Greenspan (2001) notes that the availability of an open, well developed ﬁnancial system being an indispensible part of a sustainable, competitive and open economy of a country increases the attractiveness of the business transactions with the use of the currency of this country.

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Chinn and Frankel (2005) believe that for the formation of a large scale and stable demand for currency from the part of non-residents the monetary market and capital market in the country (group of countries) issuing the currency are expected to be open, free and also well developed. Moiseev (2008) supposes that in order to increase the international status of a currency the authorities of the country should actively encourage the capital and monetary market where non-residents will be able to make their deposits and reserves. These ﬁnancial markets are expected be open and liberal. Let’s make more precise some provisions reasonably mentioned by the scientists. An open ﬁnancial market allows the foreigners investing into the ﬁnancial instruments issued in the currency of this country. The developed national ﬁnancial market may also provide alternative sources of ﬁnancing and may determine a high demand for this currency from the part of non-residents. At the same time the role of the national banking system as one of the basic segments of the ﬁnancial market in the process of the internationalization of a currency is determined by the following aspect. These are the banks which can mediate the global trade and investment flows using the currency and by means of offering a diversiﬁed set of assets in it for foreigners contributing by this to its wider international use. National markets of stocks and bonds by means of providing to foreign investors opportunities for the investment of private savings and ofﬁcial reserves can also increase the attractiveness and the degree of use of the currency of the given country. Pentti and Macedo (1978), Greenspan (2001), Chinn and Frankel (2005) mention the stability of the country as the condition of the currency internationalization. The stability of a currency is expressed through a low level of inflation and the absence of violent fluctuations of its price relative to other currencies. Pentti and Macedo point out that the most secure currency for all the investors regardless the country of its origin is the monetary unit of the country (group of countries) with the least unpredictable inflation. Under the condition of the absence of the limitations for the use of international currencies the most secure foreign currency acquires a wider use as a unit of the denomination of ﬁnancial instruments. Greenspan pays attention to the fact that the reduction of the purchasing power will impede its use. But if a currency is a secure store of wealth even in period of economic fluctuations it will become attractive to investors. Chinn and Frankel point out that the purchasing power of the world currency even if it is used only as a unit of account should not fluctuate disorderly. This requirement should be observed if the assets of trade ﬁrms, investors and central banks are denominated. In this situation the long term stability of the currency is more important. In fact economic agents are interested in a long term stable purchasing power of this or that monetary unit. In other words a world currency can be the currency if in the country issuer (group of countries) the inflation rate is low and the exchange rate is not subject to considerable fluctuations. The Russian scientist Krasavina (2008) gives the opinion that one of the conditions of the achievement by monetary unit of the status of the world currency is the increase of international reserves by its issuer. The role of international reserves in this process is explained by the fact that they characterize the stability and the solidity of the ﬁnancial situation of the county, guarantee the fulﬁllment of the taken international

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obligations, support of the liquidity in ﬁnancial markets during crises and also they provide the regulation of the volatility of the currency exchange rate. Another condition of the internationalization of a currency is the absence of considerable limitations on its use in current and capital transactions of the balance of payments. Pollard (2001) supposes that the barriers to the exchange of one currency for other currencies limit its global use. Genberg (2009) also supposes that the internationalization of a currency implies the absence of limitations on its use in international ﬁnancial transactions. The reason consists in the fact that the limitations on the convertibility of the currency for the transactions in the account of capital operations will increase the transaction costs of this currency and this fact will reduce its attractiveness in comparison with other currencies. Besides the limitations on the currency use in international ﬁnancial transactions impede its use in the international trade of goods. As such a trade includes the elements of the ﬁnancial nature (trade ﬁnancing, currency exchange hedging) so the prohibition of such operations or a considerable price growth will become a barrier to the turnover of such currency and to the transactions of the current account. Thus the achievement of the status of the world currency is possible under following conditions. Firstly, it is a considerable weight of the issuer in the world production and export. Secondly, in the county issuer there should be an open, regulation free, developed market. Thirdly, the issuer is expected to have considerable international reserves. Fourth, the currency should be stable and this fact is expressed by a moderate inflation and an insigniﬁcant volatility of its rate. Fifth, there should not be considerable limitations on the use of the currency in current and capital transactions of the balance of payment. The further research (Kudryashova 2015) of the conditions of the internationalization of currencies allowed grouping them into two sub groups: these are economic ones and institutional and organizational ones. The availability of economic conditions in the country (groups of countries) issuing this currency provides the growth of conﬁdence in it from the part of non residents and in the result a considerable and stable international demand for this currency is created. Also the economic situation provides the stability of a national currency. In its turn the economic conditions can be divided into two subgroups. The ﬁrst one (weight in the world GDP, weight in the world export of goods and services, volume and development of the ﬁnancial market) provides the creation of a considerable, large scale and stable demand for the currency of this issuer. The second subgroup of economic conditions (inflation rate, exchange rate dynamics, volume of international reserves) characterizes and provides the stability of this currency what is reflected on the positive dynamics of the demand for it. However without the creation of the economic prerequisites for the ﬁrst subgroup a considerable increase of the international status of the currency is impossible. The creation of institutional and organizational conditions gives the opportunity of making various transactions in a certain currency and to assess the advantages of its use relative to other countries of the world. The conditions of this group include the absence of currency limitations in current and capital transactions of the balance of payments.

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3 Methodology and Materials The information about the volume and structure of international reserves of the countries (groups of countries) is available in the Data Template on International Reserves and Foreign Currency Liquidity of the IMF. A more complete statistics about the currency structure of reserve assets of different countries of the world is published by the IMF in the database of the Composition of Foreign Exchange Reserves. But this database contains the information only about some monetary units including the US dollar, euro, pound sterling (Great Britain), Japanese yen, Swiss franc and since 2013 about the Canadian dollar and the Australian dollar which were also included into this record. Consequently it is complicated to show the share of the yuan in the structure of international currency reserves using this source. The information about the yuan for year 2014 was published in the yearly report of the Bank for International Settlements. The data about the currency structure of cross-border payments is published monthly by the Society for Worldwide Interbank Financial Telecommunications. The statistical information about the GDP dynamics, export volume is found in the statistic base of UNCTAD. The qualitative indicators characterizing the degree of the development of separate segments of ﬁnancial markets of the countries (groups of countries) under analysis are presented by the World Bank in the database Global Financial Development. The data about the inflation is presented in the Open Data of the World Bank. The comparative analysis method, historical method, method of absolute and relative indicators, table and graphical methods of research were used in the article for the analysis of the statistical information.

4 Results In practice the increase of the international status of the currency is expressed in the growth of scale and expansion of the sphere of its use by non-residents. It is possible to determine the degree of the internationalization of the currency using the indicators used by the IMF for the assessment of the freely usable currencies. The indices include: weight of the currency in trade ﬁnancing, the weight in cross-border payments, share of currencies in ofﬁcial foreign exchange reserves, international debt securities outstanding, volume of transactions (turnover) in foreign exchange markets for wide trade and others. In 2010–2015 the values of these indicators for the Chinese yuan increased what shows the growth of demand for this currency beyond the country issuer. Nevertheless the degree of the internationalization of the national currency of the People’s Republic of China still remains lower than that of other world currencies. First of all the role of the yuan as the currency used for international trade ﬁnancing increased considerably. So if in 2011 the Chinese yuan was not practically used in such operations but already in 2012 it became the third currency with the share of 4% after the US dollar and the euro in the total volume of transactions. In another four years it moved on the second place with the weight of the yuan of 9,1% from all the

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transactions. In 2015 the US dollar accounted for 80,1% of transactions, the euro accounted for 6,1%, the Japanese yen accounted for 1,9%. At the same period the yuan started being used considerably more often in the cross-border payments. If in January 2012 the Chinese national currency ranked the 20th in the total volume of cross border payments so by January 2015 it moved to the 5th rank with the share of 2% (to compare with: the weight of the Japanese yen at the same period was 2,8%). The total weight of basic world currencies exceeded 83%.1 However the weight of the Chinese yuan in the total volume of the foreign exchange reserves in the world remains negligible. In the end of 2014 it made up only 1%. About 93% of foreign exchange reserves is accounted for the US dollar, euro, pound sterling and the Japanese yen.2 The scale of use of the national currency of the People’s Republic of China in the international debt securities market in 2010–2015 was considerably lower than that of other world currencies. So the weight of yuan in the international market for bonds in 2016 made only 0.6%. The weight of the US dollar was 34.1%, of the euro it was 38.5%, of the pound sterling it was 9.6%, of the Japanese yen it was 2.0%. The role of the Chinese national currency in the volume of transactions in foreign exchange markets for wide trade is relatively insigniﬁcant so far but there is an upward trend in its use. In 2010–2016 the yuan moved up from rank 17 to rank 8 (4.0%) in the volume of transactions in foreign exchange markets. At the same time the level of the world currency (pound sterling) with the minimal rate of this index (11.8%) for 2016 was not attained.3 In 2010–2015 the People’s Republic of China achieved considerable results in the creation of economic, institutional and organizational conditions for the increase of the international status of the yuan. Let’s analyze in details the changes that took place. Nowadays the Chinese economy among all countries of the world ranks the 2nd after the USA on the basis of the absolute volume of the GDP. In 2010–2015 the contribution of China into the production of the world product increased 1.6 times and made more than 14% (Fig. 1). But as one of the issuers of world currencies is the association of countries (Euro area), the GDP of which exceeds the Chinese GDP, only the USA and the Euro area are ahead of China in the weight in the world GDP. Their shares in 2015 made up 15.3% and 24.0% correspondingly. Over several decades of the implementation of the policy of reforms and “openness” of China the country increased considerably its role in the international trade of goods and services. In 2015 China became one of the largest exporters of goods and

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Society for Worldwide Interbank Financial Telecommunications (2016), SWIFT RMB Monthly Tracker, Available at: https://www.swift.com/our-solutions/compliance-and-shared-services/businessintelligence/renminbi/rmb-tracker/document-centre#topic-tabs-menu (accessed 14.08.2016). International Monetary Fund (2017), Data Template on International Reserves and Foreign Currency Liquidity. Available at: http://data.imf.org/?sk=2DFB3380-3603-4D2C-90BE-A04D8BBCE237& ss=1481575224638 (accessed 24.02.2017) Bank for International Settlements (2016), Triennial Central Bank Survey of Foreign Exchange and OTC Derivatives Markets in 2016, Available at: http://www.bis.org/publ/rpfx16.htm (accessed 19. 09.2016).

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2015, Other, 36.6 2010, Other, 36.6 2015, China, 14.9 2010, China, 9.1 2015, Japan, 5.5 2010, Japan, 8.4 2015, United Kingdom, 3.8 Kingdom, 3.7 2015, Euro area, 15.3 2010, Euro area, 19.3 2

2015

2015, United States, 24.0 22.9

2010

Fig. 1. Weights of countries in the world GDP in 2010 and 2015. Source: UNCTAD, Data center. Available at: http://unctadstat.unctad.org/wds/TableViewer/tableView.aspx?ReportId=96 (accessed 19.02.2017)

services in the world. Among the issuers of world currencies only the euro zone is ahead of China on this indicator (Fig. 2). Positive changes were observed also in the functioning of the national ﬁnancial market of the China. Using for the assessment the degree of its development the absolute weight of some segments it becomes obvious that not only its considerable growth but also the achievement of the development of some world currencies issuers is important. Thus, the stock market capitalization of the People’s Republic of China grew in 2010–2015 twofold and exceeded $8 trillion. In the USA this indicator in 2015 exceeded $25 trillion and in the Euro area it made up a little bit more than $ 6 trillion. The bank assets volume increased more than 1,7 times and by the end of 2014 it made up $14.9 trillion and this is higher than the Euro area ($13,8 trillion), than the USA ($10.4 trillion) and Japan ($8.5 trillion). The dynamics of the scale of the debt market was positive and the growth rate for 5 years made 2.5 times and the absolute size reached $.,5 trillion. The analysis of the development of the ﬁnancial market of China allows conﬁrming that only the bank segment of the market corresponds to the level of the development of ﬁnancial markets of the USA, Euro area, Great Britain and Japan. When analyzing the conditions of securities market and debt securities market of China the lagging behind the markets of world currencies issuers is observed (Table 1). The banking segment of the Chinese ﬁnancial market provides for the moment the largest opportunities for the investments in yuans. According to the data of the World

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2015, Other, 45.2 2010, Other, 46.9 2015, China, 11.6 2010, China, 8.7 2015, Japan, 3.5 2010, Japan, 4.6 2015, United Kingdom, 3.7 2010, United Kingdom, 3.6

2015, Euro area, 25.4 2010, Euro area, 26.4 2015, United States, 10.6 2010, United States, 9.8

2015

2010

Fig. 2. Weights of countries in world export in 2010 and 2015 Source: UNCTAD, Data center. Available at: http://unctadstat.unctad.org/wds/TableViewer/tableView.aspx?ReportId=96 (accessed 19.02.2017). Table 1. Indicators of ﬁnancial markets development of world currencies issuers in 2015, % Country/Group of countries

Stock market capitalization to GDP

Deposit money banks assets’ to GDP 145.02

Outstanding domestic private debt securities to GDP

Outstanding domestic public debt securities to GDP

United 112.11 12.33 58.63 Kingdom United States 139.0 60.32 91.93 82.63 Japan 111.7 185.12 56.5 177.3 Euro area 65.3 102.72 37.83 46.63 2 China 74.4 143.4 28.7 16.1 1 The data for year 2012. 2 The data for year 2014. 3 The data for year 2011. Source: [World Bank, Global Financial Development. Available at: http://databank.worldbank. org/data/reports.aspx?source=global-ﬁnancial-development (accessed 21.02.2017).]

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Bank, the growth rate of the assets of the banking system of China in 2010–2014 somewhat exceeded the growth rates of the GDP. As a result the ratio of deposit money banks assets’ to GDP increased and made up in 2014 more than 143% what is higher than the rate of world currencies issuers like the USA and the Euro area. The indicator of the stock market capitalization to GDP increased from 66.7% in 2010 to 7,4% in 2015. Although the value of this indicator of other world currencies issuers did not have in 2010–2015 a long term trend nevertheless in the end of the period under analysis it was higher than in China except the Euro area. It is obvious that the stock market of China is not the main source of company money in the People’s Republic of China. The debt securities market in China is considerably less capacious than the stock market. In 1990–2009 the ratio of the outstanding domestic private debt securities to GDP had a positive trend having attained the maximum at the level of 34%. In the years that followed its negative dynamics was observed. The market for governmental bonds has a lower capitalization. Starting with 1990 its value constantly grew and made up 18% in 2007. In 2008–2014 the value of this indicator was characterized by an insigniﬁcant volatility and in the issue it remained considerably lower than the values of the USA, Euro area, Great Britain and Japan. Besides low indicators of the capitalization the Chinese bond market remains comparatively closed for non-residents. Since 2015 the National bank of China allowed foreign Central banks, sovereign funds and international institutional investors working in the Chinese interbank bond market without obtaining a preliminary approval of the Chinese authorities. Besides asset management companies got the permission to invest $30 billion into the Chinese bonds in the program for qualiﬁed foreign institutional investors. However despite such measures the domestic bond market of China offers comparatively small opportunities for foreign investors of money investment. During the analyzed period the dynamics of the prices in China and also the scale of the fluctuations of the exchange rate of the yuan relative to other countries proved that the Chinese national currency was stable. In 2010–2015 the inflation in the People’s Republic of China was mild, its rate fluctuated in the boundaries from 1.4% to 5.4%. It is worth mentioning that at the same period the inflation rate of other world currency issuers was about the same (Fig. 3). The current order of the formation of the exchange rate of the yuan relative to other currencies does not imply its considerable volatility. The IMF deﬁnes the exchange rate regime in China as “Crawl-like arrangement, Monetary aggregate target” and also mentions that in fact the exchange rate of the yuan is pegged to the US dollar. The price of the Chinese national currency is determined not by the market forces but by the National bank of China. It sets rigid boundaries of the yuan exchange rate fluctuations relative to the American dollar. Since March 2014 this band was widened from 1 to 2%. The previous widening took place in April 2012, when the diapason was ﬁxed within 1% instead of previous 0.5%. It is worth mentioning that the exchange rate of other world currencies (free floating exchange rate) differs considerably from the

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6.0 5.0 4.0 3.0 2.0 1.0 0.0 -1.0

2010

2011

2012

2013

2014

2015

-2.0 China

Japan

United States

Euro area

United Kingdom

Fig. 3. Dynamics of inflation in various countries in 2010–2015, % Source: World Bank, Open Data, Inflation, consumer prices (annual %). Available at: http://data.worldbank.org/indicator/FP. CPI.TOTL.ZG (accessed 20.02.2017)

exchange rate functioning in the People’s Republic of China. The price of the US dollar, euro, pound sterling and the Japanese yen relative to other currencies is determined by market forces but does not exclude the opportunity of currency interventions for its stabilization. The creation in the People’s Republic of China of the largest in the world international currency reserves contributed to the stability of the yuan. Their total volume in 2015 made up $3.4 trillion. That is almost 1.2 times higher than in year 2010. The absolute total volume of reserve currencies of China exceeds the same indicator of Japan 2.8 times, of Euro area 4.6 times, of the USA almost 9 times, of Great Britain 26 times. The least positive changes during the analyzed period were observed in the course of a partial removal of limitations on the use of the Chinese national currency in capital transactions of balance of payments. The yuan is still not a freely convertible currency. And although the control measures are selectively cancelled, the operations account of other world currencies issuers is much more open than the Chinese one. The Chinese government plans to increase the convertibility of the yuan only by year 2020. The study of the experience of the internationalization of the pound sterling, US dollar, Japanese yen, Deutsch mark and French franc and the euro which replaced them proves that the achievement of the free convertibility of these currencies preceded the achievement of the status of the world currency and did not follow it.

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5 Conclusion Thus, for ﬁve years between the ﬁrst and the second applications of the PRC for the inclusion of the yuan into the basket currency of SDR its internationalization increased considerably. The development of international functions of the Chinese national currency is conﬁrmed by a considerable growth of its role as a currency used for international trade ﬁnance and for the implementation of international or cross-border payments and also for the formation of the tendency of the growth of volume of transactions volume with the yuan in the foreign exchange market for wide trade. At the same time the weight of the yuan in the total volume of ofﬁcial reserve holdings and also the scale of its use in the international debt securities market remains insigniﬁcant. Such a change of the international status of the yuan became the consequence of the following causes. The conditions of the widening of the sphere and scale of the international use of the national currency of the People’s Republic of China (share in the world economy and world trade, low inflation rate, volume of international reserves) created by 2010 became even more favorable. In case of creation of further conditions the impact growth of the People’s Republic of China on the creation of the world product and the yuan stability could provide in the long term period a more considerable demand for it. However at the present stage of development the stock and debt sector of the ﬁnancial market in China cannot offer nonresidents similar opportunities for investments and for obtaining ﬁnancing as highly developed markets of the USA, Euro area, Japan and Great Britain can. This fact has a negative impact on the competitiveness of the Chinese ﬁnancial market and impedes the further internationalization of the yuan. Besides in spite of the relative liberalization the existing limitations on capital transactions of balance of payments will in future contribute to the widening of spheres and scale of international use of the Chinese national currency.

References Chinn, M., Frankel, J.: Will the Euro Eventually Surpass the Dollar as Leading International Reserve Currency? NBER Working Paper 11510 (2005) . http://www.nber.org/papers/ w11510. Accessed 30 Aug 2016 Eichengreen, B.: The Euro as a Reserve Currency (1997). http://eml.berkeley.edu/*eichengr/ research/mantokyo.pdf. Accessed 10 Sep 2016. https://doi.org/10.1006/jjie.1998.0411 Genberg, H.: Currency Internationalisation: Analytical and Policy Issues. HKIMR Working Paper 31/2009 (2009). https://ssrn.com/abstract=1628004 or http://dx.doi.org/10.2139/ssrn. 1628004. Accessed 02 Sep 2016 Kenen, P.B.: The Role of the Dollar as an International Currency, p. 40. Group of Thirty, New York (1983) Kouri, P.J.K., Macedo, de, J.B.: Exchange rates and the international adjustment process. Brookings Papers on Economic Activity, pp. 111–157 (1978). https://www.brookings.edu/ bpea-articles/exchange-rates-and-the-international-adjustment-process/. Accessed 11 Jan 2017 Krasavina, L.N.: Rossiyskiy rubl; kak mirovaya valuyta: strategicheskiy vyzov innovatsionnnogo razvitiya Rossii [The Russian ruble as the world currency: a strategic challenge]. Dengi i kredit 5, 11–18 (2008)

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Kudryashova, I.V.: Rol’ organizatsionnykh i institutionalnykh usloviy v formirovanii sovremennykh mirovykh valyut [The role of organizational and institutional conditions in the modern world currencies formation]. Finansy i kredit 40, 44–50 (2015a) Kudryashova, I.V.: Transformatisya ekonomicheskikh usloviy formirovaniya sovremennykh mirovykh valyut [The transformation of the economic conditions of the modern world currencies formation]. Finansy i kredit 38, 55–66 (2015b) Moiseev, S.: Rubl’ kak rezervnaya valyuta [Ruble as reserve currency]. Voprosy ekonomiki 9, 4–21 (2008) Narkevich, S.S., Trunin, P.V.: Rezervnye valyuty: factory stanovleniya I rol’ v mirovoy ekonomike [Reserve currencies: Factors of evolution and their role in the world economy], p. 136. The Gaidar Institute, Moscow (2012) Pollard, P.S.: The creation of the Euro and the role of the Dollar in international markets. Fed. Reserv. Bank St. Louis Rev. 83(5), 17–36 (2001). https://ﬁles.stlouisfed.org/ﬁles/htdocs/ publications/review/01/09/0109pp.pdf. Accessed 14 Sep 2016 Remarks by Chairman Alan Greenspan: The Euro as an international currency Before the Euro 50 Group Roundtable, Washington, D.C., Board of Governors of the Federal Reserve System (2001). http://www.federalreserve.gov/boarddocs/speeches/2001/200111302/. Accessed 10 Aug 2016 Tavlas, G.S., Ozeki, Y.: The internationalization of currencies: an appraisal of the Japanese Yen. In: International Monetary Fund, Occasional Paper 90 (1992). Available at: http://web.pdx. edu/*ito/Tavlas_Ozeki.pdf. DOI: http://dx.doi.org/10.5089/9781557751973.084 Accessed 30 Aug 2016

The International Business Cooperation and Its Inﬂuence on Enterprise Financial Security Under Globalization Natalia Reshetnikova1 ✉ , Magomedgabib Magomedov2, Dmitry Buklanov2, and Elena Zakharchenko3 (

1

)

Rostov State University of Economics, Don State Technical University, Rostov-on-Don, Russia [email protected] 2 Don State Technical University, Rostov-on-Don, Russia 3 Rostov State University of Economics, Rostov-on-Don, Russia [email protected] Abstract. This article is aimed to analyze the link between internationalization and Meetings-, Incentives-, Conventions- and Exhibitions (MICE) industry which is refer to the destination development. A comprehensive review of the totality of the processes associated with the regional market of Business Tourism, allowed to develop a number of actual tools that make it possible to obtain impor‐ tant practical results. One of these tools is a so called public-private partnership (PPP), to strengthen the trust between government and business representatives on regional level. Practical recommendations for the tourism business activity development can be applied in the regional, national and international business travel market. This article reveals the cooperation process between foreign private companies and the local government in organizing the development of the industry connected to MICE and its inﬂuence on enterprise ﬁnancial security under the globalization. Keywords: Internationalization · Enterprise ﬁnancial security · MICE Meetings industry · Business tourism

1

Introduction

The global tourism market is exposed to internationalization processes and as a result is forced to apply modern strategies, oﬀering consumers innovative ways of tourism. Issues connected to the business communication, a requirement in the continuous inter‐ action of business participants, form a new way of thinking in the tourism industry evolution: “Business Tourism Development”. This article reveals the concept of inter‐ national Business Tourism. The main factor in the contemporary world tourism market is the growing process of internationalization between the actors in the tourism business sector. The main goal of this study is to justify the strategic orientations and eﬀective oper‐ ation of institutional arrangements of the Meetings-, Incentives-, Conventions- and

© Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 294–308, 2019. https://doi.org/10.1007/978-3-030-00102-5_31

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Exhibitions (MICE) industry, due to the global transformational changes to enhance the internationalization of the actors in the tourism business activity. The methodology used in this research was to do a systematic analysis of national and regional components of the tourist services market, in the course of which system‐ atically contributing factors, as well as negative inﬂuences on the economic actors of the tourism business activity have been identiﬁed and described. The structure of this article is as follows; The ﬁrst part is a description of the essence of the MICE industry, explaining this concept and its main components and elements. The next part shows the Business Tourism destination as a result of internationalization processes. The third section presents the cooperation of foreign private companies with the local government and Meetings-, Incentives-, Conventions- and ExhibitionsIndustry. The last part discusses the characteristic trends of public-private partnership (PPP) as a signiﬁcant tool of the cooperation process between foreign private companies and the local government, to strengthen the trust between government and business representatives on regional level; the CVB structure and formation in the region is presented and enterprise ﬁnancial security in the frame of globalization.

2

Business Tourism Destination as a Result of Internationalization Processes

Internationalization of enterprises has attracted the attention of the scientiﬁc community in the twentieth century. Issues connected to business communications, continuous interaction between the participants of business and the increasing role of business contacts both at the national as well as on global level, formed a new tendency in the tourism industry. In this case, special importance is given to the study of the formation of and developments in the business travel market, the evolution of its origin; to deﬁne the leaders of the world market, the main actors and the stakeholders’ inﬂuence. One of the key, but quite poorly studied issues related to this segment, is the impact of business travel on the socioeconomic development of individual regions and groups of regions around the world. At the same time, the institutional and theoretical basis for the integration of the Russian regions’ development of the Business Tourism market is new and it demands reveal. The need for identifying regional segments of the domestic MICE-industry as a factor of business internationalization activity has led to the relevance of this study. Vector of the world economy at the present stage was transformed in the direction of expanding and enhancing the impact of internationalization of Business Tourism in the service market. In many countries, there is an increase in production of tourism services and in their share in the GDP, as a result the number of people employed in the services sector is increasing every year, which is supported by the growing number of national and international companies involved in the tourism services sector. Realizing the urgency of identifying the reasons of increasing income from the service sector in the GDP of developed countries at the present stage of the world economy development, we consider it appropriate to consult authoritative economists

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who have devoted their studies to the service sector and international trade in the service market in particular. For example, Christopher Lovelock, a widely recognized expert in the ﬁeld of serv‐ ices, control theory and service organizations, says: the development of services includes: government policies, social changes, business trends, development of infor‐ mation technology, globalization and the internationalization of service organizations (Lovelock 2010). The rapid globalization of the world economy has increased the chances for the services market abroad both in developed countries and in emerging economies in recent decades. The eﬀect of this is that services are becoming a driving force as well as the fastest growing sector in the international trade (e.g. Grönroos 1998; Javalgi and White 2002). This fact attracts researchers to follow the changes taking place in the industry. Despite this growing importance, the internationalization within the services sector remains an elusive and largely invisible business area (Javalgi, Martin and Young 2006). An important contribution to the study of the problems was brought by Western economists such as (Andersson 2000; Nordstrom 1991; Oviatt, and McDougall 2005). Their researches focus on the construction of theoretical models and strategies of inter‐ nationalization of companies. The study questions the transformation of domestic ﬁrms in multinational companies/corporations. The internationalization of the ﬁrm is an area of great research interest (Bilkey and Tesar 1977; Cavusgil 1980; Johanson and Vahlne 1977, 1990; Luostarinen 1979). One of the most important models in this ﬁeld is the so called Uppsala Model, which was developed by Johanson and Vahlne 1977, 1990). The model explains internationaliza‐ tion as a process of increasing experiential knowledge (Eriksson et al., 1997; Penrose 1959). The discussion is focused on development over time, and the main theme is the ﬁrms’ behavior when it comes to diﬀerent establishment sequences according to markets and entry modes. Markets are entered with successively greater psychic distance. Psychic distance is deﬁned as the factors preventing or disturbing the ﬂow of infor‐ mation between companies and markets. Examples of such factors are diﬀerences in language, culture, political systems, level of education, level of industrial development, etc. (Johanson and Wiedersheim-Paul 1975). The ﬁrm’s international behaviour in a single market is a consequence of a successively greater commitment and is described as follows. At the beginning there are no regular export activities, then export takes place via independent representatives, later through sales subsidiaries and ﬁnally a manufac‐ turing subsidiary is established (Johanson and Wiedersheim-Paul 1975). The Uppsala internationalization model and other process models have been criti‐ cised for being deterministic (Melin 1992; Reid 1981; Turnball 1987). If the companies are developed in accordance with the models, individuals will have no strategic choices. In this study, however, top management and entrepreneurs are regarded as important for the suppliers’ international strategies (Andersson 2000). In the 1990s the entrepreneurs’ importance for international business was highlighted by many researchers. Some researchers such as Welch and Luostarinen (1988) proposed the following interpretation of the concept, according to which the internationalization of the business activity of the enterprise is a «process of increasing involvement in international activ‐ ities of the company».

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Firms enter into foreign markets for several reasons. According to Root (1994) manufacturing ﬁrms and services ﬁrms enter foreign markets because home markets are stagnating or foreign markets are growing faster, some follow their domestic customers who are going international, some ﬁrms may go abroad in search of a greater sales volume or in order to reduce costs, thereby they strengthen their competitiveness at home as well as at foreign markets. This understanding of the internationalization of business enterprise has received the prevalence and relevance to the works of Western scholars. The Author formulated her own deﬁnition, where the internationalization of the business services in business travel is deﬁned as an «integration process of the regional and national business services in Business Tourism infrastructure into a single global economic space, the expansion of territorial organization of Business Tourism oppor‐ tunities beyond the national economy». The following global tendencies demonstrate the relevance of the deﬁnition mentioned above: – Emergence of international hotel chains in the national market (Hyatt, Novotel, Hilton, Sheraton, Marriott, etc.); – International Congress Halls, World Trade Centers, CVB (Convention Bureaus), International airports, Transportation hubs (actors of the tourism business activity); – Strengthening the processes of internationalization and integration of national and regional business processes and services. – The main aim of this article is to solve the following tasks: – To specify place and role of the regional tourism under the internationalization processes; – To determine the place of Russia and the role of the Russian MICE sector in the global business travel market; – To analyze the current state and two assess potential of the international Business Tourism destination in the Business Tourism Development. The theoretical part of this study shows the global trend of growth and commitment to leading positions of business and professional services network such as submission service marketing, advertising, management, leasing, research, and information and technologies, consulting, auditing and accounting services. Its dynamics depends on the content of activities, it is critical from the standpoint of the development of a modern economy based on knowledge, and national competitive‐ ness. M. Porter (Porter 1990) provides illuminating insights into how nations can improve competitive advantage in an age of globalization. There are four main determinants of national competitive advantage: Factor Condi‐ tions; Demand Conditions such as Firm Strategy and Structure and Rivalry; Related and Supported Industries. However, in order to have positive results, the individual companies, the company leaders and the national governments need to work together. According to M Porter’s Approach to Globalization we formulate an idea of the PPP, that allows to strengthen trust between the government and business representatives on the regional level. PPPs may be seen as a cooperative alliance between the public and

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private sectors, in diﬀerent areas of intervention which are traditionally inherent to the public sector, but without embracing a complete privatization process (Linder 1999). The underlying premise of PPPs is to beneﬁt all parties involved, through alignment of their resources and goals. PPPs are becoming more common, because governments realize these agreements may have many tangible and immediate beneﬁts, and the private sector is granted access to new markets and opportunities. According to Kim, Kim and Lee (2005), PPPs are essentially partnerships between public sector organiza‐ tions and private sector and corporate investors, for the purpose of conception, planning, funding, construction and supply of infrastructural equipment or exploration of services. ECLAC (2007) adds that PPPs are characterized by the sharing of risks, investment, resources, responsibility and rewards. Some authors, such as Goymen (2000), Marques and Santos (2016) consider that the creation of an organizational structure (CVB) using the common interests of stake‐ holders can be seen as an example of PPP on the regional level. Consequently, the existence of a CVB is required to promote cooperation between stake‐ holders and to pressure local, regional and national authorities in order to develop harmonized policies, appropriate branding, and marketing strategies in the particular territory. Under the conditions of the principles of management in the tourism industry there is a qualitative restructuring and diversiﬁcation of business: expanding the scope of tourist services. There is a tendency for the synergy of functional and inﬂuence tourism and other businesses. The challenge is to expand and strengthen national tourism market. In this regard, it is important to develop Business Tourism as a socio-economic factor of innovative development. Cooperation of foreign private companies and the local government connected to Meetings-, Incentives-, Conventions- and Exhibitions is presented in this part at as a key factor of the concept of internationalization of this paper. The concept of «Business Tourism», «MICE», and «MICE-technologies» is increasingly common in the travel packages oﬀered by major tour operators and event-companies. Following the recom‐ mendation of ICCA, most experts use the term «MI meeting industry» as a general notion, the term «MICE» is also used. Issues to influence the facts that determine the trends in the global Business Tourism market, are relevant to the modern tourist segment of the world economy, each factor deserves special observation and research. One of these factors of the modern world tourism market is the internationalization of tourism business activity. In Russia, it is particularly important to design and launch specific government programs that would aim at compre‐ hensive and practical development and promotion of the industry. Here, considerable efforts have been made by the government, business, non-governmental organizations and their clear and concrete understanding of the importance of addressing this problem. Promoting the development of Business Tourism, given its place in the economy and the nature of the industry as an important component of the Russian tourism industry, should be the respon‐ sibility of the government and the business community. The MICE industry as a conceptual category of tourist industry is closely linked with tourism and hospitality industry. It is an integral part of the tourism industry, providing a signiﬁcant positive impact on the investment attractiveness and development of

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regional areas of the national economy, concerning to the context of international economical relationship. The MICE industry plays a signiﬁcant role in the development of business, cultural and scientiﬁc relations between regions and countries. In addition, MICE - is one of the resources for integrating and developing companies through business education and participation in trade fairs and congresses. Business Tourism Development is one of the most important keys of the Business Tourism actors’ success. The MICE industry is a driver of economic, social and cultural development world‐ wide, as it: – creates added value for tourism and enhances the tourism economy, mainly in the low season (i.e. business events’ visitors are not only among the most lucrative tourist segments but they can extend their stay and/or return with family and friends/festivals and promotional events as showcase of excellence in the creative industries…); – creates jobs and retrains workforces (multiplicative eﬀect of tourism industry); – increases trade through the promotion of international collaboration and the support of business and professional networks; – attracts investments by promoting the proﬁle of hosting cities/regions provides opportunity for destinations’ regeneration, expansion and growth (i.e. infrastructure and services development); – spreads knowledge and enhances innovation and creativity. The author determined that the increase in the number of events is relevant to increase in implemented business projects and proﬁt growth business entities of tourist destina‐ tions (see Table 1). Table 1. The enterprise ﬁnancial security system building. An enterprise ﬁnancial security sources of threats Possible ways to diversify the risks of negative scenarios High management eﬃciency, development of the Internal and external: conscious/unconscious actions of oﬃcials or subjects (state or municipal corporate governance system, optimality of the enterprise organizational structure authorities, counterparties/competitors, international organizations) Ensuring a high level of education and qualiﬁcation of staﬀ High-quality legal protection of all aspects of the enterprise Enterprise staﬀ security, its capital and property, commercial interests High competitiveness achievement due to External: a combination of circumstances: the technological independence ﬁnancial situation on the market for the sale of products of this enterprise, scientiﬁc discoveries Ensuring environmental safety through and technological developments) minimizing the destructive impact of production results on the state of the environment The information ﬁeld and commercial secrets protection Source: compiled by the author Zakharchenko E.S. by (3), (4)

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Every year countries and cities around the world are forcing for the top positions and rankings, according to the number of conformed major meetings. The MICE-related events aﬀect innovative processes for the economy and society and produces new tech‐ nologies development at regional and national levels. That is why the MICE industry can be the catalyst of the rapid development of modern business and communication infrastructure. Marques and Santos (2016) noted, that the areas with lower population density and lower supply of services and facilities have positioned themselves in this segment in order to attract a larger number of visitors and boost tourism, especially at the level of accommodation facilities situated in non-urban areas that have been able to adapt to the demands of this segment and contribute to meetings conducted in quieter places. Rostov-on-Don city is a one of the leader of the South of Russia in the development of MICE-industry. More than 50% of arrivals are connected with business and MICEevents. In comparison with other Russian cities, such as Sochi, Kazan, Ekaterinburg, Vladi‐ vostok which are the leader in their territories, Rostov-on-Don is one of the fastest developing region, having recognized the potential of this industry to bring economic, social and intellectual beneﬁts. With ever more exhibition grounds (Vertol Expo), accommodation units (Sheraton, Hyatt, Mercure) and entertainment facilities, airport hub being constructed throughout the region, Rostov-on-Don and Rostov Land is strongly positioning itself as a leader in the Russian Federation in the sector of MICE. This situation is especially developing because of The 2018 FIFA World Cup which will held in Russia in 2018. One of the cities is Rostov-on-Don. This event is attracting a big amount of tourists who will bring investments to the region. One of the world leaders of the MICE industry is no doubt, Asia. With the massive development boom that is currently underway throughout Asia come both challenges and opportunities. New convention and exhibition facilities, hotels, casinos, integrated resorts and themed entertainment precincts are being developed throughout the region. This development of new products, combined with the world’s increasing focus on economic engagement in Asia, means that the entire region will enjoy strong growth in its conventions and meetings market. At the same time, the explosive growth of product means that there is an increased challenge in Asian destinations to ensure that they attract adequate levels of future busi‐ ness to sustain the health of all the hotels and venues that constitute their own facility inventories. To be successful, there can be no doubt that every destination will be seeking increases in tourism while also diversifying their markets so that every possible source of new business is fully developed. One of the key areas for this diversiﬁcation will be the business events market – meetings, incentives, conventions and exhibitions. Governments throughout Asia have awoken to the fact that hosting these kinds of meetings is a vital form of global engage‐ ment – both economic and intellectual. They are adding MICE development to their economic policy statements because they see MICE as key to their economic develop‐ ment strategies. Throughout this process, the action of specialized organizational structures such as the CVBs, proves to be of great strategic importance.

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Aims and roles of CVB creating in the region Market research of MICE potential in the region Identifying the priorities of CVB for MICE development in the region Evaluating the effectiveness of the chosen strategy implementation Positive result: Preparing the constituent documents, organizational management structure by the Regional Chamber of Commerce. Forming the CVB memebrship Attracting funds for financing the CVB membership fees, budget subsidies Establishment of CVB Constituent Assembly Positive result: Marketing activities for promotion CVB at the regional, national and global markets of MICE-industry

Promotion of CVB: 1. Forming the CVB memebrship 2. Joining the Russian and international associations of business tourism organisations. 3. The participation of Regional Government as Supervisory Board in the activities of CVB

Recognition and promotion of Regional CVB in the international market MICE

Implementation of the strategy and indicated Mission of CVB

Monitoring the effectiveness of the CVB by representatives of the government and business authorities and membersof CVB

Fig. 1. The structural steps VCB creation and implementation in the region Source: By the author

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Gunn (1972) was the ﬁrst person to conceptualize a tourism system. In his simple early model, he noted that attractions drive tourism. A corollary of this conceptualization was that as magnitude of the attraction increased, the number of visitors was likely to increase. This corollary was analogous to the theory of cumulative attraction, which had been formulated in the context of retailing. According to the survey of Governmental and business authorities of the Russian region, – Rostov Land, which was made by the Regional Chamber of Commerce of Rostov Land and business tourism organizations of Rostov-on-Don, since 2014, the majority of tourists visited the region are business tourists. In the frame of the Govern‐ mental program of Tourism Development, the Business Tourism is one of the signiﬁcant element for Investment Development and Brand creation of the region in Rostov Land (Fig. 1). As we mentioned above that CVB plays a signiﬁcant role in the attraction of tourists and promotion for territories, and based on the potential of resources and possibilities, the structure of creation and implementation of CVB in the region is presented above (see the picture). Thereby, contributing to the growth of the regional economy and prosperity of the region and its individual cities is a consequence of the functioning of the business travel industry.

3

Enterprise Financial Security

A complex process of developing new economic relations is taking place in Russian Federation as for now by building the fundamental basis of an effective state through ensuring the financial security of business entities. In connection with the relations aggravation between Russia and a number of Western countries, the country faces the task of adapting to new economic conditions. To achieve this strategic goal, the Strategy of Economic Security of the Russian Federation for the period until 2030 was adopted in 2015, according to which it is declared: the country’s economy development, ensuring economic security, including enterprises financial security, transferring them to a new technological level, and also the creation of conditions for the development of the individual, Russia’s entry into the number of leading coun‐ tries in terms of gross domestic product and a successful confrontation with the influence of internal and external threats (1). The enterprise ﬁnancial security is customary to understand the state of its security against the negative inﬂuence of external and internal threats, destabilizing factors, under which a stable realization of the main commercial interests and goals of the stat‐ utory activity is ensured. (2) Based on the foregoing, Table 1 summarizes the main risks and threats to which business entities are exposed, as well as possible ways of protecting against them. It should be taken into account that the low level of ﬁnancial security of the enterprise leads to its bankruptcy. The statistics of bankruptcies of legal entities for the last 5 years in the Russian Federation is presented in Fig. 2.

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The growth trend of the bankruptcies number of Russian enterprises presented in the picture illustrates their low ﬁnancial security, the lack of mechanisms for adapting to the new economic situation, taking into account the anti-Russian sanctions introduced. 1400 1200 1000 800 600 400 200 0 Jan, 2013

Sep, 2013

Jan, 2014

Sep, 2014

Jan, 2015

Sep, 2015

Jan, 2016

Sep, 2016

Jan, 2017

Sep, 2017

Fig. 2. Bankruptcy of Russian companies, pcs. (2013–2017). Source: compiled by the author Zakharchenko E.S. by (5)

Among the main drivers of the Russian enterprises bankruptcies intensity can be called: the closure of external ﬁnancial markets, the exchange rate volatility growth, the interest rates growth (due to the increase in the key rate of the Bank of Russia) and the deterioration of the conditions for reﬁnancing enterprises. The main condition for the enterprise ﬁnancial security is the ability to withstand existing and emerging hazards and threats, as discussed in Table 1 above. In order to have a high degree of ﬁnancial security, the enterprise should be able to develop and implement the ﬁnancial strategy independently in accordance with the objectives of the overall corporate strategy and the principles of corporate governance, in conditions of uncertain (taking into account newly introduced anti-Russian sanctions) and a competitive market environment. To ensure this, the business entity should maintain ﬁnancial stability, ensure suﬃ‐ cient ﬁnancial independence of the enterprise and ﬂexibility in making ﬁnancial deci‐ sions, and demonstrate the cost of equity growth (taking into account the concept of managing the company’s value). Thus, ﬁnancial stability is a necessary, but insuﬃcient condition for the ﬁnancial security of an enterprise. These concepts are inextricably linked with each other, complementing each other. Consequently, the ﬁnancial security provision can only be based on the ﬁnancially sustainable development of the enterprise, in which conditions are created for the imple‐ mentation of such a ﬁnancial mechanism that is able to adapt to the changing conditions of the internal and external environment.

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To assess the enterprise ﬁnancial security level in order to prevent bankruptcy and liquidate management should be guided by the criteria for assessing ﬁnancial security, such as: 1. Indicators or threshold values that characterize the activities of an enterprise in various functional areas. Compare with the actual performance of the company, the main of which are solvency ratios and liquidity, which also have certain regulatory (recom‐ mended) values. The key way to determine these indicators is to conduct a factor analysis of the enterprise based on data provided in the main forms of ﬁnancial statements. The advantage of using the indicator approach to determining the degree of ﬁnancial security of an enterprise is the ease with which basic formulas are used to calculate coeﬃcients provided that the ﬁnancial statements are reliable; 2. Integrated sets of indicators used with diﬀerent levels (see Table 2). Table 2. The most eﬀective indicators for assessing the ﬁnancial security of an economic entity Non-ﬁnancial indicators Indicators of production Production dynamics

Capacity utilization rate

Financial indicators Social indicators Level of remuneration of labor Total expected sales in relation to the average indicator for industry or the economy as a whole Wage arrears Actual and necessary amount of investments Loss of working hours Innovation activity level

Rate of renovation of ﬁxed assets Human resources structure Level of congestion for a certain time Share of production in GDP Existence of a corporate social Assessment of competiveness responsibility Structure and technical resource of the ﬂeet of machinery and equipment

Level of proﬁtability of production Capital productivity Arrears (receivables and payables) Share of own sources of ﬁnancing of working capital, materials, energy carriers for production

In addition, the company’s cost management concept, which is relevant both for business owners and potential investors, suggests that the growth of the well-being of the company’s owners is measured not only by the volume of installed capacities, the number of employees employed or the turnover of the company, but the market value of the enterprise owned by them. Consequently, if there is a growth in the value of the company in the long term, it is also planned to ensure the ﬁnancial security of the enter‐ prise, which in turn serves as a guarantee of the investment attractiveness of the business. Thus, the highest level of ﬁnancial security is achieved at those enterprises that take into account the speciﬁcs of the market for the production of products in the required volume, and also ensure the growth of investment attractiveness through continuous monitoring of the company’s market value.

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If this type of enterprise strategy is successfully implemented, the amount of funds coming into budgets of diﬀerent levels will also increase, which will have a positive economic eﬀect.

4

Conclusions

In the beginning of the article we declared the aim to ﬁnd the link between the Interna‐ tionalization mad MICE industry. Business Tourism as an independent branch of the global economy is directly linked to the development of foreign economic relations, the desire to use the best practices of other countries in the creation of material and immaterial values, which enhances the quality and the number of international contacts. In this regard, the relevance of the issue of internationalization of the business travel segment comes to the fore, becoming one of the most important items on the global agenda. Creating an enabling environment for the participation of regional business in international economic relations, infrastructure upgrading of urban areas, attracting new investment to the region and companies, increased regional trade and increase in capacity of airports and hotels, and is an incen‐ tive factors in the internationalization of Business Tourism services in the context of the regional tourist market globalization. Meanwhile, as a support of the development of corporate communication, cooper‐ ation between businesses structures in the formation of a platform of PPP on regional and national level, the players of the national market of Business Tourism are joining forces to promote MICE opportunities in Russia. As we analyzed in this study the PPP in tourism sphere is a signiﬁcant instrument of stabilization and economic development in Russian Federation. In this research paper described a deﬁnition of PPP and described its modern status in Russia. Described reasons for necessity of the development of this sphere of the economy. In this article is showing general tools and methods of classiﬁcation of the regions according to the necessity in the governmental investments for the development. The main ways of the development of the PPP in the tourism sphere in Russia are described and analyzed by the author of this article. In this research paper you will also ﬁnd successful examples of the creating PPP projects in Russia. The leader of the national market MICE - Association of Business Tourism, has teamed up with the international organization - Association of Corporate Governing business trips, for the further development of the Russian market of Business Tourism. According to the Association of Business Tourism such initiative involves the creation of a joint organization that will oﬃcially represent the interests of the largest interna‐ tional associations in the ﬁeld of Business Tourism brand. New formats of cooperation will consolidate eﬀorts to implement activities, training programs and exchange of experiences between professionals business-travel market. It is expected that the role of business travel will continue to grow. According to foreign experts, by 2020 the number of international business visitors will increase almost three-fold - from 0.6 billion to 1.6 billion.

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The Russians economists’ estimations are that the Russian market of business travel and meetings industry until 2016, can take 1.3 million visitors. By research’s results Euromonitor International Today, Russia is ranked 6th in the world in the ﬁeld of Busi‐ ness Tourism. The practical implementation of the research ﬁndings and results of this paper is important for the Business Tourism development on the regional level and CVB imple‐ mentation as a key tool in the supply structure associated with the territory and in the management, planning and development of tourism destinations, especially those which want to assert themselves as successful Business Tourism destination.

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Normal Flow of Resources as a Basis for Improving the Quality of Final Financial Information Alexander A. Bazhenov1 ✉ , Igor E. Mizikovsky2, Ekaterina P. Garina3, Viktor P. Kuznetsov3, and Alexander I. Gavrilov4 (

)

1

Vladimir State University named after Alexander Grigorievich and Nikolai Grigorievich Stoletov, Vladimir, Russia [email protected] 2 National Research Nizhny Novgorod State University, Nizhny Novgorod, Russia [email protected] 3 Nizhny Novgorod State Pedagogical University Named After K. Minin, Nizhny Novgorod, Russia [email protected], [email protected] 4 Russian Academy of National Economy and Public Administration Under the President of the Russian Federation, Nizhny Novgorod Institute of Management, Dzerzhinsk, Russia [email protected] Abstract. The strategy of ensuring sustainable competitiveness of manufac‐ turing enterprises assumes, as one of the key directions, permanent economy and the most rational use of material resources: raw materials, basic materials, semiﬁnished products, components and purchased products; fuel and energy for tech‐ nological needs. At the same time, there is obviously a lack of generally accepted, eﬀective and inexpensive tools for implementing cost-eﬀectiveness in the usual activities of the organization. The formation of conditions for the production and marketing of products (works, services) in which permanent savings and the rational use of material resources become possible depend not only on the sectoral features of the enterprise, but also on a number of speciﬁc factors: the region of location, the possibilities of the production infrastructure, the quality standards of the products produced, the owner’s requirements for structuring management, marketing conditions, logistics, currency rates, etc. The article explores the appli‐ cation of the expenditure rate for the purpose of saving and maximizing the rational use of material resources. It is shown that there is a need for a clear, unambiguous and scientiﬁcally grounded deﬁnition of the economic concept of the consumption rate of materials. A study was carried out and the author’s deﬁ‐ nition of the “standard of materials costs” was formulated. Keywords: Resources · Norm · Expense · Organization · Costs · Validity · Losses Savings · SWOT analysis · Factors

1

Introduction

The eﬀect of any measures to save and rationalize the costs of conventional activities is achieved through the systematic use over the long calendar period of tools. “One-oﬀ” activities, as a rule, are eﬀective in the short-term time interval and, from the point of © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 309–315, 2019. https://doi.org/10.1007/978-3-030-00102-5_32

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view of systemic actions for the implementation of the strategy, are ineﬀective. In the formation of a set of tools that provides implementations of the strategy should take account of the eﬀective application of each of them in a long time on the second run. One of such tools, as practice shows, is the expenditure cost rate, which has the ability to adapt ﬂexibly and adaptively in various areas of the enterprise. The research conducted by the authors at a number of manufacturing enterprises of the Nizhny Novgorod indus‐ trial cluster showed that, unfortunately, in their corporate standards there is often no transparent and clearly formalized disclosure of expenditure norms for material resources, there is no description of the procedure for their calculation and subsequent application, taking into account the speciﬁcs of this economic subject. Therefore, in the opinion of the authors, the problem of harmonious “ﬁt” of this instrument into the complex fabric of the enterprise’s management ﬁeld in the sphere of normal activity remains urgent. Another problem identiﬁed in the study of the economy of manufacturing enterprises was the lack of a proper feasibility study for calculating expenditure norms, which leads to the use of normalized values of costs based on empirical, often arbitrary data. At most of the enterprises under investigation, there remains a pressing problem of timely updating and systematic use of the contents of the base of expenditure cost norms. In these conditions, the development and implementation of administrative inﬂuences to ensure systematic economy and maximize the rational use of material resources is signiﬁcantly hampered.

2

Theoretical Bases of Research

The analysis of the theoretical and methodological base of the problematic subject, carried out by the authors of the article, showed the ambiguity of the researchers’ approaches to the deﬁnition of the concept of “material consumption rate”. It is quite obvious that the consumption rate is, ﬁrst of all, the quantitative characteristic of resource consumption in the speciﬁc measurement. This paradigm is positioned by a team of authors under the guidance of Professor Safronov [15]. They approve that “the rate of material consumption should be understood as suﬃcient and necessary quantity for the manufacture of a unit of production.” Further in this source it is speciﬁed that “the rate of material consumption is a certain measure of costs, which reﬂects the situation that has not developed in the production of products, but gives a guide, gives purposeful character in the improvement of production, technology, type and style of the products.” Like any parameter that quantitatively characterizes the volume of consumption of materials in the usual activities of the organization, the rate of consumption requires timely updating, including based on the results of optimization and ﬂexible “binding” to speciﬁc production and technological and organizational conditions. It is no coinci‐ dence that Stepanov, Afanasenko and Borisova [2] note that the norm “represents the optimal amount of expenditure of material resources for the production of a unit of production in speciﬁc technical, organizational and economic conditions of production”. At the same time, in a number of sources there is some “departure” from the obvious need for optimization and scientiﬁc justiﬁcation for the regulatory parameters of the

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expenditure of materials, the identiﬁcation of the consumption rate with the maximum allowable amount of resource use in normal operations is positioned. So, in the opinion of Ermakova and Dremlyugi [4], “the rate of consumption of materials is the maximum permissible amount of material for manufacturing a unit of a product of an established quality in accordance with the existing state of the techniques, technology and produc‐ tion organization.” Ulasovets in [3] emphasizes that the rate of consumption is “the maximum permissible amount of raw materials for the production of a unit of produc‐ tion… of an established quality, taking into account the planned organizational and technical conditions of production.” There is a position that assumes an emphasis on an administrative resource that does not rely on such concepts as “optimization”, “maximum values”, etc. An example is the opinion of Ginzburg [8], who approves that the norm is “the established value of the measure of consumption… of the material.” Meanwhile, in all the above opinions of scientists on the issue of scientiﬁc interpretation of the rate of consumption of materials, there is no “binding” of this concept to the calendar period, which also contradicts the policy of systemic adaptation of value to changing production and technological conditions. The deﬁnition of the concept of the norm, semantically corresponding with the calendar period, takes place in the works of a number of authoritative authors, but without emphasis on organizational and other production conditions. The results of the analysis of the theoretical and methodological base of this problem, carried out by the authors, are presented in Table 1. Table 1. Analysis of the theoretical and methodological basis of the concept of the norm of expenditure of materials in ordinary activities [13, 14] Scientiﬁc position Authors, sources Measure of the expenditure of material per unit Safronov, N.A., Vakhrushin, M.A., of products Rasskazova-Nikolaeva, S.A., Sidorova, M.I., Karpova, T.P. [11] The optimal value of the costs of material Stepanov, V.I., Afanasenko, I. D., Borisova, V. resources for the production of a unit of V., The site “Financial Dictionary of the trader” production… in speciﬁc technical, organizational and economic conditions of production The maximum permissible amount of material Ermakova, I.A., Dremlyuga, O.A., Ulasovets, for manufacturing a unit of a product of an V.G.,Websites “Open Source Content established quality in accordance with the Management”, “Economic Dictionary” GOST existing state of the techniques, technology and 14.322-83 “Standardization of the production organization consumption of materials. Basic provisions (with Amendment No. 1)” The rate of material consumption is planned per Nikolaeva, O.E., Shishkova, T.V., Bechtereva, unit of output, components or services E.V., [7], Zharikova, L.A., [10] Kerimov, V.E., produced during the period [12], Sukhov, R.L., Babaev, Yu.A The set value of the material consumption Ginzburg, A.I measure

According to GOST 14.322-83 “Standardization of the consumption of materials. The main provisions (with Amendment No. 1)” [9] the expenditure rate of material

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resources used in ordinary activities can be represented as a set consisting of three elements: • Useful resource consumption i.e. costs that are embodied in the product; • Technological waste caused by the established production technology and not mate‐ rialized in the product; • Loss, the amount of material irretrievably lost during the manufacturing process. Technological (return) wastes form the remnants of material resources that are subject to transfer in accordance with the technology used at the enterprise and produc‐ tion in other units of the organization as the basis for the production of other types of products (works, services). In accordance with the adopted regulatory documents in the ﬁeld of accounting, they are subject to valuation at a reduced price of the initial material resource (at the price of possible use), if they can be used for the main production, but with increased costs (reduced output of ﬁnished products) and (or) for auxiliary produc‐ tion, including for the production of consumer goods (goods of cultural and household use and household use) or sold on the side. The estimation of a material resource for realization on the party is made at current market prices. Losses (irretrievable waste) are those waste “that the organization cannot use and realize and that are subject to… isolation in order to exclude the possibility of their further use”. Theoretically, they can also be attributed to losses.

3

Methodology of the Study

In the course of the study, the authors used theoretical methods of generalizing and comparing data, formalizing (structured description) of the characteristics of the object of investigation, SWOT-analysis, as well as empirical methods of observation and description of the subject area.

4

Analysis of the Results of the Study

The analysis showed that there is a need for a clear, unambiguous and scientiﬁcally justiﬁed deﬁnition of the economic concept of the consumption rate of materials. The authors formulated the following deﬁnition: “The rate of consumption of materials is a corporate-accepted and quantitatively identiﬁed measure of consumption of a certain resource per unit of product in speciﬁc processes of production and sale of products (works, services) in a certain calendar period of business activity” [4]. In addition, the authors found that the write-oﬀ of material costs at many enterprises occurs based on actual expenditure of resources documented during the production and sale of products, often without using the norms of resource consumption [2]. The absence of standardized costs at many enterprises, creates conditions for unreasonable spending of current assets at those enterprises where the rationing of resources is conducted, the information obtained showed that on the majority of them (about 95% of the total number of research organizations), the segment of expenditure norms of material resources is built on consolidated norms. It becomes diﬃcult to diﬀerentiate expenditure norms in

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the context of the origin (centers) of costs and technological operations, which compli‐ cates not only the accounting and calculation work, but also signiﬁcantly reduces the quality of the information ﬁeld for developing management actions to maintain the economy and rationality of material costs [3]. The aggregate rate of consumption per unit of product is calculated as the aggregate of the consumption of homogeneous types (groups) of resources and cannot directly be the operational base for the operational control of the actual consumption of the material, since it reﬂects in general, at diﬀerent operations and at diﬀerent cost centers. In addition, the consolidated norm includes not only a “clean” amount of materials used for the product being manufactured, but also a number of auxiliary operations, including product quality testing, equipment adjustment, tool repair. At the same time, it should be noted that the reasons for the widespread prevalence of the methodological approach under consideration are relatively low labor input and a signiﬁcant simpliﬁcation of accounting for costs and calculating the cost of labor products, a virtually guaranteed success in automating this process. The analysis of the materials studied showed that, in fact, the complexity of the option for constructing the base of expenditure cost based on composite norms is several times lower in comparison with the variant assuming the speciﬁed norms as such. Studies prove that the speciﬁed rates of consumption of metal and other materials per unit of product approved by the enterprise are of key importance in normal opera‐ tions, including maintaining a regime of economy and rational use of the resource base. They are subject to reﬂection as a rule in the design speciﬁcation of products and are in fact numerical characteristics of the expenditure of material resources in the speciﬁca‐ tion of individual nomenclature groups (positions). A distinctive feature of the speciﬁed norms, according to the authors, is the absence in the design documentation of data on the weight of material blanks, waste and losses. Based on these norms, there are real opportunities for conducting accurate economic calculations in the enterprise’s accounting and calculation space and in budget planning, creating conditions for improving the quality of internal (management) reporting, and creating operating plans (for example, a production program) [1]. Speciﬁc norms are ﬂexibly and adaptively “tied” to technological operations, products of production and, at the same time, to the centers of occurrence (responsibility) of costs. Competent use of the information and tool platform for the normalized costs of material resources will ensure the improvement of the quality of primary data on the costs incurred by opti‐ mizing the primary workﬂow, eliminating duplication of documents and reducing the ﬂow of document. In turn, this will allow timely detection of deviations (overexpenditure or savings) of materials based on the approved database of operational speciﬁed stand‐ ards, including prior to the direct execution of the technological operation and inform the persons making managerial decisions about this. At the same time, it should be noted that the calculation of the speciﬁed norms, the creation and maintenance of the expen‐ diture base on their basis, updating and use in the management of the organization’s normal activities, is a laborious and expensive process that requires the attraction of additional forces and means of management of the enterprise. Table 2 presents the posi‐ tive and negative aspects of the use of the speciﬁed expenditure norms for material resources.

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Table 2. SWOT-analysis of the use of speciﬁed expenditure rates of material resources as a tool to ensure the economy mode [5, 6] Environment Inner

Outside

5

Positive sides Advantages: eﬀective maintenance of a regime of economy and rational use of the resource base Additional features: is one of the important tools for the implementation of the organization’s competitiveness strategy

Negative sides “Weakening” properties: high labor input calculation, timely update and use Factors that may complicate the achievement of a strategic goal: attraction of additional forces and means of management of the enterprise

Conclusions

Based on the SWOT analysis carried out by the authors, the following conclusions can be drawn: 1. Write-oﬀ of material costs at many enterprises occurs because of actual expenditure of resources documented during production and sales of products, often without using the norms of resource consumption. 2. At the same time, the speciﬁed norms for the consumption of metal and other mate‐ rials per unit of product approved by the enterprise are of key importance in normal activities, including for maintaining a regime of economy and rational use of the resource base. 3. Based on these norms, there are real opportunities for conducting accurate economic calculations in the enterprise’s accounting and calculation space and in budget plan‐ ning, creating conditions for improving the quality of internal (management) reporting, and creating operational plans (for example, a production program).

References 1. Bazhenov, A.A.: Registers of accounting as the most important element of the informationaccounting ﬁeld of the organization. In: Economics, Management, Finance in the View of Modern Research: Materials of the II European International Research and Practice Conference 20.11.17. Scientiﬁc Publishing Center “Open knowledge”. Hamburg, Germany, pp. 4–9 (2017) 2. Bazhenov, A.A.: The formation of the cost of inventory in the accounting (ﬁnancial) statements. In: Human and Natural Sciences and Problems of Modern Communication: Materials of the I European International Research and Practice Conference 30.09.17. Scientiﬁc Publishing Center “Open knowledge”. Prague, Czech Republic, pp. 21–26 (2017) 3. Bazhenov, A.A., Mizikovsky, I.E.: Veriﬁcation of the facts of the economic life of a unitary enterprise in the system of accounting and analytic space. In: Modern Research in Global Scientiﬁc Activities: Current Issues, Achievements and Innovations: Materials of the I European International Research and Practice Conference 31.07.17. Scientiﬁc Publishing Center “Open knowledge”. Soﬁa, Bulgaria, 2017. pp. 15–24 (2017)

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4. Mizikovsky, I.E., Bazhenov, A.A., Garin, A.P., Kuznetsova, S.N., Artemeva, M.V.: Basic accounting and planning aspects of the calculation of intra-factory turnover of returnable waste. Int. J. Econ. Perspect. 10(4), 340–345 (2016) 5. Garina, E., Kuznetsova, S., Romanovskaya, E., Garin, A., Kozlova, E., Suchodoev, D.: Forming of conditions for development of innovative activity of enterprises in high-tech industries of economy: a case of industrial parks. Int. J. Entrep. 21(3), 1–6 (2017). Research Article 6. Garina, E., Kuznetsova, S., Garin, A., Romanovskaya, E., Andryashina, N., Suchodoeva, L.: Increasing productivity of complex product of mechanic engineering using modern quality management methods. Acad. Strat. Manag. J. 16(4), 1–8 (2017). Research Article 7. Bekhtereva, E.V.: Cost: Rational and Eﬀective Accounting of Costs. 5th edn., Pererab, Practical accounting. Omega, 148 p. (2011) 8. Ginzburg, A.I.: Economic analysis: Textbook for high schools. The standard of the third generation, 448 p. Peter, St. Petersburg (2011) 9. GOST 14.322-83: Standardization of the consumption of materials. Basic provisions (with Amendment No. 1). http://docs.cntd.ru/document/1200012273. Accessed 20 Jan 18 10. Zharikova, L.A.: Managerial Accounting: Textbook. allowance. Publishing house of Tambov State Technical University, Tambov, 136 p. (2004) 11. Karpova, T.P.: Management Accounting: Textbook for high schools. 2nd ed. Professional textbook: Accounting, 351 p. Unity-Dana (2004) 12. Kerimov, V.E., Suhov, R.L.: Accounting of costs and calculation of the cost of services in travel agencies. J. Account. 11, 44–49 (1999) 13. Vakhrushin, M.A., Rasskazova-Nikolaeva, S.A., Sidorov, M.I.: Management accounting-1: Training manual for the program of training and certiﬁcation of professional accountants. Basic course, 141 p. Binfa (2011) 14. Babaev, Y.A.: Accounting for production costs and costing of products (works, services): Textbook. Pract. allowance, 160 p. University textbook (2007) 15. Safronov, N.A.: Business Economics: Textbook, 584 p. Lawyer (2007)

Economic Security as a Factor of Formation of Modern Russian Entrepreneurial Environment Ulyana A. Pozdnyakova ✉ and Margarita T. Kozhukhova (

)

Volgograd State Technical University Russia, Volgograd, Russia [email protected], [email protected]

Abstract. In the modern conditions of integration of national economy into the world economy, the problem of economic security and determination of the role and place of Russian entrepreneurship in globalized economy comes to the fore‐ ground. The authors determine interconnection between support and development of entrepreneurship and provision of national economic security. The authors determine conditions that inﬂuence formation and development of entrepreneu‐ rial activities and problems of Russian entrepreneurship in the conditions of inte‐ gration in the world market. A complex of measures is oﬀered as a result. Keywords: Globalization · Entrepreneurship · Economic security Entrepreneurial environment · Problem of SME JEL Classiﬁcation Codes: F6 · M6

1

Introduction

In the modern conditions of transition to open economy and integration of national economy into the global economy, the problem of economic security and determining the Russia’s role and place in the globalized economy comes to the foreground. According to M.D. Intriligator, globalization is large increase of scales of the global trade and other processes of international exchange in the conditions of more open, integrated, and borderless global economy (Intriligator 1998) Globalization transforms from the economic term, which means transnational func‐ tioning of economy, into a generalizing category that characterizes evolutional and revolutionary changes in social reality. Globalization of economy is a complex and contradictory process. On the one hand, it simpliﬁes economic interaction between states, creates conditions for countries’ access to leading achievements of humanity, ensures saving of resources, and stimulates the global progress. At the same time, it increases economic wars – combination of actions aimed at achieving economic domination in supporting national economy through economic inﬂuence on economic system of another party with simultaneous provision of security and protection of own economic system (Loginov 2007). It should be added that not only countries but also transnational corporations and banks participate in these wars. A lot of states cannot stand such pressure, so their national industry is falling down.

© Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 316–324, 2019. https://doi.org/10.1007/978-3-030-00102-5_33

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A well-known economist J. Stiglitz proves that globalization destroys industry, stimulates growth of unemployment and poverty, slows down technological progress, and deepens ecological catastrophe on the planet (Stiglitz 2006). According to other authors, globalization is used by the USA as a tool for weakening or elimination of its geo-political opponents (Platonov 2008; Kissinger 2002) The process of globalization is very quick, but such advantages as distribution of modern technologies, possibilities of increase of ﬁnancial potential for investments and consumption are gained not by everyone but only by the states that guide this process and possess intellectual, ﬁnancial, and information possibilities. Recently, “ﬁnancial globalization” has been distinguished as a separate category – it is the process of gradual uniﬁcation of national and regional ﬁnancial markets into one global ﬁnancial market, and increase of interdependence between markets of sepa‐ rate ﬁnancial tools (Rakhlis 2013) Having started developing market economy, Russia entered the path of open devel‐ opment, following the global tendencies, which show that opening the economy accel‐ erates development of the country. However, Russia, with insuﬃcient competitiveness of economy, was not able to use advantages of open development. Excessive openness poses the highest danger for national economy, for it aggravates the problem of national interests and economic security of the state. Provision of economic security belongs to exclusive competence of the state. The task of the state is to ensure social stability of society, create conditions for entrepre‐ neurial activities, and fend possible threats to the country’s security. Entrepreneurial society has a large role in regulation of socio-economic processes. Development of entrepreneurship stimulates formation of middle-class and, thus, creation of public society in the country – which is interested in political stability, development of demo‐ cratic foundations, and increase of quality of human capital.

2

Methodology

In the conditions of integration of national economy into the global economy as an equal participant of production of goods and services, the main link is domestic entrepreneur‐ ship, and its development and increase of protection of its interests is one of the main conditions of excluding the long-term threat to national economic security. Based on this, the main priority of the state is supporting and developing entrepreneurship (Fig. 1). A special economic role in this process belongs to the sector of small entrepreneurship, which, as compared to large economic subjects, better adapts to changing economic conditions.

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U. A. Pozdnyakova and M. T. Kozhukhova Task of the state

Support for entrepreneurship

Creating favorable entrepreneurial environment

Ensuring economic security

Openness of economy

Fig. 1. Interaction between support and development of entrepreneurship and provision of national economic security. Source: compiled by the authors.

In order to conﬁrm dependence of the level of national economic security on the level of development of small and medium entrepreneurship, let us view certain indi‐ cators of entrepreneurship in countries of the world. In developed countries, small and medium entrepreneurship (SME) is the basis of market economy – which is seen in high indicators that determine the level of develop‐ ment of SME. Thus, in the USA, the UK, Germany, Italy, and France, the sector of small and medium entrepreneurship produces 50–70% of GDP and provides more than 50% of employment (A RECOVERY ON THE HORIZON, 2013). Besides, this sector in developed countries acquires twice as many innovations than large companies, being a testing ground for innovational processes in industry, and activates structural transfor‐ mation of spheres by dynamic reaction to change of the structure of consumption. The most important function of small entrepreneurship is creative function, which is related to acquisition of competitive advantages. Its role grows in the modern economic system – innovational economy. Increase of the function that is related to innovations generates new economic climate for entrepreneurial activities and expands the market of technological developments and venture entrepreneurship. Besides, infra‐ structure of entrepreneurship develops, access to useful information expands, patent and license services strengthen, and tools and means of entrepreneurial activities improve. Also, small business is an important element, which stimulates development of compe‐ tition, as it possesses increased ﬂexibility as compared to large business. Let us compare key indicators of the sector of SME in Russia and certain countries of the European Union (Table 1).

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Table 1. The main indicators of development of the sector of SME in diﬀerence countries, 2015 (Source of data for the EU countries: “Annual report on small and medium companies of the EU” - http://new.mspbank.ru/userﬁles/2015EU.pdf; Source of data for the sector of SME in Russia – the Federal portal of SME http://smb.gov.ru/ﬁles/images/Пpeзeнтaция_cтpaтeгия.pdf). Countries

Number of SME, million

Russia EU (21 countries) USA Japan

5.6 21.6 22.5 9

Share of employed in SME of the total number of employed, % 25 66.9 50.1 69.5

Share of SME in GDP, % 19.2 58 52 51.6

On the whole, the sector of SME accounts for the large share of the Russian economy – however, according to the main indicators of the sector’s development, it is behind the leading economies of the world: the share of added value in GDP does not exceed 21%, which is by 2–4 times lower than in developed countries, and SME ensure only a quarter of employment (25%).

3

Results

Let us evaluate interconnection between the level of economic security, number of subjects of entrepreneurial activities, and sum of their turnover. Let us present the data in the table (Table 2). Table 2. Dependence of the number of subjects of SME and the sum of their turnover on the level of national economic security (Mamina 2012) 1998 Level of national economic 1.88 security Number of subjects of SME, 4.46 million Total turnover of SME, RUB 261.9* billion

2000 2.7

2007 5.89

2008 5.85

2009 5.08

2011 5.92

4.78

3.94

4.1

4.2

4.4

613.7*

15,468.9*

21,833

19,904

27,760.6

*(turnover of only small companies)

Let us use the methods of regression analysis. We cannot use multiple correlation, as dependent variable correlate with each other (the more the subjects of entrepreneur‐ ship, the larger the turnover sum). In the ﬁrst case, let us suppose linear dependence of random value Y (number of subjects of SME) on X (level of national economic security). According to the least squares method, let us evaluate the level of correlation and build a theoretical model of paired regression. Let us performed the necessary calculations in Excel (Fig. 2).

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Fig. 2. Screenshot of calculations in Excel.

The equation of linear regression has the following form: 𝐘 = 4.81 − 0.11𝐗

Coeﬃcient of linear paired correlation = −0.694 Theoretical coeﬃcient of determination = 0.476 In the second case, let us suppose linear dependence of random value Y (turnover of subjects of SME) on X (level of national economic security). After similar calcula‐ tions, we have: Coeﬃcient of linear paired correlation = 0.963 Thus, there is strong linear dependence between the level of national economic security and the number of subjects of entrepreneurship and the volume of their turnover. According to classics of political economy, entrepreneurial activities are developing under the inﬂuence of factors and conditions that predetermine successfulness of their activities. Thus, it is possible to say that implementation of entrepreneurial activities at the eﬀective level is possible only with presence of entrepreneurial environment. In foreign scientiﬁc literature, deﬁnition “entrepreneurial environment” is rather rare, for it is replaced by “environment of entrepreneurial organization”, “business environ‐ ment”, “environment of organization”, etc. There is no shared opinion in the Russian literature on entrepreneurial environment. Within the ﬁrst approach, it is oﬀered to see entrepreneurial environment as a favor‐ able socio-economic, political, and civil & legal situation that ensures economic freedom for able-bodied citizens for conducting entrepreneurial activities, which are aimed at satisfaction of needs of all subjects of market economy. However, another approach states that conditions of entrepreneurial environment could stimulate entrepreneurial activities and hinder them. The third approach to determining entrepreneurial environment as a public economic situation, which includes the level of economic freedom, possibility of emergence of

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Economic • financial state of the country, population’s living standards, payment capacity, effective demand, level of development of financial and credit system, market situation, etc.. Organizational and technical • Infrastructure for development of entrepreneurial activities (system of commercial banks; legal, accounting, and audit companies, advertising agencies; transport and insurance companies). Scientific and technical • level of technological progress in basic spheres of economy, presence of innovational processes, level of their implementation in public production. Socio-cultural • Level of education in the country, professional and qualification structure of workforce, social and psychological climate of entrepreneurship, cultural and moral indicators of consumers, level of development of organizational and consumer culture. Political and legal • Legal protection of population and legal basis for entrepreneurial activities, stability of political situation, mechanisms of state management and procedures of making socially important decisions, development of property relations, level of development of civil law and legal consciousness in the country, mechanisms of interaction between economic subjects and their arbitrage, etc. . Demographic • Number and structure of population, indicators of natural movement of population, characteristics of labor market, number of e conomically active population, availability of jobs.

Fig. 3. Conditions that inﬂuence formation and development of entrepreneurial activities.

entrepreneurial sector, domination of the market type of economic relations, and usage of necessary resources, is rather interesting. Thus, generalizing the existing opinions, we oﬀer the following deﬁnition of entre‐ preneurial environment – totality of economic, social, organizational & technical, polit‐ ical & legal, and other conditions that determine functioning of entrepreneurship and stimulate its development (Pozdnyakova 2015). Conditions that inﬂuence formation and development of entrepreneurial activities are shown in Fig. 3: It is possible to see correlation of the above conditions of entrepreneurial environ‐ ment with components of national economic security (Fig. 4). In the modern economic conditions, the main problems that hinder the development of Russian subjects of small and medium entrepreneurship at the modern stage are as follows (Fig. 5):

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globalization

globaliza tion

Sphere of economic security

SC

EcoC

STC

SME

MCC

globalization

Entrepreneurial environment

PLC

globalization

Fig. 4. The role of national economic security in formation of entrepreneurial environment. (SC – social component; EcoC – ecological component; SCT – scientiﬁc and technical component; MCC – moral and cultural component; PLC – political and legal component; SME – small and medium entrepreneurship.)

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Absence of initial capital, difficulty of access to financial resources

Absence of production and office premises Complexities of organizational procedures (licensing, certification, and allocation of land plots) Absence of necessary infrastructure and the system of information provision of entrepreneurial activities Absence of knowlege in management with entrepreneurs

Weak institutional and legal basis in the sphere of entrepreneurial activities Corruption of economy and administrative barriers that hinder development of entrepreneurial activities Fig. 5. The main problems that hinder development of Russian subjects of SME.

4

Conclusions

In the conditions of integration of Russian entrepreneurship into the global market, the issue of solving the above problems in implementation of strategic interests of economic security is especially urgent and consists in creation of conditions for active development of small and medium entrepreneurship (Kozhukhova 2015). This requires implementa‐ tion of the following complex of measures: – simpliﬁcation of administrative procedures and reduction of related expenditures of companies during registration of business and at the start of entrepreneurial activities; – active stimulation of technological progress by providing a subsidized regime of taxation for companies of high-tech sector of economy for the period of establishment (2–3 years) and provision of subsidized conditions of rental of premises in municipal and federal ownership to small and medium companies that conduct R&D; – stimulation of crediting of entrepreneurial structures; – formation and development of entrepreneurial infrastructure, including provision of help for entrepreneurs in organizational, consultation, and other aspects of activities; – eliminating ineﬀective and excessive state regulation in the sphere of licensing and control over entrepreneurial activities; – support for exhibition activities, promotion of products of domestic entrepreneurship in regional and international markets, etc. – formation of legislative and legal environment for activities of market subjects.

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References A recovery on the horizon?. [E-source]. http://ec.europa.eu/enterprise/policies/sme/facts-figuresanalysis/performance-review/files/supporting-documents/2013/annual-report-smes-2013_en.pdf Stiglitz, J.: Globalization and its Discontents. London, 2002; Making Globalization Work. London (2006) Annual report on small and medium companies of the European Union. http://new.mspbank.ru/ userﬁles/2015EU.pdf Intriligator, M.D.: Globalization as a source of international conﬂicts and growth of competition. Problems of Theory and Practice of Management, No. 6 (1998) Kissinger, H.: Does America Need Foreign Policy? (2002) Loginov, E.A.: Systemic problems of economic security. V.1. Economic security: geo-politics, p. 14. Nauchtekhizdat (2007) Mamina, M.T.: Ranking evaluation of the state of national economic security. Sci. Overv. 5, 592– 599 (2012) Platonov, O., Raizegger, G.: Why America dies: a view from East and West, part III (2008) Rakhlis, T.P., Koptyakova, S.V.: The role of banking system in the conditions of globalization of world economy [E-source]. Eur. J. Soc. Sci, 3(31) (2013). https://cyberleninka.ru/article/v/ finansovaya-globalizatsiya-kak-sovremennyy-etap-internatsionalizatsii-mirovogo-hozyaystva Federal portal of SME. http://smb.gov.ru/ﬁles/images/Пpeзeнтaция_cтpaтeгия.pdf Pozdnyakova, U.A.: The present and the future of economic development: a global aspect [Esource]. In: Popkova, E.G., Kuzlaeva, I.M., Pozdnyakova, U.A.: Global scientiﬁc society: integration, cooperation, and communication: materials of the conference (April 21–30, 2015 г.). Section No. 6. I Russian portal of online conferences. Marka Marketing Agency with VolSTU. Volgograd (2015). http://gs-conf.com/index.php/stati-i-vserossijskaya-elektron naya-seminar-konferentsiya-globalnoe-nauchnoe-soobshchestvo-integratsiya-kooperatsiyakommunikatsiya/36-nastoyashchee-i-budushchee-ekonomicheskogo-razvitiya-globalnyjaspekt Kozhukhova, M.T.: The role of small and medium entrepreneurship in provision of Russia’s economic security. In: Mamina, M.T.: Bulletin of Volgograd State Technical University: collection of articles. 4(131), VolSTU. Volgograd, 0,25 pr.p (2014)

Role of the State in Financial Mechanism of Development of Industrial Companies Vera I. Menshchikova1(&), Marina A. Kakushkina2, Evgeny V. Sukhanov3, and Irina B. Shapovalova3 1

2

3

Tambov State Technical University, Tambov, Russia [email protected] Russian Presidential Academy of National Economy and Public Administration, Tambov, Russia [email protected] Russian Presidential Academy of National Economy and Public Administration, Lipetsk, Russia [email protected]

Abstract. The purpose of the article is to study the key elements of state industrial policy from the positions of their influence on the ﬁnancial mechanism of industrial companies. The authors offer a hypothesis that progressive development of industrial complex in the modern conditions is impossible without active state interference with these processes. The ﬁnancial mechanism of development of industrial companies is presented as a system of external and internal elements, which contains the tools of formation, usage, and distribution of ﬁnancial resources, aimed at provision of effective functioning of the real sector of economy. At that, state regulation in the sphere of industrial production is presented as conscientious influence of the state on industry for the purpose of provision of high effectiveness and social direction of its development. The measures of state influence on the ﬁnancial mechanism of development of industry depending on the project scale and phases of products’ life cycle are distinguished. Interconnections between interest rates and the state of the industrial sector of economy are determined. A conclusion is made on the necessity for transition to monetary policy, which envisages simultaneous achievement of the whole totality of goals for provision of sustainable development of the country’s economy, manageability of inflation, increase of investments’ inflow, and systemic management of interest rates and other tools that influence the ﬁnancial mechanism of industrial companies’ development. Keywords: Industry Financial mechanism State industrial policy

State support

1 Introduction During recent decades, the Russian industry was peculiar for negative tendencies, related to insufﬁciency of ﬁnancial resources, which were used not only at the expanded but also at the simple reproduction of the main production funds of most sub-sectors of the industrial complex. Apart from that, high level of moral and physical wear of the © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 325–333, 2019. https://doi.org/10.1007/978-3-030-00102-5_34

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main funds of the Russian industry does not allow manufacturing high-quality competitive products. In these conditions, the state implements industrial policy for stimulating the development of industrial companies, using a range of tools, among which the main role belongs to ﬁnancial tools. Thus, actuality of the research aimed at studying the role of the state in the ﬁnancial mechanism of development of industrial companies grows.

2 Methodology For determining the state, tendencies, and dynamics of development of industrial complex, the authors use the methods of comparative analysis and analysis of statistical information. The authors also use general scientiﬁc methods of research – induction, deduction, synthesis, and formalization. In order to study the essence and structure of the ﬁnancial mechanism of development of industry, the authors use the methods of logical and structural analysis. The authors use the hypothesis that progressive development of industrial complex of the country depends on the state’s interference with its ﬁnancial mechanism.

3 Results The performed research showed that the ﬁnancial mechanism of development of industrial companies is rather complex – as to its essence and structure – element of economy. Scientiﬁc literature offers various approaches to this deﬁnition. At that, the researchers open the notion of the ﬁnancial mechanism on the whole, without speciﬁcation of its peculiarities as to the industrial sector of economy. Thus, A.G. Gryaznova and E.V. Markina think that “ﬁnancial mechanism is a totality of types and forms of organization of ﬁnancial relations, speciﬁc methods of formation and usage of ﬁnancial resources and means of their quantitative determination” (Gryaznova and Markina 2005). In the work of S.V. Barulin and E.V. Barulina, the ﬁnancial mechanism is seen as “totality of elements, forms, methods, and tools of formation and usage of ﬁnancial resources, public and private economic incomes, that is to ensure complete functioning of the system of ﬁnances and implementation of the ﬁnancial policy of the state and economic subjects” (Barulin and Barulina 2007). In deﬁnitions of certain researchers, state is seen as an institute that sets the rules of functioning of any ﬁnancial mechanism. Thus, a group of authors under the guidance of A.M. Kovaleva considers “ﬁnancial mechanism to be a system of management of ﬁnance, used for organization of interaction of ﬁnancial relations and money funds for the purpose of effective influence on the ﬁnal results of production, set by the state according to the requirements of economic laws” (Kovaleva et al. 2015). The structure of ﬁnancial mechanism is peculiar for its complexity and ambiguity, as speciﬁc elements of this mechanism depend on diversity of ﬁnancial relations that mediate the activities of industrial companies. Having generalized certain studies in the

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EXTERNAL ELEMENTS Normative and legal regulation (effective law)

Amortization, tax, and interest levers and stimuli (tax rates, tax subsidies, key rate, bank interest rate, amortization policy, etc.)

Tools of the financial market (securities, contracts, currency swaps, etc.)

Financial mechanism of development of industrial company

Internal elements Methods of financial management (planning, accounting, analysis, monitoring, and control)

Internal system of regulation (accounting policy, norming, investment policy, financial controlling, etc.).

Internal financial tools (debit and credit debts, pricing policy, etc.)

Fig. 1. Structure of the ﬁnancial mechanism of industrial company (compiled by the authors).

sphere of structure of ﬁnancial mechanism, we think that for industrial companies the ﬁnancial mechanism of their development includes a range of elements (Fig. 1). Thus, according to the authors, the ﬁnancial mechanism of development of industrial companies is a system of external and internal elements that contain the tools of formation, usage, and distribution of ﬁnancial resources, aimed at provision of effective functioning of the real sector of economy. At that, the role of the state in provision of effective functioning of the real sector of economy is very important, as state regulation in the sphere of industrial production is conscientious influence of the state on industry for providing high effectiveness and social direction of its development. At present, the Russian Federation implements the Federal law dated December 31, 2014, 488-FZ “Regarding industrial policy in the Russian Federation”. According to this law, the main directions of stimulation of industrial development are the following types of state support: – ﬁnancial support (subsidizing production and creation of infrastructure, provision of tax subsidies, assets of the Fund of development of industry, etc.); – provision of preferences during state purchases (bans and limitations for import, priority for products of Russian origin); – support for foreign economic activities (stimulation in promotion in foreign markets, provision of guarantees, etc.); – support for technological and innovational activities (placement of state orders for R&D, subsidizing of R&D, stimulation of implementation of innovations, etc.);

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– information support (catalogues, information resources, fairs, exhibitions, conferences, etc.); – support for development of HR potential (educational programs, additional professional education, etc.). The above forms of state support for development of industry are of the direct character. They are aimed at economic subjects of the industrial sector of economy. At that, selection of speciﬁc tools of state support depends on the scale of the project and the phase of product’s life cycle (Table 1). Table 1. The tools of state support for development of industrial companies depend on the scale of the project and manufactured products’ life cycle Life cycle phase Project scale Large industrial companies

Creation of product

Creation of new productions

Modernization, expansion of activities

State order for execution of R&D; direct support within state programs

Medium industrial companies

Compensation of expenditures for R&D

Small industrial companies

Programs for support for small and medium business

Subsidizing of expenditures; Compensation of compensation of interest for interest for credits credits for technical refor investment equipment projects State guarantees for credits for the projects of federal importance; supporting projects on the basis of project ﬁnancing (credits and state guarantees for credits); special investment contracts; support for creation and modernization of industrial parks’ infrastructure Compensation of interest for Compensation of credits for technical reinterest for credits equipment; supporting export; for investment subsidizing of expenditures projects for increase of turnover assets Support for creation and modernization of infrastructure of industrial parks; special investment projects Advantages during state purchases of the program for support for small and medium business

Why does the state should interfere with the ﬁnancial mechanism of industrial companies’ development? The answer to this question is obvious. At present, sustainable development of the Russian economic is connected to solving the problems of overcoming stagnation in industrial production; reduction of economy’s import dependence; increase of competitiveness of domestic companies’ products. Apart from that, there is a range of reasons of the fundamental character – contradiction between the market ethics and society’s ethics, limitation of economic space for the mechanism

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329

of competitive market, and “natural” character of monopolies, as well as factors of instability, etc. Provision of the innovational quality of industrial growth on the basis of full and fully effective employment of production factors is impossible without active state interference with ﬁnancial mechanisms of industry’s development. Let us present the results of study of the state and tendencies of development of the Russian industry in 1990–2016. Thus, in recent decades, there have been tendencies of de-industrialization of industry in Russia, which were caused by implementation of state policy, which led to limitations for Russia in purchase of new technologies, brain drain, outflow of capitals, increase of further technological underrun from the leading industrial states, etc. Unfavorable conditions of functioning in the processing sectors of economy predetermined reduction of investments into these sectors, which led to reduction of production volumes. Thus, according to the Federal State Statistics Service (Federal State Statistics Service, 2017), during the recent two decades production of machines and equipment decreased in Russia. Production of tractors for agriculture and forestry reduced by more than 40 times in 2017, as compared to 1991; production of machines and equipment for light and textile industry reduced by 18 times; production of excavators reduced by 16.5 times; production of bulldozers reduced by 8 times, etc. The most negative tendency is seen on machine-building. Also, the index of industrial production is very low in Russia – 101% in 2017, as compared to 2016. Besides, material and technical base of the processing industry could have been much better: the share of worn out main funds reached 15%, and the level of wear exceeded 45% (Fig. 2).

share of worn out funds

level of wear, %

coeﬃcient of removal

coeﬃcient of update 0

5 2015

10 2014

15 2013

20 2012

25 2011

30

35

40

45

50

2010

Fig. 2. Material and technical base of the processing industry of Russia (compiled by the authors based Federal State Statistics Service).

According to the experts of the ranking agency RIA Ranking, “due to lack of ﬁnancing, growth of production of machine-building, technological equipment, and aviation equipment stopped. These factors create threats to economic security for the Russian economy, reduce its competitiveness and investment attractiveness for longterm ﬁnancing” (Analytical bulletin of RIA Ranking, 2017). For sustainable development of industrial companies, Russia requires investments, which will become a forcing factor primarily in the sectors of industry in which wear of

330

V. I. Menshchikova et al.

the main funds exceeded 50%. However, growth rates of investments into the main capital of domestic industry remain very low, and sources for investments are usually unsubstantial own assets of industrial companies (Fig. 3).

32.20%

41.40% 58.60%

67.80%

Own assets

Own assets

2010

2016

Fig. 3. The structure of investments into ﬁxed capital of industrial companies of Russia in 2010 and 2016 (compiled by the authors).

As the performed research showed, development of processing productions in the Russian industrial complex is restrained by a range of factors. Survey of managers and leading specialists of industrial companies of Tambov and Lipetsk Oblasts allowed determining such factors as insufﬁcient level of demand for company’s products in the domestic market (54% of respondents), uncertainty of economic situation (50%), lack of ﬁnancial assets (40%), high level of taxation (40%), etc. (Fig. 4). 22%

54%

40% 21% 30%

Insuﬃcient demand for company's products in the domesc market Compeng import High level of taxaon

40% 50%

22%

Wear and absence of equipment Uncertainty of economic situaon High interest rate of commercial credit

Fig. 4. The main factors that hinder development of companies of the processing industry (compiled by the authors).

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As was mentioned earlier, state interference with activities of the industrial sector of economy could have a form of direct support (ﬁnancial, investment, personnel, etc.) and indirect support (interest rates). According to domestic and foreign experience, one of the efﬁcient mechanisms of influence on the state of the industrial sector is management of the reﬁnancing rate, which – directly or indirectly – influences the ﬁnancial and business activity in the country. In Russia, apart from reﬁnancing rate, the key rate has been used since September 2013. It is called key rate due to its leading role during establishment of interests that are set by banks for any credit operations. It directly influences the banking funds and the level of inflation in the country. According to the experts of the Department of monetary policy of the Bank of Russia, “the key rate sets the money’s value, which, in its turn, influences the volumes of crediting. Reduction of the rate stimulates economic activities – on the one hand, ensures growth of production, on the other hand – increase of consumption, which leads to aggregated demand” (Bank of Russia, 2017). In other words, softening the monetary conditions, it is possible to stimulate aggregated demand. However, it is “important to consider the phase of the economy. Nowadays, when it is at the zero level, growth of aggregated demand does not bring the pro-inflation character, but this may change in the future. That’s why the Bank of Russia has to balance between stimulation of economy’s growth and prevention of inflation growth” (Bank of Russia, 2017). Studying interconnection between interest rates and economic growth (product issue) has been an important issue for scholars and practitioners. Thus, for example, in the Tobin monetary model of growth there’s a situation when “influencing offer and demand for money or other alternative assets and this changing their proﬁtability, public authorities can influence proﬁtability of investments that is ‘acceptable for investors’ (Tobin 1965). There are a lot of studies that open negative influence of interest rates on issue of products on the country. For example, the works of Jorgenson (Jorgenson 1963) and Wickens (Wickens 2008) open the negative character of connection between interests rates and issue; the researchers explain the negative influence of real interest rate on expenditures of companies, spent for capital. However, certain theories determine ambiguous influence of interest rate on issue. For example, (Arrow 1968) explains that “growth of interest rate, on the one hand, negatively influence the issue due to growth of expenditures for borrowings, and, on the other hand, positively influences the issue by means of increase of investments in the current period in the situation of agents’ expecting further growth of interest rates and, as a result, increase of expenditures caused by delay of decision on investing”. A group of Russian scholars came to the conclusion that “with increase of interest rates for credits, it is possible to see certain reduction of economic activity/At that, economic agents during making decisions on the value of investments into ﬁxed capital use the adaptive forecasts of inflation” (Drobyshevsky et al. 2016). Application of the key rate in Russia during a short period of its existence showed that its change influences the level of inflation by the currency rate channel, stimulating inflow or outflow of foreign capital with the corresponding growth or reduction of interest rates, which leads to change of ruble exchange rate and conditions of activities of importers and exporters. Figure 5 shows dynamics of change of the key rate in Russia in 2013–2018.

332

V. I. Menshchikova et al. 18 16 14 12 10 8 6 4 2 0

Key rate (%)

Fig. 5. Dynamics of the key rate in Russia in 2013–2018 (compiled by the authors according to the data of the Bank of Russia from open sources).

Business requires ﬁnancing of own investment projects – and it is not sufﬁcient. Despite the programs that help business to obtain ﬁnancing with reduced rate, it is very difﬁcult to attract borrowed money for investment projects. Figure 6 shows comparison of annual average interest rates for credits and deposits in Russia and certain countries of the world in 2015.

45 40 35 30 25 20 15 10 5 0

10.02

6.04 32.01 2.75 11.4 Russia

0.6

5.6 China

5.28 Brazil deposit

Germany

0.42

0.84

1.22 Japan credit

3.55

3

Mexico

Canada

0.55

Fig. 6. Average annual interest rates for credits and deposits in Russia and certain countries of the world in 2015.

Thus, monetary policy that is implemented nowadays predetermined – together with other reasons – stagnation of the Russian processing industry. This is explained by the fact that it has no crediting of investments into development of production: the large part of capital investments is ﬁnanced by means of companies’ own assets, and the share of production investments in assets of the banking system is very low. Besides, the transmission mechanism of the banking system, which ensures expanded reproduction by means of transformation of savings into investments, does not work – which

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is due to high interest rates and excessive volatility of ruble exchange rate. Such state of affairs leads to unambiguous opinion regarding the necessity for increase of the role of the state in development of the industrial sector of economy in modern Russia.

4 Conclusions As a result of the research, the offered hypothesis is proved – progressive development of industrial complex in modern Russia is impossible without active state policy. It should be noted that there’s a necessity for transition to multi-purpose monetary policy, which envisages simultaneous achievement of the totality of goals for provision of sustainable development of the country’s economy, manageability of inflation, increase of inflow of investments, and systemic management of interest rates and other tools that influence the ﬁnancial mechanism of industrial companies’ development. There should be a complex of interconnected and well-coordinated measures for increase of competitiveness of the Russian industrial complex companies.

References Arrow, K.J.: Optimal capital policy with irreversible investment. Capital and Growth, Papers in Honour of Sir John Hicks, pp. 1–19 (1968) Jorgenson, D.: Papers and Proceedings of the Seventy-Fifth. Am. Econ. Rev. 53(2), 247–259 (1963) Tobin, J.: Money and economic growth. Econometrica J. Econ. Soc. 33(4), 671–684 (1965) Wickens, M.: Macroeconomic Theory: A Dynamic General Equilibrium Approach. Princeton University Press (2008) Barulin, S.V., Barulina, E.V.: Regarding the issue of the essence of ﬁnance: a new opinion on the debatable problem. Finances 7, 55–58 (2007) Drobyshevsky, S.M., Trunin, P.V., Bozhechkova, A.V., Sinelnikova-Muryleva, E.V.: Influence of interest rate on economic growth. Money Credit 9, 29–40 (2016) Mamonov, M., Pestova, A., Pankova, V., Akhmetov, R., Solntsev, O.: Financial Sector, Economic Growth, and Macro-Economic Stability: Series of Reports on Economic Studies. vol. 21. Bank of Russia (2017) Machine building: tendencies and forecasts. Analytical Bulletin of RIA Ranking Agency. www. riarating.ru Ofﬁcial web-site of the Bank of Russia. http://www.cbr.ru Ofﬁcial web-site of the Federal State Statistics Service. http://www.gks.ru Federal Law Dated December 31, 2014, No. 488-FZ Regarding Industrial Policy in the Russian Federation. SPS Consultant+ Gryaznova, A.G., Markina, E.V. (ed.): Finances. Finances and statistics, 504 p. (2005) Kovaleva, A.M. (ed.): Finances. 6th edn., 443 p. Yurait Publ., (2015)

Innovational Tools of Provision of Food Security Through State Support for the AIC in the Conditions of the Digital Economy Aleksei V. Bogoviz ✉ (

)

, Elena I. Semenova , and Ivan S. Sandu

Federal State Budgetary Scientiﬁc Institution “Federal Research Center of Agrarian Economy and Social Development of Rural Areas – All Russian Research Institute of Agricultural Economics”, Moscow, Russia [email protected], [email protected], [email protected]

Abstract. The purpose of the article is to develop innovational tools of provision of food security through state support for the AIC in the conditions of the digital economy in modern Russia. The authors use the systemic approach, within which the AIC is viewed as a comprehensive system of interconnected indicators, and the method of trend analysis for studying dynamics of change of the indicators of the state and development of the Russia’s AIC, analysis of causal connections for determining mutual dependence and succession of problem of development of modern Russia’s AIC, and the method of formalization for visualization of statistical and analytical data. The information and empirical basis of the research includes the data of the Economist Intelligence Unit, the World Bank, and the Federal State Statistics Service on dynamics of indicators of development of the Russia’s AIC for 2010–2017. As a result, the authors determine aggravation of the problem of provision of food security in modern Russia in 2018 and substan‐ tiate the impossibility of its successful solution with application of traditional (ﬁnancial) tools of state support for the AIC, showing regularity of aggravation of this problem with the help of traditional tools. A conceptual scheme of provi‐ sion of food security through state support for the AIC in the condition of the digital economy is presented – it reﬂects expedient and high eﬀectiveness of application of the developed innovational tools, which is based on the possibilities of digital economy. These tools allow reducing the load onto the federal budget for state support for the AIC due to foundation on non-ﬁnancial tools and due to temporary character of the state support for the AIC, which is aimed at creation of conditions and stimulation of growth of competitiveness of the AIC companies and their further independent development. Keywords: Innovational tools · Provision of food security State support for the AIC · Digital economy · Modern Russia

1

Introduction

The agro-industrial complex (AIC) in the countries that do not specialize in products of this complex (unfavorable conditions for its development, etc.) is one of the most

© Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 334–340, 2019. https://doi.org/10.1007/978-3-030-00102-5_35

Innovational Tools of Provision of Food Security

335

vulnerable spheres of economy against the inﬂuence of globalization. High dependence of the AIC on the nature and geographic factor causes large diﬀerentiation of economic systems according to possibilities for development of this complex. That’s why in the countries that do not specialize in manufacture of the AIC products, globalization stimulates the increase of pressure on domestic manufacturers of the AIC products from foreign manufacturers that function in a more favorable environment and achieve larger eﬃciency with higher quality and lower products’ price. This aggravates the problem of provision of food security and raises the necessity for state support for the AIC. From the positions of economic eﬀectiveness, traditional tools of state support for the AIC, which is brought down to subsidizing and provision of certain other ﬁnancial preferences, is peculiar for low eﬀectiveness, as, ﬁrstly, it envisages large and systemic expenditures of the federal budget due to establishment of dependence of companies of the AIC on state support, and, secondly, leads to reduction of quality and growth of prices for the AIC products and, therefore, preservation or even aggravation of the problem of food security. This predetermines high topicality of development of innovational tools of state support for the AIC, which allows for successful solution to the problem of provision of food security. The working hypothesis of the research is the idea that modern Russia is peculiar for low food security and needs state support for the AIC, and in the conditions of digital economy the access to usage of innovational tools opens, which allows achieving high eﬀectiveness of this support. The purpose of the article is related to development of innovational tools of provision of food security through state support for the AIC in the conditions of digital economy in modern Russia.

2

Materials and Method

Drawbacks of traditional tools of state support for the AIC for provision of food security and the necessity for search for more eﬀective alternative are emphasized in multiple works of such modern authors as (Bogoviz et al. 2018a), (Bogoviz et al. 2018b), (Bogoviz et al. 2018c), (Bogoviz et al. 2018d), (Bogoviz et al. 2018e), (Bogoviz et al. 2018f), (Mikhaylova et al. 2017), (Popova et al. 2018), and (Troyanskaya et al. 2017). Peculiarities and possibilities of digital economy to be a technological platform for modernization of economy, including state regulation of economic processes, are discussed in publications of such experts as (Boojihawon and Ngoasong 2018), (Curran 2018), (Elder-Vass 2018), (Martin-Shields and Bodanac 2018), (Popkova et al. 2017a), (Popkova et al. 2017b), and (Sandeep and Ravishankar 2018). At that, the issues of usage of possibilities of the digital economy for modernization of the tools of provision of food security through state support for the AIC are insuﬃ‐ ciently studied in the existing scientiﬁc literature and thus require further attention. For veriﬁcation of the oﬀered hypothesis, the authors use the systemic approach, within which the AIC is viewed as a comprehensive system of interconnected indicators; the method of trend analysis for studying dynamics of change of the indicators of state

336

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and development of Russia’s AIC; the method of analysis of causal connections for determining mutual inﬂuence and succession of the problems of development of modern Russia’s AIC, and the method of formalization for visualization of statistical and analyt‐ ical data. The information and empirical base of the research include the data of the Economist Intelligence Unit, the World Bank, and the Federal State Statistics Service on dynamics of the indicators of development of Russia’s AIC in 2010–2017, which are given in Table 1. Table 1. Dynamics of the values of indicators of development of Russia’s AIC in 2010–2017. Indicators

2010

2011

2012

2013

2014

2015

2016

2017

Position in 2017

Level of wear of the main funds, % Created added value, % of GDP Annual growth of labor eﬃciency, % Index of food security, points

42.1

42.8

42.5

42.7

43

41.6

41.2

41.1

–

3.867

3.919

3.697

3.619

4.066

4.558

4.740

4.791

99

103.2

103.8

103.3

102.2

100.7

98.1

99.7

99.3

–

No data

No data

68.3

60.9

62.7

63.8

62.3

66.2

41

Source: compiled by the authors based on: (Economist Intelligence Unit 2018), (World Bank 2018), (Federal State Statistics Service 2018a), (Federal State Statistics Service 2018b).

3

Results

The results of visualization and trend analysis of the data from Table 1 are shown in Fig. 1. 120 100 80

Wear of main funds, %

60

Created added value, % og GDP

40

Annual growth of labor efficiency, %

20

food security index, points

0 2010 2011 2012 2013 2014 2015 2016 2017 Fig. 1. Dynamics of values of the indicators of development of Russia’s AIC in 2010–2017. Source: compiled by the authors.

Innovational Tools of Provision of Food Security

337

As is seen from Fig. 1, at present Russia is peculiar for recession of the AIC and its low global competitiveness. This is shown by high level of wear of the main funds of the AIC companies (41.1% in 2017). Slight negative eight-year trend of this indicator (−2.38%) reﬂects the application but low eﬃciency of measures in the sphere of modernization of the main funds of the AIC. This is also shown by low added value, created by the AIC – in 2017 this value constituted 4.791% of Russia’s GDP (99th position in the world) – and negative annual growth (annual reduction) of labor eﬃciency in the AIC (by 3.78% over the last 8 years). As a result, the index of food security reduces (by 3.07% over 8 years, 41st position in the world in 2017), which shows aggravation of this problem in Russia. Systemic consideration of these tendencies allowed determining regularity of aggra‐ vation of the problem of provision of food security with foundation on the traditional tools of state support for the AIC in modern Russia (Fig. 2). Insufficiency and irrationality of usage of state financial support for the AIC

Wear of the main funds of the AIC companies

Growth of dependence of the AIC companies on state support

Increase of the volumes of state financial support for the AIC

Reduction of labor efficiency in the AIC and reduction of competitiveness of the AIC companies

Aggravation of the problem of food security

Fig. 2. Regularity of aggravation of the problem of provision of food security with foundation on traditional tools of state support for the AIC in modern Russia. Source: compiled by author.

As is seen from Fig. 2, the initial reason for emergence of this problem was insuﬃ‐ ciency and irrationality of usage of state ﬁnancial support for the AIC, which did not allow for timely and full provision of modernization of the main funds in the AIC, which led to their wear. This was followed by reduction of labor eﬃciency in the AIC and reduction of competitiveness of the AIC companies. This led to aggravation of the problem of food security and initiated increase of the volumes of state ﬁnancial support for the AIC. This measure led to increase of depend‐ ence of the AIC companies on state support and further reduction of their competitive‐ ness. Foundation on traditional (ﬁnancial) tools of provision of food security through state support for the AIC does not allow solving this problem. For that, we developed innovational tools of provision of food security through state support for the AIC, which are accessible in the conditions of digital economy:

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– normative and legal provision of digital development of the AIC: non-ﬁnancial tools, aimed at legislative establishment of the necessity for digital modernization of the AIC, development of the corresponding state strategy (program), and ﬁxation of the necessity for only digital ﬁnancial accounting and digital payments by the AIC companies, which will allow increasing transparency of their economic activities and increasing their credibility; – digital infrastructural provision of the AIC: the tools that envisages slight expendi‐ tures of the federal budget, aimed at creation of infrastructural conditions for doing digital business by the AIC companies, which allows optimizing their production and distribution processes; – digital production modernization of the AIC: ﬁnancial tool, which envisages state subsidizing of modernization of the main funds of companies of the AIC on the basis of new digital technologies for their achieving global competitive advantages in the technological sphere, which will allow increasing eﬃciency and quality with reduc‐ tion of expenditures and prices. The logic of application of the oﬀered innovational tools of provision of food security through state support for the AIC in the conditions of digital economy is reﬂected by the following conceptual scheme (Fig. 3). Achieved positive effect: growth of compe titiveness of the AIC companies, reduction of expenditures of the federal budget for state s upport for the AIC, successful solution to the problem of provision of food security

Digital production modernization of the AIC Digital infrastructural provision of the AIC

Normative and legal provision of digital development of AIC

-growth of labor efficiency in the AIC (due to authomatization of business processes); -increase of quality ofproducts of the AIC with reduction of expenditures for production. -establishment and deve lopment of digital entrepreneurship in the AIC; -optimization of production and distribution processes in the AIC. -creation of favorable conditions for digital modernization of the AIC; -growth of credibility of the AIC companies.

Goal: highly-effective provision of food security through state support for the AIC

Fig. 3. A conceptual scheme of provision of food security through state support for the AIC in the conditions of digital economy. Source: compiled by the authors.

As is seen from Fig. 3, application of the oﬀered tools of provision of food security through state support for the AIC in the conditions of digital economy allows achieving positive eﬀect that is related to growth of competitiveness of the AIC companies, reduc‐ tion of expenditures of the federal budget for state support of the AIC, and successful solution to the problem of provision of food security.

Innovational Tools of Provision of Food Security

4

339

Conclusions

The results of the performed research conﬁrmed the working hypothesis, substantiating the aggravation of the problem of provision of food security in modern Russia in 2018 and impossibility of its successful solution with application of traditional (ﬁnancial) tools of state support for the AIC. The oﬀered conceptual scheme of provision of food security through state support of the AIC in the conditions of digital economy allowed substantiating expedience and high eﬀectiveness of application of the developed inno‐ vational tools, based on the possibilities of digital economy. These tools allow reducing load on the federal budget for state support of the AIC due to foundation on non-ﬁnancial tools (normative and legal provision of digital devel‐ opment of the AIC and digital infrastructural provision of the AIC) with minimum ﬁnancial support in the form of subsidizing of digital modernization of the main funds of the AIC companies, as well as due to the temporary character of state support for the AIC, which is aimed at creation of conditions and stimulation of growth of competi‐ tiveness of the AIC companies and their further independent development. As a result, the problem of provision of food security is successfully solved.

References Bogoviz, A.V., Alekseev, A.N., Chepik, D.A.: Improvement of the economic mechanism of state support for innovational development of the Russian agro-industrial complex in the conditions of import substitution. In: Advances in Intelligent Systems and Computing, vol. 622, pp. 555– 561 (2018a) Bogoviz, A.V., Bugai, Y.A., Osipov, V.S.: Import substitution in the agro-industrial complex in the interests of provision of food security: Option or necessity? Adv. Intell. Syst. Comput. 622, 37–43 (2018a) Bogoviz, A.V., Lobova, S.V., Bugai, Y.A.: Eﬀective import substitution in the agro-industrial complex: Competition or monopoly? Adv. Intell. Syst. Comput. 622, 30–36 (2018b) Bogoviz, A.V., Lobova, S.V., Ragulina, Y.V., Alekseev, A.N.: A critical review of Russia’s energy eﬃciency policies in agriculture. Int. J. Energy Econ. Policy 8(3), 67–75 (2018c) Bogoviz, A.V., Taranov, P.M., Shuvaev, A.V.: Innovational tools for provision of food security through state support for the agro-industrial complex in the conditions of digital economy. Adv. Intell. Syst. Comput. 622, 659–665 (2018d) Bogoviz, A.V., Tufetulov, A.M., Chepik, D.A.: The mechanism of activation of the process of import substitution in the agro-industrial complex for provision of food security. Adv. Intell. Syst. Comput. 622, 71–76 (2018e) Boojihawon, D.K., Ngoasong, Z.M.: Emerging digital business models in developing economies: the case of Cameroon. Strat. Change 27(2), 129–137 (2018) Curran, D.: Risk, innovation, and democracy in the digital economy. Eur. J. Soc.Theory 21(2), 207–226 (2018) Economist Intelligence Unit: Global Food Security Index (2018). http:// foodsecurityindex.eiu.com/Resources. Accessed 12 Feb 2018 Elder-Vass, D.: Lifeworld and systems in the digital economy. Eur. J. Soc. Theory 21(2), 227– 244 (2018)

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Martin-Shields, C.P., Bodanac, N.: Peacekeeping’s Digital Economy: The Role of Communication Technologies in Post-conﬂict Economic Growth. Int. Peacekeeping 25(3), 420–445 (2018) Mikhaylova, N.A., Babich, T.V., Smirnova, O.S.: Improvement of the state support mechanism for regional agro-industrial complex under the conditions of international sanctions and Russia’s membership in the WTO. In: Contributions to Economics, pp. 151–157. ISBN 978-3-319-60695-8 Popkova, E.G., Bogoviz, A.V., Lobova, S.V.: Vacuum in the structure of human capital: a view from the position of the theory of vacuum. In: Human Capital: Perspectives, Challenges and Future Directions, Hauppauge, pp. 163–181. Nova Science Publishers, Inc., Hauppauge, New York (2017a) Popkova, E.G., Morozova, I.A., Litvinova, T.N.: New challenges for human capital from the positions of its infrastructural role in the system of entrepreneurship. In: Human Capital: Perspectives, Challenges and Future Directions, pp. 257–275. Nova Science Publishers, Inc. Hauppauge, New York (2017b) Popova, L.V., Dugina, T.A., Skiter, N.N., Panova, N.S., Dosova, A.G.: New forms of state support for the agro-industrial complex in the conditions of digital economy as a basis of food security provision. Adv. Intell. Syst. Comput. 622, 681–687 (2018) Sandeep, M.S., Ravishankar, M.N.: Sociocultural transitions and developmental impacts in the digital economy of impact sourcing. Inf. Syst. J. 28(3), 563–586 (2018) Troyanskaya, M.A., Ostrovskiy, V.I., Litvinova, T.N., Matkovskaya, Y.S., Bogoviz, A.V.: Possibilities and perspectives for activation of sales in the agricultural machinery market within sectorial development of Russian and European economies. In: Contributions to Economics, pp. 473-480 (2017). ISBN 978-3-319-60695-8 World Bank: Agriculture, value added (% of GDP) (2018). https://data.worldbank.org/indicator/ NV.AGR.TOTL.ZS?view=chart&year_high_desc=true. Accessed 12 Feb 2018 Federal State Statistics Service: Indices of labor eﬃciency in economy (2018a). http:// www.gks.ru/wps/wcm/connect/rosstat_main/rosstat/ru/statistics/accounts/. Accessed 12 Feb 2018 Federal State Statistics Service: Main funds: level of wear (2018b). http://www.gks.ru/wps/wcm/ connect/rosstat_main/rosstat/ru/statistics/enterprise/fund/. Accessed 12 Feb 2018

Informatization of the Russian Society: Evaluation and Perspectives Julia V. Ragulina1 ✉ (

1

)

, Svetlana V. Lobova2 , and Alexander N. Alekseev3

Federal State Budgetary Scientiﬁc Institution “Federal Research Center of Agrarian Economy and Social Development of Rural Areas – All Russian Research Institute of Agricultural Economics”, Moscow, Russia [email protected] 2 Altai State University, Barnaul, Russia [email protected] 3 Plekhanov Russian University of Economics, Moscow, Russia [email protected]

Abstract. The purpose of the work is to determine the current state and perspec‐ tives of informatization of the Russian society in the aspect of increase of global competitiveness of Russia’s economy, by its informatization. The authors use the method of comparative analysis for comparing the level of informatization of the Russian society to the level of the OECD countries; and the methodology of the Theory of Games for compiling forecasting scenarios of further informatization of the Russian society for increasing competitiveness of modern Russia’s digital economy. The information and empirical basis of the research include the data of the World Economic Forum on the level and separate indicators of society’s informatization (through the prism of the index of network readiness) in Russia in 2012 and 2016, and in the countries of the OECD (on average) in 2016. It is concluded that modern Russia is peculiar for low level and slow rate of society’s informatization for achieving the level of the OECD countries in the mid-term (2020) with preservation of the current approach to state strategic management of this process. For ensuring the global competitiveness of Russia in the condi‐ tions of establishment of the global digital economy, it is recommended to change this approach, which envisages doubling of the volume of state target ﬁnancing of the process of Russian society’s informatization, as well as reconsideration of the program (top-priority directions of informatization) in favor of emphasis on “weak spots”, which show the largest underrun from the OECD countries and slow rate of informatization. The key aspects are formation and development of digital entrepreneurship. For successful implementation of the oﬀered new direc‐ tion of informatization of the Russian society, the authors’ recommendations are oﬀered. Following the selected optimization scenario in modern Russia will allow increasing the results by three times and achieving the level of the OECD coun‐ tries by 2020, thus ensuring global competitiveness of Russia’s digital economy. Keywords: Informatization of the Russian society · Digital economy Competitiveness in the information sphere

© Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 341–347, 2019. https://doi.org/10.1007/978-3-030-00102-5_36

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Introduction

Informatization of modern economic systems, which started spontaneously, it now under the control of state regulators. This is caused by the fact that under the inﬂuence of the global informatization and increase of global competition in the information sphere, the goals of informatization went beyond the economic interests, related to optimization and increase of eﬀectiveness of economic activities, and transferred to the level of inter‐ ests of society on the whole, which are oriented at increase of population’s living standard and growth of global competitiveness of economy. Thus, a problem of managing the process informatization appeared – it requires scientiﬁc substantiation of selection of certain strategies and tools that are based on highprecision forecasts and plans. However, due to insuﬃciency of accumulated experience of informatization in developing countries and impossibility for full foundation on experience of developed countries due to speciﬁc nature of their economic systems, the process of informatization in most of them is spontaneous – despite the state strategies and target ﬁnancing. The authors oﬀer a hypothesis that modern Russia is peculiar for low level of soci‐ ety’s informatization (as compared to developed countries of the OECD) and slow rate of implementation of this process, which does not allow overcoming the underrun; so it is necessary to reconsider the strategic approach to management of this process. The purpose of the work is to evaluate the current state and perspectives of informatization of the Russian society in the aspect of increase of global competitiveness of Russia’s economy through its informatization.

2

Materials and Method

Fundamental foundations and basic characteristics of the information (digital) economy are studied in the works (Abdikeev 2017), (Ereshko and Kokuytseva 2017), (Murdock 2017), (Petrenko et al. 2017), and (Sukhorukov et al. 2017). Practical features of the process of informatization of various modern economic systems are analyzed in the works (Bogoviz et al. 2017), (Gualandri 2017), (Igolnikova et al. 2017), (Issayeva et al. 2016), (Sukhodolov et al. 2018a), (Sukhodolov et al. 2018b), (Bogoviz et al. 2018a), (Bogoviz et al. 2018b), and (Ragulina et al. 2018). The authors use the method of comparative analysis for comparing the level of informatization of the Russian society to the level of the OECD countries; and the methodology of the Theory of Games for compiling forecast scenarios of further infor‐ matization of the Russian society for increasing the competitiveness of digital economy of modern Russia. The information and empirical basis of the research include the data of the World Economic Forum on the level and separate indicators of society’s infor‐ matization (through the prism of network readiness index) in Russia in 2012 and 2016 and in the OECD countries (on average) in 2016 (Fig. 1).

Informatization of the Russian Society

Using the ICT in society Using the ICT in economy

Political and legal… 7 6 5 4 3 2 1 0

Using the ICT by the state

Business and innovational… ICT infrastructure

Russia, 2016 OECD countries, 2016

ICT accessibility

Using the ICT in…

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Russia, 2012

Information literacy and… Individual usage of the…

Fig. 1. Indicators of informatization of the Russian society in 2016. Source: compiled by the authors based on: (World Economic Forum 2018a), (World Economic Forum 2018b).

3

Results

According to the National program of the RF “Information society” (2011–2020), in 2011–2016, informatization of the Russian society accounted for RUB 693.71 billion from the federal budget (Ministry of Communications and Mass Media of the Russian Federation 2018), which equals 1% of the 2016 GDP in current prices (GDP constituted RUB 85,880.6 billion). Due to implementation of measures within this program, 4.5 points out of 7 (41st position among 139 countries of the world) in 2016 were achieved as to network readiness index, according to the World Economic Forum (World Economic Forum 2018b), as compare to 4 points out of 7 (56th position among 142 countries of the world) in 2012 (World Economic Forum 2018a). Money measurement of the result of implementation of this program is connected to achievement of the volume of digital economy in Russia of the level of 3.9% of GDP in 2016 (McKinsey 2018) (RUB 3,349.34 billion). This shows high eﬀectiveness of this program, as the result exceeds expenditures by almost ﬁve times (3,349.34/693.71 = 4.83). At the same time, Russia’s underrun from the OECD countries as to the level of society’s informatization society grew, with the average value of the network readiness index constituting 5.68 points in 2016. In 2018–2020, according to the above program, it is planned to spend RUB 516.82 billion from the federal budget (Ministry of Communications and Mass Media of the Russian Federation 2018). This allows compiling the basic (the one corresponding to the current course) forecasting scenario of informatization of the Russian society until 2020, with preservation of the current rate of growth of the network readiness index – 0.37 points (516.82*(4.5−4.0)/693.71). That is, its value will be at the level of 4.87 points, which is below the average value of the indicator among the OECD countries even in 2016, which will grow in 2020. Also, the current growth rate of the volume of digital economy will be preserved – RUB

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2,495.29 billion (516.82*3,349.34/693.71), which will constituted RUB 5,844.63 billion (3,349.34 + 2,495.29). Despite the fact that this scenario will be peculiar for high eﬀec‐ tiveness of implementing the program of informatization of the Russian society (2,495.29/516.82 = 4.83), the level of this informatization will be lower than on average in the OECD countries, which will show low global competitiveness of the Russia’s digital economy. For determining the possibilities of increase of global competitiveness of the Russia’s digital economy, we deem it expedient to consider other scenarios – apart from the basic one – which allow achieving larger results in the sphere of informatization of the Russian society due to increase of the volume of ﬁnancing of this process, and reconsider the program of its implementation with emphasis on development of its “weak spots”. At that, it is necessary to take into account the result in monetary expression and qualitative expression (comparing the level of informatization to the OECD countries). The compiled scenarios are analyzed with the usage of the Theory of Games and are presented in Table 1. Table 1. Forecast scenarios of informatization of the Russian society Until 2020. Scenario

Result, RUB billion QCC, shares of 1

Probability, shares of 1

Basic (preservation of the volume of ﬁnancing and program)

2,495.29

4.87/5.68=0.86

1.00

Quick (increase of the volume of ﬁnancing with preservation of the program)

2,495.29

4.87/5.68=0.86

0.2

4,990.58

5.24/5.68=0.92

0.8

Expanded (increase of the volume of ﬁnancing with reconsideration of the program)

2,495.29

4.87/5.68=0.86

0.2

4,990.58

5.24/5.68=0.92

0.45

7,485.87

5.68/5.68=1

0.35

Expenditures, RUB billion 516.82

Eﬀectiveness, shares of 1 (2,495.29*0.86* 1.00)/ 516.82=4.15

1,033.64

(2,465.29*0.86* 0.2+4,990.58* 0.92*0.8)/ 1,033.64=3.96

1,033.64

(2,465.29*0.86* 0.2+4,990.58* 0.92*0.45+7,4 85.87*1*0.35) /1,033.64= 4.94

Source: compiled by the authors.

In Table 1, the indicators are calculated in the following way: – result: increase of the volume of digital economy; – QCC – quality coeﬃcient of competitiveness: ratio of the value of the network read‐ iness index of Russia to the average value of this index among the OECD countries; – probability: probability of achievement of result and QCC, in totality, according to the scenario, equals 1; – expenditures: volume of ﬁnancing (assets of the federal budget); – eﬀectiveness: [∑(result*QCC)*probability]/Expenditures As is seen from Table 1, in view of quality coeﬃcient of competitiveness, eﬀective‐ ness of the basic scenario became lower, constituting 4.15. Quick scenario, which envis‐ ages increase of the volume of ﬁnancing by two times (up to RUB 1,033.64 billion) with

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preservation of the program, allows doubling the volume of the digital economy and the value of the network readiness index with probability of 0.8 with preservation of the indicators of eﬃciency of the basic scenario with 0.2 probability. However, despite this, the level of the OECD countries as to the value of the network readiness index will not be reached, so growth of expenditures will not lead to large increase of global competitiveness of the Russian digital economy, which determines low eﬀectiveness of this scenario (3.96) and inexpedience of its practical implementa‐ tion. Expanded scenario, which envisages increase of the volume of ﬁnancing (by two times, as compared to the basic scenario, to RUB 1,033.64 billion) allows increasing the volume of the digital economy and the value of the network readiness index by three times with 0.35 probability with preservation of the indicators of eﬃciency of quick scenario with 0.45 probability and the indicators of eﬃciency of the basic scenario with 0.2 probability. Due to this, the level of the OECD countries as to the network readiness index could be reached, which will lead to large increase of global competitiveness of the Russian digital economy. Eﬀectiveness of this scenario is maximal (4.94), which is a basis for its practical implementation. Perspectives of implementation of the determined optimal (expanded) scenario of informatization of the Russian society are related to reconsid‐ eration of the key directions of informatization of the Russian society. According to the basic scenario, these directions are development of the system of education and HR training, formation of information infrastructure, provision of infor‐ mation security, achievement of technological results, and improvement of normative and legal regulation. At that, development of digital entrepreneurship is not envisages as a separate (top-priority) direction, through according to the index of usage of the ICT in entrepreneurship and the index of usage of the ICT in economy Russia is peculiar for large underrun from the OECD countries, and growth rate of the values of these indi‐ cators in Russia in 2016 is minimal, as compared to 2012. That’s why recommendations for successful implementation of the determined optimal (expanded) scenario of informatization of the Russian society include special attention to development of digital entrepreneurship in Russia, which requires the following measures: – simplifying the procedure (transfer into remote form within E-government) and establishment of zero prices for registration of digital companies; – social advertising of digital entrepreneurship, aimed at growth of its investment attractiveness and growth of trust of consumers to it; – creation of additional simpliﬁed system of taxation for digital entrepreneurship, which supposes lower tax rates (3% from income or 7.5% from diﬀerence between incomes and expenditures).

4

Conclusions

Thus, the oﬀered hypothesis is proved; it is shown that modern Russia is peculiar for insuﬃciently high level and slow rate of society’s informatization for reaching the level

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of the OECD countries in the mid-term (2020) with preservation of the current approach to state strategic management of this process. That’s why for provision of global competitiveness of Russia in the conditions of formation of the digital economy, it is recommended to change this approach, which envisages doubling the volume of state target ﬁnancing of the process of informatization of the Russian society and reconsideration of the program (top-priority directions of informatization) in favor of emphasis on “weak spouts”, in which the largest underrun from the OECD countries and slow rate of informatization are observed. The key aspects are formation and development of digital entrepreneurship. For successful implementation of the oﬀered new direction of informatization of the Russian society, the authors’ recommendations are oﬀered. Following the selected optimization scenario in modern Russia will allow increasing the results by three times and reaching the level of the OECD countries by 2020, this ensuring global competitiveness of the Russia’s digital economy. It should be concluded that a serious barrier on the path of successful informatization of the Russian society is aiming of the strategy of state management of this process only at growth of eﬀectiveness of the economic system, due to which provision of global competitiveness of Russia in the information sphere is not envisaged and is not achieved. That’s why implementation of the optimization scenario requires adding additional goal into the state strategy, related to provision of global competitiveness of the Russia’s digital economy.

References Abdikeev, N.M.: Cognitive technologies of business processes management in digital economy. In: Proceedings of 2017 10th International Conference Management of Large-Scale System Development, MLSD 2017, 8109583 (2017) Bogoviz, A.V., Ragulina, Y.V., Komarova, A.V., Bolotin, A.V., Lobova, S.V.: Modernization of the approach to usage of region’s budget resources in the conditions of information economy development. Eur. Res. Stud. J. 20(3), 570–577 (2017) Bogoviz, A.V., Ragulina, Y.V., Sirotkina, N.V.: Systemic contradictions in development of modern Russia’s industry in the conditions of establishment of knowledge economy. Adv. Intell. Syst. Comput. 622, 597–602 (2018a) Bogoviz, A.V., Sozinova, A.A., Ostrovskaya, V.V.: Approaches to managing economic growth of socio-economic systems. Stud. Syst. Decis. Control 135, 131–137 (2018b) Ereshko, A.F., Kokuytseva, T.V.: Computable models of the cooperation of digital economies. In: Proceedings of 2017 10th International Conference Management of Large-Scale System Development, MLSD 2017, 8109617 (2017) Gualandri, E.: Does the informatization of society concern the psychotherapists? | [L’informatizzazione della società riguarda gli psicoterapeuti?]. Psicoterapia e Scienze Umane 51(3), 363–374 (2017) Igolnikova, I.V., Khlopyannikov, A.M., Khlopyannikova, G.V., Matyushkina, I.A., Shchelikova, N.Y.: Informatization of society as a determinant of global changes in the labor market. Int. J. Appl. Bus. Econ. Res. 15(13), 101–109 (2017) Issayeva, G.B., Baimuldina, N.S., Yessengabylov, I.Z., Aldabergenova, A.O., Smagulova, L.A.: Contemporary period of civilized society development is characterized the process of informatization. Int. J. Appl. Eng. Res. 11(2), 955–957 (2016)

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McKinsey: Volume of digital economy in Russia (2018). http://tass.ru/ekonomika/4390974. Accessed 13 May 2018 Murdock, G.: Communication, crisis and control: economies, ecologies and technologies of digital times. Medijska Istrazivanja 23(2), 17–34 (2017) Petrenko, S.A., Makoveichuk, K.A., Chetyrbok, P.V., Petrenko, A.S.: About readiness for digital economy. In: Proceedings of 2017 IEEE 2nd International Conference on Control in Technical Systems, CTS 2017, 8109498, pp. 96–99, (2017) Ragulina, Y.V., Bogoviz, A.V., Alekseev, A.N.: Modeling the management of innovational processes in regional economy. In: Advances in Intelligent Systems and Computing, vol. 622, pp. 568–573 (2018) Sukhodolov, A.P., Popkova, E.G., Kuzlaeva, I.M.: Peculiarities of formation and development of internet economy in Russia. Stud. Comput. Intell. 714, 63–70 (2018) Sukhodolov, A.P., Popkova, E.G., Kuzlaeva, I.M.: Production and economic relations on the internet: Another level of development of economic science. In: Studies in Computational Intelligence, vol. 714 (2018b) Sukhorukov, A.I., Koryagin, N.D., Eroshkin, S.Y., Kovkov, D.V.: Statistical modeling of the process of generating analog information in the problems of the digital economy. In: Proceedings of 2017 10th International Conference Management of Large-Scale System Development, MLSD 2017, 8109691 (2017) World Economic Forum: Networked Readiness Index 2012 (2018a). http://www3.weforum.org/ docs/Global_IT_Report_2012.pdf. Accessed 13 May 2018 World Economic Forum: Networked Readiness Index 2016 (2018b). http://www3.weforum.org/ docs/GITR2016/GITR_2016_full%20report_ﬁnal.pdf. Accessed 13 May 2018 Digital economy: The digital economy of Russia 2024 (2018). https://data-economy.ru/ organization. Accessed 13 May 2018 Ministry of Communications and Mass Media of the Russian Federation: State program “Information society” (2011–2020) (2018). http://minsvyaz.ru/ru/activity/programs/1/. Accessed 13 May 2018 The President of the RF: The strategy of development of information society in the RF for 2017– 2030, adopted by the Decree dated May 9, 2017, No. 203 (2018). http://kremlin.ru/acts/bank/ 41919. Accessed 13 May 2018

Strategizing as a Tool of Information and Analytical Provision and a Technology of Regional Development Management Daria V. Lanskaya, Yuri I. Treschevsky ✉ , Konstantin V. Getmantsev, and Tatyana A. Myasnikova (

)

Voronezh State University, Voronezh, Russia [email protected]

Abstract. The article examines the problems that arise in the process of imple‐ menting the strategy - strategic - as a necessary condition for the success of stra‐ tegic planning. The materials of the draft Social and Economic Development Strategy of the Krasnodar Region developed in the region until 2030 analyzed the current conditions for the implementation of the Strategy and prospects for its practical implementation. The problems of the content of the Strategy for the development of the region and its implementation have been revealed. The problem of reforming the state regional administration is highlighted in connec‐ tion with the growth of threats and challenges, as well as the scale and nature of the strategic tasks being accomplished. The measures on activization of activity of bodies of representative and executive authority of local self-government on realization of strategy of development of the region. Keywords: Strategy · Strategic planning · Strategic · Strategy implementation Region JEL Codes: R58 regional development planning and policy R12 size and spatial distributions of regional economic activity

Analysis of the practice of strategic planning of social and economic development in Russia for the period up to 2035 shows that one of the most urgent problems is the stage of the immediate implementation of the strategy, connected primarily with the use of tools for its implementation and the solution of a whole range of organizational prob‐ lems, the use of coordinating mechanisms and ensuring the eﬀectiveness of resource support [1, 2, 5–7]. The experience of the Russian regions shows that the authorities, acting as carriers of the need to search for development paths, show an interest in strategic planning, are actively involved in the development of the strategy, but at the implementation stage the strategies prove to be in diﬃcult position on the use of tools for implementing stra‐ tegic decisions. Implementation of the adopted strategy requires even greater eﬀorts in resolving a set of complex practical problems. Among the priority problems in the implementation phase of the strategy are:

© Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 348–356, 2019. https://doi.org/10.1007/978-3-030-00102-5_37

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– adjustment of the management system in the region in order to ensure its adequacy to the speciﬁcs of the regional strategy and strategic directions and projects and the introduction of design and process management technologies; – implementation of a measuring system for the eﬀectiveness and eﬀectiveness of the implementation of the strategy and the organization of continuous monitoring; – Resource support for the implementation of strategic projects and projects on stra‐ tegic development directions; – implementation of the regional development budget, providing investment support for strategic development directions and projects; – Informational and analytical support of the process of implementing the portfolio of regional state programs and projects and raising problems related to the eﬀectiveness and eﬀectiveness of the strategy implementation; – coordination of activities of oﬃcials, administrative and executive bodies, as well as business entities in the course of implementation of regional government programs and projects; – preparation of options for solving emerging problems in the course of implementation of the development strategy; – Preparation of proposals on adjusting strategic development directions and projects of the regional strategy in accordance with new factors and trends in the world, the country and the region, and also taking into account the real progress of their imple‐ mentation [7]. The activities of the representative and executive authorities, as well as the large business and regional elite of the Krasnodar Territory, connected with the planning and creation of prerequisites for the implementation of the Strategy of Social and Economic Development of the Krasnodar Territory until 2030 (Strategy 2030) have shown the severity of these problems. The search for solutions to these problems is extremely slow. Decision-makers at various levels are pressured by management stereotypes, prepared proposals and draft decisions “drowned” in agreements, indecisiveness and complicated decision-making procedures. To start, as the positive world and domestic practice shows, it is necessary with the renewal of the regional management system, giving it the prop‐ erties of systemic, ﬂexible and dynamic. The basis for updating the system of regional management should be technologies of problem-oriented and project management. Another approach for determining the prospects for the development of the region can be the experience of separating the challenges identiﬁed in the strategic initiative. “Innovative America”, which was adopted in 2007 and aimed at “responding to challenges …”. It is noteworthy that among the challenges are highlighted “the eﬀorts of Asian countries and other states to boost the economy; loss of US leadership in the ﬁeld of innovation and production of products with high added value; implementation of active strategies of innovative industrial development by other countries; impossi‐ bility to compete with highly skilled low-wage economies of other countries on the basis of traditional methods of cost reduction; lack of skilled workers able to adapt to tech‐ nological changes and growing market demand in the face of rapid technological change and increased international competition; lack of a system of balanced investment in education, R&D and entrepreneurship, necessary for an innovative economy” and a number of others. It is noteworthy that the meaningful eﬀorts of other countries for their

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own development are formulated as threats to the United States. In the framework of the initiative for the regional authorities, nine strategic directions have been formed. It is noted that while in the US there is no proper reaction to them. Russia’s response to global challenges in 2017 has acquired a signiﬁcantly diﬀerent form in the form of the Strategy for Economic Security of the Russian Federation for the period up to 2030, in which twenty-ﬁve challenges and threats have been identiﬁed [10]. In particular, the desire of developed countries to use their advantages in the level of economic development, high technologies (including information technologies) as a tool for global competition; absence of Russian non-oil companies among global leaders of the world economy; weak innovation activity, lag in the development and imple‐ mentation of new and promising technologies (including digital economy technologies), insuﬃcient qualiﬁcation and key competencies of domestic specialists; low economic growth due to internal causes, including limited access to long-term ﬁnancial resources, insuﬃcient development of transport and energy infrastructure; insuﬃciently eﬀective public administration; the uneven spatial development of the Russian Federation, the increased diﬀerentiation of regions and municipalities in terms of the level and pace of socio-economic development. In this document, eight main directions of state policy in the sphere of ensuring the economic security of the country are formulated, each of which deﬁnes a set of measures to neutralize challenges and threats. In the analytical materials of the Ministry of Economic Development of Russia it is noted: “All the most important challenges that are now facing Russia - these are the challenges of innovative development, post-industrial transformation” [8]. Among the main directions of the state policy to ensure the economic security of the country are: the development of public administration, forecasting and strategic plan‐ ning; ensuring the growth of the real sector of the economy; creation of economic conditions for development and introduction of modern technologies, stimulation of innovative development; development of the national ﬁnancial system. It is necessary to emphasize the paradigm shift in Russia’s development with the change in the rate of “equalizing the levels of economic development of the territories to the idea of creating innovative growth points” [4]. So V.V. Klimanov notes that “when developing instruments of regional policy both in foreign countries and in Russia, two types of state impact on spatial development are combined: an equalizing and idea-based formation of points or poles of growth” [4]. Identiﬁcation of such growth and development points in the Krasnodar Territory was aimed at all information and analytical activities, which culminated in the presentation of the ﬁnal version of Strategy 2030 to the Ministry of Economic Development by CJSC Leontief Center [12]. Together with the text of the Strategy, they also proposed tools for its implementation: • Legislative consolidation of the Strategy of social and economic development of the Krasnodar Territory until 2030, in the form of the Law of the Krasnodar Territory; • consolidation of the Strategy implementation plan in the form of a “road map” for a calendar year in the form of a resolution of the head of the administration (governor) of the Krasnodar Territory;

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• Creation of a strategic development agency in the region, as an integrating structure that manages the implementation of the Strategy. Unfortunately, due to the wait-and-see attitude of the representative and executive authorities, none of the tools for implementing the Strategy has been put into eﬀect. Moreover, the Strategy of Social and Economic Development of the Krasnodar Territory until 2030 has not yet been adopted and is being agreed upon in the authorities of the federal center. Analyzing the reasons for this provision, the following is highlighted as the main: the unwillingness of the authorities and management to take strategic actions and scale projects at the regional level, when it is necessary to take full responsibility for them‐ selves. Among the problems of the stage of choosing a strategy or making a strategic deci‐ sion are the following. Problems of a legal nature. The ﬁrst problems with Strategy 2030 arose already in October 2016 and were asso‐ ciated with the development of the country’s spatial development of the Russian Feder‐ ation, which enshrined the requirement to take into account federal parameters in the strategies of the regional level. In the materials proposed to the developers of the Strategy of the Krasnodar Territory, there are no indications as to the extent to which the require‐ ments of the normative acts of the Russian Federation are taken into account. As a result, the Strategy of Social and Economic Development of the Krasnodar Territory until 2030 was subjected to the necessary alteration taking into account the requirements of the federal Strategy, and the deadline for submitting its ﬁnal version was shifted to a later date. The following problems arose with the developers when trying to implement the Strategy of social and economic development of the Krasnodar Territory until 2030 as the Law of the Krasnodar Territory. To date, the Legislative Assembly of the Krasnodar Territory has taken a formally waiting position as follows: since the federal strategy of spatial development of the Russian Federation has not been adopted, the adoption of a regional Strategy is not possible [8]. In many ways, such a position can be overcome in the course of making adjustments in the course of its implementation. The fact is that even if the Strategy 2030 is adopted at the regional level and subsequently adopted the National Strategy for Spatial Devel‐ opment of the Russian Federation until 2030, it is always possible to make the necessary adjustments to regional legislation. The position of the Legislative Assembly of the Krasnodar Territory in many respects becomes clear when referring to the budget planning documents, in particular, to the budget parameters of the Krasnodar Territory for 2017, approved by the Krasnodar Territory Law No. 3566-KZ “On the Territory Budget for 2017 and the Planning Period 2018 and 2019” In which there are no provisions for the implementation of the Strategy of social and economic development of the Krasnodar Territory until 2030, there is a list of state programs of the Krasnodar Territory and other sources of funding. In addition, if we turn to the ﬁnancial planning documents, in particular, to the prospective ﬁnancial plan and the forecast of the social and economic development of

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Krasnodar Krai for 2018, then there is also no necessary ﬁnancial support for the implementation of the Strategy 2030. Thus, it can be assumed that the three-year planning cycle (until the end of 2019) can not be considered as a signiﬁcant reason for the possible transfer to a later date of the Social and Economic Development Strategy of the Krasnodar Region. This is the feature of strategic planning, that it is not something frozen and unchanged. Strategic planning is a continuous change, adequate to challenges and threats. In the conditions of dynamism of development and turbulence of the external environment at the stage of realization strategy signiﬁcantly increases the importance of the strategic process, as part of the overall process of implementing the strategy. The problem is of an organizational nature. The most serious problems arose in the formation of the organizational environment for the implementation of the Strategy of Social and Economic Development of the Krasnodar Territory until 2030. Initially the developer of the Strategy 2030 CJSC Leon‐ tief Center planned to create a single agency for the implementation of the Strategy the Strategic Development Agency of the Krasnodar Territory. This agency was to be formed by regional authorities, experts, interested representatives of business and society, representatives of municipalities of the region. It should be headed by a person with suﬃcient powers for strategic coordination of the activities of ministries and municipalities. The most serious problem here was the deﬁnition of the competence of such a struc‐ ture. The developers of Strategy 2030 proposed that the essence of its activities should be the project management of the development of the region, in particular, assuming the Agency’s deﬁnition of perspective directions of social and economic development within the framework of the set of activities of Strategy 2030 and the formation of project teams on an interagency basis for their implementation. In fact, it was a question of some super-departmental structure in the regional administration system. Although the expe‐ rience of other regions in which such agencies operate, they are assigned other functions and powers. Such agencies have a status diﬀerent from that of the regional government. In November 2017, these functions were received by the Department of Investments and Development of Small and Medium-Sized Enterprises, where a special department of project support for the strategy of Krasnodar Region was established. Moreover, in December 2017, the University of Kuban, following the results of the contest “Univer‐ sities as centers of the innovation development space,” became the university center for innovative, technological and social development of the region, simultaneously acquiring the status of a university as an oﬃce for project competence and a training center for regional project management specialists. All this raised the issue of the expe‐ diency of creating the Agency for Strategic Development of the Krasnodar Territory. There is a contradiction between the form of such a coordination body and the status of the ministries themselves in the regional administration system. Most likely, we need to talk about the formation of a strategic committee in the structure of the Krasnodar Krai administration, as a change management center, which implements strategic devel‐ opment of the region with broad powers in monitoring, control, planning and regional development tools. Such an organ of regional management from an informational and analytical point of view would be able, in the process of development strategy, to

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implement an integrative management function - strategy. Among the priority the tasks of the newly created committee, the introduction of a project management system, the improvement of process activity, the implementation of strategic and projects for the reindustrialization of traditional sectors of the regional economy and new industrialization in the basis of the sixth technological order, with the formation of a regional sector of the knowledge economy or “smart” economy, and an innovative ecosystem. Strategy is an inseparable set of management processes and includes the following tools: conceptualization (concept development); programming (development and imple‐ mentation of programs); design (development and implementation of projects); planning (development and implementation of plans, implementation of speciﬁc activities) and timely discussion of adjustments. The main thing in organizing the course of the strategy is the launch, with the help of the listed organizational means of managing the process of activity towards the desired Future (in interrelation with the Past through the Present). The technology of organizing strategic works is based on the use of means of organizing activities, co-organization of participants in the strategic process, as well as on proce‐ dures for managing the development, launching, implementation and justiﬁcation of the development strategy adjustment. The most important components of the technology for the organization of strategic works are the management of the development of regions/municipalities (the organization of existing structures in a strategic manner, the development and the formation of special development institutions) and management of the implementation of a strategy of any level [3, 6, 9]. In the process of implementation of the strategy, the importance of information analytical support of the strategy increases, which is realized as a function of strategic planning. It is a voluminous and continuous process linking forecasting, planning and management of strategy implementation in the ﬁeld of possible trajectories in evolu‐ tionary and systemic paradigms, institutional ﬂexibility and including integrated proce‐ dures for the implementation of goals and strategies for the development of the regional socio-economic system, their adaptive systemic adjustment, national It is aimed at the reproduction of systemic links in the conditions of profound and comprehensive trans‐ formations between profound changes in technologies, organizations, institutions, social communications [6]. Problems of interaction with the regional community. A separate group of problems related to the implementation of the Strategy of Social and Economic Development of the Krasnodar Territory until 2030 were the problems of involving the regional community in the implementation of the Strategy. Firstly, the issues of strategy development were almost ignored by representatives of large business and natural monopolies of the region. The fact is that many of the activities of the Strategy pursued the goal of linking plans for the development of large businesses with the process of social and economic development of the region, but this did not always correspond to the interests of the business itself. If the business saw this as an interest in it, it was actively involved in the process of developing the Strategy 2030. So representatives of the sanatorium and resort industry were actively involved in the process of working on the strategy, in particular, representatives of agro-tourism (Abrau-Dyurso CJSC), where the deputy of the regional parliament works as a director), certain lines of activity of hoteliers in the foothill and mountain regions of the Krasnodar

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Territory (the Kuban Riviera group of projects), the farming in the form of a com plexa events in the ﬁeld of creating collective logocenters and procurement centers and some other types of businesses. But large businesses, for example, PJSC Gazprom, Russian Railways, and Kubane‐ nergo, did not participate in the development of the strategy. The collaboration was partially truncated. As a result, Strategy 2030 and strategic plans of business entities have not yet created the conditions for achieving the synergy eﬀect. Here is an example with the support of the administration of Mostovskiy district of the Krasnodar Territory on the territory of the municipality a project was developed for the construction of a mountain tourist complex for 1000 places (Psebai district), an investor was found ready to invest 1.4 billion rubles in the project, with PJSC “Kubanenergo” and PJSC “Gazprom-Kuban” for power supply to the facility that was not received, as the plans for the development of electric grids and gas networks of natural monopolists did not provide for develop‐ ment of supplying infrastructure investment platform area. The project was impossible to implement. Another example - the activities of the Strategy to expand the zone of marine recre‐ ation in the area of the cities of Novorossiysk and Gelendzhik, envisaged by Strategy 2030, implied the expansion of the transport corridor in the area of Novorossiysk and the increase in passenger traﬃc along the A-146 route due to the construction of a new traﬃc intersection in the Novorossiysk port area. Moreover, CJSC Novorossiysk Commercial Sea Port is ready to invest 5 of the required 12 billion rubles in the construction of this interchange, but neither the Government of the Russian Federation nor the administration of Krasnodar Krai are ready to allocate the missing 7 billion rubles for the construction of the viaduct, as a result the zone development project recreation still remains the intention. These are not isolated examples of mismatch in approaches. In fact, today the issue stands in such a way that part of the activities of Strategy 2030 can not be realized because they are not coordinated with the energy supply and transport organizations of the region. Such projects as the construction of new resorts in the Caucasus foothills, the formation of a tourist cluster on Taman and in Anapa, the creation of new ports, the construction of two innovation centers in Krasnodar and Sochi is not supported by the corresponding development of the infrastructure. Today, the enormous eﬀorts of the regional administration to work with natural monopolists and transport organizations are required to create conditions for the implementation of the draft Strategy 2030. A particular problem with the implementation of the 2030 Strategy was the low integration of existing environmental services. So, a number of activities of Strategy 2030: the transport corridor along the Sea of Azov to the Crimean transition, the devel‐ opment of the mountain tourist cluster of the Kuban Riviera, the construction of the transport crossing the village of Mozyiskaya - Sochi and many others appeared in the zone of specially protected natural territories of the Krasnodar Territory. There are 376 such zones in the Krasnodar Territory, mostly concentrated in the region of the Cauca‐ sian Range, as well as in the Azov Lowland. Today, the strategy considers these regions as perspective development centers of the region, but it is impossible to implement these

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projects due to the nature of environmental legislation. The Strategy 2030, which was not agreed upon in this part, can not be realized. Ryan Gravel considers the solution of similar problems. In his opinion, cities and agglomerations have a huge potential for creating more healthy and comfortable condi‐ tions for people’s lives. He considers the experience of solving similar problems [12]. Estimating further prospects for the implementation of the Strategy of Social and Economic Development of the Krasnodar Territory until 2030, the following should be noted. First, the Strategy requires timely adjustment of the budget legislation. Adoption of Strategy 2030 in the absence of corrective amendments to budget legislation will lead to the failure of some of its projects, reduce the level of interest in the results of the Strategy from the side of regional authorities, neutralize the tasks of integration of budgetary and extra-budgetary sources of development of the Krasnodar Territory. The mechanisms for implementing the strategy through the system of state programs, announced by the developer of Strategy 2030 of CJSC Leontief Center, require their simultaneous development together with the text of the Strategy and the adoption of documents in the package, otherwise they risk remaining unaccepted. Secondly, with regard to the creation of organizational conditions, and in particular the creation of the Agency for Strategic Development of the Krasnodar Territory, it is necessary to concentrate in its authority the powers already exercised by diﬀerent regional departments in terms of project management, budget planning, ﬁnancial and economic forecasting, development of regional programs for social and economic development and so on, what can be done without restructuring the whole system of state administration in the region is impossible. There is a need to create a special format for preparing strategic decisions and mechanisms for their implementation. Therefore, the adoption of Strategy 2030 should be accompanied by the adoption and implementation of the program of administrative reform in the state administration of the region. Thirdly, the involvement of regional stakeholders, in particular the subjects of natural monopolies, the largest regional and national companies operating in the region, remains open. Today, it is required to reach a preliminary agreement, for example, in the form of concluding a contract of intent and partnership with the creation of channels for dialogue and interaction between the regional administration and large business entities in the development of parameters and areas for joint work, the formation of strategic vectors for the development of the Krasnodar Territory. Fourth, the question of participation in the implementation of Strategy 2030 of the population of the region remains open. Without a broad information company, direct involvement of the population in the process of strategic planning and implementation of the strategy, it is not necessary to count on the support of the population. On the contrary, private social problems will form the own vector of the social and economic policy of the region, which is part of the imbalance with the activities of Strategy 2030. Therefore, it seems necessary to take into account the interests of the local population, incorporate them both into the text of Strategy 2030, and directly into measures for its implementation, place the initiatives of the regional community.

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Acknowledgments. The reported study was funded by RFBR according to the research project No. 17-32-01044.

References 1. Budaeva, K., Klimanova, V.: Points of growth as an element of strategic planning in the regions of Russia. Regional studies, No. 3, pp. 99–106 (2017) 2. Budaeva, K.V., Egorsheva, Z.I.: Structurally-substantial analysis of strategic planning documents within the framework of the goal-setting of the capital cities of Russian regions. State Audit. Right. Economy, No. 3-4, pp. 106–111 (2017) 3. Ermolenko, V.V.: Intellectual service of superstrategic solutions in the corporation of the knowledge economy. Human. Community. Control, No. 1, pp. 46–62 (2010) 4. Klimanov, V.V., Budaeva, K.V., Chernyshova, N.A., Yagovkina, V.A.: Regional strategy and programming in the Russian Federation. 2016: Annual Report. IROF, 88 p. (2017) 5. Konstantinidi, H.A.: Strategic development of the regional economic system in conditions of acceleration of post-industrial transformations. Moscow:Izd-vo of the economy of knowledge. Business Strategies, No. 7(27), pp. 21–24 (2016) 6. Loginov, A.N., Goyher, O.L.: The concept of spatial polarized development: the growth point, the growth pole, transport and communication and information and communication corridors. Regional problems of economic transformation, No. 11, pp. 105–111 (2015) 7. Draft Concept of spatial development of the Russian Federation for the period until 2030. Ministry of Economic Development and Trade, 111 p. (2016) 8. Zhikharevich, B.S. (ed.): Strategy 2010: market leaders, 72 p. International Center for Social and Economic Research “Leontief Center”, St. Petersburg (2010) 9. Strategy of economic security of the Russian Federation for the period up to 2030. Decree of the President of the Russian Federation of May 13, 2017 No. 208 10. Strategy of social and economic development of the Krasnodar Territory for a long-term period. Version 1.1 (full). Krasnodar, St. Petersburg, 225 p., 30 November 2017 11. Gravel, R.: Where We Want to Live: Reclaiming Infrastructure for a New Generation of Cities, 15 March 2016 12. The Global Competitiveness Report 2009-2010. www.dol.gov/_sec/stratplan

Financial Barriers to the National Cancer Program Implementation in Modern Russia and Means to Overcome Them Yuri V. Przhedetsky1 ✉ , Natalia V. Przhedetskaya2, Viktoria Y. Przhedetskaya1, Ksenia V. Borzenko2, and Viktoria V. Pozdnyakova3 (

)

1

3

Rostov Research Institute of Oncology, Rostov-on-Don, Russia [email protected], [email protected] 2 Rostov State University of Economics, Rostov-on-Don, Russia [email protected], [email protected] Rostov Research Oncological Institute of the Ministry of Healthcare of the RF, Rostov-on-Don, Russia

Abstract. The purpose of the study is to reveal ﬁnancial barriers on the way of the national cancer program implementation in modern Russia and to identify means to override them. The authors employed methods of regression and corre‐ lation analysis, with the help of which they determined dependences of index values of the national cancer program implementation and its funding extent in Russia in 2017–2029 based on the data of target values (indices) of the Russian National Strategy for Cancer Control for a long-term period until 2030. The authors identify ﬁnancial barriers to the national cancer program implementation in modern Russia and underpin an insuﬃciency of applicable (and estimated) way of solving these issues. It is concluded that ﬁnancial barriers are a serious and systematic obstacle to the national cancer program implementation in modern Russia. The authors suggest ways of more successful overcoming ﬁnancial barriers to the national cancer program implementation and develop the concept to overcome them after implementation, which reﬂects the preferable ways of overcoming diﬃculties and highlights the broad prospects for its widespread implementation. This concept is recommended for practical use as a fundamental basis to improve current national strategy and developing future one to counter cancer in modern Russia. Keywords: Financial barriers · National cancer program · Modern Russia

1

Introduction

The growth of cancer rate has been observed during several decades. Therefore, the implementation of national cancer programs aimed at strategic state management of prevention and diagnosis of cancer, as well as a treatment and rehabilitation of cancer patients, is an important index of condition and development of healthcare systems in modern countries. Developed countries (The Organization for Economic Cooperation and Development) have achieved the greatest success in solving national cancer issues. © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 357–363, 2019. https://doi.org/10.1007/978-3-030-00102-5_38

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Owing to it, a current share of patients surviving with cancer in France (2018) is 60% and in the USA is 64%. To ensure the life quality corresponding to the level of developed countries in modern Russia, we need to report the healthcare statistics, foremost cancer one, in accordance with indices of these countries. However today, Russia is the ﬁrst-listed due to the world total cancer rate (122.2 cases per 100,000 people) and cumulative risk (13.69% of newborns will be vulnerable to cancer up to 75 years). At the same time, the share of patients surviving with cancer in Russia is 40–50%. Taking into account that other developing countries (China, India) face similar prob‐ lems and have almost the same statistics like modern Russia, and also providing that the key diﬀerences between developed and developing countries are concentrated in the ﬁnancial area (tendency to saving, investment opportunity, availability of ﬁnancial capital, etc.), in this paper we put forward an assumption that there are ﬁnancial barriers on the way of the national cancer program implementation in modern Russia.

2

Materials and Method

The essence, common principles and peculiarities of national cancer programs imple‐ mentation in modern countries are reﬂected in publications by (Asare et al. 2018), (Kit et al. 2015), (Minasian et al. 2015), (Morris et al. 2018), (Przhedetsky et al. 2018), (Siegel et al. 2015), (Zlatnik et al. 2018). The ﬁnancial aspects of national cancer programs implementation in developing countries have been studied in papers by (Amir et al. 2012), (Sazonov et al. 2013), (Lomovceva et al. 2016) (Łyszczarz and Nojszewska 2017), (Nekhlyudov et al. 2016), (Veselovsky et al. 2018).

Table 1. Dynamics of index values of the national cancer program implementation and its funding extent in Russia in 2017–2029. 2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

Death rate due to cancer, people per 100 thousand of people

189.5

190.6

191.7

190.6

189.5

188.4

187.3

186.2

185

184.7

184.5

184.3

184

Share of cancer patients under a medical check-up 5 or more years from diagnosis setting, per cent

54.9

54.5

54.1

54.5

54.6

54.7

54.8

54.9

55

55.2

55.4

55.6

55.8

The 1 stage cancer recognition, per cent

33.1

32.2

31.3

32.2

33.1

34.1

35

35,9

36,8

37.2

37.7

38.1

38.5

State funding extent of activities on the national cancer program implementation, bln.roubles

47.75

174.76

189.28

197.09

208.915

221.45

234.737

248.822

263.751

279.576

296.35

314.132

332.979

st

Source: drafted by authors on the data (Government of the Russian Federation 2018).

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A literature review on the chosen topic showed that the practice and ﬁnancial barriers to the national cancer program implementation in modern Russia are not thoroughly studied, that’s why the current scientiﬁc vision of national cancer programs implemen‐ tation in developing countries is not full. This article is dedicated to eliminate a revealed ﬂaw in the system of available scientiﬁc data. The testing of hypothesis suggested in this paper is carried out by means of regression and correlation analysis methods. We determined a dependence of index values of the national cancer program implementation and its funding extent in Russia in 2017–2029 through data on target values (indices) of the Russian National Strategy for Cancer Control for a long-term period until 2030 (Table 1).

3

Results

192 190 188 186 184 182 0

200 Funding extent

400

56 y = 0.0042x + 53.942 R² = 0.4296 55.5 55 54.5

50 The 1st stage cancer recognition rate

y = -0.0295x + 194.24 R² = 0.6145

194

Share of people under a medical check-up the first…

Death rate per 100 thousand of population

As follows from the regression and correlation analysis, we obtained the following regression curves (lines) (Fig. 1).

40 30 y = 0.0271x + 28.735 R² = 0.6395

20 10 0

54 0

200 400 Funding extent

0

200 Funding extent

400

Fig. 1. Regression curves displaying dependencies of performances of the national cancer program implementation in Russia in 2017–2029. (y) on its funding extent (x). Source: drafted by authors.

As can be seen from Fig. 1, with an increase in a state funding extent of activities to implement the national cancer program in Russia in 2017-2029 of 1 billion rubles, it is possible to reduce a death rate due to cancer by less than 1 person per 100 thousand of people (correlation 61.45%), an increase in the proportion of cancer patients under a medical check-up from a diagnosis setting 5 or more years of 0.004% (correlation 42.96%), an increase in the 1st stage exposed cancer rate of 0.02% (correlation 63.95%). Consequently, eﬃciency of the national cancer program in modern Russia mainly determines a funding extent, as evidenced by a high correlation of performances in all obtained patterns of double linear regression. At the same time, the reward of state investments in the national cancer program implementation in modern Russia is very low, as indicated by a slight change in program performance rate depend on funding. Our in-depth analysis of the Russian National Strategy for Cancer Control for a longterm period until 2030 made it possible to identify the following ﬁnancial barriers on the way to its practical implementation:

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– lack of funding for the national cancer program: despite the fact that 33 billion rubles (69.12% of the total funding extent) in 2017 was spent on chemotherapy, this allowed providing only one-third of required drugs that are critically needed for cancer patients. Insuﬃciency of ﬁnancial resources causes constrained limitation of ﬁnancial costs per unit of medical care provided to a cancer patient, which leads to a bigger quality deviation of provided services and the impossibility of achieving target values of the national cancer program implementation. Thus, in 2017 this rate was 1623.4 rubles for the service, which is less than 30 dollars; – inappropriate expenditure of funds allocated for the national cancer program imple‐ mentation: funds are spent primarily on quality upgrading of speciﬁc medical services provided in cancer treatment, while severe cancer patients (stage 4) cannot obtain these services (reach an Oncology Centre), and this is a crucial condition for obtaining a particular cancer treatment; – orientation to counter the consequences, but not to eliminate the causes of cancer diseases (short-term funding orientation): despite the fact that prevention of cancer is declared as one of the basic principles of the national cancer program in modern Russia, practical implementation activities reﬂected in road map are mainly aimed at consequences - early recognition and treatment. Although, it allows reducing the death rate due to cancer, but not ensuring a decrease in the incidence rate and therefore causes an increasing need in ﬁnancial resources against its decline over the longerterm. The Russian National Strategy for Cancer Control for a long-term period until 2030 envisages the following promising means to solve the ﬁnancial problems due to its implementation: – Increasing state funding (subsidy assistance) of activities on the national cancer program implementation that without speciﬁcation of exact funding amount in terms of a federal budget gap in the country is a reasonable cause to believe that this funding will be insuﬃcient to overcome completely the deﬁcit of ﬁnancial resources; – development of additional (voluntary) medical insurance system for citizens in event of cancer, due to the fact that the low level of net disposable income of the population does not allow reaching required insurance coverage of ﬁnancial expenses for cancer treatment; – launching the mechanism of public-private partnership in the national cancer program implementation. According to the forecast, in 2018 ﬁnancial resources raised under this mechanism should amount to 50 billion rubles that is also insuﬃcient to solve ﬁnancial issues in full. We oﬀer the following ways to overcome more successfully abovementioned ﬁnan‐ cial barriers for the national cancer program implementation in modern Russia: – raising massive private ﬁnancial resources to invest the national cancer program: this requires state social marketing aimed at promoting a corporate social responsibility of Russian enterprises as a grant funding of activities (subsidies) for the national cancer program implementation that will overcome funding gap;

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– Optimization of the expenditure of funds allocated for the national cancer program implementation: it is recommended to spend additional state subsidy assistance at launching an electronic record system for the provision of medical services in cancer treatment, which makes these services available to all patients at home or distantly (for example, receiving prescriptions, ordering drugs); – reorientation of partial expenditure of funds for the elimination of cancer causes (long-term orientation): social marketing of healthy lifestyles, the tightening of envi‐ ronmental legislation and public co-funding to upgrade the puriﬁcation facilities at industrial enterprises improving the environmental situation and reducing the cancer incidence. The described recommendations laid the basis for the developed author’s concept to overcome the ﬁnancial barriers to the national cancer program implementation in modern Russia (Fig. 2). The purpose is to overcome the financial barriers to the national cancer program implementation in modern Russia – Providing healthy lifestyle; – Improving ecological situation.

Elimination of causes, financial costs decreasing Growth of – Launching electronic record system; funding Financial expenditure – Provision of telemedicine services. expenditure optimization efficiency Financial deficit – Promotion of private Raising a significant private elimination investment inflow in terms of funding corporate social responsibility.

Wa ys to ach ive:

Long-term funding orientation

The result is to achieve funding of activities on the national cancer program implementation in full, to reduce a cancer incidence rate and to increase a survival rate

Fig. 2. The concept to overcome the ﬁnancial barriers to the national cancer program implementation in modern Russia. Source: compiled by authors.

As can be seen from Fig. 2, a suggested concept to overcome the ﬁnancial barriers to the national cancer program implementation in modern Russia allows achieving funding activities for the national cancer program implementation in full, reducing the cancer incidence and improving the survival rate of cancer patients. As a whole, it will ensure consistency of the results with target values of the program, improve Russia’s position in international cancer ranks, and upgrade the life quality in Russia by increase of healthcare performances.

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Conclusions

Thus, we have proved the suggested hypothesis and have conﬁrmed that ﬁnancial barriers are a serious and systematic obstacle to the national cancer program implemen‐ tation in modern Russia. The developed author’s concept reﬂects the preferable ways to overcome these barriers and highlights the broad prospects for widespread implemen‐ tation. This concept is recommended for practical use as a fundamental basis for improving current national strategy and developing future one to counter cancer in modern Russia.

References Amir, Z., Wilson, K., Hennings, J., Young, A.: The meaning of cancer: implications for family ﬁnances and consequent impact on lifestyle, activities, roles and relationships. Psycho Oncol. 21(11), 1167–1174 (2012) Asare, M., Peppone, L.J., Roscoe, J.A., Kleckner, I.R., Mustian, K.M., Heckler, C.E., Guido, J.J., Sborov, M., Bushunow, P., Onitilo, A., Kamen, C.: Racial diﬀerences in information needs during and after cancer treatment: a nationwide, longitudinal survey by the University of Rochester cancer center national cancer institute community oncology research program. J. Cancer Educ. 33(1), 95–101 (2018) Kit, O.I., Vodolazhsky, D.I., Timoshkina, N.N., Przhedetsky, Yu.V., Khokhlova, O.V.: Molecular biology of familial cases of human melanoma. Vop. Onkol. 61(6), 889–897 (2015) Lomovceva, O.A., Tkhorikov, B.A., Gerasimenko, O.A., Polyakov, V.G.: The strategic nature of public-private project in solving the problems of small and medium-sized cities in Russia. Soc. Sci. (Pakistan) 11(12), 3138–3141 (2016) Łyszczarz, B., Nojszewska, E.: Productivity losses and public ﬁnance burden attributable to breast cancer in Poland, 2010-2014. BMC Cancer 17(1), 676 (2017) Minasian, L.M., Tangen, C.M., Lawrence Wickerham, D.: Ongoing use of data and specimens from national cancer institute-sponsored cancer prevention clinical trials in the community clinical oncology program. Semin. Oncol. 42(5), 748–763 (2015) Morris, L., Gorayski, P., Turner, S.: Targeting general practitioners: prospective outcomes of a national education program in radiation oncology. J. Med. Imaging Radiat. Oncol. 62(2), 270– 275 (2018) Nekhlyudov, L., Walker, R., Ziebell, R., Rabin, B., Nutt, S., Chubak, J.: Cancer survivors’ experiences with insurance, ﬁnances, and employment: results from a multisite study. J. Cancer Survivorship 10(6), 1104–1111 (2016) Przhedetsky, Y.V., Przhedetskaya, N.V., Panasenkova, T.V., Pozdnyakova, V.V., Khokhlova, O.V.: Transformation of consumers’ behavior in the conditions of digital economy by the example of services in cancer treatment. Advances in Intelligent Systems and Computing, vol. 622, pp. 631–637 (2018) Sazonov, S.P., Lukyanova, A.V., Popkova, E.G.: Towards the ﬁnancial budgeting governance in transitive economies. World Appl. Sci. J. 23(11), 1538–1547 (2013) Siegel, R.D., Castro, K.M., Eisenstein, J., Stallings, H., Hegedus, P.D., Bryant, D.M., Kadlubek, P.J., Clauser, S.B.: Quality improvement in the national cancer institute community cancer centers program: the quality oncology practice initiative experience. J. Oncol. Pract. 11(2), e247–e254 (2015)

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Veselovsky, M.Y., Izmailova, M.A., Bogoviz, A.V., Lobova, S.V., Ragulina, Y.V.: System approach to achieving new quality of corporate governance in the context of innovation development. Qual. Access Success 19(163), 30–36 (2018) Zlatnik, E.Y., Przhedetsky, Y.V., Kochuev, S.S., Novikova, I.A., Nepomnyashchaya, E.M., Zakora, G.I., Bondarenko, E.S., Pozdnyakova, V.V.: Immunologic factors in tissues of cutaneous melanoma depending on its thickness. Med. News North Cauc. 13(1), 44–48 (2018) Government of the Russian Federation. National strategy for Cancer Control for a long-term period until 2030 (2018). http://oncology-association.ru/ﬁles/national-strategy.pdf. Accessed 8 May 2018

New ICT as a Threat to Physical Development and Health of a Modern Human or a Means of Propaganda of Healthy Living Elena S. Berezhnaya(&), Vladimir A. Bondarev, Yevgeniya V. Zazulina, Natalya V. Koloskova, and Anna V. Strichko Institute of Service and Business (Branch) of Don State Technical University, Shakhty, Russian Federation [email protected], [email protected], [email protected], [email protected], [email protected]

Abstract. The purpose of the work is to determine the influence of new ICT on physical development and health of a modern human by the example and experience of Russia and to develop practical recommendations for using new ICT for propaganda of healthy living, which allow overcoming negative consequences of their distribution and maximizing positive effect. It is achieved with the help of regression analysis. The information base for analysis includes the materials of the World Economic Forum (the Global Information Technology Report) and the Federal State Statistics Service of the RF for 2005-2016. As a result, it is concluded that new ICT have contradictory influence on physical development and health of a modern human. On the one hand, usage of new ICT could lead to aggravation of vision and to obesity. On the other hand, new ICT are a highly-effective means of propaganda of healthy living, as they allow covering mass audience with minimum expenditures of time and ﬁnances. Their positive influence on physical development and health of a modern human is very vivid in modern Russia. Growth of accessibility and active usage of new ICT over the recent years led to triple increase of the number of members of sports clubs. The authors offer practical recommendations for using new ICT for propaganda of healthy living, which allow overcoming negative manifestations of their distribution and maximizing the positive effect. Keywords: Health Healthy living Physical culture Sports Health-saving technologies new ICT

Physical development

1 Introduction The 21st century is called digital age, as it is a period of development of information and communication technologies (ICT), of which the newest and the most used are digital technologies. These technologies became very popular and changed the way of life of a modern human. Opening perspectives for high-speed and highly-effective management of information and unlimited communications, new ICT cause dependence with people. Constant usage of digital technologies may be a threat to physical © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 364–370, 2019. https://doi.org/10.1007/978-3-030-00102-5_39

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development of human’s health, as it envisages sedentary life-style and leads to increased load on vision organs. At the same time, new ICT ensure increase of accessibility of information, expansion of means, and simpliﬁcation of the process of its distribution. This allows promoting public values, which include saving health and physical development of human. According to this, new ICT could serve the interests of propaganda of healthy living via social advertising from the state and private organizations within the measures of corporate responsibility and spontaneously, by reflecting in open access (e.g., in social networks) private practices of healthy living, which would be examples for others. Thus, there is a contradiction, related to uncertainty of the influence of new ICT on physical development and health of a modern human. The working hypothesis of the research consists in the idea that in modern Russia positive effects from distribution of new ICT in the sphere of healthcare and sport are manifested to a larger extern than negative consequences. The purpose of the work is to verify the offered hypothesis by determining the influence of new ICT on physical development and health of Russians and to develop practical recommendations for usage of new ICT for propaganda of healthy living, which allow overcoming negative consequences of their distribution and maximizing the positive effect.

2 Materials and Method Statements on potential negative influence of new information and communication technologies on physical development and health of a modern human could be found in the works (Bogoviz et al. 2017), (Gopalan et al. 2016), (Inshakova et al. 2017), (Panova and Lleras 2016), and (Popkova et al. 2018). Arguments in favor of positive influence of distribution of new ICT on the modern society in the aspect of popularization of healthy living could be found in the works (Gutierrez et al. 2016), (JosephShehu and Ncama 2017), (Lee et al. 2016), (Puigdomènech et al. 2015), (Qureshi 2016), (Sanchez et al. 2016), and (Woo et al. 2016). As a result of the performed literature overview, it is concluded that the problem of influence of new ICT on physical development and health of a modern human is poorly studied, as in most publications these issues are viewed indirectly and at the level of suppositions, while there have been no thorough medical or direct statistical studied – which shows the necessity for further research of this topic. The offered hypothesis is veriﬁed with the help of regression analysis. This method is used by the authors for compiling the models of paired linear regression of the form y = mx + b, in which the values of coefﬁcients m show the direction (+/−) and the value (numerical values of coefﬁcients) of change of y with increase of x by 1, and for calculation of determination coefﬁcients (r2), which show the share of change of y that is caused by variation x. The information basis for analysis includes materials of the World Economic Forum (The Global Information Technology Report) and the Federal State Statistics Service of the RF for 2005-2016. The research is performed by the example of modern Russia. Dependent variables (y) are such indicators of health and sport as:

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– general disease rate of children aged 15–17, per 100,000 people (all diseases) (registered diseases with patients with the diagnoses that is set for the ﬁrst time in life); – obesity rate of children aged 15–17, per 100,000 people (registered diseases with patients with the diagnoses that is set for the ﬁrst time in life); – eyes diseases rate of children aged 15–17, per 100,000 people (registered diseases with patients with the diagnoses that is set for the ﬁrst time in life); – number of members of health and ﬁtness clubs, thousand people; – members of health and ﬁtness clubs, % of Russian population. Independent variables (x) are such indicators of usage of ICT as: – number of cell phone users, per 100,000 people (6.01 Mobile phone subscriptions/ 100 pop); – share of Internet users, % of population (6.02 Individuals using Internet, %); – share of households with PC, % of population (6.03 Households w/ personal computer, %); – share of households with Internet connection, % of population (6.04 Households w/ Internet access, %). These data are systematized in Table 1. Table 1. Dynamics of the values of indicators of development of ICT, physical development, and health of Russian population in 2005-2016. Indicators Health General and disease rate of sport children aged 15–17, per 100,000 people (all diseases) Obesity rate of children aged 15–17, per 100,000 people Eyes diseases rate of children aged 15–17, per 100,000 people Number of members of health and ﬁtness clubs, thousand people

2005

2010

2013

2014

2015

2016

111,451.9 135,763.3 143,754.8 141,653.0 137,383.8 137,273.8

289.2

463.8

582.8

638.5

732.8

733.4

4,645.6

5,711.7

6,267.8

6,427.6

6,385.3

6267.1

17,510.3

26,257.0

35,314.9

39,071.4

43,464.4

46,701.3

(continued)

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Table 1. (continued) Indicators Members of health and ﬁtness clubs, % of Russian population Usage Number of of ICT cell phone users, per 100,000 people Share of Internet users, % of population Share of households with PC, % of population Share of households with Internet connection, % of population Source: compiled by the Statistics Service 2018).

2005

2010

2013

2014

2015

2016

12.17

18.34

24.64

27.20

29.72

31.92

155.1

165.3

168.3

171.6

175.6

179.3

49.0

54.0

57.9

62.3

67.5

70.5

57.1

60.3

62.8

65.6

68.9

71.0

46.0

51.5

56.6

61.4

67.2

69.9

authors based on: (World Economic Forum 2018), (Federal State

For excluding the possibility of determining the false dependence of indicators (random aggression), quantitative analysis is supplemented by qualitative (logical) analysis of causal connections of these indicators.

3 Results As a result of regression analysis, we received the following results (Table 2). According to the data from Table 2, growth of general disease rate of children aged 15–17 in Russia is slightly caused by development of ICT. However, eyes diseases rate is by 86.23% explained by growth of the number of cell phone users, by 65.69% – growth of the share of Internet users, by 65.19% – growth of the share of households with PC, and by 68.12% – growth of the share of households with Internet connection. At that, dependent variable grows minimally (by 0.06 on average). Obesity rate in this social category is by 96.72% explained by growth of the number of cell phone users, 95.47% – growth of the share of Internet users, 95.42% – growth of the share of households with PC, and 95.54% – growth of the share of households with Internet connection. At that, dependent variable grows signiﬁcantly

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Table 2. Results of regression analysis of indicators of development of ICT, physical development, and health population in Russia 2005-2016. Share of households with Internet connection m r2 m r2 m r2 m r2 0.01 0.6096 0.01 0.3778 0.01 0.2733 0.01 0.3972 Number of cell phone users

Share of Internet users

Share of households with PC

General disease rate of children aged 15–17, per 100,000 people Obesity rate of children aged 15– 19.86 0.9672 0.94 0.9547 0.60 0.9542 1.05 0.9554 17 Eyes diseases rate of children 0.23 0.8623 0.01 0.6569 0.01 0.6519 0.01 0.6812 aged 15–17 Number of members of health and 0.01 0.9865 1.06 0.9474 0.01 0.9575 0.01 0.9691 ﬁtness clubs Source: compiled by the authors.

(on average, by 5.61). Number of members of health and ﬁtness clubs is by 98.65% explained by growth of the number of cell phone users, 94.74% – growth of the share of Internet users, 95.75% – growth of the share of households with PC, and 96.91% – growth of the share of households with Internet connection. At that, dependent variable grows insigniﬁcantly (on average, by 0.27). The determined dependencies allow concluding that distribution of new ICT creates advantages and drawbacks for physical development and health of a modern human. Long usage of digital technologies that is not accompanied by physical activity and walks leads to obesity and aggravation of vision. However, the general state of human’s health remains practically unchanged. It is more susceptible to negative influence of unfavorable environment. It should be noted that while usage of new ICT may lead to aggravation of health of those who use the ICT, aggravation of ecological situation influences everyone. That’s why it is inexpedient to explain aggravation of the state of health of modern human by development of ICT. At the same time, these technologies are the main means of propaganda of healthy living. We developed the following practical recommendations for usage of new ICT for propaganda of healthy living, which allow overcoming negative consequences of their distribution and maximizing the positive effect: – ﬁnancial stimulation: we offer to give bonuses to employees of national enterprises for propaganda of healthy living with the help of new ICT; – social advertising: we deem it necessary to expand the usage of social networks for state social advertising of healthy living, which, in our opinion, envisages limitation of usage of new ICT. In order to avoid their negative influence on physical development and health of a modern human, it is necessary to avoid their long usage and use breaks for sports activities. Examples of such usage of new ICT should be the topics of new social advertising; – negative motivation: we also recommend legal establishing of ﬁnes for propaganda of unhealthy living (drinking alcohol, smoking, etc.) in social networks.

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4 Conclusions Thus, the offered hypothesis is correct – new ICT have contradictory influence on physical development and health of a modern human. On the one hand, with “incorrect” usage – for the long time without any breaks and without periodic physical exercises – new ICT lead to aggravation of vision and to obesity. However, these phenomena could be consequences of other factors, the key of which are bad food and aggravation of environment. At the same time, with “correct” usage – with breaks for physical exercises – new ICT have almost no negative influence on human health. On the other hand, new ICT are a highly-effective means of propaganda of healthy living, as they allow covering mass audience with minimum expenditures of time and ﬁnance. Their positive influence on physical development and health of a modern human is very vivid in modern Russia. Growth of accessibility and activity of usage of new ICT over the recent years led to tripe increase of the number of members of health and ﬁtness clubs. This phenomenon could be caused by the influence of other factors – increase of accessibility of sports objects, growth of income, etc., but the potential of new ICT in stimulating popularization of healthy living is very large. For better research of the determine potential, we offer practical recommendations for usage of new ICT for propaganda of healthy living, which allow overcoming negative consequences of their distribution and maximizing positive effect. The framework character of these recommendations is a certain limitations. That’s why detailed elaboration of the offered recommendations, which show perspective directions of expansion of usage of new ICT for stimulating physical development and health of a modern human, and development of the corresponding national strategy of propaganda of healthy living with the help of new ICT are perspective directions for further research.

References Bogoviz, A.V., Ragulina, Y.V., Komarova, A.V., Bolotin, A.V., Lobova, S.V.: Modernization of the approach to usage of region’s budget resources in the conditions of information economy development. Eur. Res. Stud. J. 20(3), 570–577 (2017) Gopalan, A., Makelarski, J.A., Garibay, L.B., Escamilla, V., Merchant, R.M., Wolfe, M.B., Holbrook, R., Lindau, S.T.: Health-speciﬁc information and communication technology use and its relationship to obesity in high-poverty, urban communities: analysis of a populationbased biosocial survey. J. Med. Internet Res. 18(6), 182 (2016) Gutierrez, M.A., Moreno, R.A., Rebelo, M.S.: Information and communication technologies and global health challenges. In: Global Health Informatics: How Information Technology Can Change Our Lives in a Globalized World, pp. 50–93. Elsevier Inc., Amsterdam (2016) Inshakova, A.O., Goncharov, A.I., Sevostyanov, M.V.: Institutional ambiguity of regulation of possessory relations in modern Russia. Overcoming Uncertain. Inst. Environ. Tool Global Crisis Manag. 1(1), 207–212 (2017) Joseph-Shehu, E.M., Ncama, B.P.: Evidence on health-promoting lifestyle practices and information and communication technologies: scoping review protocol. BMJ Open 7(3), 014358 (2017)

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Lee, M.-H., Liu, P.-Y., Lio, M.-C.: The impact of the diffusion of information and communication technology on health: a cross-country study. Appl. Res. Qual. Life 11(2), 471–491 (2016) Panova, T., Lleras, A.: Avoidance or boredom: negative mental health outcomes associated with use of information and communication technologies depend on users’ motivations. Comput. Hum. Behav. 58(1), 249–258 (2016) Popkova, E.G., Litvinova, T., Mitina, M.A., French, J.: Social advertising: a Russian perspective. Espacios 39(1), 17 (2018) Puigdomènech, E., Trujillo-Gómez, J.-M., Martín-Cantera, C., Díaz-Gete, L., Manzano-Montero, M., Sánchez-Fondevila, J., Gonzalez-Fernandez, Y., Garcia-Rueda, B., Briones-Carrió, E.-M., Clemente-Jiménez, M.L., Castaño, C., Birulés-Muntané, J.: Information and communication technologies for approaching smokers: a descriptive study in primary healthcare Health behavior, health promotion and society. BMC Public Health 15(1), 2 (2015) Qureshi, S.: Creating a better world with information and communication technologies: health equity. Inf. Technol. Dev. 22(1), 1–14 (2016) Sanchez, S., De Boissieu, P., Gueyraud, C., Armingaud, D., Guerrier, M., Denormandie, P.: Information and communication technology and health of the elderly. Technologies de l’information et de la communication et santé des seniors. Soins Gerontol. 21(121), 10–14 (2016) Woo, E.H.C., White, P., Lai, C.W.K.: Impact of information and communication technology on child health. J. Paediatr. Child Health 52(6), 590–594 (2016) World Economic Forum. The Global Information Technology Report (2018). https://www. weforum.org/reports/the-global-information-technology-report-2016. Accessed 7 Feb 2018 Federal State Statistics Service. Healthcare in Russia – 2017 (2018). http://www.gks.ru/bgd/regl/ b17_34/Main.htm. Accessed 7 Feb 2018

Failure of the Funded Model of the Russian Pension System: Reasons and Solutions Lyubov V. Grigorieva(&), Leyla A. Mytareva, and Ekaterina A. Shkarupa Institute of Economics and Finance, Volgograd State University, Volgograd, Russia {grigorievalv,mytarevala,shkarupaea}@volsu.ru

Abstract. A socially-oriented Russian state should provide citizens with a decent level and quality of life. The pension protection of the population is aimed at replacement of pensioner’s active revenue by a recurring one. The Russian pension system has existed since 2002 and has already suffered several crisis conditions. The Russian pension system undergone the most severe crisis in 2014 and until now can not get out of it. The purpose of this article is to offer measures to get out of crisis due to current social and economic situation in Russia. To achieve this purpose, the authors successively: investigated the causes of the Russia pension system failure in 2014; made an assessment of the current national pension system; suggested the most appropriate guidelines to get rid of crisis by systematizing available approaches. The authors also deﬁned the main trends of improving the Russian pension protection: a complete refusal from funded state pension system; transition of the state pension system to the insurance funding and payment of basic pension to all insured, equal to the pensioner’s subsistence level; introduction of familyoriented forms of corporate and private pensions. Keywords: Social policy Public ﬁnance Pension protection Pension insurance and provision Pension system JEL Classiﬁcation Codes: P340

G220 H240

1 Introduction Notwithstanding that it is rarely recognized in open manner, actually, the pension system of any state is ultimately aimed at an establishment of an effective pension protection for citizens. That is, any state creates and implements own vision of the pension system through funded and distributive pension patterns, as well as through their various combinations of state and/or private participation in order to provide their pensioners with recurring revenue ensuring a decent level and quality of life after retirement. There is logic in evaluation of the current pension system efﬁciency through the lens of qualitative and quantitative indices on reimbursement and provision of present © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 371–383, 2019. https://doi.org/10.1007/978-3-030-00102-5_40

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and future pensioners with recurring revenue, to the extent providing a decent level and quality of life. Since 1991 (the time of the Russian Federation establishment after the collapse of the USSR) the pension system of Russia has undergone a number of major changes. In 2002, the country passed from a redistributive pension system based on the principle of solidarity between generations to a funded one with the personal pension savings. In 2014, Russia ofﬁcially recognized the failure of the existing pension system in accumulated portion and made a transition to an insurance pension system combining both distributive and funded patterns. With making one reservation that funded constituent is temporarily and till the present time frozen. The current pension system is the most non-transparent and complicated of all Russian practices. The authorities search for solutions to steer the Russian pension system out of the crisis. The purpose of given research is to offer ways to get out of crisis according to current social and economic situation in Russia. To achieve it, we need to solve a number of issues: to investigate the causes of the Russian pension system failure in 2014; make an assessment of the current national pension system; suggested the most appropriate guidelines to get rid of crisis by systematizing available approaches due to worldwide trends of economic development and transformation of ﬁnancial system in terms of digital economy and artiﬁcial intelligence.

2 Materials and Methods The background of the study is a designed approach to the core and scope of Russian pension protection; statistical data on current pension system and protection of Russians and Russian pensioners; data on effective performance of key participants and pension system levels. To assess the current pension protection of the population, we included a systematic approach to uncover the core and structure of pension protection in the research methodology; also we employed methods of comparative analysis, tabular and graphical methods of data processing and ыгиьшыышщт; to identify key issues and guidelines for improving the Russian pension protection we used the method of abstraction and synthesis.

3 Results 3.1

Causes for Failure of Funded Pattern of Russian Pension Protection

Under the pension protection system of the population, the authors understand the joint activities of country, specialized ﬁnancial institutions, employing companies, citizens and their associations who aimed at generating sources of recurring revenue to cover the pension risks of the population in the form of pensions and “quasi-pensions”. At the same time, for pension protection of the population the country establishes an institutional mechanism that ensures collection, accounting of contributions and payment of

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373

pensions to beneﬁciaries, which is traditionally called the pension system. The insured event due to this approach to pension protection is the loss of active revenue by the individual. It is untraditional, because the insured event under the Russian law for a “labor pension” is reaching a certain age (55 years for a woman and 60 years for a man) who has worked at least 9 years (it is notable that in 2024 this experience will be 15 years, and then will be increased up to 35 years) during which his employers regularly paid insurance fees to the Pension Fund of the Russian Federation. In other cases, when reaching this age, as well as losing a breadwinner, disabling due to invalidity – these are insured events to receive a “social pension”. The current reform mixed the notion of labor and social pensions and introduced the category of insurance pension, which, in fact, combined both the labor and social constituents. The main reasons for failure of the Russian funded pension system in 2014 were: (1) ofﬁcially recognized reasons listed by the legislator in the Strategy for the longterm development of the Russian Federation pension system: economic and demographic challenges on the way of the national pension insurance system; inadequacy of the pension system to current Russian economic development and non-conformity to international standards; failure to achieve long-term ﬁnancial sustainability and a balanced budget of the Russian Federation Pension Fund (PFR); lack of a mechanism to ensure the safety of the purchasing power of pension savings, taking into account their increasing amounts; the unsolved issue of early retirement (pensions granted before the generally established age for certain categories of citizens); unbalanced tariff of insurance fees for self-employed citizens; loss of pension’s function to insure income loss due to reaching retirement age; economic non-compliance of tariffs for insurance fees and liabilities for payment of labor pension; and etc.; (2) reasons given by a number of researchers: unsuccessful mixture of state pension insurance and private, voluntary, “non-state pension insurance”, where pension funds are transferred to private pension funds and companies, as well as an effect of double burden, when employed generation should simultaneously pay fees for current pensions (insurance part) and make pension savings (Kulikov and Vdovina 2016); non-coverage of the pension system of all Russians - so, by various estimates, from 20 to 25 million of employed Russians do not participate in the pension system (Kolesnik 2017), while they will qualify for a social pension in the future; the initial failure (inefﬁciency) of pension insurance linking budget revenues of the pension system to payment for labour, because in Russia the share of the payroll budget in GDP has been tens of points lower than in West European or North America countries since the Soviet times (Kolesnik 2017); imbalance between pension insurance and current Russian economy and peculiarities of Russian attitude quietly different from the Western one, whose advanced experience Russia is trying to adopt for building efﬁcient pension protection (Kolesnik 2017); and etc. A number of these issues have remained to the present, despite the current reform of the pension system. From 2014 till present, a three-tiered pattern of the pension system is being implemented in Russia, which includes a state labor pension, a

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corporate pension and a private pension of physical entity. It is expected that the transition period will take at least 10 years (Soloviev 2014). 3.2

Place and Role of Russian Pension Protection in the Financial System of the Country

In Russia, the pension system is implemented in two areas: state pension system (state systems of compulsory pension insurance and pension provision) and non-state pension system (voluntary pension insurance with the participation of non-state pension funds and insurance companies - corporate and private pensions). Today in Russia there are systems of: state pension provision (GPO), compulsory pension insurance (OPS); nonstate pension provision (NPO), which is divided into traditional (NPOt) and alternative (NPOa) provision. The generated cash flows in the ﬁnancial system that are initiated by the relations of the pension protection system and subsystems of the ﬁnancial one have enormous amounts. In Table 1 we presented some elements (based on the data of the Federal Service of State Statistics and Research, conducted by Budko (2017)). According to our estimates, funds accumulated annually by the Russian pension protection system amounts to 5% of the country’s GDP and more, without investment revenue received from the placement of pension savings. Table 1. Russian ﬁnancial and pension protection systems ratios in 2012-2016 Index Net assets value invested by pension savings, RUB billion - State securities of the RF - State securities of the RF for investment of institutional funds - State securities of the RF entities Federal budget value for pension payments, RUB billion Net assets value invested by pension savings, RUB billion Funds deposited in accounts of credit organizations Rouble deposits in credit organizations

2012 1,020.6

2013 958.6

2014 971.5

2015 990.5

2016 n/a

431.3

419.3

344.3

419.4

n/a

534.6

464.7

549.6

488.6

n/a

54.7

74.7

77.5

82.5

n/a

268

287

356

403

393

1,317.9

2,011.1

2,079.3

2801.9

n/a

139.8

311.5

34.1

92.7

n/a

515.9

469.1

644.4

676.0

n/a (continued)

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375

Table 1. (continued) Index Bonds of Russian emitents Shares of Russian emitents Mortgage-backed securities Other assets Insurance fees in the Pension Fund of Russia for pension insurance, RUB billion Share in household revenues structure consisting of pension payments, per cent Insurance fees paid by physical entities in the pension system, RUB billion Scope of pension savings. RUB billion. in total Including pension savings transferred to: -non-government pension funds - private management companies - government management company Average granted pension, rubles, including: Old-age pension Disability pension Survivor’s pension (per each incapable member of family) Suffered form radiation and technological disasters and members of family

2012 503.7

2013 1,002.5

2014 1,074.1

2015 1,555.1

2016 n/a

46.3

72.8

77.6

225.2

n/a

38.3

87.9

163.2

159.5

n/a

73.7 3,038.5

67.4 3,478.8

85.9 3,711.8

93.6 3,878.7

n/a 4,144.5

n/a

n/a

n/a

51,0

51,6

n/a

n/a

n/a

n/a

n/a

4,139.99

2,991.72

3,072.92

3,772.57

3,927.98

669.19

1,088.41

1,132.44

1,719.55

2,129.94

34.28

37.76

37.67

40.63

42.09

1,643.77

1,865.55

1,902.81

2,012.40

1,967.96

9,153.6

10,029.7

10,888.7

12,080.9

17,425.6

9,790.1 6,106.3 5,959.0

10,716.4 6,669.2 6,598.6

11,569.1 7,209.9 7,185.1

12,830.4 8,040.1 7,924.9

18,172.5 13,253.7 13,175.7

8,402.6

8,639.2

9,779.2

10,766.7

16,261.1

(continued)

376

L. V. Grigorieva et al. Table 1. (continued)

Index Federal public civil ofﬁcers Long-service pension Test-pilots Social pension Insurance pension Funded pension Pension Fund of Russia National Pension Fund Voluntary funded pension National Pension Fund Insurance company The GDP, RUB

2012 12,422.9

2013 14,020.1

2014 15,550.0

2015 17,186.4

2016 22,500.8

64,057.4 64,321.4 5,919.0 6,566

364,283.5 67,704.0 6,446.4 7,164

361,989.6 76,855.4 7,548.3 7,691

446,260.3 85,736.2 8,302.4 8,895

451,872.0 94,308.4 13,644.4 12,725

582 13,895

636 12,974

693 7,379

759 11,945

802 12,708

1,986.3 1,780.42 62.9

2,202.5 2,055.91 71.0

2,398.4 2,676.53 79.2

2,640.8 3,347.80 83.2

2,908.9 2,126.97 86.0

Thus, despite the crisis, the existing system of Russian pension protection has a signiﬁcant amount of long-term money that can be used to fund long-term of development programs and long-term savings. Besides, the inflow of “long-term money” is carried out both in state securities (a third of all invested assets) and in the business. 3.3

Current Efﬁciency Values of Russian Pension Protection

The efﬁciency of the pension system is revealed in a combination of its economic feasibility, performance and practicality. Economic efﬁciency means the ability of the whole system to fully provide its expenses with accumulated revenues, and also to establish a ﬁnal pension capital in an equal or larger amount than the ﬁnancial resources of the population and employers expensed on it. Performance of the pension system is a full coverage of pension risk. And the practicability lies in the necessity to build pension protection for all categories of citizens; to provide an available system on accumulation of ﬁnancial resources covering pension risks; delivery of pension protection in the event of real pension risk. Proceeding from the above said, the key indices (but not exhaustive) are: – – – – –

ratio of income and expenses of the main pension provider - PFR; income replacement rate; ratio of social pension and a pensioner’s subsistence minimum; ratio of average granted pension and a pensioner’s subsistence minimum; value of average accumulated individual pension capital and average pension beneﬁt received; – ratio of employed pensioners and all pension recipients.

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Table 2. Efﬁciency evaluation of pension protection system Index 2012 PFR revenues, RUB billion 5 890.4 PFR expenditures, RUB billion 5 451.2 PFR deﬁcit/proﬁcit, RUB billion 439.2 Average granted pension, RUB 9153.6 Average salary, RUB 26,629 Income replacement ratio, per 34.37 cent Social pension, RUB 5,919 Pensioner’s subsistence level, 5,123 RUB Social pension and pensioner’s 115.5 subsistence level ratio 178.7 Average granted pension and pensioner’s subsistence level ratio, per cent Share of employed pensioners, 13,669 thousand people Share of pension recipients, 40,573 thousand people Employed pensioners and 33.7 pension recipients ratio, per cent Source: calculated on the Rosstat data

2013 6 388.4 6 378.6 9.8 10029.7 29,792 33.67

2014 6 159.1 6 190.1 −31 10888.7 32,495 33.51

2015 7 126.6 7 670.3 −543.7 12080.9 34,030 35.50

2016 7 625.5 7 829.7 −204.2 17425.6 36,709 47.47

6,446.4 5998

7,548.3 6,617

8,302.4 7965

13,644.4 8,081

107.5

114.1

104.2

168.8

167.2

164.6

151.7

215.6

14,325

14,917

15,259

9,883

41,019

41,456

42,729

43,177

34.9

36.0

35.7

22.9

Table 2 shows calculation of the above mentioned indices, except for the ratio of average accumulated individual pension capital and average pension beneﬁt received. This is due to the lack of statistical data in this context. Detailing the data obtained by calculation, we can note arising budget deﬁcit of the PFR from 2014. It is noteworthy that just in 2014 Russia introduced a moratorium on the transfer of citizen pension savings accumulated by the PFR in non-state pension funds (NPF) and management companies (MK). That is, ﬁnancial resources aimed at securing obligations to current recipients of pensions, couldn’t coverage the fund’s expenses. The increase in the income replacement rate has a positive trend. If in 2012 it was only 34.4 per cent, then by 2016 it increased to 47.5 per cent, which is caused by a dramatic growth of average granted pension, with a slight increase of the average accrued salary. In this case, an increase of the average granted pension is a result not so much of effective ﬁnancial management and the increment in the pension capital of citizens, as an administrative increase of pension amount by a discretionary decision of the authorities. The ratio of social pension and subsistence level remains is at an extremely low level. Based on the calculations presented in the table, the social pension is not much higher than the subsistence minimum, and sometimes the difference is only 300–400

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rubles. For this reason, recipients of social pensions can not afford anything, except for a minimum of food products and mandatory payments. The positive trend is the change in this ratio at the end of 2016, which amounted to 168.8%. That is, social pensions are almost 1.7 times higher than the pensioner’s subsistence level. At the current trend, social pensions will allow their recipients to maintain their living at a higher level. The ratio of the average granted pension and the pensioner’s subsistence level is also low. The variation for studied term from the minimum value of 151.7 per cent in 2015 to the maximum 215.6 per cent in 2016 exhibits a system failure to provide a guaranteed level of income maintaining a certain standard of living. It is an important fact that the pension protection system is aimed at covering the pension risk, the one constituent of is the loss of income. However, there is a practice when, under statutory pension grounds a citizen is beginning to receive pension protection, while he didn’t lose income due to ongoing working activity. Thus, there is an issue to consider the pension protection system not as protection from pension risks, but as a remuneration for labor. Therefore, the system begins to cover the non-existing risk, which affects its expenditure base. The presented calculations show that in average 32.6 per cent of pension recipients do not have a real pension risk. The reasons of these circumstances are in the legal framework, as well as in insufﬁcient ﬁnancial support for established coverage of pension risks. Or, more precisely, this is an inadequacy of the legislation in organization of the pension protection system; lack of recognized notion of pension risk; immaturity of the pension risk management system; low salary; frequently changeable “rules” of the pension capital establishment, etc. 3.4

Organizational Mechanism of Russian Pension Protection

The organizational mechanism of the Russian pension protection system of the population consists of several elements that are structurally represented in Fig. 1. On the basis of it, the Russian pension protection system can also be deﬁned as a set of subsystems and constituents operating in the space of the pension risk landscape generating pension risks of its participants, and implemented as compulsory and voluntary at different subject levels with the help of four main economic mechanisms (GPO, OPS, NPOt, NPOa), while the objects of the pension protection system are pensions and “quasi-pensions”. Figure 2 shows operating economic mechanisms of pension protection of the population according to the Russian speciﬁcs (Grigorieva et al. 2017). As can be seen from the presented diagram, there is a particular list of participants involved in the implementation of pension protection of the population, which can be divided into two large groups: functional and institutional. Functional participants of pension relations within the framework of these mechanisms are: supervision bodies (government bodies - PFR, the RF Federal Tax Service, Bank of Russia, nongovernment - self-regulatory insurance institutions); insurers (state - PFR, non-state NPF, insurance companies); specialized intermediaries and participants (depositories, actuaries and managing companies); insurers (individuals and employers); insured persons and beneﬁciaries (individuals).

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Fig. 1. The Russian pension protection system.

Institutional participants of pension relations are represented by: the state, specialized ﬁnancial and credit institutions (insurers - PFR, NPF, insurance companies and other ﬁnancial intermediaries), the population (insured, insurers, beneﬁciaries), employers (insurers). Each participant has own role in the implementation of pension protection, which is expressed in their position in the chain of implementation of citizen protection against pension risks. Depending on applicable economic mechanisms, the list of participants can be altered.

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1 - tax and non-tax payments to the

8 - transfer of fees to the NPF /

relevant budgets / extrabudgetary

insurance company under pension

funds;

insurance contracts;

2 – remittance of tax and non-tax

9 - transfer of partial company funds

payments to the relevant budgets;

in confidential management;

3 - transfer from the federal / regional

10 - transfer of pension savings for

budget for the pension payment due to

investment;

federal / regional legislation;

11 - transfer of investment revenue;

4 - payment of pensions provided by

12 - payment of funds upon arising

appropriate

grounds under a pension insurance

legislation

and

other

enactments;

contract;

5 - transfer of citizens insurance fees

13 - formation of the target financial

to a non-state pension fund;

asset;

6 - transfer of citizen pension savings

14 - receiving a target investment

for investment;

revenue.

7 – revenues from pension savings investments;

Fig. 2. Operation of economic mechanisms of pension protection in Russia

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4 Recommendations 4.1

The Most Common Proposals for Improvement of the Russian Pension Protection

Among the most common guidelines for improvement of the Russian pension protection, we can point out the main groups of activities discussed in the mass media by the Government and experts: (1) activities that help temporary suspension of the implementation of partial current pension obligations of PFR and NPF through transfer of the most part in the future, including: a signiﬁcant increase in the retirement age (in some cases, it is proposed to increase the retirement age of women by 10 years to 65, and men- by 5 years to 60 years); increase in minimum length of service (up to 35 years); a moratorium on the receipt of pensions by employed pensioners; promotion of late retirement; (2) activities that contribute to the harmonization of income and obligations of the pension system: increasing the amount of insurance fees, especially for the selfemployed population; increasing interest rates and/or introducing a progressive income taxation to encourage employers to close a gap between the payment for labour of company top-managers and its employees; establishing a system of state guarantees for pension savings security (this guideline has been already partially implemented, a specialized guarantee agency has been founded, but there are many omissions); hardening of monitoring and requirements for NPF activity; expansion of NPF instruments allowed for investment of pension savings; upgrading information transparency of all three levels of the pension system – state, corporate and private (partially implemented, since 2016 a specialized state information system has been established); (3) activities to enhance the corporate pension system and private pensions: introduction of tax beneﬁts; elimination of the funded pattern from the state pension system; improving ﬁnancial literacy of the population. Special attention should be paid to the standing apart proposals, aimed at harmonizing the pension system and pension protection of Russians with Russian values and attitude peculiarities. We agree with A.P. Kolesnik, suggesting to tie (ﬁt together) the pension system with the Russian attitude and the principal union of Russian values – “family, work and patriotism” (Kolesnik 2017). 4.2

Author’s Proposals for Improving the Pension Protection of Russians

On the back of approach by A.P. Kolesnik (pp. 1–2), the authors propose: (1) to refuse completely from a cumulative constituent in the Russian state pension protection, replacing it with a guaranteed payment to each Russian citizen of a pension in the amount of the subsistence level by analogy with the institution of “universal basic income” (providing a regular payment by the state of a certain amount of money to every citizen, regardless of income level and job performance); The source of ﬁnancing such payments can be current insurance fees

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payable by employers in the PFR for their employees. At the same time, the gross amount of these fees can be reduced by at least 6%, which now deemed to the cumulative pattern. In the opinion by A.P. Kolesnik, a basic pension protection corresponds to the support and development of Russian patriotism; (2) to introduce a family-oriented pattern of non-state pension provision. The necessity to legalize the collective nature of public ﬁnance in Russian law was mentioned several times in other papers (Mytareva et al. 2014; Gorshkova et al. 2015; Mytareva and Belozerov 2015). Russians mentally tend to collectivity; the family is the highest value for the majority. The possibility of building collective - family ﬁnancial relations in the area of pension protection is a vital element for non-state pension provision. Including, it will allow to solve a issue of succession of pension savings, which is topical for Russians; (3) to provide a state mechanism for attracting “long-term” pension funds of corporate and private pension systems into investment process, for example, by involving them in ﬁnancing infrastructure projects, in order to maintain and increase the time value of pension savings.

5 Conclusions As the study showed, in 2014 the crisis of funded pattern of the Russian pension system and protection was inevitable for a diversity of reasons. Many causes are still not eliminated and keep on worsening the current crisis. Values of the performance of the current Russian pension protection are unsatisfactory; the level of pensions is extremely low. Authorities and experts has been investigating various alternative activities to improve the Russian pension protection, which are mostly unsystematic and actually represent common measures to eliminate the consequences, but not the causes of inefﬁciency. The authors are sure that the Russian pension protection system needs to be adapted not to the reliable world experience of Western countries, but to the speciﬁc features of Russian attitude and values. In particular, a funded pattern can take place in the nonstate pension protection of Russians, the state system should be based on the insurance pattern of the distributive type. Non-state pension protection in the context of corporate and private pensions should be family-oriented. That is, pension protection should be possible for members of the same family by their mutual consent. If we don’t solve revealed issues, then in the long term current pension system would not be able to maintain pensions at decent level (above the pensioner’s subsistence level); the replacement rate is predicted to decline. This will cause issues with middle-class pensioners, and will also further undermine the sustainability of non-state pension funds.

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References Budko, S.A.: Modernization of the essential pension insurance system based on targeted funding (2017). https://nsuem.ru/scientiﬁc-activities/dissertation-councils/Thesis-the-last-defense/mat erials.php?id=92623 Federal state statistics service. http://www.gks.ru/ Gorshkova, N.V., Grigorieva, L.V., Mytareva, L.A., Shkarupa, E.A.: The Pension Risks’ Impact on the Level of the Russian Life, in Globalization and its socio-economic consequences, 4–5 October 2017, Rajecke Teplice, Slovak Republic (2017) Gorshkova, N.V., Mytareva, L.A., Perekrestova, L.V., Glushchenko, A.V., Fisher, O.V.: The System of Family Budgeting as a Methodological Basis for Personal Accounting and Guarantee for Growth of Financial Literacy of the Russians. Social Sciences, vol. 6 No. 5 (2015). http://www.mcser.org/journal/index.php/mjss/article/view/7505 Grigorieva, L.V., Gorshkova, N.V., Mytareva, L.A.: Economic mechanisms of population protection from pension risks as an instrument of social and economic development of the region, Bulletin of VolSU. Series 3: The Economy. Ecology, No. 1(38), pp. 31–44 (2017) Kolesnik A.P.: Pension system and values of Russian civilization. Business Strategy, No. 1, pp. 18–31 (2017) Kulikov, N.I., Vdovina, E.S.: Financial reforms in Russia: yesterday, today, tomorrow. Financial analytics: problems and solutions, No. 9(291), pp. 2–11 (2016) Mytareva, L.A., Belozerov, S.A.: Searching for a rational methodology for assessing the level and structure of the tax burden of the population. In: Mayburova, I.A. (ed.) Fiscal federalism. Problems and perspectives of development: “Monograph for undergraduates”, under the direction of “Finance and Credit”, UNITY-DANA, Moscow, pp. 252–259 (2015) Mytareva, L.A., Grigoryeva, L.V., Shkarupa, E.A., Portnova, G.V., Maletsky, A.A.: The ﬁnancial potential of the region’s population: concept, structure, features, Volgograd Region, Volgograd (2014) On the approval of the Strategy for the long-term development of the pension system of the Russian Federation. 2524-r of December 25, 2012 (as amended on 06/12/2017). http://www. consultant.ru/ Soloviev, A.K.: Pension reform in Russia new stage. Finance: Theory and Practice, No. 5, pp. 27–36 (2014)

Metaphor in Financial and Economic Discourse Svetlana V. Shustova ✉ and Alla F. Korlyakova (

)

Perm State University, Perm, Russia [email protected]

Abstract. Financial and economic area of knowledge plays an important role in human life; therefore, it must be considered in conjunction with thinking and activities of a person. The term “ﬁnancial and economic discourse” is character‐ ized by complexity and contradictoriness, since it makes actual a cognitive event, the basic concept of which is a conceptual metaphor or a metaphorical model. The conceptual framework includes a reﬂection of the objects and phenomena of the world of economy that make it possible to describe economic concepts in a most understandable way. The object of analysis in the article is the semantic derivation in the ﬁnancial and economic terminology based on the material of Russian and English. The subject of research, apart from metaphorization processes in the area of nomination of persons, are metaphors in ﬁnancial and economic discourse in general. Semantic derivation is a process of formation of derivative naming units in the term system which allows observing the widening of semantic potential of the term. Keywords: Financial and economic discourse · Semantic derivation · Term Metaphor · Nomination of persons · Metaphorization

1

Introduction

Financial and economic discourse is distinguished as an area of speciﬁc communication, the substantive aspects of which are such basic concepts as commodity, money, proﬁt, market, investment, economist, ﬁnancier, bank. These concepts emerge full blown in the following model: causator (economist, ﬁnancier, bank, ﬁnancial institution, giro‐ bank) production of goods causation object (an individual, a legal entity) instrument (money, monetary assets, cryptocurrency, currency, ﬁnances) proﬁt (revenue). The aspects of ﬁnancial and economic discourse can be used to identify the quality of goods, quality of services, eﬃciency of production, cashﬂow management. The participants of ﬁnancial and economic discourse are individuals and legal entities the semantic potential of which has not been examined from the perspective of semantic derivation and lexical categorization, except for a number of works (Trufanova 2006). The authors focus on issues of nomination of subjects and objects (causator and the object of causation) from the perspective of metaphorology, as well as metaphorical potential of ﬁnancial and economic discourse based on the application of a subjective auxiliary criterion representing the grouping of metaphors according to the degree of topical approximation of an auxiliary subject without taking into account the main

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subject. Mass media (television, newspapers, radio, Internet) serve as the main sources of ﬁnancial and economic discourse, since they have access to the mass audience and information.

2

Research Data and Methods

Hypothetical-inductive and hypothetical-deductive methods, as well as the method of metaphorical modeling served as methodological basis of research. The information contained in dictionaries, encyclopedias, the British National Corpus, the Russian National Corpus, the web versions of the newspapers “Sovetskaya Rossiya”, “Rossiy‐ skaya Gazeta”, “The Guardian” is used as the data for research.

3

Findings

Semantic derivation should be treated as formation in the terminology of derivative naming units as a result of development of semantic structures of already-existing words. This method includes a fairly wide range of semantic transformations, namely: various types of transfers (metaphorical, metonymical), as well as a change of semantic content of words (its expansion or narrowing). The term “metaphor” is a technique that is used for the substitution of one language unit with another, transforming its initial semantic meaning. A substitute name or a descriptive expression is transferred to a particular object or person to which it cannot be applied literally (Martin and Ringham 2010, p. 103). Zalevskaya. A.A. notes that metaphor is a means for a more expressive and precise description of an object, an action or a characteristic, formation of the world view, integration of the verbal and sensualimaginative system of a person. The heuristic potential of metaphor as an informative means is one of mandatory in a varied “toolkit” of individual methods and techniques of interaction of a person with the world around (Zalevskaya 1991, pp. 70–73). In metaphor, we deal with a transfer of the name from one object to another (from one subject to another); hence, the equally named substances assimilate each other and at the same time continue to be thought of as diﬀerent substances < … > Metaphor is a fundamental property of language, no less fundamental than, for example, the opposition of elements of language (Stepanov 2010, p. 229). Metaphor identiﬁes the essential, and, consequently, a permanent attribute of the object (Arutiunova 1990, p. 30; cf. Embler 1953; Gramm 1996; Lakoﬀ 1993). It is commonly known that there is no system of parameters that can be used to classify metaphors. The system of parameters of classiﬁcation of metaphorical names can be subject to the following conditions: (1) speciﬁcity of the content plane, (2) speciﬁcity of the expression plane, (3) dependence on the context, (4) functional specif‐ icity (Moskvin 2018, p. 122). In English, the names of persons that were formed by means of metaphorical transfer, are the one-word names of persons (bear, sheep, scout и дp.) and phraseological units with the meaning of a person, formed as a result of metaphorical rethinking of the basic component (business angel, company doctor, wild duck и т. п.).

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Most of metaphorically rethought English nominations of persons are also the result of the transfer by association. A similarity of characteristics which serves as the basis for metaphorical transfer is in many cases not evident for those who are unfamiliar with economical terminology of native speakers and requires special analysis of dictionary deﬁnitions of the corresponding names. For example, we shall compare the dictionary deﬁnitions of the terms “bears” and “bulls”: bear – ‘someone who thinks that prices of shares, bonds, currencies, or basic goods are going to fall, and who may sell shares, bonds etc. they do not actually own, expecting to be able to obtain them more cheaply later, before they are going to deliver them to the buyer’ [LBED] (cf. “bears” – “stock gamblers who speculate for a fall of the rate (price) of securities, currencies, and goods” [GED]; bull – “someone who thinks prices of shares, bonds, currencies, etc. are going to rise, and who will therefore keep and buy investments” [LBED] (cf. “bull” – a gambler who buys or stores previously bought commodities or securities expecting the prices to rise” [GED]. As we can see from the deﬁnitions, the ﬁrst term means a stock gambler who spec‐ ulates for a fall; in other words, “knocking down” the prices in the same manner as a bear knocks down its adversary. The second term, on the contrary, is used to denote a stock gambler who speculates for a rise of prices by association with a bull who tosses its adversary with its horns. Appearingly, in this case, the direction of movements of the animal dealing with his adversary is similar to the nature of action of the gambler depending on the expected trend of prices. We shall specify the main lexical groups which are used in metaphorical formation of nomination of persons of this area: (1) names of animals (insects), for example: bear – a stock gambler speculating for the fall; shark (loan shark) – a money lender; dollar bull - a gambler who buys or stores previously bought dollars in expectation of the rise of their market rate; wolf– an experienced and skillful stock gambler; sheep– an inexperienced stock gambler; gold-bug – 1. a protagonist of the idea of the gold standard; 2. an analyst who considers gold to be the most reliable investment; bird-dog – 1. an agent seeking or fulﬁlling orders for the supply of certain goods, 2. a person seeking information about the standing and earning capacity of the company; pigeon – a professional gambler; cockroach – a person who is interested in small business; lame duck – 1. a legal entity (a company) involved in ﬁnancial diﬃculty, 2. a jobber (stock jobber) who is not able to fulﬁll his/her obligations for completed transac‐ tions; ideas hamster – a person who constantly introduces new ideas and techni‐ ques in economic area and ﬁeld of activities, an “idea man”; fat cat – a well-todo businessman who thinks of self-interest only, a “moneybag”; supercat – a representative of a new generation of well-to-do businessmen (especially the top managers of companies which were in state ownership until they were privatized); copy cat – a person who manufactures counterfeits, a counterfeiter, etc. MPs yesterday accused NatWest chief Lord Alexander of behaving like a loan shark by charging penal rates [BNC].

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Rather than fat cat developers beneﬁting from the countryside, small businesses and local people should have the main part to play in sensitive development [BNC]. The sixth, Italy, was to prove something of a lame duck in their company, because of her lack of resources [BNC]. Business sharks are always hungry [rg.ru]. If we use American political terminology to describe the current composition of State Duma, we can call it a “lame duck”, and the Russians say “it is spent” [RNC]. A speaker – our speaker, of the State Duma, – told me once: ﬁrst we turned our attention to a young lady from Tyumen, she was an A-student, her daddy was a fat cat; however, as soon as we started to delve into this thing we found out she’s a damn gluesniﬀer [RNC]. “Fat cat” is a person who overtly or secretly helps a politician to get to power by giving him money for bribery or advertising [RNC]. Ironically, a bull and a bear are adversaries in ﬁnancial markets [Wort]. “Bulls” are stock gamblers who speculate for a rise at the stock exchange markets. Foreseeing the increase in the rate of securities and promoting it, the “bulls” buy securities the rate of which is expected to increase, well in advance, in order to proﬁtably sell them at a later stage at a higher price, eﬀecting a speculative operation thereby. The name “bulls” occurs due to the intention of such gamblers to toss the prices [GED]. (2) names of ﬁctional creatures, for example: angel (business angel) – a well-to-do person who invests his/her own money in a startup or in an expanding business; white knight - an individual or a company which buys the shares of another company with a view to preventing its takeover (cf. “black knight” is an individual or a company who oﬀers to buy the shares of another company with a view to subsequently attain control over it, and “grey knight” is a participant in a bidding process for buying the majority ownership in a company who doesn’t disclose any plans concerning its future); ghost - a person who is registered as an employee but is out of work and unsalaried in practice; sleeping beauty – a legal entity – is a potential takeover target which didn’t receive any takeover oﬀers before; rain‐ maker – 1. a person who generates a lot of proﬁt for the company (for example, due to engagement of new customers), 2. a well-connected businessman who lobbies for the company; Gnomes of Zurich – bankers and ﬁnanciers of Central Europe (especially with regard to Swiss bankers) who carry hidden political and economic impact: He says that the bid is hostile because it goes over the heads of the directors. A white knight could come along and make a more friendly oﬀer, but this hasn’t happened yet [BNC]. One of Barley’s more crashing mistakes occurs on a ﬁrst and valuable meeting with the rainmaker [BNC]. As both company chairman and business angel, Sir John plays an active role, he and Ivan are equal partners [BNC]. (3) names of persons that were not initially involved in the economical ﬁeld of activ‐ ities, for example: rocket scientist - an employee of a bank or a brokerage ﬁrm who is engaged in trading in ﬁnancial markets using computer programs and other

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techniques; head-hunter - a person who searches for highly experienced employees, a recruiter; bottom ﬁsher - an investor who buys securities the rate of which reached the “price bottom”; clown (a term from the travel industry) - a customer who frequently changes his/her plans and preorders; gatekeeper - an advisor of prospective investors; company doctor - a ﬁnancial advisor who special‐ izes in the analysis and solution of problems arising in the companies; scout - an individual expert who deﬁnes the long-range objectives for portfolio investment; white squire - an individual who has a comparatively small capital but is able to help the company escape unfriendly takeover: It’s not for nothing that he has earned his reputation as Scotland’s most eﬀec‐ tive ‘company doctor’ [BNC]. Another option to defeat a hostile bidder is to bring in a friendly “white squire” who takes a strategic blocking stake in the target company [BNC]. The second type of individual headhunter was the practical, down-to-earth type with more management experience at diﬀerent levels than the blue-bloods, who identiﬁed the existence of a demand for skills in senior recruiting but who was not pretentious or elitist about it in any way [BNC]. Metaphorical rethinking of a word and expression is a speciﬁc feature of many occupational slangs. The most part of names of persons considered in this section appear to have emerged in the occupational slang of economists (Trufanova 2006, p. 59). In special dictionaries, these nominations are supported with status labels that indicate the prior use of these nominations in situations of informal communication. As can be seen from the above examples, the majority of metaphorical rethinkings of the names of persons in the dictionary of ﬁnancial and economic domain, as well as and in common-literary dictionary, is based on connotation – “a legalized in a particular language evaluation of an object of reality, the name of which is the speciﬁed word” (Apresian 1995, p. 159). In general, metaphorical names of persons have a positive connotation (business angel, white squire, company doctor), they have a negative connotation less often (black knight), they can be used for expression of irony (gold-bug, baron, fat cat). Thus, it becomes obvious that “a stylistically marked sign reﬂects, as a matter of fact, not the object itself, but the usually recognized attitude of a certain language community towards it” (Uﬁmtseva 1977, p. 55). At the same time, as mentioned above, some of the speciﬁed names are subject to terminologization in English. Collaterally with this process, those who accompanied their status labels are gradually disappearing from special dictionaries (cf., for example, the terms “bear”, “bull”, “company doctor”, “white knight” in the latest edition of LBED [LBED]. It should be noted that the scope of application of metaphor in the ﬁeld of nomination of persons is not limited to the examples presented above. Composite names, formed as a result of joining of metaphorically rethought attributive component to the names of persons that serve as the basic components for a number of other phrases, became wide‐ spread in the English special dictionary of the business area, for example: “big-gun” (literally “heavy artillery”); “advertiser” - a major advertiser (cf.: regional advertiser, sponsoring advertiser); “sleeping (silent) partner”: (cf.: equal partner – managing

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partner); “ghost (mystery, phantom) shopper” – phantom shopper (cf.: casual shopper – cost-conscious shopper – a buyer who clearly reacts to the price). Metonymical transfer, i.e. a transfer of the name from one object to another, “that is associated with this object by contiguity, adjacency, involvement in the same situation”, is performed, like a metaphorical transfer, according to a deﬁnite models. However, the potential of the use of these metonymical models, as noted by many researchers, is restricted by a limited number of connections between the two objects. The following models of metonymical formation of terms are characteristic of English only, namely: 1. An adjective as a function of prepositive deﬁnition + an article of clothing – nomi‐ nation of persons, for example, blue collar (worker) a production worker; white collar (worker) – an oﬃce worker; grey collar (worker) – a service worker; open collar – a person who works at home with no ﬁxed oﬃce hours; golden collar - an employee who has computer knowledge; new collar - educated representatives of middle class of the “baby boom” generation with an annual income of 20–40 thou‐ sand dollars; black coat – an oﬃce employee; blue button – a clerk who undertakes an internship in London Stock Exchange. US management guru Peter Drucker points out that while blue collar productivity has increased some forty-fold over the past 100 years, white collar productivity has remained static [BNC]. The dealers, under intense pressure to achieve sales targets, took their frustrations out on the youths. “ Richard “ they would scream, or simply “ Thingummy “ if they did not know his name, or still more commonly, “Blue Button” or “Button” [BNC]. The ranks of hired employees are joined by the intellectuals and “white-collars” − managers of large companies, and not just the proletariat [sov ross.ru]. The result was the transformation of the United States from a great industrial and scientiﬁc state, a single nation, into a postindustrial nation of white-collars [sov ross.ru]. White collar in mended jeans [rg.ru]. Accountants, analysts, record keepers, white-collars class. They are being replaced by digital technology at present [rg.ru]. Typical “white collar”, an oﬃce employee who doesn’t go in for sports [rg.ru].. 2. An object or a kind of activity – nomination of persons: paper (inf) – pass, passcheck – “paper”; fraud (inf) – fraud – fraud; reference – recommendation, refer‐ ence – pledgor. “You’re a fraud, Richard”, Graham said, turning to look at his friend [BNC]. Subjective criterion belongs to one of criteria of diﬀerentiation of the types of ﬁnan‐ cial and economic metaphors; it involves grouping by the main or auixliary subject of comparison or formation of lexical classes and semantic ﬁelds. Subjective auxiliary criterion represents the grouping according to the degree of topical approximation of the auxiliary subject without notice of the main subject. The analysis of metaphorical actualization in ﬁnancial and economic discourse allowed the researchers to single out the following topic-based groupings.

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Sports metaphor: inﬂuential Asian gamblers [x-true.info] bring the country to the top in terms of the level of development of electronic banking [sovross.ru], with the advent of a new gambler [rg.ru], XXI International Economic Forum started [sovross.ru]. No increase in interest rates is expected this month, although further hikes are fore‐ cast for later this year. James Knightley, senior economist at ING Bank, said: “She has followed up [Bernanke] with strong leadership and solid decision making that led to the robust economic performance, we see today. Given all these successes, Jay Powell has been set a very tough bar to match” [TG]. McEwan ﬂagged an ongoing investigation by the DoJ in the US over the sale [TG]. GRG staﬀ were also alleged to have applied pressure on a businessman to increase the price he needed to pay to regain control of his company from £400,000 to £2m, by using the “Kissinger school of negotiation”. The phrase is thought to be a reference to the hardball tactics deployed by former US secretary of state Henry Kissinger [TG]. Anthropomorphical metaphor: survive in the selection process, Bona Fide lending operations, corporate bonds begin to negotiate even with a negative interest today, ﬂight capital [sovross.ru], economic survival, ﬁnancial survival [Ngram]. Animalistic metaphor: The “Big Three” stretches its tentacles to many other coun‐ tries [sovross.ru]. Belief in the falsehood they proclaim, like in the unendowed Dollar, actually forces everyone to act this way and not otherwise, because the economic monster, raised by its counterparts in its constant pursuit of wealth, power and glory, does not even breathe down our neck, but pushes us in the back on the way of the most “benevolent intentions” [Ngram]. Treasury committee releases details of ‘widespread inappropriate treatment’ that City watchdog refused to make public [TG]. Sea metaphors: price of the ﬂagship (with regard to smartphones), keep the company aﬂoat (Apple), advanced ﬂagship Samsung from the Android world and iPhone [x-true.info], a wave of low or even negative interest rates from the banking sector goes over to ﬁnancial markets [sovross.ru], “Russian Davos” has put up the sails [sovross.ru]. tobacco business is really a strong insubmersible ﬂagship of economy of any country [Ngram]. Sberbank will trigger a wave of increase in deposit rates [Ngram]. Criminal metaphor: the economy of organized crime, economic crimes, (illegal) maleﬁcent economic crimes [Ngram]. Economic crimes always ended in a murder [Ngram]. In this regard, it is expedient to single out an independent sector of the criminal economy in the system of economic aﬀairs [Ngram]. Mythological metaphor: Russia is strangled by a network vampire [sovross.ru]. Medical metaphor: still-born children of the money world (cryptocurrency), survivor currencies, kleptomaniac bureaucrats, economic madness [sovross.ru], Dutch disease of economy [Ngram], syndrome of the Chinese economy, symptoms of economic disease, symptoms of economic idiocy, symptoms of economic crisis, symptoms of dete‐ rioration in the operating environment, symptoms of economic equalization, symptoms

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of economic instability, symptoms of economic regress, symptoms of economic decline, symptoms of economic stabilization, symptoms of economic disease, symptoms of deep contradictions in conventional economic growth, symptoms of economic recovery, symptoms of economic cycle, symptoms of economic stagnation, symptoms of economic life and evolution. Dutch disease is a situation when seemingly fair economic indicators hide signiﬁcant maladjustments, when the development of other sectors of the economy is heavily inhibited and depressed as a result of the powerful growth of the export component [Ngram]. while some of them are not indiﬀerent, they are discussing what is happening and moving forward, although very bad, all the others are turned either backwards, or completely to the left or to the right, which corresponds to the real behavior of people in the society of relations. Thus, an economic indiﬀerence manifests itself, and an economic syndrome of the exercise of power or its government institutions emerges [Ngram]. In the autumn of 1937, symptoms of economic crisis appeared in a number of coun‐ tries once again [Ngram]. When we assess the health of the economy, ﬁrst of all, it is necessary to ﬁnd out what can beat it down to the weak ﬁnancial standing [Ngram]. “There was in practice little focus on returning customers to ﬁnancial health […] through genuine business restructuring” [TG]. Physiological metaphor: weak ﬁnancial standing [Ngram]. When the economy in the country is ailing, people think only about food and about how to survive [RNC]. “Generation-on-generation progress has been all but wiped out for millennials whose home ownership rate in their late 20s, at 33%, is half that for the baby boomers at the same age (60%),” the foundation said [TG]. It’s been a tricky but momentous year for RBS, in which the bank has put to bed many of the legacy issues which have hampered performance since the ﬁnancial crisis,” he said [TG]. A vote of 67–32, with support from a coalition of moderate Democrats, a number of whom are facing tough midterm elections, allowed the Senate to begin debating a bill that would scale back some of the 2010 laws, known as Dodd-Frank, meant to prevent future abuses in the ﬁnancial system [TG]. Environmental metaphor: Sberbank intends to transform from a conventional bank into a “diversiﬁed ecosystem” in years to come [sovross.ru]. Political metaphor: sales king, peak of power (smartphones), ideological heir of the iPhone SE [x-true.info]. Chemical metaphor: A bank is a powerful accumulator of data (an accumulator is a chemical source of electric energy) [x-true.info]. Fitomorphic metaphor: economic revival, decline of the economy, ﬁnancial revival [RNC, Ngram], the economy is thriving in the capital’s theater [Ngram]. And there came a boom, which meant an abundance of all goods, a stable brand, and an economic revival [RNC]. The end of the 80s witnessed ﬁnancial revival of PLO [RNC].

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This bill seeks to right-size the regulatory system in our country and to allow our community banks and credit unions to ﬂourish,” senator Mike Crapo, chair of the Senate banking committee and the author of the legislation, told reporters on Tuesday [TG]. Theatrical metaphor: an act of drama, a stage [sovross.ru]. Well, couldn’t the authorities start with the second act of drama at once? That is, with the creation of oﬃcial digital currencies…? [sovross.ru]. The curtain was dropped after the ﬁrst act. The ﬁrst act featured the mythical Satoshi Nakamoto (supposedly the founder of bitcoin) … [sovross.ru]. Now the curtain rises again. And we can see entirely diﬀerent actors on stage already. The second act presents “decent” and very “respectable people” − presidents, prime ministers, ﬁnance ministers and heads of the Central Banks, deputies, leaders of political parties [sovross.ru]. Architectural metaphor: creation of oﬃcial digital currencies and laying of the foundation of an electronic banking concentration camp [sovross.ru]. Blockchain and Big data are the key elements of the building called “electronic banking concentration camp” [sovross.ru]. Geometrical metaphor: crooked economy and crooked justice, Kudrin’s crooked economy, crooked economy rips oﬀ “the last trousers” from our citizens [sovross.ru]. Metaphor of relationship: Gaidar and Chubais runts [sovross.ru]. Spatial metaphor: half a trillion dollars circulate between the oﬀshore companies and the Russian economy; circulation is about hundreds of billions dollars every year; withdraw from the Cabinet of Ministers; preferential terms can give impulse to economic growth, a multibillion-dollar bill was “rolled out” at Naftogaz’s suit; not to go beyond the bank; periphery of the world capitalism; to channel in line with legislation [sovross.ru]. When recession is under way, the managers realize that they need to master comple‐ mentary competences in order to increase their tolerance to market ﬂuctuations [RNC]. The question has long been raised that the economy of our country and its budget are pegged to oil and gas prices [RNC]. The price of the ﬂagship (smartphone) comes close to one thousand dollars [xtrue.info]. iPhone was lagging, bending and slipped out of hands [x-true.info]. “This is a symbolic moment for this bank and a clear indication of the progress we continue to make in putting the past behind us,” said its chief executive, Ross McEwan [TG]. “The scale of the pay squeeze for those aged under 30 is surpassed only by Greece,” said Resolution. It was found that in 2014, British people born in the years around 1980 earned 13% less than those born around 1970 did at the same stage in life. In Greece this decline was 25% [TG]. She added: “People in this building may forget the devastating impact of the ﬁnan‐ cial crisis 10 years ago – but the American people have not forgotten. The American people remember. The millions of people who lost their homes; the millions of people who lost their jobs; the millions of people who lost their savings, they remember and they do not want to turn loose the big banks again”. [TG].

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It also found that the pay squeeze on British under 30s was twice as big as the squeeze on those in their 50s – a bigger age divide than in any other country [TG]. Militaristic metaphor: the third gas war [newinform.com], saving the economic situation, a breakthrough in mobile phone construction, the army of fans (of smart‐ phones), the landﬁlls are advancing, electronic banking concentration camp, digital ghetto, the launch of oﬃcial digital currencies, under the cover of the term “oﬃcial digital currency” [x-true.info], the launch of RSCoin is scheduled for 2018, ﬁnancial intelligence, investment occupation, cryptocurrency on the oﬀensive [sovross.ru]. Amnesty (of capitals) can simply destroy us [sovross.ru]. In mid-range segment, Apple is attacked by Chinese gamblers Huawei and Xiaomi [x-true.info]. Special ghettos will be created for private cryptocurrencies at the best case [sovross.ru]. The existence and activities of economic markets, foundations, and banks frequently emerges full blown in warfare terms. The parties can attack, defend, counterattack, block the positions of an adversary. The concepts “combat”, “ﬁght”, “battle”, and “impact” are used in such cases. economic impact is far more reliable and eﬃcient than all the battles that were won [Ngram]. Economic impact with the western interests is just as evident [Ngram]. In the XXth century, there was an economic battle between capitalism and commu‐ nism [Ngram]. An increasingly intense economic battle for the key positions in the nation’s economy, for the control over resources of Katanga deepens in Kongo between the most inﬂuential monopolies [Ngram]. our economic battle has long been lost and we are absolute economical captives [Ngram]. Political-economic battle with two media oligarchs, who felt themselves like they are the information governors of the state, was inevitable [Ngram]. But the creditors had to bleed, too. They received hardly any interest on their assets, and their interest losses on loans to southern Europe piled up to several hundreds of billions of euros [TG]. Climatic metaphor: harsh economic climate, ﬁnancial climate [Ngram]. A signiﬁcant number of England’s 42 historic Anglican cathedrals are at “severe ﬁnancial risk” and some have ineﬀective and under-resourced management, an inves‐ tigation set up by the archbishops of Canterbury and York has found [TG]. Technological metaphor: economic levers, ﬁnancial leverages, ﬁnancial regula‐ tors, ﬁnancial mechanism, economical mechanism [RNC], Economic levers are required in addition to the care about a living person [RNC]. The main ﬁnancial leverages are controlled by the Federal Center [RNC]. Financial regulators will present minimum claims against this bank [RNC]. After the baby boomers retire, government coﬀers will run out between 2028 and 2038. That means anybody looking to tap the resources of northern European taxpayers will need to do so soon, before it is too late [TG].

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While RBS “did not set out to engineer” ﬁnancial diﬃculty, the bank had a “conﬂict of interest”, with staﬀ encouraged to prioritise the extraction of fees and so-called “upside instruments” to boost revenue, rather than looking after the needs of the small ﬁrms [TG]. Ten years after the Great Recession plumbed economic depths unseen since the Great Depression, it is necessary to step back from quotidian politics to get a glimpse of the bigger picture. Europeans need to ask themselves where they have been, and where they are headed next on their journey [TG]. The use of “forward guidance” by Yellen and other Fed chairs involved sending very clear signals about the timing and pace of monetary policy changes – it was adopted by central bank governors the world over, from Mark Carney at the Bank of England to Mario Draghi at the European Central Bank. It has proved vital for investors looking to gauge how monetary policy might develop. As a consequence, it helped to keep vola‐ tility low in markets and pave the way for big share price gains [TG].

4

Discussion

Classiﬁcation of metaphors by the auxiliary subject is of interest to linguists, historians, and culturologists due to the fact that it is regarded as the key to understanding the foundations of thinking and the processes of creating not only a national-speciﬁc outlook, but its universal image (Arutiunova 1990, p. 6). Metaphor, as a result of the relationship between two meanings of a word, one of which acts as a source meaning, and the other acts as a derivative meaning, is a prime example of inter-temporal changes in the ﬁeld of lexical semantics (Gak 2010, p. 122). Metaphorization is based on the vagueness of concepts used by a person reﬂecting in his/her consciousness a changing diverse extralinguistic reality (ibid.). Metaphor is a means of formation of a paramorphic model which allows the actualization of one system with the help of another system. In this case, it can be referred to metaphorical modeling as a result of which the model demonstrates the following properties: (1) two-plane nature (content plane and expres‐ sion plane); (2) several models can be created for the same object; (3) the model can demonstrate a diﬀerent degree of speciﬁcation and generalization; (4) the model can be homomorphic and isomorphic (homomorphism is considered as an assimilation, while isomorphism is considered as a sameness, oneness, identity).

5

Conclusions

Metaphorization in the ﬁeld of ﬁnancial and economic discourse has a wide realistic potential and is one of important aspects of categorization, conceptualization and reality evaluation in the modern Russian and English mass media that give coverage to ﬁnancial and economic situation in the world. Due to the fact that a metaphor emerges at the level of the deep-deated structures of the human mind, we can see that metaphor goes beyond linguistics. Metaphorization as a process actualizes the operation on knowledge which results in the creation of universal images of phenomena and events in a particular ﬁeld of activities.

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References Apresian, Y.D.: Integral description of language and system-level lexicography, Moscow (1995). 767 p. Arutiunova, N.D.: Metaphor and discourse. Theory of metaphor. Collection of research papers. General Editor - Arutiunova, N.D., Zhurinskaya, M.A., pp. 5–32. Progress Publishing House (1990) Gak, V.G.: Linguistic transformations. Types of linguistic transformations. Factors and ﬁelds of implementation of linguistic transformations. 2nd edn. Revised. LIBROKOM Book Center (2010). 408 p. Zalevskaya, A.A.: Mechanisms of metaphorization and their consideration for the purposes of modeling of the authors projection of text at translation. Translation as a modeling and translation modeling. Collection of research papers, pp. 69–82. Tver State University, Tver (1991) Martin, B., Ringham, F.: Semiotics dictionary. LIBROKOM Book Center (2010). 256 p. Moskvin, V.P.: Russian metaphor: an outline of semiotic theory. LKI Publishing House (2018). 200 p. Stepanov, Y.S.: In a three-dimensional space of the language: semiotic problems of linguistics, philosophy, and art. Editor in Chief - Neroznak, V.P. Rev. 2. LIBROKOM Book Center (2010). 336 p. Trufanova, N.O.: The problem of nomination of persons in inﬁnancial and economic terminology. Thesis research. … Candidate of philosophical sciences, Moscow (2006). 213 p. Uﬁmtseva, A.A., Aznaurova, E.S., Kubriakova, E.S., Teliya, V.N.: Linguistic essence and aspects of nomination. Language nomination. General issues/Editor in Chief - Serebriannikov, B.A., Uﬁmtseva, A.A., pp. 7–98. Nauka, Moscow (1977) Shmeliov, D.N.: Selected Works of Russian Language, Moscow (2002). 887 p. Embler, W.: Metaphor and Social Belief. Language, Meaning and Muturity, The Languages of the Slovic culture, Moscow, NY (1953) Gram W.S.: Economic Metaphor: Ideology, Phetoric and Theory. Metaphor: Implications and Applications, New Jersey (1996) Lakoﬀ, G., Johnson, M.: Metapgor We Live By. Chicago Univ. Oress (1980) Lakoﬀ, G.: The Contemporary Theory of Metaphor. Metaphor and Thought. 2nd. ad. Cambridge Univ. Press (1993)

Dictionaries GED – Great Economic Dictionary. Under the editorship of Azriliyan, A.N., Moscow (2004) LBED – Longman Business English Dictionary. Pearson Education Limited (2004)

Artwork Sources RNC – Russian National Corpus. http://www.ruscorpora.ru. Accessed 14 Mar 2018 BNC – British National Corpus. http://corpus.byu.edu/bnc/. Accessed Jan–Mar 2018 TG – The Guardian. https://www.theguardian.com/business/ﬁnancial-crisis. Accessed 15 Mar 2018 Ngram – Google Books Ngram Viewer. https://books.google.com/ngrams. Accessed 14 Mar 2018

Legal Issues of Development of the Global Financial System

Establishment of the Institute of Tax Consulting as an Element of Market Relations and the Object of Economic and Legal Regulation Lyudmila S. Kirina and Natalia A. Nazarova ✉ (

)

Financial University Under the Government of the Russian Federation, Moscow, Russia [email protected]

Abstract. Development of the tax system in the Russian Federation is based on creation of the special tax legislation and other normative acts that regulate the process of establishment, calculation, and payment of taxes and control over the correctness of their calculation by the state, which predetermines the formation of a wide information basis, the knowledge of which is necessary for all partici‐ pants of tax legal relations. Thus, the role of speciﬁc information, the application of which inﬂuences the successfulness of business of economic subjects, grows. However, usage of this information requires special professional knowledge and skills in the sphere of taxation. Topicality of the studied problem is predetermined by the purpose of provision of economic subjects’ awareness of the tax aspects for increase of eﬀectiveness of their entrepreneurial activity by consulting serv‐ ices in the sphere of taxation. At that, the issue of the national peculiarities of the institute of tax consulting in Russia and the level of its realization is still open. The purpose of the article is to determine the role of tax consultants in expansion of taxpayers’ awareness on the correct application of the tax law. The leading approaches to studying this problem include are the historical & legal and compa‐ rative & legal ones, which allow viewing the process of formation of the institute of tax consulting as an element of market relations and the object of economic & legal regulation. Results: the article presents the historical stages of establishment of the institute of tax consulting in some European countries and Russia, open the general tendencies and peculiarities of its formation, and determine socioeconomic preconditions for emergence of the institute of tax consulting as an element of market relations and the object of economic & legal regulation. The article materials are of certain practical value for specialists – consultants in the sphere of taxation and tax law; persons that perform scientiﬁc research in the sphere of economic & legal regulation of consulting activity; persons that conduct entrepreneurial and legislative activity. Keywords: Taxes · Tax information · Tax consulting · Market relations Regulation of consulting activity · Foreign experience · Law on tax consulting Professional risks · Insuring consultants’ responsibility

© Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 399–406, 2019. https://doi.org/10.1007/978-3-030-00102-5_42

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Introduction

1.1 Establishing a Context Modern transformations in the context of the general global civilizational dynamics, formation of the information society, and strengthening of the role of market mecha‐ nisms show that the main processes of formation of the institute of consulting services are not unidirectional and unambiguous, which leads to necessity for studying its speciﬁcs and tendencies of development. A special topicality in the existing conditions of development of Russia’s economy belongs to the issues of combination of state regu‐ lation and the mechanism of free functioning of the consulting services market in the sphere of taxation. This form of services appeared in Russia in 1990’s, which was caused by a whole range of factors – emergence of new economic & legal relations between the state and citizens; establishment of a new tax system, peculiar for constant increase of the number of normative documents in the tax sphere; active involvement of citizens and legal enti‐ ties into tax relations with the absence of necessary knowledge in the sphere of taxation, etc. Thus, the need for the services of tax consultants, the activity of which should be legally established and determined, grows. Depending on the purpose of the research, various models of tax consulting regula‐ tion at the state level are distinguished: tough position of the state (special law, strict control over its observation); relatively free functioning of consulting companies (private associations, the Chamber of tax consultants); mixed variant (law, private asso‐ ciations) (Chernik 2016). 1.2 Literature Review The activities of consultants for tax and revenues are studied in the works of economists and lawyers in Russia and abroad. The history of development of the normative acts that regulate the activity of tax consultants was studied by Kucherov (2016), Petrova (2015), Chernik et al. (2016). Establishment of tax consulting as a form of practical activity is studies in the works of such economists as Demisheva (2014), Tildikov (2004), Styrovaya et al. (2014). The history of development of tax consulting was also studied by Tomson (2003), Bonito (2007), Busse et al. (2009). 1.3 Establishing a Research Gap The previous research does now allow for complex consideration of the process of the formation of institute of tax consulting as an element of market relations and the object of economic & legal regulation in diﬀerent historical periods. This work studies the comparative & legal aspect and is aimed at analysis of precon‐ ditions of emergence of the institute of tax consulting and its development in Russia and abroad.

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1.4 Aim of the Study The purpose of the work is to determine and open the general tendencies and peculiarities of establishment and development of institute of tax consulting in Russia and abroad. This is necessary for answering the question on expedience of formation of the system of laws on consulting activity in the sphere of taxation in the Russian Federation, which would be oriented at increase of the role of tax consultants in provision of deeper knowledge of economic subjects on the tax relations.

2

Methodological Framework

2.1 Research Methods The following methods were used during the research: general scientiﬁc – analysis, synthesis, comparison, and generalization; private and scientiﬁc: historical & legal and comparative & legal, which allows for the complex consideration of the process of formation of institute of tax consulting as an element of market relations and the object of economic & legal regulation in Russia and abroad. The historical & legal method was used to study the genesis of establishment and development of institute of tax consulting. The comparative economic & legal analysis was used for determining the peculiarities of formation and regulation of this phenomenon in the Russian law and other countries. 2.2 Research Basis The research basis includes the scientiﬁc studies, publications of the Russian and foreign economists and lawyers who study the speciﬁcs of tax consulting, legislation in the sphere of consulting activity, and the problems of provision of economic subjects’ awareness on tax aspects. 2.3 Stages of the Research The problems were studied in two stages: First stage: analysis of existing scientiﬁc literature on the topic of the research and the law in the sphere of economic & legal regulation tax consulting; determination of the problem, purpose, and methods of the research. Second stage: formulation of conclusions received in the course of analysis of scien‐ tiﬁc literature and the law, preparation of the publication.

3

Results

3.1 Emergence of Tax Consulting as a Form of Practical Activity Development of institute of tax consulting in the RF is one of the important and necessary tasks. The directions of development and improvement could be determined by studying

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the development and functioning of this form of activity in other countries, where the institute of tax consulting has been existing for a long time and has a clear structuring of mechanisms, standards, and rules. In most countries, tax consulting requires from the persons who provide such services the professional preparation and conﬁrmation of the right for their provision, let alone the license. In economically developed countries, consulting on the issues of taxation can be performed only by specially authorized persons. In a certain form state controls tax consulting and sets the rules according to which it becomes important and responsible form of activity, and the persons with such profession have to prove their high profes‐ sional level. 3.2 Establishment of the Institute of Tax Consulting in Germany In the EU, everything related to tax consulting is regulated legally. Germany is the leader in this sphere; both at the federal and the state level, there are more than 40 laws related to tax consulting. Even the fees for a tax consultant for services provided are set – i.e., any consultation service has its price according to the tariﬀ catalog, set by the legislators. In Germany, tax consultants are people with the proﬁle education. In order to be able to perform tax consulting, it is necessary to conform to the set requirements and receive a license (permit). Germany has the Law on tax consultants which sets the rights and obligations of tax consultants, the procedure of agreement conclusion, responsibility for improperly provided service, pricing, insurance of professional risks, and other important aspects of building the interrelations with the government bodies, customers, private associa‐ tions, etc. Advertising in the sphere of tax consulting is prohibited. Tax consultants are allowed only to mention their activity. Tax consultant preserves the right to provide services in other countries, including Russia – despite the fact that he might have no idea of the Russian tax laws. It is very important from the point of view of international regulation on the issues of tax consulting. The EU has a range of directives that set what is acknowledged, where is acknowledged, and by whom is acknowledged. These issues are not yet set with the RF – not because the institute of tax consultants is in the process of creation in the RF but also because of some other generally known reasons. 3.3 Emergence and Development of Institute of Tax Consulting in Russia First Stage. Establishment of the tax system in our country, in the process of which there were constant change of the law on taxes and levies, led to emergence of demand from taxpayers for consultation services on implemented taxes, changes and additional to the tax law, and the order of application of the normative & legal acts on taxes and levies, the order of application of changes and additions to the tax law, etc.

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At the ﬁrst stage, there was spontaneous emergence of tax consulting, which services were provided by specialists – experts and organizations, primarily audit companies (1992-1999). Second stage of the establishment of tax consulting is predetermined by stabilization of the tax system of Russia, introduction of the ﬁrst part of the Tax Code of the RF, and reduction of the number of taxes and levies (1999-2000). The multitude of the taxation objects, complexity of budget interrelations, and a large volume of information led to realization of the necessity for professional training of specialists on tax consulting. For these purposes, the order of the Ministry of Taxes and Assessments of Russia dated August 25, 1999 No. AP-3-15/278 established a central committee for tax consulting. This committee was created for the purpose of coordinating the work of the system of tax bodies in the sphere of preparation and attestation of tax consultants, accreditation of tax consulting bodies, authorized training centers, and mass media for provision of the high level of tax consulting. Simultaneously with these issues, a decision on creation of a network of consulting bodies was made, where taxpayers could receive qualiﬁed council, which reﬂected the Ministry’s striving for formation of the professional level of provision of services for tax consulting. However, the Federal Tax Service of Russia has refused the involvement with the issues of organization of tax consulting for taxpayers, motivation this decision by the fact that the main task of tax bodies is control over observation of tax law for the purpose of ensuring revenues into the Russian budget system. Thus, it is possible to state that together with development of market relations and complexity of application of existing norms of law on taxes and levies, another reason that predetermined the emergence of tax consulting in Russia as an independent type of entrepreneurial activity is the policy of government bodies, oriented at strict limitation of functions of tax bodies and tax consultants that are independent from the state. Third Stage. An important stage of development of tax consulting in the RF is the Ministry of Labor of the RF passing the Decree No. 57 dated August 4, 2000, which introduced a new classiﬁcation “Consultant for taxes and levies” into the Job evaluation manual for managers, specialists, and other public oﬃcers. Fourth Stage. On January 9, 2002, a non-proﬁt partnership “Chamber of tax consul‐ tants of Russia” (hereinafter - CTC of Russia) was registered; its head became Dr. D.G. Chernik, professor and member of the Russian Academy of Natural Sciences. The Chamber is the leading professional association of tax consultants that stimulates the development of consulting services markets and develops the standards of provision of consulting services, performs attestation of specialists for this direction, conducts their training and additional training. Fifth Stage (2011 – until now). At the General Assemble of the CFE, the CTC of Russia was accepted into the European Confederation of tax consultants (September 30, 2011). As of now, 16,000 tax consultants have been licensed. The CTC of Russia expands the sphere of its activity: it forms the tax culture of the society and presents the professional interests of the Russian tax consultants at the international level.

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Perspectives and Problems of Development of Tax Consulting in Russia Beginning from 2015, there has been active increase of demand for tax consulting. According to the experts’ estimates and the results of the research, scientiﬁc consulting in the structure of the Russian consulting is one of the most perspective directions. According to the Expert RA, the share of “pure” consulting for taxes constitutes 7%. However, tax consulting is accompanied by additional legal services, such as presenta‐ tion of taxpayer’s interests in tax bodies or court, which raises the share of tax consulting in the common market to 12%. The services include development of projects for opti‐ mization of taxation (56%); presentation of client’s interests in the Federal Tax Service and courts (25%); oral and written consultations (12%); development of internal provi‐ sions and preparation of documents (7%). According to Expert RA, in 2016, the total revenue of the largest consulting groups constituted $120 billion. The market of Russian tax consulting is developing very dynamically, but its volume is smaller than the volumes of developed countries, and the number of consultants per 10,000 people is very low in Russia (1.1 with the average European level of 7). Insuﬃcient development of institute of tax consulting in Russia is caused by several reasons. Let us view some of them. Lack of Competition in the Russian Market. The objective need for using the consul‐ tants’ services emerges in the conditions of high competition, when the cost of incorrect managerial decision is very high and the economic subject has to increase the eﬀec‐ tiveness of its activity. As a lot of spheres of production in Russia lack tough competition, the management may take ineﬀective decisions, make mistakes and still preserve the positions in the market. Drawbacks of the Managerial Culture. A lot of managers haven’t yet realized that successful organizational solutions require high competence and deep specialized knowledge. Secondly, Russian managers, as a rule (most of them are organizers and owners of the companies), are not psychologically ready to delegate certain stages of decision making to an external consultant. Thirdly, consulting, as a sphere related to knowledge and intellect, is viewed in Russia as a free service and which should be ﬁnanced on leftovers. Drawbacks of the Consulting Culture. At present, most sphere of the Russian consulting are not regulated by any legislative acts, and the conduct of consultation activity by legal entities and individuals does not require special education or license for this activity. As a results – a lot of people in consulting with a low professional level who do not observe the ethic norms of consulting. This negatively inﬂuences the general quality of consulting services and consultant’s image in the eyes of the Russian taxpayers. Lack of Financial Assets. The consultants’ services are used by large companies, as medium and small business does not have free ﬁnancial assets for paying for their recommendations.

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Absence of Legislative Regulation of Tax Consulting. The necessity for passing the Federal law “On tax consulting” is caused by the fact that legal responsibility should be present with all types of legal relations, and the sphere of consulting is not an exception. At present, responsibility of tax consultants in the RF exists only in the civil & legal (contractual) form, which leads to necessity for solving the issue on insuring professional risks. On May 23, 2014, the draft bill “On tax consulting” was passed in the State Duma. There are a lot of debatable issues on passing of this law, so the ﬁnal decision is not yet made.

4

Discussion

The term “tax consulting” is an economic & legal category. Various aspects of consulting activity are studied and analyzed in the works of economists and layers in Russia and abroad. The history of development of the laws that regulate tax consulting in diﬀerent contexts was viewed in the studies by D.G. Chernik, I.I. Kucherov, G.V. Petrova, et al. Establishment of tax consulting as a form of practical activity is studied in the works by T.A. Demisheva, T.V. Styrova, A.V. Tildikova, et al. The history of development of consulting was viewed by foreign authors: T. Tomson, D. Bonito, G. Busse, et al. The global experience shows the necessity for economic & legal regulation of the market of tax consulting services. This is caused by the fact that at the macro-economic level tax consulting is an element of the market infrastructure. In the conditions of uncertainty, peculiar for market relations, a lot of subjects that take managerial decisions are interested in reducing their tax liabilities, while not violating the eﬀective tax legis‐ lation, and in reducing the factual tax load. Together with thin, the state is also interested in effective functioning of insti‐ tute of tax consulting, as it stimulates the socio-economic stability of the society. At that, the forms of state regulation of activity of tax consultants in various coun‐ tries differ a lot. In this article, establishment and development of institute of tax consulting is viewed in the aspects of its formation as an element of market relations and as the object of economic & legal regulation under the inﬂuence of objectively existing socio-economic factors. The study is of the comparative & legal direction: the preconditions for emer‐ gence of institute of tax consulting and its development in the EU, Germany, and Russia are analyzed. This aspect is important for formation of the legal regulation of consulting activity in the RF, where the market mechanisms began to work much later than in the European countries.

5

Conclusions

Based on the performed study of establishment of institute of tax consulting as an element of market relations and the object of economic & legal regulation, which stim‐ ulates the provision of individuals and legal entities’ awareness on the problems of

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taxation, it is possible to conclude the following. Formation of this element of the market was performed gradually, and its emergence had certain socio-economic preconditions, namely: – Russia’s transition to market relations, which led to creation of the new tax system in our country and emergence of the large volume of speciﬁc information that requires special knowledge for its application; – emergence of a large number of economic subjects that are interested in reduction of tax expenditures and, therefore, tax load, without violation of eﬀective tax legislation; – presence of professional specialists in the sphere of taxation who possess the modern methodology of tax consulting conducted on the basis of special professional knowl‐ edge; – globalization of economic activity that creates preconditions for increase of positive and negative institutional peculiarities of the companies and stimulates the distribu‐ tion and application of the leading information basis and development of the consulting services market. The national path of development of tax consulting allows for the formation of the system of laws on consulting activity oriented at provision of deeper knowledge of individuals and legal entities on tax interrelations.

References Gary, W.: Carter Getting Started in Tax Consulting. John Wiley & Sons, Inc., New York (2001) Tom, T., Joe, B.: Overview of the model of professional competence of consultant. www.cﬁn.ru/ consulting/ Managerial consulting: In 2 V. M.: Interexpert (1992) Demisheva, T.A.: Organization and methodology of tax consulting: Study guide. M.: MCFER (2014) Internet interview of the President of the Chamber of tax consultants D.G. Chernik. Institute of tax consulting: problems and perspectives. www.garant.ru Kucherov, I.I.: Tax law. General part. Study guide for academic bachelors, M.: Yurite (2016) Tax consulting: theory and practice: Study guide. Edited by N.I. Malis. Magistr: INFRA-M (2017) Market of consulting services in Russia – RAEX ranking agency (Expert RA) [E-source] (2016). http://www.raexpert.ru Tildikov, A.V.: Foundations of tax consulting. Study guide. Obninsk (2004) Petrova, G.V.: International ﬁnancial law. Study guide for universities, M. Yurait, 22 p. (2015) Chernik, D.G., Kirina, L.S., Gorokhova, N.A., Barteneva, T.S.: Tax consulting: study guide. Edited by D.G. Chernik, 422 p. Economics, Moscow (2016) Decree of the Ministry of Taxes and Assessments of Russia No. AP-3-15/278 dated August 25, 1999 “On creation of the Central committee on tax consulting of the Ministry of Taxes and Assessments of the RF” Decree of the Ministry of Labor and Social Development of the RF dated August 4, 2000 No. 57 “On implementing additions to the Job evaluation manual for managers, specialists, and public oﬃcers”

The Concept of Restoration of the Leading Role of the Global Financial System in Activation of Growth and Development of the Global Economy Elena G. Popkova1(&) and Tatyana V. Alferova2 1

Institute of Scientiﬁc Communications, Volgograd, Russia [email protected] 2 Perm State National Research University, Perm, Russia [email protected]

Abstract. The purpose of the work is to determine the difference in the role of the global ﬁnancial system in provision of growth and development of the global economy before and after the 2008 global crisis and to develop the concept of restoration of the leading role of the global ﬁnancial system in activation of growth and development of the global economy. The methods of regression analysis are used by determining dependencies between the indicators of development of the ﬁnancial system – the volume of the global stock market and the volume of direct global foreign investments – and the indicator of the global economy’s growth – global GDP per capita. The research is performed for 19982007 (before the crisis) and for 2008-2017 (after the crisis) based on statistical data of the World Bank. As a result, it is concluded that the global ﬁnancial system, which is a platform for movement of direct foreign investments and functioning of the stock market, performed strong positive influence on growth of global GDP per capita before the 2008 crisis. After the crisis, this influence became statistically insigniﬁcant. In order to restore the leading role of the global ﬁnancial system in activation of growth and development of the global economy, the authors’ concept is offered for modernization of this system in the aspect of reduction of its risk component and activation of its innovational development. Keywords: Global ﬁnancial system Development of the global economy

Activation of growth

1 Introduction The global ﬁnancial system, which potential in stimulation of growth and innovational development of the global economy seemed inﬁnite, turned out to be not only most susceptible to crisis but also a reason of the crisis’ becoming the crisis of the global scale. Increase of state regulation of the global ﬁnancial system allowed stopping distribution of crisis. However, despite gradual overcoming of its consequences, the modern global economy has not entered the phase of rise. In order to start a new turn of economic cycle in development of the global economy, it is necessary to look for © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 407–413, 2019. https://doi.org/10.1007/978-3-030-00102-5_43

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perspective vectors of its growth. Thus, the view of the global society turned to the real sector, which showed the largest sustainability to crisis. In its turn, this leads to expectations of increase of ecological risks, which inevitable accompany the process of industrialization and which became an argument in favor of post-industrialization at the end of the 20th century, in the conditions of which domination of the ﬁnancial system as a key vector of growth of the global economy was established. This actualizes a serious scientiﬁc problem that is related to high risk of transition of economic crisis into ecological crisis in case of return to the age of industrialization and the necessity for search for the means of modernization of the global ﬁnancial system for preserving post-industrial specialization of the modern global economy. The working hypothesis of the research is that the global ﬁnancial system, which largely determined the level and rate of growth and development of the global economy until the 2008 global crisis, started playing a secondary (insigniﬁcant) role in this process. The purpose of the work is to determine the differences in the role of the global ﬁnancial system in provision of growth and development of the global economy before and after the 2008 global crisis and to develop the concept of restoration of the leading role of the global ﬁnancial system in activation of growth and development of the global economy.

2 Materials and Method The performed literature overview on the formulated problem showed that the role of the global ﬁnancial system in provision of growth and development of the global economy before the 2008 crisis is studied in detail in the works (Arkhipova 2016), (Bogoviz et al. 2018a, b), (Popkova 2018), (Sazonov et al. 2013) and (Zvonova and Kuznetsov 2018). Financial reasons of the 2008 crisis, related to functioning and development of the global ﬁnancial system, are studied in the works (Aller and Grant 2018), (Askari et al. 2018), (Bilorus 2014), (Dudin et al. 2014), (Nkeki 2018), (Ogura 2018), (Riccetti et al. 2018), (Salvador et al. 2018), (Siokis 2018) and (Zhang et al. 2018). At the same time, the current state of the global ﬁnancial system, its influence on the global economy and perspectives of restoration of the leading role of the global ﬁnancial system in activation of growth and development of the global economy are characterized by insufﬁcient attention from modern scholars and require further elaboration. Methodology of the research is based on application of the methods of regression analysis. The author sets dependencies between indicators of development of the ﬁnancial system – volume of global stock market and volume of global direct foreign investments – and the indicator of growth of the global economy – global GDP per capita. The research is performed separately for 1998-2007 (before the crisis) and for 2008-2017 (after the crisis). The initial statistical data from the materials of the World Bank are systematized and presented in Table 1.

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Table 1. Dynamics of the volume of the global stock market, volume of the global direct foreign investments, and global GDP per capita in 1998-2017. Indicators/Years

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

Volume of global stock market, $ billion

21.653

30.699

45.903

33.393

27.299

28.501

35.538

44.705

57.722

88.442

Global GDP per capita, $

5,257.111

5,380.922

5,483.179

5,378.482

5,514.62

6,115.303

6,802.115

7,273.97

7,780.497

8,657.265

Volume of global direct foreign investments, $ billion

679.308

961.898

1461

796.274

744.141

710.756

1.009

1.543

2.147

3.099

Indicators/Years

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Volume of global stock market, $ billion

83.758

66.598

70.101

72.796

58.250

63.728

74.889

99.787

77.535

77.662

Global GDP per capita, $

9,379.031

8,784.178

9,513.305

10,446.247

10,548.629

10,715.681

10,877.244

10,164.213

10,192.298

10,220.461

Volume of global direct foreign investments, $ billion

2.451

1.365

1.860

2.283

2.115

2.129

1.792

2.363

2.398

2.433

Source: compiled by the author based on: World Bank (2018a, b, c).

3 Results

10000 8000 6000 4000

y = 52.585x + 4188.1 R² = 0.7395

2000 0

0

20 40 60 80 Volume of global stock market

100

Global GDP per captita

Global GDP per capita

As a result of computer processing of data in Microsoft Excel, the following regression curves were obtained (Figs. 1 and 2). 10000 8000 6000 4000 2000 0

0

y = 1,9521x + 7410,9 R² = 0,6855 500 1000 1500

2000

Volume of global direct foreign investments

12000.000 10000.000 8000.000 6000.000 4000.000 y = -4.6472x + 10430 R² = 0.0067 2000.000 0.000 0.000 50.000 100.000 150.000 Volume of global stock market

Global GDP per capita

Global GDP per capita

Fig. 1. Regression curves that reflect dependence of global GDP per capita (y) on the volume of the global stock market (x1) and the global volume of direct foreign investments (x2) in 19982007. Source: calculated by the authors.

15000.000 10000.000 y = 708.89x + 8582.1 R² = 0.1429

5000.000 0.000 0.000

1.000

2.000

3.000

Volume of global direct foreign investments

Fig. 2. Regression curves that reflect dependence of the global GDP per capita (y) on the volume of global stock market (x1) and global volume of direct foreign investments (x2) in 20082017. Source: calculated by the authors.

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As is seen from Fig. 1, before the crisis (1998-2007) global GDP per capita grew by $52.585 with increase of the volume of the global stock market by $1 billion (correlation – 73.95%) and by $1.9521 with increase of the volume of global direct foreign investments (correlation – 68.55%). After the crisis (2008-2017), global GDP per capita reduced by $4.6472 with increase of the volume of the global stock market by $1 billion (correlation – 0.67%) and increased by $708.89 with increase of the volume of global direct foreign investments (correlation – 14.29%). Therefore, before the crisis the global ﬁnancial system was a decisive factor of growth of the global economy, which stimulated its intensiﬁcation, and after the crisis this system performed insigniﬁcant and even negative influence on growth of the global economy, which shows its small role in this process. For restoration of the leading role of the global ﬁnancial system in activation of growth and development of the global economy, it is necessary to modernize this system, which will allow reducing the risk component of its functioning and development that led to the crisis. The highest and the most vivid risk of functioning of the modern global ﬁnancial system is the risk of its quick destabilization that is related to quick change of the mood of the ﬁnancial markets’ players and cardinal changes of the tendencies of their development. In addition to high risk component, the modern global ﬁnancial system depleted its innovational potential. That’s why restoration of its leading role in activation of growth and development of the global economy requires provision of innovational development of this system. For this, the following concept was developed (Fig. 3). As is seen from Fig. 3, in the offered concept the tool of achieving the goal of restoration of the leading role of the global ﬁnancial system in activation is modernization of this system, which is conducted in two directions. 1st direction: risk management of the global ﬁnancial system. Within this direction, it is recommended to provide the global ﬁnancial system and conducted operations with real assets. This could be dome with the help of return to the gold standard or with limitation or prohibition of deals with derivatives. In addition to this, it is offered to stimulate corporate social responsibility (CSR) of entrepreneurial structures that work in ﬁnancial markets and to develop common global standards of state regulation of ﬁnancial markets for increasing their stability. Implementation of this direction allows preventing quick destabilization of the global ﬁnancial system and making it more predictable, and manageable. 2nd direction: management of innovations in the global ﬁnancial system. Within this direction, it is expedient to stimulate R&D in the ﬁnancial sphere and to apply the mechanism of public-private partnership for implementing innovational projects in the ﬁnancial sphere. Implementation of this direction allows creating a new wave of ﬁnancial innovations. As a result of the described modernization, the risk component is reduces and innovational development of the global ﬁnancial system is activated, which allows making it the vector of growth of the global economy. That is, the presented concept allows overcoming the determined barriers on the path of restoration of the leading role of the global ﬁnancial system in activation of growth and development of the global economy.

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Goal: restoration of the leading role of the global financial system in activation of growth and development of the modern global economy development of the global standards of state regulation of financial markets for increasing their stability Regulation stimulation of corporate social responsibility (CSR) of entrepreneurial structures that work in financial markets CSR

Provision

provision of the global financial system and performed operations with real assets

R&D

Tool: modernization of the global financial system

stimulation of R&D and test research in the financial sphere

PPP

application of the mechanism of public-private partnership (PPP) for implementing innovational projects in the financial sphere Result: reduction of the risk level and activation of innovational development of the global financial system, which allows making it the growth vector of the global economy

Fig. 3. The concept of restoration of the leading role of the global ﬁnancial system in activation of growth and development of the global economy. Source: compiled by the authors.

4 Conclusions As a result of the research, it is possible to conclude that the offered hypothesis is proved. The global ﬁnancial system, which is a platform for movement of global direct foreign investments and functioning of the stock market, has strong positive influence on growth of global GDP per capita before the 2008 crisis. After the crisis, this influence became statistically insigniﬁcant. For restoration of the leading role of the global ﬁnancial system in activation of growth and development of the global economy, the offered concept is offered, which suggests modernizing this system in the aspect of reduction of its risk component and activation of its innovational development. It should be noted that this concept creates preconditions (provides opportunities) but does not guarantee establishment of the global ﬁnancial system as a new vector of growth of the modern global economy. Interest of the global society to establishment of the real sector as a leading sphere of the global economy and a vector of its growth is very high, being increased by perspectives of the new industrial revolution in the sphere of Industry 4.0. However, even in this case, the developed concept will be in demand, as it allows preparing more ecologically safe post-industrial alternative to the real sector, which will be more preferable – especially in case of an ecological crisis.

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Due to this, further studies should be devoted to substantiation of advantages of the developed concept of restoration of the leading role of the global ﬁnancial system in activation of growth and development of the global economy as compared to the concept of foundation on the global economy on the real sector. At that, it is expedient to focus on precise quantitative evidences on the basis of scenario analysis. Acknowledgments. The reported study was funded by RFBR according to the research project No. 18-010-00103 A.

References Aller, C., Grant, C.: The effect of the ﬁnancial crisis on default by Spanish households. J. Financ. Stab. 36, 39–52 (2018) Arkhipova, V.V.: World ﬁnancial system: globalization or deglobalization? World Econ. Int. Relat. 60(5), 40–49 (2016) Askari, M., Shirazi, H., Aghababaei Samani, K.: Dynamics of ﬁnancial crises in the world trade network. Phys. A Stat. Mech. Appl. 501, 164–169 (2018) Bilorus, O.: World structural crisis and transformations of the global ﬁnancial system. Econ. Ann. XXI(7–8), 4–7 (2014) Bogoviz, A.V., Ragulina, Y.V., Morozova, I.A., Litvinova, T.N.: Experience of modern Russia in managing economic growth. Studies in Systems, Decision and Control, vol. 135, pp. 147– 154 (2018a) Bogoviz, A.V., Ragulina, Y.V., Sirotkina, N.V.: Systemic contradictions in development of modern Russia’s industry in the conditions of establishment of knowledge economy. Advances in Intelligent Systems and Computing, vol. 622, pp. 597–602 (2018b) Dudin, M.N., Prokofev, M.N., Fedorova, I.J., Frygin, A.V.: The world experience of transformation of innovative approaches to assurance of ﬁnancial stability of social economic systems. Life Sci. J. 11(9), 370–373 (2014) Nkeki, C.I.: Optimal investment risks and debt management with backup security in a ﬁnancial crisis. J. Comput. Appl. Math. 338, 129–152 (2018) Ogura, Y.: The objective function of government-controlled banks in a ﬁnancial crisis. J. Bank. Finance 89, 78–93 (2018) Popkova, E.G.: Contradiction of economic growth in today’s global economy: economic systems competition and mutual support. Espacios 39(1), 20 (2018) Riccetti, L., Russo, A., Gallegati, M.: Financial regulation and endogenous macroeconomic crises. Macroecon. Dyn. 22(4), 896–930 (2018) Salvador, C., Fernández de Guevara, J., Pastor, J.M.: The adjustment of bank ratings in the ﬁnancial crisis: international evidence. North Am. J. Econ. Finance 44, 289–313 (2018) Sazonov, S.P., Lukyanova, A.V., Popkova, E.G.: Towards the ﬁnancial budgeting governance in transitive economies. World Appl. Sci. J. 23(11), 1538–1547 (2013) Siokis, F.M.: Credit market Jitters in the course of the ﬁnancial crisis: a permutation entropy approach in measuring informational efﬁciency in ﬁnancial assets. Phys. A Stat. Mech. Appl. 499, 266–275 (2018) World Bank: GDP per capita (current US$) (2018a). https://data.worldbank.org/indicator/NY. GDP.PCAP.CD?view=chart. Accessed 25 Apr 2018 World Bank: Stocks traded, total value (current US$) (2018b). https://data.worldbank.org/ indicator/CM.MKT.TRAD.CD. Accessed 25 Apr 2018

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World Bank: Foreign direct investment, net inflows (BoP, current US$) (2018c). https://data. worldbank.org/indicator/BX.KLT.DINV.CD.WD?view=chart. Accessed 25 Apr 2018 Zhang, X., He, Z., Zhu, J., Li, J.: Quantity of ﬁnance and ﬁnancial crisis: a non-monotonic investigation. North Am. J. Econ. Finance 44, 129–139 (2018) Zvonova, E.A., Kuznetsov, A.V.: Scenarios of world monetary and ﬁnancial system development: opportunities and risks for Russia. World Econ. Int. Relat. 62(2), 5–16 (2018)

Possibilities of the International Cooperation and Export of Subjects of Small and Medium-Sized Business Under the Conditions of Financial Crisis Tatyana Y. Anopchenko and Vladislav I. Ostrovskiy ✉ (

)

Southern Federal University, Rostov-on-Don, Russian Federation [email protected]

Abstract. Globalization of the world economy is an objective process that reﬂects the realities of the current stage of the development of many countries and the transnational production. In the light of the globalization of the world economy in recent years, small and medium-sized enterprises of many countries, which have adopted new forms and methods of international cooperation, have also begun to prove their right to participate in the system of foreign economic activity. Modern Russia has chosen the course to the expansion of international cooperation in order to enhance its capacities for eﬀective participation in the global markets, to raise its status in the international political arena and to accel‐ erate the pace of economic growth due to the expansion of markets for products of domestic enterprises. Keywords: International cooperation · Small and medium-sized businesses Foreign economic activity · Export cooperation JEL Code: L 22 · M 13

1

Introduction

Modern global globalization processes are characterized by the deep development of cooperation, increased international competition and trade. In Russia, globalization is based on the diversity and the particular characteristics of regions, the development and the intensiﬁcation of integrative collaboration of which is in fact a preparatory stage of the regionalization process associated with the strengthening of the role of regional ﬁnancial institutions and instruments. By carrying out export cooperation, ﬁrms ensure the achievement of higher results of their business activities in foreign markets due to the synergy eﬀect resulting from pooling of resources and eﬀorts of several ﬁrms.

2

Methodology

The research methodology is based on the fundamental and applied works of domestic and foreign scientists on the problems of international cooperation, the promotion of products abroad, the strategic aspects of marketing, the use of modern analytical, © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 414–420, 2019. https://doi.org/10.1007/978-3-030-00102-5_44

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information and communication technologies. The general scientiﬁc research methods are used, among which more attention is paid to systematic analysis, synthesis and inte‐ grated approach to solving economic problems, which allowed to carry out graphical, statistical and comparative analysis, to implement information-gathering marketing methods in the form of desk study and focusing. The combined application of these methods has achieved this goal and conﬁrmed the validity of the ﬁndings. Results. The development of export relations with other countries allows small and medium-sized businesses to maintain or increase production capacity, which are idle due to the consumers’ inability to pay in the domestic market, by expanding the market. Small and medium-sized businesses make the greatest contribution to the development of the economic system, being the driving force of innovation and employment of the working population. It is small and medium-sized businesses that have the greatest potential to bring together national and international value chains through cooperation with larger businesses (SBA 2018). In 2017, the external trade turnover of the participants of foreign economic activity (FEA) of the Stavropol territory amounted to more than $1.5 billion. It is higher than the level of the same period in 2016 by more than 21%. The export-import operations in the Stavropol region in 2017 were carried out by 632 participants of foreign trade, a third of which are in the small and medium-sized enterprises (Table 1). Table 1. Indicators of foreign trade of Stavropol territory (Federal customs service 2018) Indicator 2016 The number of traders 664 The volume of foreign trade for US $2.05 million 1 participant

2017 632 US $2.62 million

Change −32 +US $570,000

The average volume of foreign trade is assumed to be US $2.62 million per FEA participant. The external trade turnover (in the same period of 2016, the number of foreign trade participants was slightly higher, but the volume of foreign trade operations of each was lower by more than US $500,000) Dynamics of exports and imports of the Stavropol territory is presented in Table 2. Table 2. Dynamics of exports and imports of Stavropol region (Federal customs service 2018) Indicator Exports, in millions of US dollars Imports, in millions of US dollars

2014 1127,03 884,51

2015 964,58 518,40

2016 831,69 532,27

2017 999,73 658,83

Participants of foreign economic activity of the Stavropol region in 2017 carried out export operations involving more than $999 million that is slightly more than 20% higher than in the corresponding period of 2016. The positive balance of foreign trade amounted to US $341.33 million. Non-CIS countries accounting for 69.19% of the value of 2017 dominated in the external trade activities of the Stavropol region. According to the

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customs statistics, the largest in the current year was the trade with China, Azerbaijan and the Republic of Belarus (Table 3). Table 3. The top of partner countries of the Stavropol territory with the largest foreign trade turnover in 2017 Rating 1 2 3 4 5 6 7 8 9

Country China Azerbaijan Belarus Turkey Ukraine The USA the Netherlands Kazakhstan Germany

Volume of foreign trade turnover, mln. USA 246,53 158,67 125,49 95,26 92,99 89,43 73,23 60,03 58,80

Export cooperation in the Russian practice has been widely developed and is char‐ acterized by a wide variety of forms. First of all, it is a partnership on a voluntary basis of two or more economically independent enterprises by means of an agreement or a contract between them. This collaboration is aimed at solving the common tasks facing the participants of cooperation in the ﬁeld of exports. Export cooperation has a func‐ tional, instrumental and the institutional side. Functionally, the export cooperation is a kind of usual concerted action of a group of independent ﬁrms. Such a collaborative eﬀort extends the capabilities of partners in their international business transactions. In order to ensure the beneﬁts of this kind of collaboration, producers must create appropriate structures, the presence of which would allow to carry out the basic functions of export cooperation at the right level. Such functions are typically regarded as marketing research, organization of joint proposals and negotiations, coordination of terms of sale, establishment of export prices, prepa‐ ration and signing of contracts, carrying out export transactions on behalf of producers, promotion of goods to the market, organization of service (Ansoﬀ 1979, 1985). In terms of instruments and institutions, the international export cooperation involves the use of certain methods and mechanisms that help to solve the problems of foreign market penetration, including the exchange of information, exchange of experience, cooperation in solving joint problems, the formation of cooperative engagement (obli‐ gations), legal allocation of cooperative engagement (obligations). International cooperation of small and medium-sized enterprises in foreign markets is associated with high risks, which are considered as a constraint for the development of foreign economic activity. The likelihood of such risks directly depends on how well the company is informed about the state of the external environment in the foreign partner country, the peculiarities of taxation. Lack of information about partners, buyers or suppliers, especially their business image and ﬁnancial condition, leads to some risks for the entrepreneur. Lack of information about the competitors can also be a source of loss for the entrepreneur (Lopatina et al. 2014).

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It is also necessary to pay attention to the fact that small and medium-sized busi‐ nesses, which are supposed to have the least opportunities in the ﬁeld of self-export, in recent years, have always preferred using the possibilities of cooperation. Today, there is an increase in cooperation and integration activity of business entities from developing countries. If ﬁve or six years ago the foreign economic activity and international coop‐ eration was the prerogative of business entities from developed countries, now the inte‐ gration and the cooperation activity of enterprises from developing countries is increasing more and more intensively (Popkova et al. 2018). In the practice of export performance enterprises can use a variety of forms of coop‐ eration. Consider the most frequently used forms of cooperation among business struc‐ tures, including small and medium-sized businesses: export association, export cartel, export ring, consortium, labour and project associations (Troshina et al. 2016). The export association consists of the ﬁrms that produce goods that do not compete with each other. Under the production-oriented programs they form a competitive range of products in foreign markets. Unlike export associations, export cartels are formed by the ﬁrms that produce competing goods. Therefore, all aspects of export activities implemented jointly are stipulated in the agreements they conclude. The export ring is a form of cooperation in which, good producers are part of the association together with enterprises of other industries, in particular export trade entities. As for the consortium, labour and project associations, they are considered as diﬀerent forms of so-called project cooperation. It is a combination of independent ﬁrms whose joint activities are determined by the need to achieve export objectives. In the framework of international cooperation can also be used other types of inte‐ gration and cooperation of the unions, independent of the location of businesses at certain stages of the value-added chain, for example, association, joint venture and international cluster (Troyanskaya et al. 2017). All of them provide the preservation of competition in industry markets, so that as a result of their formation, small and medium-sized businesses continue to show high ﬂexibility and innovation activity. In addition, they gain access to new markets for products and more favourable conditions for the organization of supply, production and marketing, which allows them to increase their contribution to the economic growth of the national economy. Therefore, the purpose of state management of these types of associations is to support and stimulate them (Popkova et al. 2018). The participation of small and medium-sized enterprises in joint export activities, as pointed out, oﬀers them a number of advantages and beneﬁts. The speciﬁc export promotion measures are designed as part of the Federal program of socio-economic development of the Russian Federation until 2025. The priority project “System meas‐ ures for the development of international cooperation and exports” was approved in 2017. According to the research of the Russian export centre, the share of small and medium-sized businesses in exports in foreign countries is more than 30%. In Russia today, this ﬁgure is barely coming closer to 1%. This indicates that the potential of Russian medium-sized exporters is underutilized.

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Despite all the prerequisites for increasing export potential among small and medium-sized businesses, there are many barriers to this type of economic entities. First, trade and administrative barriers in other countries for small export companies. Second, the strict visa regime, the vague system of trade preferences and the absence of a free trade zone in many countries complicate business activities and scare owners who have already learned the rules of the game in the domestic market and know the behavior of the Russian consumer. Third, the issues of ﬁnancing and monetary optimization. The owners of small companies are not always able to accurately calculate the amount of entry and costs of the foreign market, as well as to anticipate all the emergency situations that may occur with business in a foreign country. Most entrepreneurs consider it risky to apply for bank credits for the development abroad secured on the current turnover of the company or the real estate. Business, as a rule, needs a speciﬁc router, which will contain step-by-step instruc‐ tions, allowing to understand where to turn for assistance with their problems, what optimal ﬁnancing mechanisms exist, where the primary analysis of the market can be received, which entry points are the most appropriate ones in this country. In addition to the factors mentioned above, there are also other elements to be considered, the use of which will further improve the eﬃciency of export activities. However, the speciﬁcs of small and medium-sized businesses associated with their low resource availability and increased risk component of their activities due to the instability of market positions makes independent access to foreign industrial markets the least attractive and practically inaccessible form of their external economic activity. A much more promising alternative is their participation in the processes of inter‐ national cooperation and integration, as it allows to bear the minimum cost of eﬀorts and resources with tangible results and the distribution of risks between the participants of the international integration or cooperation association of business entities. At the same time, infrastructure support for international integration and cooperation of small and medium-sized businesses is of paramount importance (Vorontsova et al. 2019). Among the possible directions of development of international cooperation of small and medium-sized businesses, it is advisable to identify the following, which should make the ecosystem of promotion to foreign markets: (1) Strategic export projects for small and medium-sized businesses. It is not appro‐ priate to dissipate eﬀorts to support exports of small and medium-sized enterprises, which, due to the lack of competencies and resources, cannot independently export their own products. Small and medium-sized businesses need a project approach implemented in developed countries. It is proposed to form large export regional and interregional strategic projects, which focus pool of co-executors from small and medium-sized companies. The government of the region creates sub-programs of individual support for export strategic projects. (2) Export lobbying. Currently, many companies do not have the desire and expressed intention to promote their products for export. It is necessary to increase conﬁdence in the authorities’ export promotion eﬀorts. It is necessary to develop and imple‐ ment the image: “export-oriented government of the region”. (3) Organizational support for exporters. It is necessary to create and update he register of reliable exporters.

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(4) Formation of regional sales oﬃces in the partner countries. With the ineﬃcient operation of existing Russian trade missions, the Stavropol region can form its own oﬃces in the most important partner countries, the purpose of which is to establish a direct dialogue with contractors, organization of information exchange, reduction of bureaucratic procedures. (5) Formation of the regional electronic platform for the export of manufactured prod‐ ucts. This measure should be aimed, ﬁrst of all, at the creation of a sustainable additional sales channel for producers. This platform will make it easier to ﬁnd suppliers for large companies that form export consignments. This will stimulate the creation and development of electronic logistics. (6) Development of the regional system of ﬁnancing of export projects. The develop‐ ment of a long-term ﬁnancial planning system to ensure a suﬃcient level of ﬁnancing for export projects will ensure the connection to the ﬁnancing of federal development institutions and commercial banks. The main task of the ﬁnancial system is to build a ﬁnancial support procedure for the full export cycle. (7) Marketing of export destinations. This direction involves the formation of a constantly updated package of proposals for regional producers. With the changing in market conditions and the emergence of new export channels, the analysis of demand of target groups in the countries purchasing export products, these proposals should be adjusted, which will allow to organize the work to meet the needs of the enterprises of small and medium businesses for reliable information, reﬂecting the market attractiveness. The implementation of the proposed measures will contribute to the development of export activities of small and medium-sized businesses, will increase the number of competitive enterprises of this type, the amount of tax revenues from their activities, create new jobs, and involve the population in business. However, these beneﬁts can be derived if producers can establish reasonable objectives for export activities, choose the most appropriate forms of export cooperation and set mandatory requirements for them‐ selves and the partners. Having identiﬁed the main factors that contribute to eﬀective export cooperation, each of the partners must make every eﬀort to ensure that the positive impact of these factors is fully used to achieve the goals of joint export activities.

3

Conclusions/Recommendations

The participation of small and medium-sized enterprises in joint export activities oﬀers them a number of advantages and beneﬁts. However, these beneﬁts can be obtained if producers establish reasonable objectives for export activities, choose the most appro‐ priate forms of export cooperation and establish mandatory requirements for themselves and their partners. As the export practice shows, for this purpose it is necessary ﬁrst of all to approach reasonably the formation of the supply of goods to foreign markets, take into greater consideration the needs of consumers abroad and, if necessary, to adapt the goods to speciﬁc needs, carefully select intermediaries, ensuring timely delivery of goods in the required quantity at an acceptable time and place, to carry out an evidencebased price policy in each of the foreign countries, to develop and implement strategies

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of international marketing at the appropriate level, and depending on the relevance to use or ﬁnd other ways of entering foreign markets. The company may start its export activities by chance or consider such activities more appropriate as a result of the progressive development of its business. The ﬁrst option is possible when the company unexpectedly receives an order from a domestic enterprise or a foreign company to sell them in overseas markets. In the second case, the ﬁrm itself initiates the withdrawal of its goods to foreign markets. The motive for such actions may be to obtain additional proﬁt by increasing the volume of sales of goods. The motivation for the company to enter the foreign market may be the expedi‐ ency of extending the life cycle of the goods. Finally, the ﬁrm may try to re-focus towards a separate external market to move away from high levels of competition in the domestic market. The motivation is not in itself enough to ensure the eﬀective export activity of the company. Therefore, one of the main tasks of the company is to use all the advantages inherent in exports.

References About the U.S. Small Business Administration (SBA). https://www.sba.gov/category/navigationstructure/about-sba. Accessed 1 Feb 2018 Federal customs service/Foreign trade of subjectsof the Federal district. http://sktu.customs.ru. Accessed 12 Mar 2018 Ansoﬀ, I.H.: Conceptual underpinnings ofsystematic strategic management. Eur. J. Oper. Res., 18 (1985) Ansoﬀ, I.H.: Strategic Management. Business & Economics, p. 236. Wiley, New York (1979) Lopatina, E.U., Tselih, C.N., Chugunova, E.V., Ostrovskaya, V.N.: Managing risks of venture entrepreneurship. Asian Soc. Sci. 10(23), 191–198 (2014) Popkova, E.G., Bogoviz, A.V., Pozdnyakova, U.A., Przhedetskaya, N.V.: Speciﬁcs of economic growth of developing countries. Studies in Systems, Decision and Control (2018) Popkova, E.G., Bogoviz, A.V., Ragulina, Y.V., Alekseev, A.N.: Perspective model of activation of economic growth in modern Russia. Studies in Systems, Decision and Control (2018) Troshina, E.P., Mantulenko, V.V., Shaposhnikov, V.A., Anopchenko, T.Y.: Speciﬁc features of entrepreneurial departments management in Russian companies. Int. J. Environ. Sci. Educ. 11(4), 6837–6852 (2016) Troyanskaya, M.A., Ostrovskiy, V.I., Shustova, S.V., Shchinova, R.A.: Marketing aspects of cluster management in retailing sector. Contributions to Economics. № 9783319454610, pp. 73–79 (2017) Vorontsova, G.V., Dedyukhina, I.F., Kosinova, E.A., Momotova, O.N., Yakovenko, N.N.: Perspectives of development of managerial science in the conditions of information society. Advances in Intelligent Systems and Computing, vol. 726, pp. 980–988 (2019)

Issues Related to Foreclosure of Pledged Property in Russia: Theory and Practice Olga N. Kichalyuk ✉ , Oksana A. Morozova, Lyudmila A. Spektor, and Aleksandr V. Sukhanov (

)

Institute of Service Sphere and Entrepreneurship (Branch) of Don State Technical University, Shakhty, Russia [email protected]

Abstract. A comprehensive legal analysis of the Institute of pledge legal rela‐ tions has been carried out in the article. The procedure for foreclosure of pledged property has been discussed. Proposals aimed at legislative improvement in the abovementioned area and practice in its application have been elaborated. Keywords: Pledge · Legal relations · Pledge holder · Thing · Pledgor Foreclosure

1

Introduction

It is commonly known that the Institute of pledge legal relations gives rise to two types of relations governed by law: relations between the pledge holder and the thing, and relations between the pledgor and the pledge holder. However, according to the analysis of judicial practice in cases of various types of pledge legal relations, the pledge holder is central ﬁgure in bail bond relations. When it comes to methods of securing obligations, let’s deﬁne the main of them. Pursuant to Article 349 of the Civil Code of the Russian Federation, there are two main methods of securing obligations: – judicial foreclosure of pledged property; – extrajudicial foreclosure of pledged property. The general rule for securing obligations is judicial protection of rights of the pledge holder; however, the law allows for the introduction of changes into this rule by agree‐ ment of the parties almost at any time (both directly during the conclusion of the contract of pledge and at any time thereafter). Each of these methods has its own rules, terms and nuances that will be considered and discussed throughout this paper. When we simulate the composition of pledge in practice, we may notice that contem‐ porary legislation tries to protect the interests of the pledgor, which causes the possibility of preventing negative consequences for him. This saying is conﬁrmed by the fact that the pledge holder cannot unreasonably appropriate the pledged property. The goal of research consists in comprehensive study of pledge legal relations, methods of securing obligations on them, as well as comparative law analysis of

© Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 421–431, 2019. https://doi.org/10.1007/978-3-030-00102-5_45

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legislative instruments in the area of pledge legal relations with a view to identifying and trying to solve the problems related to their use. The target goal requires solving the following tasks: – study and analyze the legal framework of pledge; – examine the essential terms of the conclusion of the contract of pledge, its forms and registration procedure; – study the basic methods of promotion and protection of interests in pledge legal relations; – carry out a legal analysis of legislation regulating the securing of particular types of pledge, identify and try to solve the problems that arise in the said area. The object of research are pledge legal relations associated with foreclosure of pledged property. The subject of research are regulatory legal acts, study materials and academic liter‐ ature, as well as case materials addressing the issues of pledge legal relations in general and relating to foreclosure of pledged property in particular.

2

Research Data and Methods

Such sources as regulatory legal acts, case material, and academic literature served as the data base of research. The issues relating to the procedure for foreclosure of pledged property were directly or indirectly the object of research of such civilist scholars as Baron, Y., Gantover, L.V., Ioﬀe, O.S., Pokrovskiy, I.L., Khvostov, V.M., et al. The following methods of scientiﬁc knowledge were used during the research: anal‐ ysis, synthesis, method of comparative legal studies, historical and legal method, logical method, system structural method and speciﬁc statistical method.

3

Findings

3.1 Historical and Legal Characteristics of Pledge Legal Relations Roman private law plays a huge role in the formation of the modern legal institutes. The Institute of pledge legal relations is no exception. The liability of the obligor under obligation which is conﬁrmed by the “responsibility of the thing”, constitutes the basis of the pledge. Thus, after the primary obligor has pledged to the creditor, the right in things, i.e. the right in property of another person arises. For example, at the early stages of the development of legal lien, in the transaction, the subject of the pledge was trans‐ ferred to the ownership of the creditor. On the other hand, mutual rights and obligations were arising in the pledge holder and lender and the pledging obligor that followed from the contract of pledge. In case of nonfulﬁllment of primary obligation by the obligor, he must have pledged the property to the creditor, while the latter had the right to demand and obtain at law the subject of pledge illegally withheld by the obligor. If the obligor was settling primary obligation, the creditor was to return the subject of pledge to him.

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Thus, pledge had dual legal nature during the period under consideration. Its real and legal nature consisted in the right of the creditor for the subject of pledge. Among other things, the property nature of the pledge was determined by the form of protection of pledge legal relations. Thus, according to Fragment 17, Unit 1, Volume 20 of the Code of Justinian, claiming a pledge granted the creditor the right to commence a real action. According to Fragment 18, Unit 13, Volume 8 of the Code of Justinian, claiming a pledge should have been real and legal in nature. At the same time, in the context of Fragment 4, Unit 1, Volume 20 of the Code of Justinian, a pledge which is eﬀected by means of agreement must be associated with securing some claim. That is, the contract of pledge was treated as coordinated expression of will (agreement) of the two adverse parties aimed at establishing the very legal bond which constitutes the scope of obligation (pledge legal relations). Pursuant to pledge transaction (“ﬁducia”), the obligor transferred the subject of property into the ownership of creditor as a security for primary obligation. In order to secure obligations of the pledging obligor, the state gave the latter a possibility to ﬁle a claim against the creditor regarding the return of pledged object which is unreasonably held by him (Baron 2011). Having considered the fundamental principles and legal nature of the pledge in Roman private law, let’s carry out the historical analysis of development of pledge legal relations in Russian law. On May 29, 1992, the Law of the Russian Federation “On Pledge” came into eﬀect. After several years, a serious regulatory problem arose: in fact, two parallel acts, the Law on Pledge 1992 and the Civil Code of the Russian Federation of 1994, qualiﬁed for regulation of the issues of pledge legal relations. In 1996, it was acknowledged at the level of judicial practice that the Law On Pledge of 1992 de facto became invalid with the adoption of the Civil Code of the Russian Federation. In addition, a more detailed resolution of pledge legal relations in our country was inﬂuenced by the ﬁnancial crisis of 2008 which promoted the reforming of the institutes of legal lien. The ﬁrst reform was associated with the adoption of Federal Law No. 306-FZ “On Introducing Amendments to Certain Legislative Acts of the Russian Federation Regarding the Improvement of the Procedure for foreclosure of pledged property” dated December 30, 2008, while the second reform was associated with the adoption of Federal Law No. 405-FZ “On Introducing Amendments to Certain Legislative Acts of the Russian Federation Regarding the Improvement of the Procedure for foreclosure of pledged property” dated December 6, 2011. Resolution No. 58 of the Plenum of the Supreme Arbitration Court of the Russian Federation of July 23, 2009 “On certain issues relating to discharge of claims of the pledge holder in case of bankruptcy of the pledgor” and No. 10 “On certain issues relating to application of legislation on pledge” dated February 17, 2011, was due in no small part to it. This was not the end of the changes in the area of the pledge of legal relations. During the period between 2008 and 2014, the third reform of the legal lien was carried out, which ended in the adoption of Federal Law No. 367-FZ “On Intro‐ ducing Amendments to Part One of the Civil Code of the Russian Federation and repeal

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of certain legislative instruments (provisions of legislative instruments) of the Russian Federation” on December 21, 2013. The analysis of research of practice of pledge disputes demonstrates that pledge in Russia is a struggle, and the pledge holder is the leading ﬁgure in it. We can observe the struggle between the pledge holder and the pledgor, between the pledge holder and other creditors of the pledgor, struggle between the pledge holder and the buyers of pledged property, struggle between the pledge holder and the organizers of the bidding process for selling the pledged property, struggle between the pledge holder and the bankruptcy creditor, struggle between the pledge holder and the revenue bodies. It is in pledge where the escalation of the age-long private conﬂict is manifested in the most vivid manner conﬂict between the creditor and the obligor. After the humanization of private law and the abandonment of the practice of direct physical action of the creditor on the person of the obligor (debt pit, pledging, etc.), the pledge remained the main and the most sureﬁre way for the creditor to obtain fulﬁllment due to him from the obligor. The degree of judicial disputes over pledge is always higher than normal: pledgors in most cases try to dispute the contract of pledge on the slightest provocation (even a cant phrase “to shake oﬀ the pledge” appeared), or otherwise put the spoke in the wheels of the “pledge wagon” (making a statement about inadequacy of claims of the pledge holder, about the termination of pledge due to the change of pledged property, about disagreement of essential terms of the contract of pledge, etc.). It seems that the pledgors who do not want to part with the pledged property are the most inventive participants of judicial disputes (Pokrovskiy 2013). The next stage of reform of legal lien was largely the result of the study and gener‐ alization of practical techniques that are used in the struggle for pledge both by the pledgors and by the pledge holders. It appears that the task of this stage of reform of legal lien speciﬁcally consisted in, on the one hand, formalizing the solutions to certain problems of legal lien found in case material (primarily of arbitration courts) in legis‐ lation, and on the other hand - establishing certain main lines which would promote further development of pledge. Moreover, such development should be ensured not so much by changing the legislative acts, but through judicial practice and contractual practices of the banks. However, the development of pledge legal relations shows that legislative innovations in the area of pledge are still to come and they will primarily deal with the issues of regulation of mortgage services in the relevant section of the Civil Code of the Russian Federation and Federal Law No. 102-FZ dated July 16, 1998 “On Mortgage (Mortgage of Real Estate)”. 3.2 Foreclosure of Pledged Property: Civil Aspect Pursuant to Paragraph 1, Article 349 of the Civil Code of the Russian Federation, the process of foreclosure of pledged property is carried out on the basis of a court decision, unless an agreement between the pledgor and the pledge holder provides for extrajudicial procedure for foreclosure of pledged property. Pursuant to Paragraph 4, Article 346 of the Civil Code of the Russian Federation, in case of foreclosure of pledged property, rights in things, tenant rights, other rights that arose out of transactions on the provision of pledged property by the pledgor into the

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ownership of and for use by third parties without the consent of the pledge holder, shall be terminated since the moment when court decision on foreclosure of pledged property comes into legal force, and in case of application of extrajudicial procedure - since the moment of origin of the right of ownership for pledged property with its purchaser. When Law No. 367-FZ was prepared, in the original version the positions of the pledge holder with the use of extrajudicial procedure for foreclosure of pledged property were largely strengthened due to the infringement of the rights of citizens who act as creditors. However, the following provisions were excluded from its content in the second and third versions of this Law (which means they were not included in the text of the Civil Code of the Russian Federation): – the agreement on extrajudicial foreclosure of pledged property owned by citizens can only be concluded after the origin of the grounds for foreclosure; – the agreement on extrajudicial foreclosure of pledged property owned by citizens must be concluded before a notary public; – foreclosure of pledged property of a citizen with notary’s executory endorsement can be made not until the origin of the grounds for foreclosure subject to conclusion of a notarized contract of pledge and notarization of agreement on foreclosure of pledged property concluded after the origin of the grounds for foreclosure. A question used to frequently arise in judicial practice of whether the pledge holder who has concluded an agreement with the pledgor on extrajudicial foreclosure of pledged property has the right to turn to the court with a claim for foreclosure of pledged property. Today, the Civil Code of the Russian Federation (Paragraph 1, Article 349) answers this question positively provided that additional expenses associated with judi‐ cial foreclosure of pledged property will be borne by the pledge holder, unless he proves that extrajudicial foreclosure of pledged property was not eﬀected due to the actions of the pledgor or third parties. In addition, the new legal provisions emerged in the Civil Code of the Russian Federation, aimed at ﬁlling a gap in legal regulation of procedure and time frames for extrajudicial foreclosure of pledged property. Thus, a pledge holder or a notary (in case of foreclosure of pledged property with notary’s executory endorsement) must send to the pledgor, to other pledge holders known to him, as well as to the obligor (if a third party acted as the pledgor) the notice of the beginning of foreclosure of pledged property. The actual disposal of pledged property can be carried out no sooner than in 10 days from the moment of receipt of abovementioned notice from the pledge holder (notary) by the pledgor (obligor), unless other time frames is provide for by law or agreement between the pledge holder and the pledgor. And in the cases provided for by banking legislation, the process of disposal of a pledged property can be carried out even before the expiry of the 10-day term with substantial risk of a signiﬁcant reduction in the value of pledged property as compared to its selling price speciﬁed in the notice. As for disposal of pledged property in case of judicial foreclosure of pledged prop‐ erty, it must be carried out through the sale of pledged property by public bidding. However, even in this case, such forms of disposal of pledged property as its abandon‐ ment with the pledge holder or sale to other party (without bidding) subject to agreement between the pledgor conducting entrepreneurial activity and the pledge holder.

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However, we cannot clearly understand the legislative wording of the bidding (public bidding) rules for the purpose of disposal of pledged property. There were certain rather concise legal provisions on the consequences of declaring the bidding process void in the prior version of Article 350 of the Civil Code of the Russian Federation. In particular, provision was made that if the bidding process is declared void, the pledge holder under the agreement with the pledgor has the right to purchase pledged property and count his claims secured by pledge towards the purchase price. The current version of Article 350.2 of the Civil Code of the Russian Federation has retained the provisions on the grounds for declaring the bidding process void and on the consequences of such actions of the bidding process organizer. Besides, it represents all the rules regulating the retainment of pledged property by the pledge holder. In addition to simple and clear rules regarding the consequences of declaring the bidding process and repeat bidding process void and regarding the abandonment of pledged property with the pledge holder in Article 350.2 (Paragraph 3) of the Civil Code of the Russian Federation, new, rather doubtful provisions have emerged, none of which have been discussed by the experts before. Provision is made that the pledge holder and the pledgor shall have the right to participate in bidding held on the basis of a court decision or during extrajudicial foreclosure of pledged property. If the pledge holder is the winning bidder, the purchase price payable to them is counted towards the repayment of secured obligation. Moreover, these rules shall also apply in case of retainment of pledged property by the pledge holder during extrajudicial foreclosure of pledged prop‐ erty. The question is, why the pledge holder should participate in the bidding process (in the form of an auction) if he can make provision for such form of disposal of pledged property as its retainment at its originally determined cost (that is, the initial selling price in case of bidding) as early as during the conclusion of the contract. And if the pledge holder does takes part in the bidding process and turns out to be the winning bidder, who will meet the bidding expenses if the purchase price payable to them is counted towards the repayment of secured obligation? In our opinion, participation of the pledgor in the bidding for the acquisition of own property (at the auction price), when he has the opportunity to simply discharge an obligation secured by a pledge, and terminate a pledge in doing so, appears to be groundless. 3.3 Special Aspects of Judicial and Extrajudicial Foreclosure of Pledged Property The general rule is that the rights of the pledge holder are protected in a judicial proce‐ dure; however, the law allows for the introduction of changes into this rule by agreement of the parties almost at any time (both directly during the conclusion of the contract of pledge and at any time thereafter). The provisions according to which foreclosure of pledged property can only be eﬀected on the basis of a court decision are contained in Paragraph 3 of Article 349 of the Civil Code. The list of cases of judicial foreclosure of pledged property is not exhaustive, since the law can provide for other cases as well. This is provided, inter alia,

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by Paragraph 6 of Article 349 of the Civil Code of the Russian Federation, Paragraph 5 of Article 55 of the Law on Mortgage, Paragraph 1 of Article 18 of the Law on Bank‐ ruptcy, Paragraph 1 of Article 15 of the Law On Mortgage Securities. In addition, the clause on extrajudicial foreclosure of pledged property cannot be contained in the contract of pledge of share (part of share) in the charter capital of the limited liability company concluded by one of the members of the company who is an individual (including an individual entrepreneur) with the pledge holder who is not a member of the company, because such a pledge is only possible with the consent of the general meeting of shareholders of the company (Paragraph 1 of Article 22 of the Law on Limited Liability Companies). A general prohibition has been imposed on extrajudicial foreclosure of pledged property, if it is the only dwelling beneﬁcially owned by a citizen (Subparagraph 1, Paragraph 3, Article 349 of the Civil Code of the Russian Federation). This rule repeats the provisions of Article 55 of the Law on Mortgage which contain a wide range of cases of extrajudicial foreclosure. According to the Civil Code of the Russian Federation, situation when the citizen concluded an agreement on extrajudicial foreclosure already after the origin of the grounds for foreclosure of pledged property is an exception. The agreement between the pledge holder and the pledgor on extrajudicial procedure for foreclosure of pledged property can be placed in the form of a separate document that the law-maker calls the agreement on extrajudicial foreclosure of pledged property. Apparently, such a documented agreement should be primarily claimed in the pledge, arising as a result of the statutory reference (legal pledge). Such agreement can also be included in the text of the contract of pledge as an independent term of the contract (Paragraph 3 of Article 349 of the Civil Code of the Russian Federation). Plenum of the Supreme Arbitration Court of the Russian Federation has assessed the agreement between the pledgor and the pledge holder on extrajudicial procedure for foreclosure of pledged property violating the prohibition on extrajudicial foreclosure of pledged property as void transaction pursuant to Article 168 of the Civil Code of the Russian Federation which was in eﬀect at the time of its conclusion as an insigniﬁcant transaction. Such an agreement can not give rise to any legal consequences; therefore, foreclosure of pledged property can only be eﬀected in a judicial procedure. If the clause on extrajudicial foreclosure of pledged property is included in the text of the contract of pledge, it must also be treated as contradicting to the provisions of the law and having no consequence in law. The property which was pledged pursuant to such agreement is subject to judicial foreclosure. Please note that supreme judicial authority, classifying null illegal term of the contract of pledge and deﬁning the consequences of nullity of such term, does not refer to the provisions of Article 180 of the Civil Code of the Russian Federation (“The consequences of the invalidity of a leg of a transaction”) at that; apparently, taking into account the diﬃculties that may arise in practice when the relevant provisions are applied. Moreover, the abovementioned legal stance of the Supreme Arbitration Court of the Russian Federation should be applied to cases when at the moment of conclusion of agreement on extrajudicial foreclosure it did not contravene the law, but at the time of

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the origin of the grounds for foreclosure (e.g., arrears of the obligor) extrajudicial foreclosure will contravene it. Agreement on extrajudicial foreclosure can be concluded at any time (Paragraph 3, Article 349 of the Civil Code of the Russian Federation), i.e. both concurrently with the conclusion of the contract of pledge and after its conclusion. The agreement between the pledgor and the pledge holder on extrajudicial foreclo‐ sure of pledged property containing in a separate document is made in the same form as the contract of pledge. In other words, if the contract of pledge was concluded before a notary public, the agreement to it (existing in the form of a separate document) must be notarized as well. This legal stance of the Supreme Arbitration Court of the Russian Federation is apparently based on the idea that the agreement on extrajudicial foreclosure of pledged property which was concluded apart from the contract of pledge must be treated as the agreement on modiﬁcation of contract, which pursuant to Paragraph 1 of Article 452 of the Civil Code of the Russian Federation must be concluded in the same form as the contract to be modiﬁed. In certain cases, the law establishes the following: in order for an agreement on extrajudicial foreclosure of pledged property to have eﬀect, there should be a notarized statement of consent of the pledgor for the conclusion of such an agreement. There are two such cases: the ﬁrst is stipulated by Paragraph 4 of Article 349 of the Civil Code of the Russian Federation (“If the pledgor is an individual, the agreement is concluded subject to availability of notarized statement of consent of the pledgor for extrajudicial procedure for foreclosure of pledged movable property”), while the second is stipulated by Paragraph 1 of Article 55 of the Law On Mortgage (“The agreement shall be concluded subject to availability of notarized statement of consent of the pledgor for extrajudicial procedure for foreclosure of pledged property”). Moreover, in the second case, the law-maker mentions that such consent is given by the pledgor prior to the conclusion of the mortgage contract. However, Plenum of the Supreme Arbitration Court of the Russian Federation did not agree with the restrictive interpretation of this legal provision (apparently referring to the “healing” of the defect in the legal structure by the subsequent actions of the parties to the transaction or third parties), indicating that, both in the ﬁrst case and in the second case, the consent can be given both before and after the conclusion of the contract of pledge. Provision has been made for a special tool for the protection of rights of the pledgor - the possibility of initiation of legal action with a claim for termination of extrajudicial procedure for disposal of pledged property because of the fact that it violates his rights or entails a substantial risk of such violation. In such a case, the court can terminate the extrajudicial foreclosure of pledged property and deliver a judgement on foreclosure of pledged property through the sale of pledged property by public bidding. This rule was perceived by the law-maker from judicial practice.

4

Discussion

One of the main theoretical problems of legal lien is the determination of its nature. It has been established that there are two approaches to what pledge represents.

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According to the first approach, the pledge is treated as security interest agreement, i.e. binding relations between the pledgor and the pledge holder. The second approach involves recognition of the pledge as the right in things, the content of which is the power of the creditor to predominantly appropriate the value of the pledged object before other creditors. For the last 20 years in Russian civil law, the pledge was construed more as a contract. It is this fact that the main problems of judicial practice in pledge disputes are seemingly associated with. The courts misunderstood the fact that the pledge is a limited proprietary right in nature, thus they handled the causes on the basis of approaches accepted in law of contract, which was absolutely unacceptable for pledge holders. Such state of things is in no small measure related to the location of the rules that regulate the pledge. The thing is that in preparation of the current Civil Code of the Russian Federation of 1994, the law-maker, unfortunately, took the approach of the Civil Code of the Russian Soviet Federated Socialist Republic of 1964, having inserted the rules of the pledge into Section “Law of Obligations”. Apparently, the position of the makers of the Civil Code of the Russian Soviet Federated Socialistic Republic of 1964 was associated with the fact that Section “Right in things” which was present in the Civil Code of the Russian Soviet Federated Socialistic Republic of 1922 and contained the rules of the pledge, was discarded during recodiﬁcation, and it was necessary to “place” the actual rules of the pledge somewhere. Most likely, Section “Law of Obligations” seemed the most suitable to codiﬁers, since pledge is a method of securing of obligations. In the preparation of the project amending the rules of the Civil Code of the Russian Federation on pledge, in particular, a question was raised of whether the entire set of rules of the pledge should be transferred to the updated Section “Right in things”. However, such a radical change in the system of the Civil Code of the Russian Federation was considered inexpedient for reasons of psychological and practical (“everyone already got accustomed to it”) than systemic nature. However, Section “Right in things” of the updated draft version of the Civil Code of the Russian Federation still contains Chapter 20.4 “Real Estate Mortgage”, which contained the rules regulating the mortgage of real estate. The legal nature of state of the creditor whose binding claims are be secured against by distrainment is of the utmost interest. In case of distrainment of property, an insulation of some property out of the property of the mass of the obligor takes place, which, as it were, is intended for the creditor, for creditor’s satisfaction. This is much like a pledge. The further logic of the law-maker also indicates that the rights of the creditor, at the request of whom a distrainment was levied, are very similar to the rights of the pledge holder. One of the most important signs of a pledge is it is the pledge of the following thing, the value of which is necessary to the creditor for satisfaction of his claims. Para‐ graph 2 of Article 174.1 of the Civil Code of the Russian Federation introduces exactly such a construction for the consequences of sale of distrained property. However, following the pledged object is only one of the elements of the composition of legal lien, while the second unavoidable element is the priority of claim of pledged object. One is tempted to ask a question: what will become of distrained property of the creditor, if the obligor or purchaser of distrained property will turn bankrupt? As a general rule, the law protects the active creditors, that is, those who are the ﬁrst to manage

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to obtain the satisfaction of claims with the use of property of the obligor or third party. It can be either the pledge holder or the creditor who managed to distrain the property of the obligor. That’s why Paragraph 5 of Article 334 of the Civil Code of the Russian Federation contains express reference to the fact that the creditor who managed to levy a distrainment upon property has the rights of the pledge holder involved concession of priority to him on legal grounds. Nevertheless, the protection of active and strong creditors in certain cases, particu‐ larly in case of bankruptcy of the obligor, is inferior to the protection of other groups of creditors - involuntary, whose claims are socially important (alimentary creditors, bank depositors, etc.). Finally, the classiﬁcation of pledge claims of the creditor which were distrained, allows solving the problem of competition of secured and unsecured creditors, as well as the problem of possibility of distrainment of pledged property under unsecured claim. Such distrainment has not been accepted up to the present time. However, if one agrees with the fact that distrainment is a peculiar kind of “judicial” pledge, then there are no obstacles for levying a distrainment upon the already-pledged object upon demand of unsecured creditor. In this case, the distrainment will be a subsequent pledge, the holder of which must, in case of nonfulﬁllment by the senior pledge, join the senior secured creditor in the procedure for foreclosure and disposal of property. If this did not happen, a minor pledge, including, apparently, “judicial”, must terminate, since the junior cred‐ itor cannot derogate the claims of the senior creditor. This is appropriate if we admit that the minor pledge will retain and will “burden” the property that is being sold by the senior pledge holder.

5

Conclusions

The Institute of pledge originated as early as in ancient Rome, but its development continues to this day, as evidenced by numerous research activities in this area, as well as regular legislative adjustments of pledge legal relations. Having analyzed the changes in the Russian legislation regulating the Institute of pledge for almost 20 years, we come to the conclusion that changes in certain rules of Paragraph 3 of Chapter 23 of the Civil Code of the Russian Federation were introduced six times, but they were not of an integrated nature. And it was no sooner than on December 13, 2013, the State Duma of the Federal Assembly of the Russian Federation adopted conceptual changes that aﬀected virtually all articles about the pledge. When we examine the Institute of pledge legal relations and foreclosure of pledged property directly, we need to turn to the deﬁnition of a pledge. Thus, pursuant to pledge, the obligee secured by a pledge (pledge holder) shall have the right to receive satisfaction out of the value of pledged property (subject of pledge) in case of non-performance or improper fulﬁllment of this obligation by the obligor, having precedence over other creditors of a person who owns the pledged property (pledgor). While paying special attention to the form of the contract of pledge, its registration, as well as its essential terms, we consider it necessary to legislatively provide for all terms of the contract that deal with its subject, and to establish the bidding procedure. In case of nonfulﬁllment

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or improper fulﬁllment of obligations under the contract of pledge, there arises the right for foreclosure of pledged property. The rule of Article 349 of the Civil Code of the Russian Federation provides for two methods of foreclosure of a pledged property: judicial foreclosure of pledged property and extrajudicial foreclosure of pledged prop‐ erty. The process of foreclosure of pledged property is carried out on the basis of a court decision, unless an agreement between the pledgor and the pledge holder provides for extrajudicial procedure. If the extrajudicial procedure for foreclosure of pledged prop‐ erty is stipulated in agreement between the parties, the pledge holder shall have the right to present the claim of foreclosure at court. In that case, additional expenses associated with judicial foreclosure of pledged property shall be borne by the pledge holder, unless he proves that foreclosure of pledged property or disposal of pledged property pursuant to agreement on extrajudicial foreclosure was not eﬀected due to the actions of the pledgor or third parties. The main problem of theory and practice of pledge legal relations is the problem of determination of nature of the pledge. For the last 20 years in Russian civil law, the pledge was construed more as a contract. It is this fact that the main problems of law enforcement practice in pledge disputes are seemingly associated with. The courts ignored the fact that the pledge is a limited proprietary right in nature, thus they handled the causes not in favor of pledge holders on the basis of generally accepted approaches in law of contract. Following the results from the analysis of the rules of pledge legal relations, it may be concluded that there are a lot of problems associated with legal regulation of disposal of pledged property for the moment. Nevertheless, legal fundamentals of the pledge cannot be called unresolved, whereas, in our opinion, only speciﬁc adjustments of rules regulating the issues relating to foreclosure of pledged property are required.

References Baron, Y.S.: Roman Civil Law System, No. 4(2), pp. 110–114. Gumanitarnaya Akademiya Publishing Center (2011) Pokrovskiy, I.A.: The main problems of civil law. Law and order in contemporary society, No. 1, pp. 35–39 (2013) Civil Code of the Russian Federation (1994) Law On Mortgage (Mortgage of Real Estate). Federal Law of the Russian Federation No. 102FZ dated July 16, 1998 (1998) Bankruptcy Law. Federal Law of the Russian Federation No. 127-FZ dated October 26, 2002 (2002) Law Concerning Mortgage-Backed Securities. Federal Law of the Russian Federation No. 152FZ dated November 11, 2003 (2003) On certain issues of application of legislation on pledge. Resolution No. 10 of the Plenum of the Supreme Arbitration Court of the Russian Federation dated February 17, 2011 (2011) Concerning the case of testing of the constitutionality of provision of Paragraph Two of Part One of Article 446 of the Civil Procedural Code of the Russian Federation in connection with actions of citizens Gumerova, F.Kh. and Shikunov, Y.A.). Ruling of the constitutional court of the Russian Federation No. 11-P dated May 14, 2012

Fundamentals of Russian Economic Policy for Increasing Competitiveness Alexey M. Tsikin ✉ and Marina L. Alpidovskaya (

)

Financial University Under the Government of the Russian Federation, Moscow, Russia [email protected]

Abstract. Chaotization of the external environment, financial and techno‐ logical restrictions imposed on Russia, stagnation of the economy necessi‐ tates the formation of a new strategy for increasing the competitiveness of the Russian economy. The purpose of this study is to form the basis for long-term economic growth, ensuring self-sufficiency of the economy and improve‐ ment the welfare of the population with the development of appropriate poli‐ cies. To achieve this goal, it is proposed to use an organizational and economic scheme based on the solution of three tasks: the de-offshorization of the Russian economy, the implementation of its controlled openness and the support of domestic manufacturers. As a result of the analysis of the first two elements, it is established that their implementation is impossible without prior introduction of the functioning support for national producers. To imple‐ ment it, it is necessary to impact on three components: support the bearing branches of the national economy, increase the efficiency of resource factors using and create favorable conditions for the activities of small and mediumsized businesses. The result of the work is scientifically grounded recommen‐ dations on increasing the competitiveness of the national economy aimed at solving its most acute issues. The results of the work can be used to develop state economic policy both for the entire national economy and for individual industries. Keywords: Economic policy · Competitiveness · National economy De-oﬀshorization · Self-suﬃciency JEL Classiﬁcation Codes: E61 · O21 · F52 · F51

1

Introduction

The post-Soviet period of Russia’s recent history was marked by a series of radical economic reforms aimed at liberalizing the economy, which was supposed to lead to an increase in the well-being of the population. Substantial structural changes, which envisaged a reduction in the state’s share in the economy and large-scale privatization, were made. However, the results obtained are cardinally contradictory to the planned ones and cause many problems of the modern Russian economy (Ershov and Zimenkova 2016).

© Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 432–442, 2019. https://doi.org/10.1007/978-3-030-00102-5_46

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In connection with the foregoing, increasing the competitiveness of domestic goods and producers is one of the main reference points in the development of Russian economic policy. The current level of competitiveness of the Russian economy is unac‐ ceptably low, but it is undeniable that there exist major factors of competitiveness and the possibility of their full development.

2

Methodology

Increasing the competitiveness of the Russian economy at all levels requires the use of rational methods that take into account the current state of the economic system. To solve this issue, it is proposed to use the adaptation scheme for developing the compet‐ itiveness of domestic goods and organizations on the basis of ensuring the self-suﬃ‐ ciency of the Russian economy (Fig. 1). State economic policy

Implementation of controlled economy openness

De-offshorization of the economy

Support for domestic producers

Factors of the Russian economy’s competitiveness

Intensity of competition in the domestic market

Indicators of the economy competitiveness

External economic competitiveness

Self-sufficiency of the economy

Clusters of competitive enterprises

Fig. 1. Schematic diagram for increasing the Russian economy’s competitiveness

To analyze the current share of oﬀshore jurisdictions in the Russian economy, the data of the Boston consulting group, the Central Bank of Russia, the National Bureau of Economic Research of the USA, as well as the publication of leading experts on this topic were used. The development of a national program to support domestic producers was carried out using advanced Russian and foreign experience on the basis of analysis of the bearing sectors of the Russian economy, its resource factors and national small and mediumsized businesses.

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Results and Discussion

The de-oﬀshorization of the Russian economy is an urgent necessity today, without which other measures to ensure the self-suﬃciency of the national economy and increase its competitiveness are practically meaningless. Such changes are generated by a complex of external and internal reasons. External reasons are caused by the growing reluctance on the part of the world community of unfair taxation, combating the laun‐ dering of proceeds from crime, and the aggravation of crisis phenomena in foreign jurisdictions. Internal factors are represented by the growing threat of oﬀ-shores for the national budget and economic security of the state, increasing dissatisfaction of the population with a decrease in their standard of living and the strongest social stratiﬁca‐ tion (Heifets 2013). The emergence of the need for de-oﬀshorization of the national economy as one of the main directions for increasing its competitiveness is due to the extremely high share of companies in oﬀshore jurisdictions and centers of proﬁt concentration of Russian companies. According to experts of Boston Consulting Group, the share of the Russian economy in oﬀshore jurisdictions at the beginning of 2015 was 24%, with a downward trend of 22% in 2019 (RBC 2015). However, it should be noted that the recent crisis phenomena with a high degree of probability allow us to assess this forecast as too optimistic. When considering the structure of private savings, the current situation appears even more negative. According to independent data of the National Bureau of Economic Research of the US, Russian citizens keep on oﬀshore accounts an amount corresponding to three quarters of their gross national income (Novokmet et al. 2017). A characteristic external sign of the Russian economy’s oﬀshorization is the dynamics of capital outﬂow from the country (Fig. 2). Almost throughout the post-Soviet

100

50

0

-50

-100

-150

-200

Fig. 2. Outﬂow (–)/Inﬂow (+) of capital to Russia for the period 1994-2015, USD billion (CBR 2017).

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period, Russia experienced capital outﬂow from the country with a signiﬁcant increase in intensity during the last crises of 2008 and 2014. The use of oﬀshore jurisdictions by Russian business leads to a decrease in the reve‐ nues of the Russian budget, a “bleeding” of the Russian monetary system and a decrease in the banks resources. Foreign economies, on the other hand, receive an additional source of economic growth. However, more critical is the placement of strategically important companies abroad, which creates a threat to national security and sovereignty. The result of oﬀshorization is Russia’s loss over the past 10 years of 100 trillion rubles of non-produced goods and unformed investments (Glazyev 2014). The main reason for these losses, according to S.Y. Glazyev, is the orientation of the national monetary policy not to solve the problems of economic growth and ensure the compet‐ itiveness of the economy, but to support foreign capital. It should be noted that a number of measures to return Russian capital from oﬀshore have already been undertaken. The most important group of methods is to increase the state’s awareness of “oﬀshore ﬁnancial networks” (Heifets 2009). The main contribution is made by Federal Law No. 382-FZ (FL 382-FZ 2014), which came into force on 01.01.2015. This law introduces the concepts of a “controlled foreign company” and a “controlling person”, which should inform the tax authority of its participation in a controlled foreign company and its proﬁts. For failure to provide this information penal‐ ties are envisaged, in case of establishing the fact of tax evasion – criminal liability. In addition to this act, laws on avoidance of double taxation signed by Russia with more than eighty countries meet the disclosure of oﬀshore schemes and a model agree‐ ment on information exchange, developed on the basis of these agreements (Decree 2010). In accordance with these acts, the state from which the tax information is requested should ﬁnd all possibilities for a substantive reply. In addition, Russia has ratiﬁed the Convention on Mutual Administrative Assistance in Tax Matters, which allows the organization of joint audits of several countries on tax matters and levies funds to pay tax debts in foreign jurisdictions (FL 325-FZ 2014) and the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS, which ratiﬁ‐ cation gives an opportunity to modify all Russian double tax treaties without individual renegotiation and increases Russian tax competitiveness in rapid changing world (Berberov and Milogolov 2017). However, the ﬁnancial statistics (Fig. 2) show that the measures taken for de-oﬀsho‐ rization of the national economy are not enough. Among the most urgent areas conducive to the withdrawal of assets from oﬀshore jurisdictions, it is necessary to emphasize the creation of an atmosphere of rejection in Russian society in general and business in particular to oﬀshore schemes used to minimize taxation and undermine the social func‐ tions of the state; formation of conditions for a productive and complete exchange of tax information in the world community; toughening of administrative and criminal liability for tax evasion; ensure openness and transparency of transactions in the domestic market; improvement on the conditions for doing business in Russia, including economic and political decisions. However, it is impossible to achieve de-oﬀshorization of the Russian economy without eliminating the fundamental cause of its emergence. S.Y. Glazyev considers the traditionally mentioned reasons for the oﬀshorization of Russia (bad business

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conditions, poor investment climate, underdeveloped stock market, imperfect legisla‐ tion, poor judicial system and property protection) are false. The main reason for oﬀshoring is the competitive advantages that Russian businesses receive when they leave for foreign jurisdictions. In this connection practically every Russian organization in the process of its development is forced to use oﬀshore schemes (Glazyev et al. 2013). Thus, a true de-oﬀshorization of the Russian economy is impossible without a program of support to domestic producers, developed taking into account national stra‐ tegic interests, which should clearly establish the criteria and level of support for indi‐ vidual (primarily import-independent and high-tech exports) branches of the national economy, on the following principles (Sorokin 2014): – increase in the volume of production of goods and services with high added value and improve the eﬃciency of the economy; – improvement of the quality of life of the population and growth in eﬀective demand; – ensuring of the economic security, including food, industrial and defense. The modern geopolitical and economic situation dictates the need to apply state inﬂuence, primarily aimed at the qualitative development of the real sector (Morkovkin 2015). In connection with the task of ensuring the self-suﬃciency of the economy and integrating it into the system of the international division of labor as a supplier of hightech products, it is necessary to solve the following main issues: increasing the eﬃciency of resource factors, improving the quality of life of the population and its consumption level, intensifying R&D and implementing their results, optimal use of ﬁnancial resources, stimulating the population to invest free money in the Russian economy, rational attraction of external ﬁnancial sources. Analysis of the Russian economy’s competitiveness has shown that the basis of the economy in Russia is created by the oil and gas industry and industries that ensure the production of low conversion products. Together with other indicators (physical and moral deterioration of ﬁxed assets, utilization of production capacities, etc.), even a slight increase in the share of the agricultural sector is indicative of a de-industrialization of the national economy rather than of an increase in the competitiveness of the economy. In connection with this, it is necessary to reform the sectoral structure of the Russian economy. The eﬀectiveness of the policy of supporting domestic producers is largely deter‐ mined by the priorities chosen. To develop the competitiveness of Russian goods and ﬁrms, increase the level of competition in the domestic market, the most appropriate is the development of organizations that ensure Russia’s import independence, high-tech exports and economic security of the country (Spartak 2016). Such a statement of the program will help to increase the competitiveness of Russian producers, because a decrease in the market share of imported products is possible only if Russian counter‐ parts have not less quality level and not a greater price level. Achieving the required competitiveness of the Russian economy will require an increase in the level of scienceintensive production, which intensiﬁes competition in the domestic market, will promote the eﬀective functioning of the competitive mechanism. As the basic directions of increase of the Russian economy’s competitiveness on the basis of its self-suﬃciency formation it is expedient to allocate:

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– support to the bearing branches of the national economy that can provide the basis for stable economic growth, and the choice of their forms of activity; – increase in the eﬃciency of national resource factors use; – creation of favorable conditions for the activity of small and medium business. The support of the bearing branches of the national economy that can provide the basis for stable economic growth and the choice of their forms of activity is the main element of the state economic policy to increase competitiveness. The current situation and peculiarities of the Russian economic system development testify to the need to use a model that provides external economic competitiveness through the development of clusters – vertically and horizontally integrated competitive ﬁrms. Determination of bearing industries should be based on the potential of their economic development and resource base. As parameters for assessing the potential of industries in terms of the possibility of implementing an innovative cluster model (Monastyrnyi 2006), it is proposed to use the level of demand for the industry’s products, the resource potential, the investment attractiveness, the level of competition, the ratio of the industry exports to GDP. The implementation of the postindustrial model of the Russian economy’s development presupposes a transition to the production of scienceintensive high-tech goods and services, while a non-price form of competition, based on the desire to improve the quality of products, is preferable (Rusanovski and Babayt‐ seva 2014). Thus, the most important for the development of the Russian economy are manufacturing industries (Mezentseva 2015). Organizations that provide world leadership should use expanded state ﬁnancial support in the form of developing and implementing federal target programs, the creation of specialized companies wholly owned by the state (for example, PJSC “United Aircraft Corporation”), the formation of state-controlled structures to support priority projects (for example, State Corporation “Rosatom”, JSC “Rusnano”). The created state corpo‐ rations should invest in the development of new goods and services not only their own funds, but also actively attract investors’ funds to science-intensive industries (for example, through venture ﬁnancing). However, state companies do not always show high economic eﬃciency (Megginson and Netter 2001). In this regard, for a long-term development of self-suﬃciency and competitiveness of the economy, it is necessary to choose a basic scenario: increasing the eﬃciency of spending public funds by refraining from direct ﬁnancing of these companies or continuing their support, which means a decrease in the eﬃciency of the funds use. Similar measures of state support should be used for industries that ensure the import independence of the Russian economy. It should be noted that for speciﬁc sectors such target programs have been developed and are being implemented (FTP 2011). The level of state support of socially signiﬁcant branches of the economy does not always correlate with the indicators of economic eﬃciency of their activities (Novose‐ lova and Efremov 2015). The task of the state economic policy in the ﬁeld of support of socially important branches should consist in gradual withdrawal from direct budg‐ etary ﬁnancing and transition to attraction of private investors’ funds. To the bearing branches of the Russian economy, primarily those in need of state support, it is advisable to include agriculture, the defense industry, the chemical industry, and machine building. Their development must be carried out according to the cluster

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principle, which requires appropriate decisions of the state economic policy (Alpidov‐ skaya and Tsikin 2017). Studies of foreign authors show an ambiguous inﬂuence of resource factors on the competitiveness of economies (Arezki and van der Ploeg 2007). At the same time, there is no doubt that a competitive state should use natural resources on an equal basis with other factors. The rejection of the peripheral model of the Russian economy’s develop‐ ment implies, in addition to the development of competitive bearing industries, the eﬀective use of available resources. To ensure the self-suﬃciency of the national economy, it is necessary to develop a program to increase the eﬃciency of using the resource potential in the following areas: full use of all raw materials; the development of agriculture and the increase in acreage; increase in the eﬃciency of use (utilization) of the main production capacities; rational use of human resources, attracting workers from the regional labor market (CU, EEAS, etc.); development of science and education, intensiﬁcation of R&D and full-scale implementation of their results; substitution of imported goods in the domestic market, penetration of Russian science-intensive prod‐ ucts with high added value to the world market. The eﬃcient use of natural resources plays a special role for Russia. The mineral and raw materials complex of Russia has high investment attractiveness, including those for foreign investors. In addition, the export of mineral raw materials ensures the inﬂow of currency into the country and is a source of ﬁnancial resources for structural trans‐ formation of the economy. Moreover, the mineral and raw materials complex of Russia is characterized by participation in virtually all spheres of the economy: provision of raw materials for the processing industries of the national economy, formation of a raw material base that meets the needs of agricultural and industrial enterprises; raising the living standards of the population, reducing social tension and increasing employment; development of Russia’s defense industry complex and ensuring its self-suﬃciency; intensiﬁcation of interstate integration processes. During the time of economic reforms carried out after the collapse of the USSR, the management of the mineral and raw materials complex by the state was signiﬁcantly weakened. The result of the ongoing economic reforms was the low competitiveness of this economic sector’s products, low volumes of production and sale of goods, low utilization and eﬃciency of the basic production capacities use (Shirov et al. 2014), actual degradation of the geological industry, stagnation in the mineral raw materials complex as a whole (Fig. 3). Thus, the volume of exploration drilling (ED) with the collapse of the USSR has decreased by almost 10 times and remains at this level. Production drilling (PD) and total drilling (TD) after the fall in the 1990s showed a tendency to increase volumes. Two of the above circumstances led to a signiﬁcant increase in the coeﬃcient of exploration drilling (KED) in the period 1970-2010 (inter‐ polated by the function T on the graph), which indicates a policy of accelerated extraction of mineral resources, not supported by the reproduction of the resource base.

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Fig. 3. The volume of exploratory and production drilling in the USSR and Russia (Bogojavlenskij 2013)

Priority measures to achieve socio-economic and technical-technological goals include the activation of geological exploration and the expansion of the mineral and raw materials base; creation of a system of incentives for the development of small oil, gas and coal deposits in remote regions; increasing the full use of mineral resources: a decrease in the share of associated petroleum gas ﬂared on ﬂares, complex processing of oil residues, etc.; the development of domestic equipment and technologies necessary to solve the tasks of maximizing the beneﬁcial use of raw materials, modernization of the exploration, production, transportation and processing of energy resources at all stages; active involvement in the development of the Arctic shelf and the world ocean resources. The formation of favorable conditions for the creation and development of business has a signiﬁcant contribution to improving the competitiveness of national economies (Branstetter et al. 2014). Today in Russia, to increase the competitiveness of the national economy on the basis of the formation of its self-suﬃciency, there is a need to intensify innovation activities at the expense of small and medium-sized enterprises (Yakovlev and Honchar 2004). It can be stated that at the current time in Russia suﬃcient conditions for the development of innovative small and medium-sized businesses are not created, in particular, there is no functioning support system for the relevant organizations, there is no clearly deﬁned strategy for their development, interaction with public authorities (Lyashevich 2006). There is no unambiguous understanding of the methods of managing small and medium-sized businesses in an environment of intense competition with leading Western transnational companies that have increased state support.

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The development of these directions is related to the improvement of market infra‐ structure, tax policy, legislation, and other regulatory measures. In addition to state support, the improvement of the competitive environment can be carried out by devel‐ oping quality management of individual ﬁrms, industries and the national economy in general. In connection with this, the improvement of the conditions for the functioning of small and medium-sized organizations presupposes the continuous improvement of the qualiﬁcations of the current managers; strategic planning of small and medium busi‐ ness development; use of best management practices of domestic and foreign organi‐ zations; overcoming negative attitudes towards entrepreneurs in society, avoiding a world outlook, according to which the only goal of private business is enrichment in the short term; consideration of small and medium-sized business as the basis for the competitiveness of the Russian economy, increasing eﬃciency, technological sophisti‐ cation and science-intensive production, ensuring a high standard of living for the popu‐ lation. In modern economic conditions, the methods of directive inﬂuence of the state on the scientiﬁc and innovative activities of small and medium-sized businesses are inef‐ fective. The state’s task is to create a system of incentives for intensifying research activities, introducing R&D results into industry, and disseminating breakthrough tech‐ niques and technologies. At the same time, small and medium-sized enterprises should play one of the leading roles in the process of innovative development of the Russian economy.

4

Recommendations

The formation of a model for the development of the Russian economy’s competitive‐ ness requires the implementation of three tasks: the de-oﬀshorization of the economy, the support to domestic producers, the creation of the controlled economy openness policy. In turn, a true de-oﬀshorization and a policy of controlled openness of the Russian economy are impossible without a program of support to domestic producers developed taking into account national strategic interests. To support domestic producers in the work it is proposed to develop bearing indus‐ tries of the national economy, small and medium-sized business organizations, increase the eﬃciency of using resource factors. To the bearing branches of the Russian economy, it is advisable to classify three groups of industries: a world leader or have the corresponding potential, ensuring import independence and performing social functions. Based on the analysis of the national economic system, the following key industries are identiﬁed: agriculture, defense industry, chemical industry and engineering. As the priority forms of state support for small and medium-sized businesses, which are needed today in Russia, it is necessary to allocate information, consulting, ﬁnancial, legal support. Particular attention should be paid to bearing small and medium-sized ﬁrms in the key sectors of the Russian economy. Modern socio-economic conditions, imposed technological and ﬁnancial sanctions restrictions, the general strategy of increasing the competitiveness of the national

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economy and reviving the industrial potential of Russia testify to the important role of the mineral and raw materials complex in solving urgent issues. It should be noted that the current level of resource eﬃciency is not suﬃcient and requires an immediate increase. Eﬀectiveness, scale and directions of using Russia’s resource potential deter‐ mine the speed of overcoming the crisis phenomena in the Russian economy, the possi‐ bility of forming a material and technological basis for the development of production of domestic high-tech and science-intensive products, transforming the structure of foreign trade turnover and ensuring self-suﬃciency in the economy. In addition, it is the mineral and raw materials complex that will continue to be the basis of the country’s economic security, the solution of many social problems and the development of the Russian economy as a whole. Acknowledgments. The article is published with the support of the Russian Foundation for Basic Research (RFBR) grant “The issues of the XXI century global economy conﬁguration: the idea of socio-economic progress and possible interpretations, No. 18-010-00877 A”.

References Alpidovskaya, M.L., Tsikin, A.M.: The National Economy’s Competitiveness: the Theoretical Issues. Tver State University, Tver (2017) Arezki, R., van der Ploeg, R.: Can the natural resource curse be turned into a blessing? The role of trade policies and institutions, EUI Working Paper ECO 2007/35 (2007) Berberov, A.B., Milogolov, N.S.: Tax policy when joining to multilateral instruments on the implementation of BEPS: the analysis of approaches in Russia and Foreign countries. Taxes and taxation, No. 10, pp. 27–44 (2017) Bogojavlenskij, V.I.: Achievements and issues of geological prospecting and fuel and energy complex of Russia. Drilling and oil, No. 3 (2013). http://burneft.ru/archive/issues/2013-03/1. Accessed 26 Jan 2018 Branstetter, L., et al.: Do entry regulations deter entrepreneurship and job creation? Evidence from recent reforms in Portugal. Econ. J. 124(577), 805–832 (2014) CBR: Statistics (2017). http://cbr.ru/statistics/credit_statistics/bop/outﬂow.xlsx. Accessed 26 Jan 2018 Decree: Decree of the Government of the Russian Federation No. 84 of 24.02.2010 “On the conclusion of interstate agreements on the avoidance of double taxation and on the prevention of evasion from payment of taxes on income and property” (2010) Ershov, B.A., Zimenkova, E.V.: Consequences of the USSR collapse. Int. J. Humanit. Nat. Sci. (3), 20–22 (2016) FL 325-FZ: Federal Law No. 325-FZ of 04.11.2014 “On Ratiﬁcation of the Convention on Mutual Administrative Assistance in Tax Matters” (2014) FL 382-FZ: Federal Law No. 382-FZ of 29.11.2014 “On Amending Part One and Two of the Tax Code of the Russian Federation” (2014) FTP: Federal target program “Development of the pharmaceutical and medical industry of the Russian Federation for the period until 2020 and beyond” (2011) Glazyev, S.Y.: Russia lost one hundred trillion rubles (2014). https://www.gazeta.ru/growth/ 2014/09/04_a_6203541.shtml. Accessed 26 Jan 2018 Glazyev, S.Y., et al.: De-oﬀshorization of the Russian economy. Ways and measures (2013). http://sysanalys.ru/publikacii/deofshorizacia. Accessed 26 Jan 2018

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Heifets, B.A.: Oﬀshore ﬁnancial networks of Russian business. Issues Econ. (1), 52–67 (2009) Heifets, B.A.: De-oﬀshorization of the Russian economy: opportunities and limits. Institute of Economics RAS, Moscow (2013) Lyashevich, I.A.: Legal issues of regulation of small and medium business in Russia at the present stage. J. Russ. Law 113(5), 61–69 (2006) Megginson, W.L., Netter, J.M.: From state to market: a survey of empirical studies on privatization. J. Econ. Lit. 39(2), 321–389 (2001) Mezentseva, O.E.: The development of high-tech production in the world and in Russia. Fundam. Res. (7–1), 176–181 (2015) Monastyrnyi, E.A.: Innovative cluster. Innovations (2), 38–43 (2006) Morkovkin, D.E.: Issues and priorities of ﬁnancing innovative development of the economy real sector. Financ. Theory Pract. (6), 39–49 (2015) Novokmet, F., et al.: From Soviets to Oligarchs: Inequality and Property in Russia, 1905-2016 (2017). http://nber.org/papers/w23712.pdf. Accessed 26 Jan 2018 Novoselova, S.A., Efremov, R.A.: Eﬃciency of using state support in agricultural organizations, Scientiﬁc and methodical electronic magazine “Concept”, No. S5, pp. 41–45 (2015). http://ekoncept.ru/2015/75090.htm. Accessed 26 Jan 2018 RBC: A ﬁfth of the Russian state will remain oﬀshore (2015). http://www.rbc.ru/economics/ 16/06/2015/557eed399a79477e1a82c3ab. Accessed 26 Jan 2018 Rusanovsky, V.A., Babaytseva, I.K.: Theoretical basis for the study of economic diversiﬁcation and structural changes at the post-industrial stage of development. Bull. Saratov State Soc. Econ. Univ. 52(3), 30–35 (2014) Shirov, A.A., et al.: Substantiation of potential scenarios for the long-term development of the Russian economy. Issues Econ. Trans. 56(10), 57–77 (2014) Sorokin, D.E.: Optimistic scenario for the development of the Russian economy. Bull. Financ. Univ. 83(5), 6–15 (2014) Spartak, A.N.: Perspective directions of Russia’s export specialization. Russ. External Econ. Bull. (4), 3–10 (2016) Yakovlev, A., Gonchar, K.: On the use in Russia of the experience of new industrial countries in the formation of “development institutions” and stimulating innovative economic growth. Issues Econ. (10), 22–23 (2004)

Revival and Renewal of Political Economy Sergey S. Slepakov ✉ , Natalia N. Novoselova, and Veronika V. Khubulova (

)

North-Caucasus Federal University, Pyatigorsk, Russia [email protected], [email protected], [email protected]

Abstract. The article presents authors’ proposals concerning the need for revival and renewal of political economy, such as: speciﬁcation of the science subject; deﬁnition of the category “economic interests” in its original meaning and social dimension; deﬁnition of politics as market of interests; a fundamental the state‐ ment of the only possible rational application of institutions, including capitalism and socialism, planning and market, as mechanisms and tools for social and economic development; deﬁnition of the content of the basic social and economic contradictions of modern times as a conﬂict of global, as well as national and state (public) interests, manifested in the subordination and absorption of national states by the global ﬁnancial system. Keywords: Political economy · Economic development Basic social and economic contradictions of modern times

In the 20th century, right up to 1990’s, political economy was a Marxist-Leninist ideo‐ logical discipline about the advantages of a socialist economic system. Industrial rela‐ tions and objective laws governing socio-economic development were its subject. Polit‐ ical economy studied how the laws worked in order to create the best conditions for their implementation in the economic practice of directive management as well as planning on the basis of socialist property (which predominantly belongs to the state). After 70 years of its existence, socialist economic system, due to its lack of competitiveness in politics and economy, degraded and collapsed. Political economy, as a science, was declared a non-market scientiﬁc discipline, contradicting the principles of democracy and was afterwards rejected. “Modern times” witnessed a replacement of political economy subject in universities by Economics (economic theory), the science of choosing the optimal options for the production of goods in the context of scarce resources. Liberal science put an end to discussions about the possibility of public interests existence as such [1]. Proﬁt became the purpose and meaning of economic development. [3] The introduction of economic theory in Russia was marked by de-ideologization of economic science, as well as economy in general [4]. As far as the economic practice of modern Russia is concerned, economic laws are implemented on the basis of diﬀerent ownership forms. The following has been declared: limits on state participation in economic development and widespread use of market mechanisms (entrepreneurship and competition). Since 1991, the government has renounced to further exercise strategic planning and management and it is only on July 11, 2014 that a new law on strategic planning came into force in Russia. © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 443–450, 2019. https://doi.org/10.1007/978-3-030-00102-5_47

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However, the national economic structure of Russia has seen little change in the last 25 years, as it remains excessively monopolized and nationalized. Ineﬃcient statedriven monopolistic capitalism occurred in Russia. This conclusion stems from the government report of the Federal Antimonopoly Service (FAS), according to Vedomosti newspaper. The document says that the state presence in the economy is growing rapidly. Thus, the share of state-owned companies in GDP grew from 35% to 70% in 2005 and 2015 respectively, and the number of state and municipal unitary enterprises has tripled over the last three years. [5] Economy is still signiﬁcantly dependent on energy-raw exports [6]. It is characteristic that the results of the social and economic development of Russia and other countries in the post-Soviet space can hardly be considered as successful in the “new” circumstances too. Many scientists believe that the determina‐ tion of the reasons for the “double-edged” (both under socialism and under capitalism) ineﬃciency of socio-economic systems in these countries requires political and economic approach and knowledge [7]. Therefore, we will try to formulate the problem of the necessity (usefulness) of political economy.

1

The Purpose of Political Economy

First of all, let us deﬁne the purpose of this science. Political economy, unlike other economic subjects, is not aimed at developing models of marginal eﬃciency of house‐ hold or business activity. Political and economic knowledge pursues the goal of formu‐ lating relevant ideas in society about the conformity of conditions and results of economic development to public interests, norms of socio-economic moral standards and justice. It is about creating a philosophic awareness and understanding of the essence of socio-economic processes, as well as contradictions in the country and the world [8]. Adequate ideas, scientiﬁc, unbiased answers to questions – such as whose interests underlie economic processes development; for who, why and to what extent they are proﬁtable; what are objective assessments of economic and social results of development – are critical for transforming the population into a civil society. The lack of objective worldview knowledge and understanding of economic devel‐ opment is an insurmountable obstacle for any national community to establish a stable and eﬀective feedback from the authorities and business. Without knowledge of world outlook, society is deprived of the opportunity to put politics at the service of public interests. Without feedback, society lacks power in the eyes of authorities and business. Let us recall the verses of famous Russian poet A. S. Pushkin: “Graze on your pasture, peaceful nations! Miss honor’s call, in slumber’s grip - Why freedom? Herds have these vocations: Be meat to slay or wool to clip. They pass along through generations A yoke with rattles and a whip.» [9]. The feedback in socialist times was minimal, and the “reconstituted” capitalism, however, has found no solution to the problem either. Addressing the issue will demand society to understand political and economic realities. The prerogative of meeting the social need for acquiring philosophic knowledge about the nature of social and economic life should be given to science, namely political economy, which needs to be updated and developed. The eradication of political economy is a road that does not lead

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anywhere. A new society needs an updated political economy. This article proposes “outlines” of some necessary and crucial updates of political economy.

2

On Political Economy Subject

The subject of science needs clariﬁcation. The deﬁnition of industrial relations and economic laws as subject of political economy does not provide an answer to a logical question: what problem does the science of political economy solve? In general, the existence of a problem implies the necessity of choice. Political economy does not duplicate economic theory, which is, as mentioned above, not focused on solving the problem of choosing the optimal models of production and realization of goods under the pressure of limited resources. What choice can be made then in the framework of political economy science? In our opinion, the problem of ensuring the top priority of the interests of the nationalstate communities (public interests) in the process of coordinating the private interests of the subjects of social and economic development should be included in the deﬁnition of the subject of political economy, as the basic one. The paramount importance of public interests is included in the deﬁnition of the subject of science due to a number of reasons. In the 21st century, we should ﬁnally recognize an unconditional primacy of politics over the economy as something inherent in centuries-old social and economic practice and modern history. This means that social development is not managed by “higher forces”, objective laws, institutions or by the “leaders’” will, but governed by political and economic interests. The political process always entails a clash of numerous inter‐ ests. The quality of politics manifests itself in the art of managing society, taking into account the interests of all its segments. The etymology of the Greek word πολιτικόςis that it consists of πολι(poly), meaning “a lot of”, and τικός(tikos), which is an “interest”. So, politics literally means “a lot of interests”. Politics, as a form of activity, at its core, expresses the hierarchy of interests and is manifested in the confrontation and reconciliation of a multitude of group and personal (individual) interests. It integrates and controls a set of behavioral models and institutions that organize competition for the power position. Policy is implemented due to the application of this power by elites in their own interests. Interests - the products of socio-economic consciousness - cause to life and set in motion the political mechanisms that manage economic processes. A scientiﬁc study of the content of political and economic processes requires a systematic approach to be adapted to the functioning of interests. However, the problem of reconciling interests in economic practice is not analyzed systematically. As a rule, research does not go beyond the limits of conﬂicts of interest. Such an approach is narrow and limited. Let us imagine as the most important area of the subject of the new political economy a phenomenon of “market of interests”, the study and deﬁnition of “currency” and the laws of its development. In fact, any political process entails the operation of the market of interests. There, interests are appropriated and alienated, sold and bought, are agreed on and contradict. By-product of consciousness, the market of interests reﬂects, sets in

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motion, determines and evaluates the results of the operation of the markets for goods, works, and services. Economic interest, as a concept, has not received a single deﬁnition to date. This category today, like in the foreseeable past, is determined diﬀerently by various authors, for example, as needs, incentives, and motives [10]. However, each of the abovementioned concepts expresses a completely deﬁnite, independent category, therefore, no way can correspond to the notion of “interests”. Let us deﬁne this concept.

3

Deﬁnition of the Category of “Economic Interests” in Its Original Meaning and Social Dimension

Etymologically, the word “interest” refers to something that has signiﬁcance for a certain person or group [13]. The casual (vulgar), used in everyday speech, deﬁnition of the term “interest” is the conscious aspiration of an individual or group to obtain a speciﬁc beneﬁt (income, preferences, etc.). It is quite natural that the scientiﬁc understanding of the role of the aggregate of interests as a driving factor in the development of economic systems is useless in economic life of an average person. [14] However, for every reasonable economic entity, the provision and protection of one’s existence are obvious tobe of top priority and the main goal. In other words, it is the reproduction of one’s own vital activity. It is in this mission, in this function that a set of needs, incentives and motivations of an economic entity of any level are integrated. At this point, economic practice is consistent with advanced science. Society, its subjects exist and progress only in the framework of the function of reproduction of their own socio-economic life. We insist that it is this function that expresses the essence of interests in original meaning and social dimension [15]. In interest are realized functional dependence of the level and quality of the subject’s life activity depending on the character and results of its participation in the social repro‐ duction process: role, place, eﬃciency. Like every participant in the reproduction process, society is a subject of self-interest. We deﬁne social, national and state interest as a function of eﬀective reproduction of the socio-economic life of a subject - the national community [16]. It is a matter of the functional dependence of the level and quality of the vital activity of the national community on the nature and results of its participation in the macro and mega economic reproductive process. The implementation of public interest should mean a permanent solution to the system task of economically and socially eﬀective development of the entire set of resources at the disposal of the national community. The marginal result is certainly signiﬁcant, but it is not the only and dominant criterion for successful social and economic development. The representatives of society in power are managing the real‐ ization of public interests. The decisive principle of their activities should be to harmo‐ nize the interests of society, with the interests of its corporate and individual represen‐ tatives. However, in the absence of eﬀective feedback institutions [17] between society and the government, a priority of corporate and other own interests over the interests of

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society is put in the system of public administration. In other words, the interests of society are pushed to the margins, and the corporate interests of the state-ﬁnancial elite are provided at the expense of and to the detriment of society. The power-holding repre‐ sentatives of society are irresponsible and not accountable to society. Modern Russia is governed in the interests of comprador oligarchic capital, which, in its turn, supports the ruling bureaucracy. In modern circumstances, the country appears to be an economic territory detached from society, whose resources are aggres‐ sively divided among themselves by diverse subjects of their own corporate and ﬁnancial interests. The disagreement between the interests of society, government and business hinders the possibility of forming and implementing an economically eﬀective and socially responsible public policy. The cause of the dysfunction of public administration insti‐ tution of the economy of modern Russia, the desocialization of power stems from the conﬂict between the interests of power and society. The only means of resolving this conﬂict can be a full-scale recognition and realization of public, national economic interests as deﬁning ones, as well as subordination of the set of their own interests to the latter ones.

4

The Imperative of Representing Institutions as Purposes and Goals of Social and Economic Development. On the Need for Functional Application of Institutions

Political and economic knowledge is intended to serve society as the only possible eﬀective means against “fundamentalism” in economic policy. The renewal of political economy in the 21st century requires abandoning decisively the ideology of an unnatural and destructive choice, which is the confrontation between the two world systems, the antagonism of the planning and the market, capitalism and socialism. The preservation and high level of importance of the ideology, formulated like “two worlds - two ways”, gives reasons to aﬃrm that political economy and society have lingered in the ﬁrst half of the last century, appeared to be insusceptible to the realities of successful development in a number of countries developing on the basis of social market models. We are not talking about the convergence of the two world systems [21]. A more deﬁnite and understandable formulation of the question concerning the rational appli‐ cation of institutions as mechanisms and tools is oﬀered, what they (institutions), in fact, represent. Nothing else. Institutions are systems of norms and rules that impose the patterns (models) of behavior in economic life on subjects. Hence, institutions in the economy perform the functions of the means of production (mechanisms, tools) used by society to deﬁne boundaries, opportunities, conditions, imperatives of behavior for economic entities. Institutional constructions (capitalism and socialism, planning and market, state power and laissez-faire principle) by deﬁnition cannot and should not serve the meaning and goals of social and economic development. Without social awareness of the profound meaninglessness and destructive signiﬁcance of an irreconcilable struggle for the priorities and triumph of institutions, the establishment of orthodox ideas as “guiding

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stars,” social and economic progress is impossible. Confrontations of institutional hegemonies are similar to wars for asserting the ways of breaking eggshells from the “sharp” or “blunt” side [22]. The aggressive clashes between the supporters of the plan and the market in the 21st century are inappropriate, as a clear sign of degradation. Any institutional construction, being declared and applied in the form of a worldview and socio-economic dominant (dogma), inevitably turns into an institution of destruc‐ tion, into a chimera, into a simulacrum, in pursuit of which systemic losses in social and economic development are unavoidable. Institutions (markets, states, rights, etc.) can and should work for the beneﬁt of society, but only in systemic unity, reasonably used by the government and society, as means, mechanisms, tools and applied rationally, strictly according to their purpose. The progress of countries and peoples to the integration of economic systems and the rational (without ideology) application of market and social institutions has been taking place since the second half of the last century, and, as a rule, without revolutions and expropriations. Countries with market economies have successfully implemented and are developing social development institutions (for example, Scandinavia, France, Germany, and Switzerland). At the same time, socialist countries (for example, China, Vietnam) introduced and mastered market institutions, having achieved a rise in economic eﬃciency, improved the welfare of the population, and the competitiveness of national economies in the global economy. Integration of market and social economic systems on the basis of rational (without ideology) application of institutions in the renewed political economy should be presented as the mainstream of world economic development in the 21st century.

5

The Main Socio-Economic Contradiction in the Renewed Political Economy

The role of the main socio-economic contradiction of modern times in political economy and in the world should be attributed to the conﬂict between global, as well as national and state (public) interests, manifested in the subordination and absorption of national states, the global ﬁnancial system. The events that occurred in Russia in 1985–1991, the economic system, created on its territory in subsequent years, are little reminiscent of revolution and its results. This more resembles a moment of global absorption [23]. The process is interesting, because it has been suspended under the current circumstances. Russia appears to “stick in the craw” of the global system, its progress “along the esophagus” has slowed down and partly stopped. That can be possibly demonstrated on the example of a well-known metaphor, “the boa constrictor has swallowed an elephant”, particularly in its zoological interpretation (the external resemblance of this ﬁgure to the hat is of little impor‐ tance) [27]. Being in such an absurd, “under-absorbed” and “under-digested” condition for the country and the state is deadly and, in all respects, extremely uncomfortable. However, it is bad not only for the “elephant”, the boa constrictor also has big problems. The conﬂict of interests between the two “monsters” is aggravating day by day and is far

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from being resolved. The reason is that the parties do not even think about reconciling their interests: “the elephant” strongly disagrees to be swallowed, the “boa constrictor” is ﬁrmly determined to swallow it. A tense, sluggish process is going on, somewhat reminiscent of the “clinch”, and, in fact, stagnation, the preservation of which seriously damages the not only the health of both monsters, but also the health of everyone who is rotating in their orbit. The parties are guided by moral principles that do not go beyond Darwinism In their competitive confrontations, which is the advantage of power. There‐ fore, the possible outcomes are well beyond the rhetoric of wishful thinking. The ﬁght is likely to result in a fatal ending if the parties do not reject the “zoology” of seizures and mutual absorption in favor of harmonizing interests, positive, conscious actions, they will not give priority to common sense and the humanitarian nature of social processes. It is clear that the author’s judgments on the problem of the revival and renewal of political economy presented in this publication require deeper justiﬁcations and a format substantially exceeding one of a scientiﬁc article. Therefore, we have conﬁned ourselves to the proposed statements.

References 1. Hayek, F.A.: Road to slavery, 264 p. Russ. Ed. New publishing house, Moscow (2005) 2. Libman, A.M.: Social liberalism, public interest and behavioral economics. Social Sciences and Modernity, no. 1, pp. 27–39 (2013) 3. http://delyagin.ru/articles/115522-bystryje-lyudi-mezhdunarodnyj-biznes-stal-vesti-sebyakak-malinovyje-pidzhaki-v-90-e.html 4. Yakunin, V.I., Baghdasaryan, V.E., Sulakshin, C.C.: Trap: New Technologies of Fighting Russian Statehood. Eksmo, Algorithm, Moscow (2010) 5. Monopoly (2017). http://center-yf.ru/data/economy/monopoliya-2017.php 6. Baghdasaryan, V.E., Sulakshin, S.S.: Superiority, Appropriation, Inequality. Scientiﬁc Expert, Moscow (2013) 7. Sulakshin, S.S.: Moral state. From Theory to Design. Science and Politics, Moscow (2014) 8. Valovoy, D.: Business history. Algorithm, Moscow (2015). livelib.ru: https://www.livelib.ru/ book/1001298182-delovaya-istoriya-dmitrij-valovoj 9. Pushkin, A.S.: Freedomssowerdesert. http://pishi-stihi.ru/svobody-seyatel-pustynnyjpushkin.html 10. Rubinshtein, A.Y.: Economics of Public Preferences. Structure and Evolution of Social Interest, pp. 31–33. Althea, The Historical Book, St. Petersburg (2008) 11. Musin, M.M.: Management of Economic Interests, p. 41. Gardariki, Moscow (2006) 12. Gaga, V.A., Cheremisina, S.V.: Motivation Complex “Progress”, Tomsk (1989) 13. http://didacts.ru/slovari/osnovy-duhovnoi-kultury-enciklopedicheskii-slovar-pedagoga-.html 14. As it is known, Aristotle believed that man is driven by interest, interests are the determinants of human activity; F. Hegel (“Science of logic”) wrote: “Interests “move the peoples’ lives» 15. Slepakov, S.S.: To the Question of the Semantic Dominants of Russian Reforms (Reproductive Approach). Philosophy of economy. Almanac of the Center for Social Sciences of the Faculty of Economics, Moscow State University. M.V. Lomonosov Moscow State University, no. 1. pp. 40–48 (2016)

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16. Slepakov, S.S.: The Driving Forces of the Political and Economic Development of Modern Russia. Philosophy of Economy. Almanac of the Center for Social Sciences of the Faculty of Economics, Moscow State University. M.V. Lomonosov Moscow State University, no. 1, pp. 132–139 (2015) 17. Zaitsev, A.V.: Institutional Dialogue in the Field of Communication Between the State and Civil Society: the Theoretical and Methodological Approach. NB: Problems of society and politics, 1. - C. 21–54 (2012). http://www.e-notabene.ru/pr/articl_110.html 18. Zaitsev A.V.: Philosophy of Dialogue and Dialogic of Civil Society: Origins and Essence. NB: Philosophical Studies, 4. - C. 1–53 (2012). http://www.e-notabene.ru/fr/article_143.html 19. Abdullaeva, R.A.: Political System: the Feedback Mechanism. Modern problems of science and education, no. 6–3 (2009) 20. Shafer, I.: Democratic Control over Public Administration. Public service: Control: Foreign experience. Public service: Control: Foreign experience (2005) 21. The theory of convergence in diﬀerent modiﬁcations was supported by such authors as Sorokin P. (1889–1968), J. Galbraith (1908), W. Rostow (1916), R. Aron (1905–1983), Zb. Brzeziński (p. 1908) and other western theoreticians. In the USSR the main advocate of convergence theory was A. Sakharov 22. Jonathan Swift. Travels into Several Remote Nations of the World, in Four Parts. By Lemuel Gulliver, First a Surgeon, and then a Captain of several Ships or Gulliver’s Travels — a satiric and fantastic novel, where the author vividly and wittily ridiculed human and social vices 23. http://golbis.com/pin/staryiy-mir-obrechen-novyiy-mir-neizbezhen-verdikt-rimskogo-klubazhestkiy-doklad/;http://golbis.com/pin/stiven-hoking-obyavil-chto-nastalo-samoe-opasnoevremya-za-vsyu-istoriyu-chelovechestva/#.WHJsfQuFS_4.facebook 24. Gadzhieva, V.: The Global Crisis: Causes, Directions, and Solutions. The Age of Globalization, no. 1(5) (2010). http://www.socionauki.ru/journal/articles/127591/ 25. Slepakov, S.S.: Twenty-ﬁve years of Russia in a new time: public interests, global competition and stakeholder management. Philosophy of economy. Almanac of the Center for Social Sciences of the Faculty of Economics, Moscow State University. M.V. Lomonosov Moscow State University. no. 3. pp. 75–84 (2016) 26. Inozemtsev, V.L.: Modern globalization and its understanding in the world. The Age of Globalization 1, pp. 31–44 (2008) 27. Antoine de Saint-Exupery.Little Prince. – Russ. Ed. Eksmo (2017)

Structural Modeling of the Institution of Russian Entrepreneurship in the Spirit of “Old” Institutionalism Svetlana L. Sazonova ✉ (

)

Institute of Economics and Finance of the State University of Management, Financial University under the Government of the Russian Federation, Moscow, Russia [email protected]

Abstract. Entrepreneurship plays an important role in the modern global economy, increasing the share of production of the enterprises of small and medium enterprises in gross domestic product and exports not only developed but also developing countries. Innovation processes cover all sectors of the economy, and more and more of the population is involved in entrepreneurial activity that promotes the penetration of entrepreneurial thinking and values of entrepreneurship in all spheres of socio-economic life of society. Institute of entrepreneurship plays an increasingly prominent role in the institutional envi‐ ronment of socio-economic systems. It actualizes the problem of studies of the relationship of entrepreneurship with the institutions of law, culture, manage‐ ment. Institutional Economics has suﬃcient capacity heuristic, methodological and theoretical research tools to study this problem. In particular, the structural modeling of the “old” institutionalism covers, in the author’s opinion, the diver‐ sity of interrelationships institute of entrepreneurship and other components of the institutional and economic environment. The article studies the essence and reveals the structure of entrepreneurship in Russia, built the structural model (pattern model). The author has deepened and expanded knowledge about the institute of entrepreneurship in Russia main stages of its formation, development, place and role in the institutional system as a whole and the factors of the dynamics based on the methodology of institutional economic theory. The author builds a structural model (pattern model) of entre‐ preneurship speciﬁc to the Russian institutional environment in which the disclosed communication institute of entrepreneurship with management insti‐ tutions, cultural and religious institutions, legal institutions and whole society. The work ﬁlls gaps in domestic and foreign economic science, due to the lack of structural modeling (pattern modeling) of institute of entrepreneurship. Keywords: Institute of entrepreneurship · Institutional environment Structural modeling · Structural model · Values of entrepreneurship Motives and incentives of entrepreneurial activities JEL Code: B4 · B5 · Z1

© Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 451–460, 2019. https://doi.org/10.1007/978-3-030-00102-5_48

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Introduction

Entrepreneurship plays a important role in the modern world economy, as conﬁrmed by the studies of OECD and the World Bank. In developed capitalist countries, 60–70% of the employed population work in small and medium business, and in China 80%; its contribution to GDP is 50% in the US, 47% in the UK, 57% in Germany, and 60% in China. According to the forecasts of the World Bank in the next 15 years in developing countries, 80% of new jobs will be created in small and medium-sized businesses. Entrepreneurship contributes signiﬁcantly to the development of scientiﬁc and techno‐ logical progress, for example in China the share of small and medium-sized businesses account for 65% of all patents, 75% of technological innovation and over 80% of new products (Impact SME ecosystem and the global economy 2017). In Russia, small and medium enterprises (SMEs) are relatively less developed, but its share in GDP is growing, it has the support of the state and in accordance with the “Strategy of devel‐ opment of SMEs until 2030”, adopted in 2016 g.ego share of GDP will increase to 35% (Strategy… 2017). On the improvement of business conditions in Russia testiﬁes 35th (compared to 40th in 2016) in the ranking of the World Bank’s “Doing Business - 2018”, as well as moving to the 100th (in comparison with the 140th) ranked by the indicator “International trade” for the same period (Economic recovery in Russia 2017). At the same time, only 4% of small and medium-sized businesses exist for more than three years (Business statistics 2017), the rest are closed earlier. Entrepreneurship and entrepreneurial activity in Russia have long-term or even a long history, but still attract the attention of researchers as a phenomenon of business practices that require reﬂection and analysis on each new historical and economic stage. In the study of Russian business contributed to both economic historians and economists, sociologists, lawyers, but the lack of a common methodological approach to the study of the distinctive features of the Russian business and entrepreneurial activities, its structure and place in the institutional environment actualizes the need for entrepreneu‐ rial studies as an economic institute in conjunction with institutional environment from the standpoint of modern institutional economic theory. In previous studies (Sazanova 2016, Sazanova 2017a, 2017b, 2017c, 2017d), the author identiﬁed the main stages of the development of entrepreneurship and business in Russia; Values, motives and incentives as factors in the dynamics of the institution of entrepreneurship are explored; the contour of the Institute of Entrepreneurship in Russia was revealed. All this work was done on the basis of the methodology of modern institutional economic theory, which made it possible to identify the signiﬁcant heuristic potential of institutionalism in the study of the institution of entrepreneurship in general and of Russia in particular. A logical continuation of the above-described studies is the identiﬁcation of the nature and structure of the institution of entrepreneurship in Russia in the conditions of the modern economy.

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Statement of the Problem, Methodology of the Study

The object of research is the institution of entrepreneurship in conjunction with the institutional environment, which makes it necessary, on the one hand, to identify the nature of the interrelationships of the institution of entrepreneurship with such compo‐ nents of the institutional environment as legal institutions, cultural and religious insti‐ tutions, institutions of governance and the society itself (the public opinion environ‐ ment), and on the other, to identify the interrelationships between the above-mentioned components. The research task is to build a structural model of the institution of entrepreneurship, which will allow to determine the place of this institution in the Russian institutional environment, to disclose the content of its interrelations with its components. This, in turn, will allow us to look nontrivially at the problem of the unsustainable development of the institution of entrepreneurship and business as a whole, and identify possible ways to solve it. Domestic and foreign science have made great strides in the study of entrepreneur‐ ship and entrepreneurship, studying them from the standpoint of economic theory, management, psychology, sociology, system economics, economic history (Kirdina 2015; Kirdina-Chandler and Hall 2017; Kleiner 2017). This made it possible to identify the distinguishing features of entrepreneurial activity in comparison with the activities of the capitalist, the hired employee, the manager both in retrospect and in modern economic reality, but there is still no general “portrait” of the entrepreneur in the insti‐ tutional environment in interrelation with non-economic spheres of human activity. In our opinion, it is precisely modern institutionalism that has a high heuristic potential for solving this research problem and creating such a “portrait”, which is due to a wide range of scientiﬁc schools and directions of institutionalism that diﬀer both in methodological basis and in methodological and theoretical research tools. The choice of methodology and theoretical tools is determined both by the charac‐ teristics of the research object and by the content of the assigned research task, which, in turn, is inextricably linked with the features of the object under study. The object of research - the institution of entrepreneurship - has a complex, volatile nature, evolving in connection with the economic environment, institutional environment, governance institutions, cultural and religious institutions, and under the inﬂuence of the historical process as a whole (Sazanova 2016). The research task does not imply the creation of a complete abstract image (abstract model) of the entrepreneur as an economic agent with a limited list of unchanged characteristics. The formulation of the research task assumes its solution in a general way, by constructing a ﬂexible, volatile structure that emphasizes the interrelations between its components, in turn, numerous, variable and not always formalizable. Therefore, from a wide range of institutional directions, the author’s choice fell on the methodology of “old” institutionalism and pattern modeling as his main theoretical tool (Sazanova 2002).

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Structural Modeling, the Institution of Entrepreneurship and Its Structural Model

Structural modeling of “old” institutionalism is inextricably linked with the historical method, since the purpose of the structural model is the explanation of reality, and not its rational reconstruction. The fundamental diﬀerence between structural models and abstract ones is their internal structure, conditioned by the very essence of the method of structural modeling, which includes several stages. The researcher ﬁrst focuses his attention on a small part of the investigated object (Ramstad 1986, 141–144) and builds an analytical basis (generalization). Then he singles out the analytical foundations in other parts of the object, his goal is to search for the universal foundations that determine the integrity of the system and its individ‐ uality. Comparing the analytical foundations of diﬀerent parts of the investigated object, the researcher reveals the connections between the fundamentals that determine the integrity and uniqueness of the object itself. These interrelated foundations can take the form of generally accepted actions (traditions), cultural norms (demonstrative consump‐ tion), a certain mode of production (competition-based capitalism). In the search for the basics, the researcher relies on a comparative method, revealing the features of similarity and diﬀerences of parts of the object that are systematized and typologized as they accumulate. As a result, the selected types receive the name of real types, since they generalize the real cases. Then the found basis becomes a hypothesis that is to be checked by a large number of actual data (survey results, personal observations, statistical data, previous research results, etc.), but no data type is recognized as the main one. Evidence in favor of the hypothesis is assessed through a process of “cross-checking various types and sources of evidence and serves as a means of assessing the credibility of someone’s interpretations” (Wilber and Harrison 1978, 77) and if the researcher ﬁnds no evidence to support the hypothesis previously advanced, or the truth of the evidence is contro‐ versial, the hypothesis is revised or rejected. As a result, several foundations (hypoth‐ eses) that satisfactorily describe the whole object under study are revealed, and it should be borne in mind that the ﬁnal test of the hypothesis is not the main objective of the study. The goal is to create a non-logically accurate, not rigorous or reliable, but only a suﬃciently convincing hypothesis and the main criterion of persuasiveness is the compliance of the hypothesis with observable empirical phenomena, evidence, facts. Preference is given to that hypothesis, which can explain more real facts. At the ﬁnal stage, based on previously identiﬁed hypotheses, the researcher proceeds to construct the model. Several originally identiﬁed hypotheses are combined into a pattern model, which is a set of interconnected foundations within the structure (the object under study). Each part of the structure is described in conjunction with many other parts, and the links between the elements of the system between themselves and between the part and the whole are interactive. The constructed structural model should be as complete as possible corresponding to the actually existing object of research, information about which is constantly updated, which requires veriﬁcation of the compatibility of previ‐ ously accepted descriptions of parts of the structure, as well as of how new facts are explained and integrated into the structural model. The constructed structural model is

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never recognized as ﬁnal, but it is always corrected, since with the purpose of the corre‐ spondence of reality it is necessary to take into account all the new and new facts char‐ acterizing the object in its development. In addition, the system under consideration is constantly evolving. This “incompleteness of the system model is conditioned by the essence of man as the object of investigation. Human systems always evolve and are always incomplete, they always remain incompatible and unclear. … individuals and groups are always in the process of resolving conﬂicts and creating new ones, traditions are changing or simplifying… Therefore, a reliable model of a particular system at a certain point in time should include incompatibilities, ambiguities and exceptions. It is diﬃcult to say which of them arose because of the speciﬁcs of the subject matter, but because of the shortcomings of the method” (Wilber and Harrison (1978, 77). Conse‐ quently, the structural model is recognized as valid and exists until most of the new information ﬁnds its place in the system. Then the researcher seeks to identify the universal features of the system, “playing a dominant role in determining others” (Ramstad 1986, 1073), by systematizing and grouping previously distinguished real types, similar in characteristics, to “real” or “nominal types.” An example of the real types can be considered the rituals (ceremonies) of K. Eyrs, the technostructure of J. Galbraith. Universals are components of the struc‐ tural model that determine the relationship between parts and the whole, such as the dichotomy of production and business of T. Veblen, the dichotomy of traditions and technology of K. Eyrs. On the basis of the foregoing, let us outline the distinguishing features of structural models: (1) the preconditions of structural models can be revised under the inﬂuence of a change in the empirical basis; (2) structural models contain a huge number of prereq‐ uisites, the number of which can not be limited, and the relationships between parts of the structure can also be reﬁned and revised, since the goal of structural modeling is as complete and reliable description of the studied object as possible; (3) the conclusions of structural models are not of a hard character, since they are not predictive, they are called upon to reliably describe the object under study and to reveal alternative variants of its further existence. The advantages of structural modeling are: (1) structural modeling is based on the principle of a cumulative causal relationship between parts of the structure and between the part and the whole; (2) structural modeling is based on the premise that all factors are able to inﬂuence the rest and receive response pulses from them; (3) structural models are more complete than abstract ones that allow us to describe a real socio-economic structure with only its cultural, religious, geographical, climatic, etc. features. The method of structural modeling makes it possible to study the institution of entrepreneurship in two dimensions: in a narrow sense, as an independent structure, and in a broad, in the context of the institutional environment. This allows us to fully reveal the nature of the institution of entrepreneurship, it is not trivial to look at its problems and suggest new ways to solve them. On entrepreneurship, an extensive scientiﬁc literature has been written, in which many problems accompanying entrepreneurial activity have been revealed. The most important, in our opinion, are such problems as: (1) the lack of suﬃcient funding for activities in general and innovative, in particular; (2) high risks (Kachalov 2016a,

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2016b); (3) lack of systemic regulation (Kleiner 2016, 2017); (4) lack of scientiﬁcally based strategy (Tambovtsev 2010); (5) conﬂicts arising in the transformation of insti‐ tutions and institutional environment (Polterovich 2001); (6) a short period of existence of small and medium-sized enterprises (3–4 years, according to the statistics of the Bank of Russia). The importance of the above problems is unquestionable, but neither the risk analysis nor the study of systemic and strategic problems will be complete, while the problem of the inﬂuence of values, motives and incentives of economic activity, their inﬂuence on the institution of entrepreneurship remains unresolved (Sazanova 2016, Sazanova 2017). Over the past 10–15 years, the institutional and economic environment of entre‐ preneurship has improved to a considerable extent, despite external challenges (economic crisis, sanctions, etc.), as noted by authoritative international sources (Russian Economic Recovery 2017). Nevertheless, the life expectancy of small and medium-sized businesses remains rather short – 3–4 years, and public opinion polls indicate an increase in the popularity of public service. The structural model of the enterprise institute presented by the author allows to look at this problem through the prism of the problem of values, motives and incentives of entrepreneurship.

4

Structural Model of the Institution of Entrepreneurship in the Context of the Russian Institutional Environment

In the “ﬁrst dimension”, the structural model of the institution of entrepreneurship is a structural model in the context of the institutional environment (Appendix). The constit‐ uent parts of the institutional environment are: legal institutions, institutions of manage‐ ment, cultural and religious institutions, and society. In turn, the constituent legal insti‐ tutions are the organizational and legal forms of business; management institutions management methods of the organization and methods of doing business; cultural and religious institutions - the values of entrepreneurship. Between all components there are cumulative return causal relationships that change under the inﬂuence of economic practice in the course of the historical process, changing both the parts and the whole. Thus, the change in economic practices in the 16th–18th centuries. (expansion of inter‐ national trade) and institutional changes in the XX century. (transformation from market to plan and vice versa) in Russia caused changes in the values of entrepreneurship and the institution itself, and this in turn inﬂuenced the choice of management methods, the choice of organizational and legal forms of entrepreneurial activity, etc.

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Cultural and religious institutions

Values of entrepreneurship Society

Methods of doing business Manage ment instituti ons (formal and informa l)

INSTITUTE OF ENTREPRENEU RSHIP

Methods of organizati on managem ent /предпри ятием Organizational and legal form of business

Legal institutes

It is the changes in the values of Russian entrepreneurship, especially in the 20th century. (Sazanova 2017a, 2017b) led to the emergence of such an organizational and

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legal form as a “limited liability company.” On the one hand, the entrepreneur, choosing this form, minimizes his risks, but, on the other hand, he chooses the “opportunist strategy” (the author’s term) in relation to society, always ready to give up responsibility for obligations, selling or closing his business 3–4 years. Another consequence of the “opportunist strategy” is the “shadow bookkeeping”, which itself is a consequence of the state’s opportunism (this is how entrepreneurs of the 1990’s perceived the inability of the state to protect them from racketeering and banditry). The eﬀorts of the state to reduce the costs of getting out of the “shadow” economy do not give a proper result, in the author’s opinion, because of the negative changes in the values of entrepreneurship. In the “second dimension” structural model of the Enterprise Institute - a model of its internal structure, which includes as components: (1) “thought patterns” or “preunderstanding” (thinking and behaviors that precede rational thought); (2) formal and informal rules, structuring the economic behavior of people, their entrepreneurial activ‐ ities. The Institute of Entrepreneurship, due to its inseparable connection with the insti‐ tutional environment, changes under the inﬂuence of changes in values, methods of doing business, and its legal regulation. These changes are expressed in the choice of the motives of economic activity (self-enrichment or serving business and society), reaction to stimuli (opt shadow or legal activities, the choice of form of business organ‐ ization, the choice of methods of organization and business management), which is inevitably reﬂected in society’s attitude towards entrepreneurial activities. In Russia still employed are not respected company, which is due, in our opinion, the above-described “trap mutual opportunism” (a term of the author). The only way out of this trap can be changes in the values of economic activity that must occur inseparably linked with changes in legal institutions and institutions of government. Opportunism should not have support in either formal or informal institutions. The presented structural model is not complete and unchanged, since this does not involve the method of structural modeling itself. Its dignity lies in deepening and expanding knowledge about the institution of entrepreneurship, but it needs constant actualization and veriﬁcation by facts.

5

Results

The study of the institution of entrepreneurship on the basis of structural modeling as a method of “old” institutionalism made it possible to formulate the following main scientiﬁc results: (1) problems of development of modern Russian business are generalized; (2) it is justiﬁed that the main problem of domestic business is the instability of its development, which is expressed in the short term of existence of small and medium-sized enterprises (3–4 years); (3) it is justiﬁed that the problem of the unsustainable development of Russian entre‐ preneurship cannot be solved by means of standard economic science; (4) the necessity of researching the institution of entrepreneurship with the help of the method of structural modeling of “old” institutionalism is grounded; (5) a structural model of the institution of entrepreneurship is constructed.

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Conclusions

The research carried out in the present study broadens and deepens knowledge of the institution of entrepreneurship in Russia, the main stages of its development, as well as its place in the institutional environment as a whole and the dynamics factors on the basis of the methodology of institutional economic theory. The structural model of the institution of entrepreneurship reﬂects the features of the Russian institutional environ‐ ment, reveals the relationship between the institution of entrepreneurship and gover‐ nance institutions, cultural and religious institutions, legal institutions and society as a whole. This study ﬁlls in the gaps in domestic and foreign economic science in the part of the study of the institution of entrepreneurship on the basis of the method of structural modeling.

References Annual reports of the Bank of Russia (1992–2016). http://www.cbr.ru/publ/?PrtId=god Ramstad, Y.: A pragmatist’s quest for holistic knowledge: the scientiﬁc methodolodgy of John R. Commons. J. Econ. Issues XX(4), 141–144 (1986) Wilber, C.K., Harrison, R.S.: The methodological basis of institutional economics: pattern model, storytelling, and holism. J. Econ. Issues XII(I), 76 (1978) The inﬂuence of the ecosystem for SMEs and the global economy”. SPIEF in 2017. Preview of 26.05.2017. http://tass.ru/pmef-2017/articles/4278934. Accessed 12 Aug 2017 The recovery of the Russian economy: how sustainable signs of growth? World Bank Group. The report on the Russian economy, no. 38, p. 37 (2017). http://www.vsemirnyjbank.org/ru/ country/russia/publication/rer. Accessed 10 Sept 2017 Kachalov, R.M., Sleptsova, Y.A.: Identiﬁcation of risk factors based on the decomposition of the economic space of the enterprise. Bull. Chelyabinsk State Univ. no. 14(396), 86–94 (2016a) Kachalov, R.M., Platonenko, O.A., Prokof’ev, A.N., Yakovlev, N.: An Empirical analysis of the attitude of Russian entrepreneurs to the problem of management of economic risk. Part 1. Russian economic barometer, no. 3(63), pp. 11–21 (2016b) Kirdina, S.G.: Methodological institutionalism and meso level social analysis. Sociological research, no. 12(380), pp. 51–59 (2015) Kirdina-Chandler, S.G., Hall, D.: Cooperation versus competition in the works of Russian evolutionists. J. Inst. Stud. 9(1), 6–26 (2017) Kleiner, G.B.: Systemic coordination and the development of the economy. In: The Civilization of Knowledge: The Russian Realities. Proceedings of the Seventeenth International Scientiﬁc Conference, pp. 16–19 (2016) Kleiner, G.B.: Systematic upgrading of domestic enterprises: theoretical rationale, concepts, principles. Regional economy, vol. 13, no. 1, pp. 13–24 (2017) Polterovich, V.M.: Transplantation of economic institutions. Economic science of modern Russia, no. 3, pp. 25–50 (2001) Sazanova, S.L.: Institute of entrepreneurship in the institutional environment of Russia. Bull. Univ. (State Univ. Manag.) no. 9, 109–113 (2017a) Sazanova, S. L.: A study of the relationship of the dynamics of entrepreneurship, entrepreneurship and the dynamics of values and incentives of management. Bull. Univ. (State Univ. Manag.) no. 6, 88–91 (2017b)

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Sazanova, S.L.: The Place and role of values and incentives of economic activity in the structure of factors inﬂuencing entrepreneurial activity and Institute of entrepreneurship in Russia. Bull. Univ. (State Univ. Manag.) no. 3, pp. 31–35 (2017c) Sazanova, S.L.: Values and incentives of management as factors of development of entrepreneurship in Russia. Problems of the theory and practice of management, no. 6, pp. 136–142 (2017d) Sazanova, S.L.: A Comparative analysis of the traditional methodology of institutionalism and neo-institutionalism”: dis….Cand. Ekon. Sciences. SPb., 2002, 186 p. (2002, 2003) Sazanova, S.L.: The evolution of values and incentives business in Russia (XIX–XXI centuries): the content of the main stages. Factors aﬀecting the dynamics of entrepreneurship and entrepreneurial activity in Russia. Bull. Univ. (State Univ. Manag.) no. 12, 26–31 (2016) Statistics business. http://vawilon.ru/statistika-biznesa/#i-2. Accessed 13 Aug 2017 Development strategy of small and medium entrepreneurship in the Russian Federation for the period up to 2030. http://economy.gov.ru/. Accessed 20 July 2017 Tambovtsev, V.L.: A Strategic theory of the ﬁrm status and possible development. Russ. Manag. J. 8(1), 5–40 (2010)

Formation of Target Programs of Innovation and Investment Development of Regions Tatiana L. Bezrukova1(&), Irina V. Kuksova1, Nadia I. Korda2, and Svetlana S. Kirillova1 1

Voronezh State University of Forestry and Technologies named after G.F. Morozov, Voronezh, Russia [email protected], [email protected], [email protected] 2 International Institute of Computer Technologies, Voronezh, Russian Federation [email protected]

Abstract. This article is devoted to the formation of target programs for innovative and investment development of the regions. Analysis of modern economic development, awareness of patterns and trends in its development, giving it an innovative vector allow us to put forward additional economic arguments in favor of the need for state participation in social reproduction on the basis of the concept of economically efﬁcient state. Innovative development of the Russian economy acts, on the one hand, as its reaction to the global trend of post-industrialization, and on the other hand, awareness of the need to restore the structural balance of the economy and increase in scientiﬁc and technological level of development that has declined during the reform period, which implies the activation of the investment process. The article proposes the structure of balanced development of the program and target management of the region, which represents a set of subprograms and their constituent parts such as conceptual, target, resource, procedural, organizational, providing and resulting ones. Keywords: Target programs Innovations Investments Region Innovative development Social and economic development

1 Introduction The relevance of the research topic is due to the increasing degree of necessity to solve the problem of determining the balance between objective processes in the economy and subjective preferences of society in speciﬁc conditions and at different stages of its development, the role of the state in social and economic processes on the basis of program-targeted investment management. Investments, acting as a system-wide growth factor and the main condition for the formation of quantitative (economic growth) and qualitative (economic development) vectors of the overall evolution of the economic system, predominantly (in comparison with other factors of economic dynamics) determine the basic parameters of its expanded reproduction and modernization. Given these circumstances, in the regulation of the investment process, the state © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 461–472, 2019. https://doi.org/10.1007/978-3-030-00102-5_49

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should play a primary role, while investment funds, banks, corporations and other participants in this process are in a subordinate position. This does not detract from the importance of these market institutions in reforming the economy, but emphasizes that the general thrust of investment processes should be determined by state actions. Effective investment management of the economic system is possible on the basis of a fundamental change in the existing system of investment management and use of historically successful experience of program-target approaches that make it possible to give a qualitatively higher level of predetermination to the management process and focus on a goal-oriented complex.

2 Methods In our opinion, program-target management is a set, goal-oriented, deﬁned in time and space, complex of legal, economic, environmental, organizational, technological, innovative and other measures aimed at quantitative and qualitative transformation (change) of the initial state of social and economic system, within the budget of time and resources, ensuring an effective solution of the systemic problems of the national economy (the quality of life of the population, social and economic, environmental development of the area, the quality of control at all levels of administration and management) (Tarasova 2013). The temporal nature presupposes the implementation of activities in a clear sequence, the unity of various stages of the general process of movement towards the goal set by the program, and spatial aspect presupposes pooling of efforts, balance of actions of all entities belonging to different sectors, levels of management and control, evaluation methods, forms of ownership, participating in the investment process (Gladilin 2014), (Grishina 2012). The content of the target program is reflected in its structure. The structure of the target program represents a set of subprograms and their sections. The content structure of the program acts in the form of the following blocks (functions) reflecting the logic of the program activity, implementation of which on the program-target basis will ensure the achievement of program objectives. It is a conceptual-purpose, resource, procedural, organizational, providing and resulting parts (Fig. 1). 1. Conceptual-target block contains the deﬁnition of the “goal tree”, with the justiﬁcation of their priority, urgency of the solution, the development vector, with quantitatively speciﬁc criteria, indicators of the planned results that determine conceptual setting of the program (Goncharova 2006). 2. The resource block characterizes the justiﬁcation of the need for quantitative and qualitative parameters of the resource provision in accordance with the composition of the program activities and planned timeframes, sequence of their implementation. Potential analysis takes into account resource constraints (Raymbaev 2017). The given block provides balance interconnection of all resources of a speciﬁc target program, and also communication with resources allocated to other programs. 3. The procedural block reflects the system of activities, tasks, works, ensuring the implementation of program activities, on the basis of the relationship between conceptual and target and resource blocks. System, sequence, phase and balance of

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I . Conceptual-target- block

Target Sub-target task

IV . organizational block

coordination adjustment е Interaction of all participants of program activities

Sub-target task

Sub-target task

III . procedural block

Processes: Industrial Social Demographic Service Immaterial

V . maintenance block Maintenance Socio- economic Legal Methodological Financial Scientific and technical Information

Environmental

II . resource block

land nature and climatic industrial infrastructure labour social environmental

VI . resulting block

forecast and evaluation of expected results predictive evaluation of the effectiveness of program activities (socio-economic, political, environmental) ,

Fig. 1. Structure of the target program.

the planned changes contribute to increasing effectiveness of processes and implementation of the program. 4. The organizational block provides coordination, coordination and interaction of all participants of program activities, organizational mechanism and procedures for program implementation (Chernyaev 2017). This block includes control of executive and legislative authorities, allowing to identify the relationship between the goals (end results) and resources (costs) of the program and to develop appropriate adjustments and measures of impact. 5. The maintenance block includes a system of necessary conditions, measures that guarantee the execution of program activities and the achievement of speciﬁed goals (ﬁnal results) (Korda 2017).

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6. The resulting block presents scientiﬁcally grounded assumptions on the effectiveness of social and economic, political and environmental outcomes of the program interaction of participants.

3 Results The level of social and economic development of the region, as well as the level of welfare of the population in the region, can not be expressed in one directly measured index (Romanenko 2016). There are several approaches to economic measurement for qualitative expression of the characteristics of the level of regional welfare development: – comparison by one indicator selected as the main indicator (for example, GRP); – comparison by several indicators, identiﬁed as priority in the state of social and economic development of the region; – construction of a system of composite social and economic indicators. Regions that have unique natural resources have a chance to lay the foundations for long-term stable development. But with the exhaustion of resources, adaptation of the economic structure of other regions, reduction of the material intensity and energy intensity of the ﬁnal products and increase in its quality and competitiveness in the world market, advantages of the regions of the commodity group will decline. They need to think about science-intensive technologies and industries for saving their rank, building up other potentials (Morkovina 2017). The most advantageous territorial and geographical location is occupied by the territories of the central part of Russia. The top ten priorities for this potential include the Moscow region, Moscow, Tula region, Krasnodar region, Kaliningrad, Belgorod, Lipetsk, Kursk, Samara, Vladimir regions. The regions of Siberia (the Republic of Tuva and the Republic of Altai), the Far East (the Republic of Sakha (Yakutia), the Kamchatka Region, the Jewish Autonomous Region, the Magadan Region, the Chukotka Autonomous District) and the Republic of Kalmykia are the least attractive in territorial terms. The most favorable demographic situation in 2000 was observed in the Tyumen Region, the Republics of Bashkortostan and Tatarstan, Moscow, the Udmurt Republic, the Krasnodar Territory, the Republic of Dagestan, the Stavropol Territory, the Republic of North Ossetia, and the Omsk Region. There are quite high birth rates, low mortality, including infant mortality. Ingushetia, Dagestan, Tyva, Yakutia, Altai have high birth rates, but also the death rate of children under the age of 1 year. The labor potential is signiﬁcant in the Nizhny Novgorod, Moscow, Kirov, Tyumen, Yaroslavl, Chelyabinsk, Samara, Sverdlovsk regions, in the Republic of Tatarstan. City of Moscow, having the highest rank (1) in terms of the number of employed in the economy, but rather low in terms of the proportion of economically active population in the total population and a high unemployment rate, as a result, takes only 20 place. According to the level of production potential, the Tyumen Region, the Krasnoyarsk Territory, the Samara Region, Moscow, the Republic of Tatarstan, the Republic of Sakha (Yakutia), the Vologda, Perm, Irkutsk Regions, the Republic of Bashkortostan

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are in the top ten. These are mainly extracting regions with a pronounced export orientation and regions with a developed manufacturing industry represented by the ﬁnal stages of production and science-intensive industries. Leaders in assessing the social and infrastructure potential are the Republic of Sakha (Yakutia), the Republic of North Ossetia-Alania, the Orel region, the Republic of Dagestan, the KabardinoBalkarian Republic. These areas have signiﬁcant indicators of housing commissioning per 1,000 people, low crime rates, including murders, relative to other territories they have more comfortable environmental situation. The ﬁnancial potential is high in Moscow and the Tyumen region, which divided the ﬁrst and second places. Also, the top ten includes the Republic of Tatarstan, the Republic of Bashkortostan, the Krasnoyarsk Territory, St. Petersburg, the Republic of Sakha (Yakutia), the Moscow Region, the Vologda Region, the Perm Region (Larionov 2017) (Maslennikov 2017). Scientiﬁc and innovation potential is high in Moscow, Novosibirsk region, St. Petersburg, Sverdlovsk, Moscow regions, the Republic of Tatarstan, Tomsk, Leningrad, Nizhny Novgorod, Irkutsk regions. This is determined by the availability of signiﬁcant research and production staff and high cost indicators for research and development. The main qualitative features of problem regions are: – Special crisis in the manifestation of a major problem, which creates a threat to the socio-economic situation in the country, political stability, ecological balance; – Availability of resource potential (industrial, scientiﬁc, technical, labor, natural), the use of which is especially important for the national economy (Sennikova 2015); – Special importance of geopolitical and geo-economic position of the region for the strategic interests of the country; – Lack of the region’s own ﬁnancial resources to solve problems of national and global importance. A conceptual approach to the formation of targeted programs for the development of innovation and investment activities in the regions suggests: 1. To consider the program-target management of investments as certain integrity with special properties, consisting of elements, subsystems, also possessing speciﬁc qualities, limited from external environment. 2. It is necessary to deﬁne the “borders” of the region as an object of program and target management of investments and its environment, in which it is necessary to distinguish its components according to the levels of formation and impactsocioeconomic, production, legal, scientiﬁc and technical, and others affecting macro-, mesa- and micro-levels. 3. To represent the program-targeted management of investments at the regional level as a purposeful and multi-vector system with independent sub-goals, the interests of individual subsystems, a system of indicators for measuring goals, various strategies and ways to achieve them, etc. 4. To consider the program-targeted management of regional investments as complete systems, taking into account their elements and structures that are formally (formal) and informally (informal), and the interaction of elements - taking into account that a change in one element causes a chain of changes in the others.

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5. To analyze the program-targeted management of investments at the regional level, not only functionally but in dynamics, as a process of self-regulation, coordination, decision-making, and also taking into account the analysis of growth processes, the general “life cycle” as a system as a whole (Bezrukova 2017) and its structural divisions, types of activities, etc.

4 Discussion At the moment, investments in the regional center of the Voronezh region lag behind investments in other cities with a million populations. In particular, Yekaterinburg more than 2.3 times, from Samara - 2 times, from Belgorod - 1.7 times, from Lipetsk 1.5 times, from Rostov 1.3 - times. One of the main reasons for the weak investment flow is inadequate development of industry (slide 6), with a low share of proﬁtability and having a stable trend of lowering output. This is partly due to the low proﬁtability of production in a number of industries and a high proportion of unproﬁtable enterprises. In the conditions of uncertainty of the global economic situation and the expectation of another economic crisis, investors prefer to keep their assets and not invest in new projects until now (Baychorov 2015). As it can be seen from the table in the Voronezh Region at the moment, up to 1/3 of all operating companies in the most income-generating sectors are unproﬁtable ones. Although their share is lower than ten years ago, but it is connected not with the improvement of the activity of enterprises, but with the ruin and dropout of the majority of unproﬁtable organizations from economic activities. Although there are positive exceptions, these are food industry enterprises that are oriented to the production and sale of food products, since this sector meets the daily needs of the population for food. Consequently, this industry is most resistant to negative factors, as the population can never refuse to purchase food, in contrast to the products of engineering, the acquisition of which is reduced due to a fall in living standards and a reduction in disposable cash income for the majority of citizens. Redirection of some of the regional budget revenues to ﬁnance the agricultural sector is a positive development, but at the same time, the approaches to organizing agricultural production leave much to be desired. In particular, there are occasional situations when breeding cattle purchased in Austria, Australia and the US, completely dies from disease or poor maintenance or even goes to slaughter in a couple of months (Anninsky district). Such an attitude will not allow achieving positive results, while livestock production remains unproﬁtable. On average, the loss-making ratio of livestock production is about 25%, whereas crop production is proﬁtable: with an average proﬁt margin of 15–20%. The production of various types of agricultural products has a different rate of return. In crop production, the most proﬁtable production is sunflower 60%, potatoes 40%, grains 37%, milk 25%. In livestock production, the proﬁtability of cattle production - 20%, pigs - 10%, poultry - 7%, Table 1. Currently, the Voronezh Region has developed a Strategy for attracting investments until 2015, where the goal of entering the region into the ﬁve leading regions of the Russian Federation is declared in terms of the rate of economic growth and the top ten

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Table 1. Proﬁtability of certain types of activities. Industries Agriculture Industry Construction Transport and communication Mining Wholesale and retail trade Provision of utilities

2004

2005

2006

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

6.3 24.7 9.7 17.2

9.3 18.5 9.6 13.6

1 2.6 14.4 12.4 6.1 5.7 8 15.3

5.8 14.9 4.2 13.4

6.7 15.3 3.9 14.4

8.2 16.6 5.1 15.1

14.3 18.3 5.8 15.7

10 17.1 5.6 14.2

7.8 13.4 5 13.4

9.1 10.8 8.3 13.5

9.1 7.8 8.9 11.4

10.7 9.4 6.7 11.1

… 18.5

… 12.9

… 19.2 8.9 8.9

32.5 11.3

35.6 9.7

30.6 10.1

30.5 8.8

25.4 10.8

28.8 7.1

31.9 8.3

31.4 8.9

28 6.7

2.4

5.7

6.1

8

8.2

−17.6 −15.7 −13.1

0.4

−0.5 −0.8 −0.1 −5.8

in terms of the rate of growth in the standard of living of the population. To achieve this goal, it is necessary to increase the competitiveness of the priority sectors of the economy and the leading enterprises of the region, attracting signiﬁcant investments for their development. Calculations showed that to achieve the goal by 2015, it is necessary to attract about RUB 800 billion of investment in the region’s ﬁxed capital”. In the Voronezh region it is planned to implement more than 75 investment projects for the development of livestock and crop production in the period until 2018, with a total funding of about RUB 70 billion. The largest of these are: – Creation and development of the breeding farm of LLC “Stephenson-Sputnik”, LLC “Stephenson-Sputnik”, Bobrovsky municipal district; – Construction of cattle-breeding complex in Kolybelka and acquisition of pedigree stock in EkoNivaAgro LLC, EkoNivaAgro LLC, Liskinsky Municipal District; – Creation of dairy cattle-breeding complex of mega-farm “Berezovka” for 4,175 heads of highly productive dairy cows, LLC “Megaferma” “Berezovka”, Bobrovsky municipal district. Construction of a dairy complex (village Sukhaya Berezovka); – Reconstruction of the complex for the production of milk, ACA named after Michurin, Ternovskiy municipal district; – Modernization of livestock breeding complex for pork production, ZAO Agrokombinat “Nikolaevsky”, Anninsky municipal district. The implementation of these investment projects will increase pork production 4 times, beef - 2 times, and milk - 1.3 times. But the prospects for the development of these projects (Bezrukova 2016) in the face of the problematic development of the country’s economy remain in question. In accordance with the data of the programs of social and economic development of the Voronezh region for the period from 2005 to 2025, it is planned to invest about RUB 125.023 billion in the existing and planned projects. The largest amount of investments of about 66% of all proposed investments falls on the period from 2012 to 2017. A signiﬁcant part of the investment falls on projects for the development of industry and modernization of production 48% of the total amount allocated, or RUB 61.671 billion. But much more are going to be invested in the modernization and development of agro-industrial complex Fig. 2.

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Млрд. руб.

14 12 10 8 6 4 2 0

2005

2007

2009

2011

2013

2015

2017

2019

2021

2023

2025

Fig. 2. Dynamics of investments in the projects of social and economic development of the Voronezh region in 2005–2025.

Since 2011, a signiﬁcant number of programs have been implemented on the territory of the Voronezh region, which are aimed at solving various problem areas in the social and economic policy of the region. The implementation of target programs assumes the existence of a high degree of program-target management. Over the past 6 years, we have seen an increase in the number of targeted programs, primarily federal programs: from 8 to 37 by 2015, regional ones from 1 to 12 in 2015, departmental programs from 27 to 64 in 2015. The number of regional target programs as a whole fluctuates around 40, sometimes only slightly decreasing in Tables 2 and 3. Table 2. The dynamics of the target programs in the Voronezh region. Indicator name 2011 2012 Federal TP 8 7 Regional TP 38 40 District TP – 1 Departmental TP – 27

2013 12 36 7 39

2014 34 39 11 37

2015 15 40 9 45

2016 37 36 12 64

Table 3. Dynamics of ﬁnancing of federal target programs in the Voronezh region. Indicator name 2011 2012 Federal TP 8 7 Amount of funds on TP 30,129.3 40,808.9 – investments 27,643.5 37,237.7 –R&D 700.9 386 – others 1,784.8 3,185.2

2013 12 12,811.1 8,564.5 745.2 3,501.4

2014 34 15,356.5 7,971.1 441.1 6,944.3

2015 15 8,428.5 1,505.8 523 6,399.7

2016 37 23,889.3 12,524.2 1,599.7 9,765.5

Federal target programs are ﬁnanced mainly from the federal budget. The bulk of ﬁnancing comes in the form of investments and investments in R&D. Despite the fact that the number of federal programs is increasing from 8 to 37, the total amount of funding is reduced from RUB 30,129.3 million in 2008 to RUB 23,889.3 million in 2016. The volume of direct investments is also decreasing from RUB 27,643.5 million in 2011 to RUB 12,524.2 million in 2016. The volume of R&D expenses has increased

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by more than 2 times, from RUB 700.9 million in 2011 to RUB 1,599.7 million in 2013. At the same time, ﬁnancing of programs at the expense of other sources has increased 5.5 times, from RUB 1,784.8 million in 2011 to RUB 9,765.5 million in 2016. In general, ﬁnancing of federal target programs is not very uniform.

5 Conclusions 1. High educational and creative potential The grounds for such an assertion: according to the total number of university students (in 2015/16 academic year - 133.4 thousand people) the Voronezh region ranks third in the Central Federal District after Moscow and the Moscow region, and 15th in the all-Russian rating, and the number of students per 10,000 inhabitants (in 2015/2016 academic year - 612 people) - the third place in the Central Federal District and the 8th place in the all-Russian rating. The signiﬁcance of this side is manifested in the objective prerequisites for the formation and development of regional innovation system of modernization and scientiﬁc support of production (Gashenko 2016). 2. Developed scientiﬁc and innovative potential The region has a network of research and educational institutions that provide fundamental research, applied and project development in the ﬁelds of innovative technologies and modern technical systems: in terms of the number of organizations performing research and development (58 in 2015), the region ranks third in the CFD (after Moscow and the Moscow region) and 11th place - in Russia. 3. Large industrial center with a diversiﬁed structure The structure of industry combines: power engineering, machine building and metalworking, chemical and petrochemical industry, building materials industry, furniture industry (Bezrukova 2013), production focused on satisfying the ﬁnal needs of the population (especially food industry). An important characteristic of the industry of the Voronezh region is the availability of production in the rocket-space, electronic, aircraft-building, chemical complexes, competitive in the national and world markets for civilian and military goods. 4. Favorable natural conditions for the development of agriculture and relatively high share of the Voronezh region in the production of certain types of agricultural products in Russia. Main characteristics: soil cover is dominated by highly fertile black soils (90%); the region ranks 7th in Russia for production of agricultural products (2015-75,261 million). 5. Favorable transport situation, favorable for the development of interregional economic relations The Voronezh Region is located at the intersection of trafﬁc flows connecting the North of the European part of Russia to the South and the West to the East, the

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meridional transport corridor “St. Petersburg - Moscow - Voronezh - Rostov Novorossiysk” and the latitude corridor “Saratov-Voronezh-Kursk” pass through it. The Moscow-Voronezh-Rostov-Novorossiysk meridional railway connects the Central Federal District with the Black Sea coast of the Caucasus, a recreation area and the only major Russian port on the Black Sea, the city of Novorossiysk. 6. Developed institutional environment. Small business According to the total number of enterprises and organizations (at the end of 2015– 53,870), the Voronezh Region ranks third in the Central Federal District and 25th in Russia. Notable development has been given to small business - in the number of small enterprises (in 2015 - 18.7 thousand), the region occupies the third place in the Central Federal District and the 23rd place in Russia; by the number of employees in small enterprises (2015 - 139.8 thousand people) - 3rd place in the Central Federal District and 22nd - in Russia; on the turnover of small enterprises (2015 – RUB 152.8 billion) the third place in the Central Federal District and 21st - in Russia. 7. Signiﬁcant potential of construction complex In terms of the volume of work performed by type of economic activity “Construction” (in 2015 – 31,139.4 million), the Voronezh region ranks 5th in the Central Federal District and 30th in Russia; for the commissioning of buildings for residential and non-residential purposes (in 2015 - 1392.4 thousand sq. m.) - 4th place in the Central Federal District and 17th place in Russia. 8. High degree of saturation with institutions of the banking system The Voronezh region steadily ranks third in the Central Federal District (after Moscow and the Moscow Region) for all major banking indicators. On the territory of the region, there are 89 credit organizations (as of January 1, 2016), including 43 branches, including the Central Chernozemny Bank of the Savings Bank of the Russian Federation (with 10 branches of the Savings Bank of the Russian Federation); 60 operating ofﬁces and 9 representative ofﬁces of credit institutions of other regions. In total, taking into account additional ofﬁces, operating cash desks outside the cash center on the territory of the Voronezh region, 696 branches of credit institutions have been created by 2016, including 686 banking services points. 9. Presence of prospected deposits of nickel and gold platinum ores as a potential object of signiﬁcant investments Along with long-term nonmetallic minerals (chalk, granites, clays, sands, cement raw materials) in the Voronezh region, there are Elan-Elkinskaya, VyazovskoUvarovka and Mamonsko-Shishovskaya areas, including ore occurrences with nickel and copper-nickel geological and industrial subtype of ores. The region is also promising for the identiﬁcation of industrial diamond deposits. 10. Objective prerequisites for the development of tourist and recreational sphere The Voronezh region has the potential to develop domestic and inbound tourism. Factors determining the competitiveness of the regional tourism industry are: natural landscapes, reserves, sanctuaries and nature monuments (there are 5 specially protected

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territories of the federal and 28 - regional levels, 127 nature monuments on the territory of the region); historical and cultural heritage; geographical position and natural and climatic conditions. The administrative center of the region is Voronezh - the largest historical city of the Central Chernozem region, numbering more than 300 objects of cultural heritage - monuments of architecture of the 17th – 19th centuries. The city has a developed cultural and entertainment infrastructure (museum and library funds, a network of cultural institutions, including those known outside of Russia), educational institutions that train cultural workers, schools of various arts and crafts (music, ballet, painting and sculpture, theatrical). Numerous cultural heritage sites are located in historic towns (Ostrogozhsk, Pavlovsk, Borisoglebsk, Novokhopersk, Boguchar, and Bobrov). Tourist resources are promising for travel with various purposes, and the location of the region in the central part of the Russian Plain, virtually eliminating natural disasters, makes its territory attractive for travel throughout the year.

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Maslennikov, V., Popova, E.V., Bezrukova, T.L., Kalinina, I., Bezrukov, B.A.: Application of organizational and managerial innovations in activities of Russian companies. Contributions to Economics, (9783319552569), pp. 415–423 (2017). https://doi.org/10.1007/978-3-31955257-6_54 Morkovina, S.S., Bezrukova, T.L., Sibiryatkina, I.V., Bukhtoyarov, N.I.: Risk factors for the development of entrepreneurship in forest sector of Russia. In: Education Excellence and Innovation Management through Vision 2020 From Regional Development Sustainability to Global Economic Growth: Proceedings of the 29th International Business Information Management Association Conference, pp. 1975–1981 (2017) Raymbaev, C.K., Kulueva, C., Giyazov, A., Bezrukov, B.A., Bezrukova, T.L.: Concept of Innovational Development of Entrepreneurial Potential of Small Enterprises. Source: Integration and Clustering For Sustainable Economic Growth. pp. 143–150 (2017). https:// doi.org/10.1007/978-3-319-45462-7_16 Romanenko, E.V., Biryukov, V.V.: Formation of an innovative investment model of the regional economy development. Yale J. Sci. Educ. vol. X, no. 1(18), pp. 608–614 (2016) Sennikova, I.L., Snigireva, G.D.: Conceptual approach to the evaluation of innovation and investment potential as the most important resource factor for the development of the region. Issues of regional economy, vol. 24, no. 3, pp. 42–49 (2015) Tarasova, N.Yu.: Formation of a zone of territorial development on the basis of the analysis of innovative and investment potential of the region. Vestnik of OrelSIEM, no. 2(24), pp. 48–54 (2013) Chernyaev, A.A., Serdobintsev, D.V.: Formation of the mechanism of innovative and investment development of the regions of the Volga region. Scientiﬁc Review: Theory and Practice, no. 7. pp. 76–87 (2017)

Ways to Protect Personal Honor and Dignity Pursuant to Current Criminal Legislation of the Russian Federation as an Important Problem of Modern Age Olga N. Kichalyuk ✉ , Oksana A. Morozova, Viktoria S. Kirilenko, and Anna A. Kulikova (

)

Institute of Service Sphere and Entrepreneurship (Branch) of Don State Technical University, Shakhty, Russia [email protected]

Abstract. The article is aimed at researching the crimes against personal liberty, honor and dignity and enforcement of criminal penalties with regard to persons violating the provisions of criminal legislation in the speciﬁed area. The authors are relying on dialectical method of cognition as the main research method. Besides, general scientiﬁc and particular scientiﬁc methods, methods of analysis, synthesis, method of deﬁnition and division of concepts, formal and logical method, and grammatical method were used. The authors of the paper gave special consideration to the responsibility for slander in foreign countries within the framework of this research. In the course of research, the authors gave consider‐ ation to the development of legislation on establishing responsibility for crimes against honor and dignity, and formulated the recommendations on establishing responsibility for crimes against honor and dignity. Keywords: Liberty · Honor · Dignity · Criminal legal protection Civil and legal protection · Object of the oﬀense · Defamation · Slander · Insult

1

Introduction

The formation of a civil society is associated with the establishment and development of such inalienable attributes of it as the state of law, rights of citizens, including the right to liberty and security of person, the right to freedom of speech, conscience and religion, as well as the right to privacy, etc. In order to comply with the generally recog‐ nized principles and the rules of international law, the Constitution of the Russian Federation of 1993 proclaims the priority of inalienable personal rights and liberties (Article 2 of the Constitution of the Russian Federation). This circumstance indicates that the point of focus of the Russian state is on personal (civil) rights and liberties of a person. One of such rights is the right of a person for dignity, protection of his/her honor and reputation (Articles 21, 23 of the Constitution of the Russian Federation). Personal liberty, honor and dignity are considered to be important qualities that are inherent in any person. Pursuant to Articles 21–23 of the Constitution of the Russian Federation, © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 473–486, 2019. https://doi.org/10.1007/978-3-030-00102-5_50

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every person shall have the right to personal liberty and security, for the respect of his/ her honor and dignity. Pursuant to Part 4 of Article 29 of the Constitution of the Russian Federation, every person shall have the right to freely seek, receive, transmit, produce and disseminate information in any legitimate way. Part 5 of Article 29 of the Constitution of the Russian Federation states that there is freedom of press, and censorship is forbidden in the Russian Federation. However, one should be very careful, since the uncontrolled use of information can cause signiﬁcant damage to the reputation of a person, public order or the morality of the population. The modern perception of the categories of honor and dignity is largely based on the views on these concepts developed by mankind. It should be emphasized that “honor” and “dignity” are polysemic words (multiple-meaning words), therefore one should always specify what meaning these words hold. They can denote both ethical categories in general, and their individual aspects, and, in addition, they can be used in other meanings. Pursuant to Article 2 of the Constitution of the Russian Federation, a person, his/her rights and liberties are regarded as the supreme value. Recognition, observance and protection of rights and liberties of the person and of the citizen are a state duty. Nothing can be the basis for impairment of personal dignity. Article 23 of the Constitution of the Russian Federation explains that every person shall have the right to privacy, personal and family secret, protection of honor and reputation of the person and of the citizen. The goal of this paper consists in the research of crimes against personal liberty, honor and dignity and enforcement of criminal penalties with regard to persons violating the provisions of criminal legislation in the speciﬁed area, which involves fulﬁllment of the following tasks: – give consideration to crimes against personal liberty; – examine the special aspects of prosecution for kidnapping and unlawful deprivation of liberty, as well as for human traﬃcking and use of slave labor; – deﬁne the crimes against personal honor and dignity; – examine the responsibility for slander in the Russian Federation and in foreign coun‐ tries; – give consideration to special provisions providing for responsibility for slander (Article 298.1) and insult (Article 297, Article 319, Article 336). The subject of research paper is criminal oﬀenses against non-material values – personal liberty, honor and dignity as inalienable rights of citizens guaranteed by the Constitution of the Russian Federation and protected by criminal law. The subject of research is provisions of criminal legislation, Russian criminal legal doctrine.

2

Research Data and Methods

The theoretical basis of research is composed of the writings of such scientists as: Beliayev‐ skiy, N.V., Dukhovskoy, M.V., Kurliandskiy, V.I., Malein, N.S, Marogulova, I.L., Markhotin, V.I., Matrosova, M.E., Noy, I.S, Nurkaeva, T.N., Osmonov, A.A., Pridvorov,

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N.A., Purtskhvanidze, B.Z., Rozin, N.N., Solodkin, I.I., Sugachev, L.N., Tovmasian, M.T. et al. The regulatory framework of research consists of international law acts on human rights, the Constitution of the Russian Federation, the Criminal Code of Georgia, the Criminal Code of Tajikistan, France, Moldova, Austria, Argentina, Belgium, as well as former and current criminal legislation of foreign countries, regulating the issues of protection of personal honor and dignity and responsibility for crimes infringing them. The analysis of the criminal policy of the Russian state in the area of responsibility for production, storage, transportation or selling of goods and products, performance of works or provision of services which do not comply with safety requirements, has shown that there is a long-standing consistent pattern that is manifested in all stages of its implementation in the legislative regulation of responsibility for these actions, expressed in the formation of a suﬃcient regulatory framework. That said, excessive dispositivity of the rule (Article 238 of the Criminal Code of the Russian Federation) and a wide range of regulation of the quality and safety of goods, products, works and services impede its full-scale application in judicial and investigative practice. Theoretical conclusions and suggestions deﬁned in research paper, can be used in further research in the area of legal protection of honor and dignity. The practical relevance of this research is that its ﬁndings can be used in the course of the law-making activities aimed at improving current criminal legislation. The methodological basis of this research is presented by a set of general scientiﬁc and particular scientiﬁc methods, technical legal methods of scientiﬁc cognition which are characteristic of modern criminal legal science. The main method of research was dialectical method of perception, combining a system-functional approach to the inves‐ tigation of the object and the subject of research paper. General scientiﬁc research methods were used in the making of this article: system structured method, comparative analysis method; besides, particular scientiﬁc research methods were used: statistical method, method of study of materials of criminal cases and judicial decisions. The use of these and other methods in the work is conditioned by the focus of research topic, including its practice-oriented approach to the solution of legal and particularly criminal legal measures aimed at ﬁghting crimes against personal liberty, honor and dignity.

3

Findings

3.1 Development of Legislation on Establishing Responsibility for Crimes Against Honor and Dignity Criminal legal defense of personal honor and dignity has been mentioned in legislation since XI century; however, the ﬁrst researches in this area emerged no earlier than in the XIX century, and they gained particular momentum since the 60th of the XX century. The ﬁrst rules regulating the protection of honor and dignity emerged in Old Russian State during the period of feudal disunity (from the XI century to the XV century). Russkaia Pravda did not contain any verbal abuses of honor, nor was there a slander; it provided for responsibility for “wergild smear” only – false accusation of murder. The

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hits with sheathed sword or sword hilt, hits with a bowl or a horn, damage to the beard and mustache were considered oﬀensive. The gravity of insult depended on the degree of gentility of an injured person (feudal lords, representatives of the upper class). At the turn of the XV–XVI centuries, the state still did not recognize the equality of honor and dignity of all citizens. In the assessment of the amount of dishonor, the law books of 1497 and 1550 not only took account of the origin of person injured, but also of his/her income, his/her sex (if it is a wife, then the amount of dishonor is twice as large as the amount of dishonor of a husband) and his/her age (“a young boyar”). Research methodology and methods. Insult was designated as “dishonor” and “yap”, i.e. the term “verbal abuse” emerged, but it had no explanation in legislation. The Russian centralized state has been forming and developing since the XVI century. A special place among the monuments of Russian law of that time is held by the Council Code 1649, Chap. 10 of which contained 73 elements that regulated responsibility for various kinds of insult. Verbal abuse was connected with the term “uncomely word”, the so-called “indecent yap”, “nasty”, “bad-mouth” words. The transition to absolutism is characterized by the further development of legisla‐ tion, including provisions of criminal legislation. During this period, a criminal respon‐ sibility for defamation (dissemination of defamatory information that is consistent with the reality) was established for the ﬁrst time in the Articles of War 171. Then a signiﬁcant step was taken in the development of provisions of criminal legis‐ lation on responsibility for crimes against honor and dignity during the period of the disintegration of the feudal system and the development of capitalism in Russia. It is associated with the adoption of the Code of Laws on penal and correctional sanctions of 1845 and the Criminal Code of Laws of 1903. In accordance with the Code of Laws of 1903, the diﬀerentiation of responsibility depending on the position of the oﬀender was eliminated. All crimes against honor and dignity (back then, there was talk of crimes against honor) were divided into two types: oﬀense (or humiliating treatment of a person) and defamation. At the same time, pre-revolutionary criminal legislation did not contain the notion of personal honor and dignity; the opinions of lawyers of the time on the meaning of terms “honor” and “dignity” signiﬁcantly diﬀered from one another and were reduced mainly to the following positions. Some scientists (e.g. Dukhovskoy, M.V., Rozin, N.N., Belogrits-Kotliarevskiy, L.S.) were of opinion that honor is a value which has objective (exterior) and subjective (interior) aspects. As for the deﬁnition of the content of the objective aspect of honor, opinions of the authors diﬀered. Thus, Rozin, N.N. believed that its main content is “sociality, social value and usefulness” of an individual. There was also such a perception that honor in the objective meaning “consists in external respect corresponding to dignity which an individual can demand from others”. According to another opinion, the external (objective) honor was deﬁned as the right, “the desire of a person to demand from fellow citizens the abstinence from all that can express contempt and disrespect to him.” Research methodology and methods. A diﬀerent approach was observed to the deﬁnition of the subjective aspect of honor. Thus, Rozin, N.N., speaking of it, meant the area of personal sensations of an individual.

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Yesipov, V. V. was of opinion that “honor in the subjective sense is a moral, mental dignity of an individual as a basis of social relations of an individual perceived by an individual. Other authors believe that the internal aspect of honor is the sense of dignity, which forces a person to subject his/her activity to moral rules. Despite the variety of deﬁnitions of the content of objective and subjective aspects of honor, most authors pointed out that only its objective aspect can be valuable for the legal composition of the right of honor and the object of the oﬀense in the speciﬁed crimes can be. Prior Correctional Labor Code of the RSFSR of 1970 solved the issue of assessment category “exceptional personal circumstances” in a similar way: an exhaustive list of these circumstances was presented in all Articles which contained this category. However, this position does not seem to be correct in the present environment. This assessment category is not disclosed in the relevant articles of the Penal Code of the Russian Federation at all; In contrast to the previous ones, the framework in which it should be used is not deﬁned either. Of course, the use of legal analogy seems to be well founded in this case. A number of scientists adhere to this method of interpretation. However, in our opinion, we cannot go this way. Otherwise, the law-maker would with great probability deﬁne these “exceptional personal circumstances”, similarly to other legal rules. Nevertheless, complexity and abundance of personal circumstances which are “exceptional”, in the presence of which the convicts can be allowed a phone conver‐ sation, cannot be limited only by death or life-threatening illness of a close relative, and by a natural disaster that caused signiﬁcant material damage to the convict or his family. The refusal to give a call at the birth of a child or for monitoring the life of dependants may entail a complete rejection of the goals of correction and the sense of correction as such, and, moreover, this will not comply with the principle of justice. The same opinion is held by the courts, stating that the list of such circumstances is extensive and it is impossible to deﬁne it as exhaustive. It is interesting to note that foreign legislation solves the issue of providing phone conversations in a completely diﬀerent way, regardless of the presence or absence of “exceptional personal circumstances”. Thus, there are automatic telephones in correc‐ tional institutions of Germany and Norway which the convicts can freely use. Phone conversations are paid at the expense of the convicts, are not limited in time and are not monitored. In Denmark, the convicts who are held in open prisons have unlimited access to the telephone as well. In closed prisons, a special permission for phone conversations is required; these conversations are monitored by a prison oﬃcer. In the United States, prisoners are allowed to call their families and friends while their conversations are monitored by the prison oﬃcers. The prisoner usually pays for the calls himself, although the recipient pays for them in some cases. In Finland, a telephone is installed in prison to be used by the convicts. A convict is obliged to tell with whom and about what he is going to talk. In closed correctional institutions, prison oﬃcers can monitor the phone conversations, except for the conversations with a prisoner’s lawyer. The phone calls are not monitored in open correctional institutions. And this fact perfectly conﬁrms our conclusion that the list of “exceptional personal circumstances” at which a phone call can be made is much wider.

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3.2 Ways to Protect Personal Honor and Dignity Personal honor, dignity and reputation deﬁne the moral status of an individual, his/her position in society, and self-esteem, of course. Pursuant to the Constitution of the Russian Federation, the dignity and the right to protection of honor and reputation shall be recognized for every person and protected by the state as supreme values. The busi‐ ness reputation is an assessment of the professional qualities of a person as an employee. To disseminate defamatory information means to tell it either to a single person or to a large number of people. Hence, the information can be either public or private. It can be communicated in writing or in orally, as well as by means of mass media and images. Such defamatory information which was told to the very person whom it in fact refers to, shall not be treated as dissemination. The requirements to refute the information which is contained in judicial decisions, judgments, and decrees of preliminary investigation agencies and other oﬃcial docu‐ ments under Article 152 of the Civil Code of the Russian Federation cannot be under consideration, as the laws provide for a diﬀerent procedure for them. In addition, the Criminal Code of the Russian Federation provides for the protection of honor and dignity of a citizen. It establishes responsibility for slander with direct intent. From the perspective of the injured person, if the information defamating him/her was disseminated knowingly and willfully, he/she can ﬁle a complaint with court on prosecution of the oﬀender. Simultaneous consideration of a criminal case and adjudication of a claim under Article 152 of the Civil Code of the Russian Federation is not permitted; however, refusal to initiate or terminate a criminal case as well as delivering a judgment of guilt or a judgment of acquittal do not prevent the consideration of a claim for protection of honor and dignity on civil process. Defamatory information in public opinion or in the opinion of certain persons impairs honor, dignity and business reputation of a citizen. The customs of business intercourse, the principles of universal and professional morality and the functioning rules of law serve as objective criteria for recognition of defamatory nature of disseminated infor‐ mation by the court. Defamatory statements of violations of these rules and principles represent the messages about the commitment of unworthy acts by a citizen, the so-called judgments of the fact. One should distinguish between assessments (opinions) and judgments. An assessment expresses the relationship of a person to an object or its individual charac‐ teristics, and does not state a fact, for example (good - bad, attractive - repulsive). Hence, the characteristics of truth and falseness are not applicable to assessments. It should be noted that there is also a layer of assessing expressions with an actual reference, that is, words giving a speciﬁc description containing statements in the form of assessment (criminal, deceitful; incompetent). The correspondence of the credibility of such state‐ ments is checked, but in the case of lack of proof they are subject to refutation. The following types of information cannot be deemed to be defamatory regardless of the degree of speciﬁcation: – critical comments on research paper or its concept;

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– neutral information from the ethical and business perspective about the character traits, physical imperfections, diseases; – political and world outlook assessments. Article 152 of the Civil Code of the Russian Federation protects honor, dignity and business reputation only in that case when defamatory information is not consistent with the reality. Accordingly, oﬀensive expressions and comparisons that cannot be checked for genuineness shall not be refuted. A voting citizen who considers that defamatory information and misrepresentations were disseminated about him/her, shall have a right to ﬁle a suit to defend his/her honor, dignity and business reputation. As for persons under eighteen and incompetent persons, a suit to defend his/her rights shall be ﬁled by their representatives in law. Defendants are obviously those persons who disseminated defamatory information. Refutation is a special measure of protection which is used in case of breach of honor, dignity and business reputation. An obligation of contradiction shall be placed upon the disseminator of defamatory information and misrepresentations regardless of his/her guilt. There is a cardinal diﬀerence between civil and legal protection of honor and dignity and criminal legal defense. In criminal procedure, intentional guilt is an essential element of the contents of slander. The criminal case is not initiated when the offender had no specific intent, and the initiated case shall be subject to termination for absence of a crime in the act. And civil and legal procedure can be applied both in cases of willful damage, and by inadvertence or accidentally, that is, unconscious infringement of honor and dignity of citizens. A person can apply for civil and legal protection if defamatory information which is not consistent with the reality was disseminated, and criminal responsibility for slander arises during dissemination of knowingly false information about other person. In other words, we can see that civil legislation does not require evidence of the fact that the information was knowingly false. Certain diﬀerences in the initiation of civil and criminal cases of protection of honor and dignity can be seen. The criminal case is only initiated against those persons that can be brought to crim‐ inal responsibility under the law, as well as the cases of prosecution are initiated by a private person. Criminal law protects honor and dignity of citizens only. The cases of civil and legal protection can be initiated by ﬁling of a complaint. What is more, civil and legal arrangements provide an opportunity to protect honor and dignity from organizations and incompetent persons. Civil law protects honor and dignity both of citizens and companies. The main diﬀerence between civil and criminal responsibility for an oﬀense against honor and dignity of citizens is the consequences. When a civil claim is satisﬁed, only the obligation to refute disseminated false and defamatory information about another person arises, while in some cases it is necessary to compensate for moral harm. The prosecution of the oﬀender under the slander clauses on slander entails a criminal history as a result of conviction, in addition to the punishments imposed on him/her, indicated in the sanctions of slander clauses. Criminal history has an impact on the social

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and legal status of a citizen, since its consequences are the inability to choose and hold certain positions because of former conviction, negative impact of unexpunged or outstanding conviction in case of commitment of a new crime. 3.3 Regulation of Issues of Responsibility for Slander Under Legislation of Foreign Countries When we analyze statutory regulations of foreign countries on criminal responsibility for oﬀense against personal honor and dignity, we may note that foreign law-makers treat their deﬁnition diﬀerently. Thus, criminal responsibility for an oﬀense against honor in legislation of some foreign countries is expected together with criminal respon‐ sibility for an oﬀense against personal honor (criminal legislations of the Republic of Azerbaijan, of the Republic of Belarus, of the Russian Federation, of Latvia, of the Kingdom of Norway, of Turkey, etc.). At the same time, in the legislation of some other countries treats honor acts as an independent object of the oﬀense, while dignity is not mentioned in the language of law at all (the Criminal Code of Austria, the Criminal Code of the Kingdom of Denmark, the Criminal Code of the Republic of Poland, the Criminal Code of Switzerland, etc.). And, alternatively, in the legislation of still others dignity is the only object of criminal legal defense (the Criminal Code of Spain). The original version of Article 298 of the Criminal Code of the Russian Federation was declared to be no longer in force. The act was depenalized and moved to the Administrative Oﬀense Code. However, the current state of life of the state indicated the untimeliness of decision of the law-maker to exclude criminal responsibility for the speciﬁed action and the need for its return. Thus, Federal Law No. 141 of 28.07.2012 “On Making Amendments to the Criminal Code of the Russian Federation and Certain Legislative Acts of the Russian Federation” supplemented the Criminal Code of the Russian Federation with Articles 128.1 and 298.1 the names of which are similar to the names of Articles 129 and 298 of the Criminal Code of the Russian Federation, which became invalid in December 2011. If the diﬀerence between the former Article 298 and the current Article 298.1 consists only in the types and amount of penalty (current version of Law provides for two types of punishment only: ﬁne and compulsory community service, the amount of which is increased several times, then Article 128.1 expands the list of penal acts related to the dissemination of knowingly unreliable information. For example, individual compo‐ nents of a crime are formed by slander stating that a person suﬀers from a disease which is of serious hazard to those around him/her, as well as slander, incident to the accusation of a person of commitment of sexual crime, for which a more severe punishment is stipulated. A separate criminal responsibility for slander committed with the use of oﬃcial position of a person, has been introduced. At the same time, the list of the types of punishment for these crimes was reduced to two: ﬁne and compulsory community service, the amounts of which have been signiﬁcantly increased. Certain foreign codes indicate optional features of the objective aspect, recognized in this case as binding in the disposition of the Article, that is, a place, a situation in which the relevant accusations can be laid:

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– at the meetings or in public places; – in the presence of several persons who have the right to assemble and hold conduct discussions in places that are accessible to a certain number of citizens, but are not public places; – in any place in the presence of an injured person, as well as before witnesses. Further, the law-maker formalizes the forms of slander: “in writing, printing or otherwise, in the form of pictures or emblems exhibited for sale or for review by the public”; “in writing, not being public in nature, but addressed or communicated to many persons” (Article 444 of the Criminal Code of Belgium). A person who has made a slanderous statement to the public authority or sent a slur in writing to a person with his/ her subordinate employee shall be imprisoned as well (Article 445 of the Criminal Code of Belgium). Pursuant to the Criminal Code of Bulgaria, unlike with most countries, the contents of slander can be deemed either as formal and tangible, as evidenced by the following formulation of Article 148 – “for slander which entailed grave consequences”. Certain Criminal Codes of foreign countries contain an express reference to the form of guilt as an element of the subjective aspect of the components of a crime directly in the dispo‐ sition of the Article. Thus, a person who was aware of the falsity of the victim’s accusation of commitment of a crime, or a person who by inadvertence did not deem it necessary to check his sources shall be prosecuted for slander in accordance with Article 206 of the Criminal Code of Spain. Thus, the Criminal Code of Spain, specifying the form of guilt as an element of the subjective aspect in the Article, does not rule out the possibility of defa‐ mation with a double form of guilt. Part 3 of Paragraph “b” of Article 135 of the Criminal Code of Tajikistan provides for the motive and motivations as the mandatory and at the same time qualifying features of the subjective aspect: “Defamation for selﬁsh or other base motives”. From the perspective of the Austrian law-maker, a person shall be prosecuted for slander, aiming at “impairing the public opinion about him/her or externally humiliating him/her” (Article 111 of the Criminal Code of Austria). Article 411 of the Criminal Code of the Republic of Kazakhstan provides for criminal responsibility for slander against a judge, a trier of fact, a public procurator, a person prosecuting a prejudicial inquiry, an expert, a bailiﬀ, an oﬃcer of justice. Part 1 indicates the possibility of bringing to responsibility a person guilty of slander against a judge, in connection with the consideration of cases or ﬁles in court. Parts 2 and 3 are formulated similarly to Paragraphs 2 and 3 of Article 298.1 of the Criminal Code of the Russian Federation. Article 304 of the Criminal Code of the Republic of Moldova establishes criminal responsibility for slander against a judge, a prosecutor, or a person promoting justice, in connection with the consideration of cases or ﬁles in court instance, associated with accusation of such persons of commitment of a grave crime, especially grave crime or extremely grave crime. The Criminal Code of Turkmenistan, namely Article 192 provides for responsibility for slander with regard to a judge, people’s assessor, prosecutor, investigator or person carrying on an investigation.

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A number of states formulated a general regulation on slander with regard to any citizen regardless of his/her status. Thus, the Criminal Code of Argentina provides for responsibility for “defamation or false accusation of a crime…” (Article 109), for the publication or any other repro‐ duction of slander committed by another person (Article 113). Besides, it should be noted that pursuant to the current criminal legislation of foreign countries, the most common oﬀenses against personal honor and dignity are insult and slander. The legislation of certain countries provides for responsibility for both crimes at once, while the legislation of other countries provides for responsibility for one of them only. Nevertheless, in point of fact, slander can be treated as a special kind of insult, because personal insult actually occurs during slander. The Criminal Code of a number of countries of both Eastern and Western Europe provides for responsibility both for insult and for slander at once. In contrast, the Criminal Code of Georgia (Article 148) provides for responsibility for slander only. In addition, an approach that is used in the Criminal Code of the Netherlands and the Criminal Code of Sweden, where a special term “defamation” is used directly in the language of law, which derives from the Latin and means public disclosure of false statements (false information) disgracing or defa‐ mating a person (his/her honor and dignity), appears to be rather interesting. In other words, the term “defamation” is actually a synonym to the Ukrainian word “slander”. However, the deﬁnition of crimes related to defamation in criminal legislation of these countries has its own special aspects as well. Thus, Chapter 5 of Part 2 of the Criminal Code of Sweden is called “On Defamation”, but this Chapter also includes a provision providing for responsibility for insult (abusive conduct) in the ﬁrst place, and not for slander. The Criminal Code of France provides for responsibility only for insult of a deceased person (Article 225). Thus, no provision is made for responsibility for slander and personal insult in general terms in the Penitentiary Code of Estonia and the Criminal Code of France, but there is provision for responsibility for special kinds of insult or slander. Having studied foreign legislation, we can see that most countries of the world established criminal responsibility for slander. In 2012, slander became a penal oﬀense again (Article 128.1 of the Criminal Code of the Russian Federation). The return of the article which provides for responsibility for slander, to the Code, was preceded by a campaign to liberalize criminal legislation due to which slander was only punishable by administrative responsibility for more than a year. At present time, slander is subject to a criminal penalty in the form of a heavy ﬁne or compulsory community service. We believe that the return of the Article to the Criminal Code is more than fair, since many people, committing such crimes, do not make account of the fact that even simple words that are false in nature, can entail criminal responsibility. As can be seen from the above, a statement in a social network can be a reason for prosecution. Recently, the courts are increasingly considering cases associated with accusations of dissemination of false information on the Internet.

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483

Discussion

Liberty, honor and dignity are the most important human rights that are protected by the provisions of the Constitution of the Russian Federation. Attempt on them and their infringement is a penal act. The term “crime” is related to the impairment of human dignity. Personal liberty, honor and dignity are the primary qualities which enable a person to freely exist in society, to fulﬁll their potential, to work in accordance with their abil‐ ities, beneﬁting society. Thus, crimes against personal honor and dignity shall be treated as an oﬀense against the property of a society in which its citizens are hampered in public activity through crime. The crimes against personal liberties, honor and dignity are very diverse; their range expands from seemingly absolutely inoﬀensive slander and ubiq‐ uitous, beaten insult up to the case of deprivation of liberty of a person which may be fraught with the most unexpected and unpredictable, tragic consequences. Unlawful deprivation of liberty cause damage to liberty in the ﬁrst place in the most direct physical sense; at the same time, from the perspective of psychology, the sense of dignity is in a state of crisis from which it scarcely ever recovers without losses. A lawbreaker is brought to criminal responsibility for crimes against personal liberties, honor and dignity in accordance with the provisions of the Criminal Code of the Russian Federation. When we deﬁne the criminal legal basis of crimes against personal liberty, honor and dignity we have to focus not only on the fact of the committed act, but also on the motives, goals and results that were achieved or were attempted to be achieved by the subject of a crime. The crimes of such groups rarely occur in isolation from social life and social processes. Each crime against personal liberty, honor and dignity intentionally discredits a citizen in order to deprive him/her of the advantages, as well as the opportunity to perform that community action which will give him/her an even greater advantage. Such crimes are committed by persons who cannot achieve the result equal to that of the victim in fair competition. Therefore, they deliberately try to oﬀend, humiliate, slander and disseminate defamatory information which us not consistent with the reality or infor‐ mation that was corrupted with criminal intent; to deprive a person of the opportunity to move and act within real time and space, holding him/her in place, kidnapping a person or committing a person to a psychiatric hospital. Special emphasis is laid on the possi‐ bility of commitment of such crimes by the persons in charge in case of abuse of their authority. The generic object of such crimes is a human personality with a combination of positive and social assessments, as well as business qualities of a person. However, the variants of the fundamental criminal line of action are visible in each of the cases of criminal acts: moral and ethical eﬀects aimed at the destruction of the inner world of a person; ﬁnancial eﬀects, depriving a person of access to normal life. The crimes which are included in Chapter 17 of the Criminal Code of the Russian Federation are broken down into crimes against liberty and crimes against honor and dignity. The ﬁrst group of crimes includes kidnapping, unlawful deprivation of liberty and unlawful commitment to a psychiatric hospital, human traﬃcking and use of slave labor.

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The second group includes, in particular, slander and insult. Both in the ﬁrst and in the second case, these crimes are implicitly life threatening. The crimes of the ﬁrst group can result in the death of the injured person, by inadvertence, while the crimes of the second group become a motive for suicide on the part of the injured person. A full-scale Counter-Traﬃcking in Minors Program including traﬃcking with a view to using their slave labor has not been adopted in Russia up to date. Furthermore, such Counter-Traf‐ ficking in Persons Program has not been adopted either. Meanwhile, the large scale, forms and organization of human traﬃcking, including minors traﬃcking with a view to using their slave labor have become so profound and sophisticated that soon our state, like many other states, will not be able to control the situation in this area. In 2012, slander became a penal oﬀense again (Article 128.1 of the Criminal Code of the Russian Federation). The return of the article which provides for responsibility for slander, to the Code, was preceded by a campaign to liberalize criminal legislation due to which slander was only punishable by administrative responsibility for more than a year. In current legislation, slander is subject to a criminal penalty in the form of a ﬁne or compulsory community service. We believe that the return of the Article to the Criminal Code of the Russian Feder‐ ation is more than fair, since many people, committing such crimes, do not make account of the fact that even simple words that are false in nature, can entail criminal responsi‐ bility.

5

Conclusions

At the present time, the insult has grown to an incredible scale. This is not so noticeable these days, because not every person goes to court for protection of his/her impaired dignity, thereby leaving his/her oﬀender unpunished. In many cases, the court does not even grant such a claim. And if it comes to court, then oﬀender will pay a ﬁne and it will be the most severe punishment for him/her. Insult has become a standard of the today’s world, that’s why those people who commit such oﬀenses do not fear anything and commit them increasingly often, since they are sensible of their impunity. All in all, we can suggest the law-maker to supplement Part 5 of Article 190 of the Penal Code of the Russian Federation with the following provision: “A systematic evasion of a probationer from compensation for harm means evasion during an extended probationary period, after the announced warning in connection with his/her evasion from compensation for harm (in whole or in part) inﬂicted by the crime, in an amount speciﬁed in the court decision, by way of concealing property, income, evasion from work, or otherwise.” In view of the foregoing, we come to conclusion that the insult at the present day is the most common form of impairment of human dignity, for which an oﬀender bears no responsibility. In this regard, it is more expedient to return Article 130 to the Criminal Code of the Russian Federation which provided for criminal responsibility for personal insult, thereby reducing the scope of such oﬀenses and improving the moral and ethical state of the surrounding people.

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Financing of Russian Companies in the Conditions of Distortion of International Trade Relations and Economic Sanctions Elena Sysoeva ✉ , Elena Budilova, Oksana Kachur, and Olga Dolgova (

)

Voronezh State University, Voronezh, Russia [email protected], [email protected], [email protected]

Abstract. The state of ﬁnancing of Russian companies is inﬂuences by a lot of factors. In recent years, these were supplemented by distortion of international trade relations and economic sanctions – which are interconnected. Progressive development of international trade relations features new regu‐ larities – which lead to their distortion. This is stimulated by the US and European sanctions, which inﬂuence the scale, cost, and selection of the tools of ﬁnancing of Russian companies – as they limit their presence in international ﬁnancial markets. The purpose of the article is to identify these regularities, determine their inﬂuence on ﬁnancing of Russian companies in the conditions of distortion of international trade relations and the regime of sanction limitations for access to international ﬁnancial markets, and substantiate the necessity for re-orientation of Russian companies to new markets and tools. Keywords: Distortion · International trade relations · Sources of ﬁnances Economic sanctions JEL Classiﬁcation Codes: G3 · F65

1

Introduction

The term “distortion of international relations” began to be used in the Russian economic thought: (1) during consideration of changes in previously observed regularities of functioning of the international system and international relations on the whole (Torkunov 2004); (2) context of description of aggravation of international relations of a separate country (in particular, Russia) in the geo-political space. The modern Russian economy is very open – according to the international standards. Russia is a part of the global space in the group of developing and transforming countries and, moreover, is ahead a lot of developed countries as to many indicators (Ishchenko and Alekseev 2015). In recent decades, gross turnover of foreign trade of goods and services of Russia achieved and even exceeded 50% of national GDP (Afontsev et al. 2016). Revenues from the export sector of economy (primarily, energy resources) constitute more than half the revenues of the federal budget (Kudrin and Gurevich 2014). However, recently there has been stable reduction of the volumes of the Russian © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 487–494, 2019. https://doi.org/10.1007/978-3-030-00102-5_51

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foreign trade turnover (−7.12% in 2014, as compared to 2013; −34.17% in 2015, as compared to 2014; −11.16% in 2016, as compared to 2015). Such negative tendency actualizes study of the problem of distortion of international trade relations on the whole and that of Russia, in particular.

2

Methodology

The following methods were used by the authors: systemic approach for determining regularities of distortion of international trade relations; methods of comparative anal‐ ysis for substantiating the tendencies of ﬁnancing of Russian companies; synthesis, classiﬁcation, grouping, and observation.

3

Results

3.1 Regularities Development of International Trade Relations and Reasons for Their Distortion Development of international trade relations are based on certain regularities (Koso‐ lapov 2002). The most important of them include the following: – unequal provision with production resources and intensity of their usage. Countries strive to export goods which production includes excessive production actors, and to import goods for which there are not suﬃcient resources; – bilateral exchange of similar, mostly high-tech goods between industrially developed countries. The reasons of such exchange are diﬀerence in consumer preferences, scale eﬀect, and possibility to sell a successful product in external market (so called crossing demand); – change of aggregate demand in the country for traded and non-traded goods. Nontraded goods include the ones which sale is not expedient in external market due to high turnover costs. They include the goods that are manufactured in the sphere of construction, communication, transport, etc. As prices for non-traded goods do not usually depend on external prices, growth of aggregate demand in the national economy leads to increase of their production and reduction of production of traded goods, as well as growth of import. Reduction of aggregate demand leads to an opposite situation – growth of production of traded goods, reduction of production of non-traded goods, and increase of export. One of the main economic reasons for violation of regular and progressive devel‐ opment of the global trade relations in the economic sphere is crisis of globalization, which is peculiar for: (1) increase of the role and inﬂuence of developing countries; (2) violation of movement of the global capital with partial closure of national economies, used by countries as a tool for ﬁghting economic crises (Kosolapov 2005). In recent decades, there has been a tendency for appearance of institutional insta‐ bility, related to establishment of new centers of power and their requirements on trans‐ formation of existing institutes, reconsideration of trade relations between countries,

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increase of the international share of national currencies, and formation of the elements of the multi-currency international system. The European economy is trying to overcome stagnation after the 2009 crisis; despite a certain renewal in 2014–2015, “the deﬂation scenario of economy’s development becomes more obvious” (Afontsev et al. 2016). At the same time, movement of the Chinese and Indian, as well as a range of other developing economies, despite a certain slowdown of their growth rates in post-crisis years, stimulates the emergence of new conﬁguration of the world centers. China and India account for 24% of global GDP, which exceeds US GDP by 1.5 times. According to a range of forecasts, in case of continuation of the current tendencies of the global development, aggregate GDP of these two Asian countries will reach 1/3 of the global GDP by 2020 and will be equal to economies of the USA and the EU (Afontsev et al. 2016). Due to accumulated gold and currency reserves (almost $4 trillion), China has become the largest creditor of the USA and European countries. While in 2006 the BRICS countries accounted for 22% of the global GDP (purchasing power parity), in 2014 – 30.4%, and by 2020 their share may reach 34% (according to the IMF estimates). 3.2 Inﬂuence of Distortion of International Trade Relations on Financing of Russian Companies It is known that Russian economy has been developing after the 1998 crisis by means of export, which is dominated by resources (more than 75% in its structure) (Ishchenko and Alekseev 2015). Positive trade balance reached $200 billion in recent years, and according to the Federal Customs Service, sometimes exceeded that level (www.customs.ru). Foreign trade turnover of Russia was growing since 2000 – until the 2008 crisis, which has a strong negative inﬂuence (36% of reduction of foreign trade turnover of the RF in 2009, as compared to 2008). In the following years – especially in 2010 and 2011, there was active growth of foreign trade turnover. Since 2014, there has been a negative tendency of reduction of the volumes of foreign trade activities of Russia. Year 2014 marked large reduction of the indicators of the Russian foreign trade – primarily, by means of decrease of prices for oil, natural gas, and certain resources, implemented economic sanctions, and substantial reduction of import due to decline and depreciation of ruble. These tendencies continued in 2015– 2017. According to statistical data (www.customs.ru), Russia shows positive dynamics in development of export relations with countries of Asia-Paciﬁc cooperation. However, the EU remains the main foreign trade partner for Russia. Reduction of the volumes of Russia’s turnover with the EU and the USA in 2014– 2017 was caused not by re-orientation of the Russian foreign economic policy to “new international centers of trade” but by economic sanctions, which were implemented in 2014, and decrease of prices for oil and natural gas in the global market. Together with change of the structure of the global economy, changes in the move‐ ment of the global capital take place. In 1960’s–1970’s, movement of capital was deter‐ mined by the following principle: in case of free movement of capital, investments

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should be directed to poorer (i.e., less eﬃcient) countries (Afontsev et al. 2016). The eﬀect from such redistribution from the economic point of view is mutually proﬁtable: economies of developing countries, which receive access to investments and more progressive technologies, receive a push for quick economic growth, and capital owners (investors) receive higher – as compared to the national economy - incomes. At that, movement of capital from developed countries to developing countries is related to violation of normal functioning of economies of the latter countries. Large inﬂow of capital into the country leads to growth of the exchange rate of national currency, which leads to reduction of competitiveness of national production and export – and, in view of the fact that export of developing countries primarily consists of the goods with low added value, excessive inﬂow of capital into the country is critical for its economic development. Developed countries specialize in export of unique goods, which reduces economies’ dependencies on strengthening of national currency. Also, ﬁnancial institutes of developed countries allow developing economies to adapt to the changing conditions by means of automatic action of market mechanisms. In 1980’s–1990’s, the global capital moved in the opposite direction – from devel‐ oping countries to developed countries (Afontsev et al. 2016). This tendency was espe‐ cially peculiar for the recent decade before the 2008 crisis. A lot of explanations to this phenomenon were given, but most of them are brought down to the following: – export of capital from oil exporting countries, which beneﬁted from increase of oil prices and invested excessive assets into developed countries (ﬁnancial assets, real estate property in the form of direct investments); – underdevelopment of fundamental conditions of investment environment (market and public institutes) reduces limited return of capital, this reducing eﬀectiveness of investments in developing countries; – imperfection of ﬁnancial markets of the countries that accept investments does not allow using the incoming assets and “turning” capital into investments. Therefore, inﬂow of foreign capital leads not only to strengthening of currency of the accepting party but also raises potential of ﬁnancial instability. In view of these tendencies of movement of capital, Russia has not become an exception. Inﬂow of money assets that entered the turnover of the Russian economy from export of energy resources created an impulse for development of the Russian economy, but also provoked a quick outﬂow of ﬁnancial resources from the domestic economy (Bulatov 2017). The data on the volumes of ﬁnancial assets that were moved out of the country are given in Table 1. Obviously, outﬂow of capital from the Russian economy reduces the possibilities of domestic ﬁnancial and banking sectors, as it leads to reduction of money supply. Starting from 2000, the structure of foreign investments – as one of the main sources of foreign ﬁnancing of Russian companies – should be deemed unsatisfactory. The main share of foreign investments in Russia include so called “other investments”, represented by trade and other short-term credits. In its turn, the share of foreign portfolio invest‐ ments in Russia has been traditionally insigniﬁcant, and the share of direct investments into the Russian economy has a tendency for reduction (Fig. 1) (Afontsev et al. 2016; Petrovsky 2014; Bushueva and Pogrebnaya 2016).

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Table 1. New export/import of capital by private sector of the RF (banks and other sectors) in 2000–2016, $ billion. Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Net import (−), net export (+) −87.8 133.6 57.5 30.8 81.4 53.9 60.3 152.1 58.1 19.8

Source: Central Bank of the RF (www.cbr.ru).

Fig. 1. Direct foreign investments into the Russian economy for 2010–2016, $ million.

A large problem for the Russian economy is changes of the structure of direct invest‐ ments. The share of contributions into capital, which reached 78–79% of all direct investments in 2004–2005 due to positive attitude towards macro-economic and struc‐ tural changes after the 1998 crisis, reduced in the following years, reaching 38% in 2013 (Afontsev et al. 2016). Thus, it is possible to conclude that foreign investors – for the purpose of minimi‐ zation of risks of direct investments in Russia – used replacement of contributions into capital of Russian companies with credits. Such phenomenon stimulates the growth of instability of the Russian economy and sensitivity to external economic factors. 3.3 Inﬂuence of Economic Sanctions on Financing of Russian Companies Since 2014, dynamics of movement of capital in Russia began to be determined by the sanction regime.

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Economic sanctions against Russia are of various reasons, structure, and mecha‐ nisms. They are peculiar for their precision – i.e., limitations are set not on the state on the whole as a single geo-economic subject but on separate residents of the country: commercial structures and individuals. The sanctions from the EU and the USA are related to limitation of access of Russian companies to the international market of capital. The possibility for obtaining long-term ﬁnancial resources, which enter the turnover of Russian organizations in the form of foreign credits and emission of securities, is blocked. Economic sanctions led to serious limitation of the possibility to borrow in the inter‐ national market of capital, in particular: – borrowings in the international market of obligations reduced. The volume of emis‐ sion of Eurobonds (from October 2013 to November 2014) reduced from $ 53.6 billion to $19.2 billion; – since March 2014, all IPO of Russian corporations have been cancelled. As a result, instead of 10–16 annual placement of shares in internal and external markets, which was peculiar for the post-crisis period, the period of 2014–2016 had only several deals for placement of shares (2 deals per year) (www.pwc.ru). As a matter of fact, the sanction regime discredits holders of depository receipts of Russian emitters – foreign minority shareholders. Application of sanctions to Russian companies leads to risk of losing the assets and non-acknowledgement of possession of shares via depository receipt as the moment of implementation of sanctions. Depositary banks may ignore orders regarding the sanction companies; – ﬁnancing of certain Russian investment projects, which were implemented together with the European Bank for Reconstruction and Development, were terminated; – the volume of syndicated lending of Russian companies decreased (Vorozhevich 2017); – inﬂow of direct investments into the Russian economy was limited. Implementation of economic sanctions provokes also increase of the cost of borrowing in the internal ﬁnancial market – especially long-term – as the main share of “long-term ﬁnancing” in previous years was provided in external market. Apart from direct increase of rates for Russian borrowers, an additional negative factor was increased exchange rate risk for borrowings in foreign currency. Increase of the cost of crediting, together with exchange rate risks, reduces investment possibilities for compa‐ nies and limits the possibilities for re-ﬁnancing of current debt of companies – which sets limitations on their operational activities, as the current ﬁnancial ﬂows are distracted for payments for the current debts (Sysoeva et al. 2016). As a result of these tendencies, the possibility of Russian companies to attract external ﬁnancing for current investment projects and re-ﬁnancing of external debts reduced.

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Conclusions/Recommendations

Thus, the modern stage of development of international trade relations at the macroeconomic level is peculiar for violation of normal functioning of the latter by means of distortion due to the crisis stage of globalization. At the same time, there appear new important international investors (countries that export capital), which re-direct their investments and trade operations for new centers of attraction of capital – in particular, Russia. An important factor that explains re-orientation of international trade relations is the change of directions of movement of the global capital. Manifestation of this tendency is peculiar for Russia: in recent decades, outﬂow of capital from Russia into countries with developed economies grew – at that, the volumes of inﬂow of money from the global market of capital showed negative dynamics. This tendency negatively inﬂuences the ﬁnancing of Russian companies, limiting ﬁnancial resources that come from the global capital market. Limitations implemented by the EU and the USA led to the following problems of the Russian corporate sector: (1) paying the external debt and ﬁnding the possibility for its re-ﬁnancing; (2) growth of cost of borrowed ﬁnancing; (3) necessity for re-orientation of Russian companies to internal sources of ﬁnancing, which have limited volumes, and usage of relatively new tools of external ﬁnancing – e.g., commercial and stock bonds.

References Afontsev, S.A., Buklemishev, O.V., Danilov, Y.A., et al.: Strategic management of Russian economy’s development in the conditions of global turbulence: Analytical report (2016). https://www.econ.msu.ru. Accessed 20 Mar 2018 Bulatov, A.S.: Payment balance of Russia in 2016 – early 2017, Money and credit. Information and analytical materials, no. 7, pp. 19–24 (2017) Bushueva, Y.S., Pogrebnaya, N.V.: Direct and portfolio investments in Russia tendencies and directions of development, New science: problems and perspectives, no. 3–1(67), pp. 57–60 (2016) Vorozhevich, A.: Syndicated lending in Russia: perspectives of legal regulation, no. 22 (9688) (2017). https://www.eg-online.ru/article/347268/. Accessed 20 Mar 2018 Ishchenko, E., Alekseev, P.: Improving the mechanism of export support in Russia, Money and credit, no. 6, pp. 36–42 (2015) Kosolapov, N.A.: Globalization: territorial and spatial aspect, International economics and international relations, no. 6, pp. 3–13 (2005) Kosolapov, N.A.: The phenomenon of international relations: historical evolution of the research subject, Studies on the theory and methodology of political analysis of international relations (2002). http://www.obraforum.ru/pdf/Essays-bogaturov-chapter2.pdf. Accessed 20 Mar 2018 Kudrin, A., Gurevich, E.: New growth model for the Russian economy. Economic policy: new challenges, Issues of economics (2014). https://akudrin.ru/uploads/attachments/ﬁle/12/ kudrin.pdf. Accessed 20 Mar 2018 Lagutina, M.L.: International politics as a tool of global management. Bulletin of international relations, no. 1(32), pp. 29–40 (2011) Makhmudova, M.M., Koroleva, A.M.: The modern state of foreign trade activities of the Russian Federation. Bulletin of Omsk University, no. 3, pp. 57–64 (2016)

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Overview of IPO of Russian companies for 2005–2014. http://www.pwc.ru/en_RU/ru/ capitalmarkets/publications/assets/a4_brochure_ipos_rus_print.pdf. Accessed 20 Mar 2018 Panova, G.S.: Banks in the conditions of international sanctions: strategy and tactics. Bulletin of MSUIR, no.15, pp. 154–168 (2016) Petrovsky, M.: Investment climate of Russia according to the evaluations of international business society (2014). http://www.mirec.ru/2014-02/investicionnyj-klimat-rossii-po-ocenkammezdunarodnogo-biznes-soobsestva. Accessed 20 Mar 2018 Statistics of the Central Bank of the RF. http://www.cbr.ru/statistics/print.aspx? ﬁle=credit_statistics/capital.htm. Accessed 20 Mar 2018 Sysoeva, E., Budilova, E., Risin, I.: « Inﬂuence of economic sanctions on the ﬁnancial resources of Russian organizations » (Conference Paper). In: 27th International Business Information Management Association Conference - Innovation Management and Education Excellence Vision 2020: From Regional Development Sustainability to Global Economic Growth, IBIMA 2016; Milan; Italy; 4 May 2016 through 5 May 2016; Code 123005. pp. 1145–1156 (2016) Customs statistics of foreign trade of the Russian Federation: Commodity structure of Russian export. http://www.customs.ru/index2.php?option=com_content&view=article&id=24932&temid= I197. Accessed 20 Mar 2018 Customs statistics of foreign trade of the Russian Federation. http://www.customs.ru/index.php? option=com_content&view=article&id=13858&Itemid=2095. Accessed 20 Mar 2018 Torkunov, A.: Modern international relations. Regularities of international relations (2004). http:// society.polbu.ru/torkunov_relations/ch05_all.html. Accessed 20 Mar 2018

Actual Problems of International Cooperation of Russia in the Sphere of Cyber Security Dmitry A. Lipinsky1 ✉ , Konstantin N. Evdokimov2, and Aleksandra A. Musatkina1 (

)

1

2

Tolyatti State University, Tolyatti, Russia [email protected], [email protected] Irkutsk Law Institute Aﬃliated with the Academy of the General Prosecutor’s Oﬃce of the Russian Federation, Irkutsk, Russia [email protected]

Abstract. The purpose of the article is to analyze international normative acts that regulate international cooperation in the sphere of prevention and ﬁghting computer crimes and information security. The authors analyze international normative legal acts and various forms of international cooperation, which are aimed at ﬁghting computer crimes, which has acquired international character and threatens not just separate countries but the whole world order. Absence of proper protection of computer networks and international cooperation in this sphere undermines the economic foundation of the global society, which stimu‐ lates development of ﬁnancial crisis in the world. This problem has acquired international character. The authors think that there’s a necessity for improving international and legal mechanisms of ﬁghting cybercrimes and other various oﬀences in the sphere of high-tech – which should lead to the UN’s adopting two conventions: on ﬁghting computer crimes and on provision of international infor‐ mation security. Keywords: Computer crimes · Information security · Cyber security Cybercrimes · Oﬀences in the sphere of computer security

1

Introduction

Modern cybercrime is of high-tech, organized, and latent character; it deals large economic damage to the Russian society and state. At that, the problem of cybercrime has gone beyond the territorial borders of a certain state, as global computer networks cover almost all countries of the global society. It is of the exterritorial character – i.e., all criminal actions are performed on the territory of one state, with damage dealt to other states. Attempts of illegal interference and hacking of servers are aimed at almost all web-sites of various state and international bodies, as well as private sector of economy, banking organizations, and corporations. Malicious software is used for hacking networks of banking organizations, for stealing money in almost all countries of the world – which is one of the reasons that stimulate ﬁnancial crisis. It could be noted that cyberattacks threaten the global ﬁnancial system, inﬂuence shares’ price, and can even hinder the functioning of international ﬁnancial markets. © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 495–504, 2019. https://doi.org/10.1007/978-3-030-00102-5_52

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Thus, the President of the Russian Federation V.V. Putin said during his speech at the meeting of the Federal Security Service in 2015 that there had been more than 24 million cases of cyberattacks, aimed at various oﬃcial web-sites and oﬃcial information systems of public authorities. Functioning of more than 1,600 web-sites had been termi‐ nated, as they threatened Russia’s security – which included web-sites related to terrorism and extremism [1]. In his turn, the Prosecutor General of Russia, Yury Chaika, in his report on November 29, 2017 said that “Russia is peculiar for growth of crimes performed with the usage of modern information technologies. During ﬁrst six months of this year it constituted almost 30%, and in 2013–2016 the number of cybercrimes grew by six times, from 11,000 to 66,000” [2]. According to the results of joint research by the Fund for development of Internet initiatives and international companies Group-IB and Microsoft, damage to the economic system of the RF from cybercrime exceeded RUB 200 billion in 2015, which constitutes 0.25% of GDP of the RF. In 2017, damage to the global economy from frequent cyberattacks could exceed $1 trillion, and in three years it might reach $2 tril‐ lion [3]. At that, it should be noted that this type of crime is transborder and transnational, as the existing cyberspace does not have national borders, and cybercriminals, being tech‐ nical “underground” of the global society”, do not identify themselves according to nationality and often form international organized criminal groups. That’s why the above features of cybercrimes lead to necessity for international cooperation between various states, aimed at ﬁghting cybercrimes; exchange of internal information between law enforcement of foreign countries on the persons who perform the crimes; and conduct of joint investigation measures for arresting and holding respon‐ sible criminals and their extradition.

2

Discussion and Problems

From the point of view of international and legal regulation in the sphere of ﬁghting cybercrimes, the Convention of the Council of Europe on cybercrime (hereinafter – the Convention on cybercrime), adopted on November 23, 2001 in Budapest, is very impor‐ tant. The Convention on cybercrime divides all computer crimes into ﬁve groups: • crimes against conﬁdentiality, integrity, and accessibility of computer systems and data; • crimes with usage of computer means; • crimes related to content of data; • content related to violation of copyright and adjacent rights; • crimes related to manifestation of racism, etc., performed with the help of computer systems [4]. It should be noted that the Convention on cybercrime became the ﬁrst international act aimed at formation of common policy in the sphere of criminal law and protection

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of society from crime in the sphere of computer information, including by adopting the corresponding legislative acts and strengthening of international cooperation. Besides, apart from uniﬁcation of criminal and criminal procedure legislation of the participating countries, the Convention envisaged a range of practical measures of international cooperation between law enforcement in ﬁghting cybercrime. In particular, exchange of data, execution of inquiries, provision of consultations on technical issues, establish‐ ment of location of suspects, and functioning of the uniﬁed network of national contact centers (24/7 network) on provision of support in investigating cybercrimes and criminal proceedings on cases of the given category of crimes. At present, the Convention on cybercrime has been ratiﬁed by more than 50 coun‐ tries, including the states that are not in the Council of Europe (Australia, the Dominican Republic, Israel, Canada, the Republic of Mauritius, Panama, the USA, Sri Lanka, and Japan). The Russian Federation is among seven countries of the Council of Europe that have not ratiﬁed this international legal act. There is a long discussion on expedience of ratiﬁcation of this legal act, which has a fundamental character in the sphere of international cooperation for ﬁghting cyber‐ crime. Thus, M.A. Prostoserdov thinks that a lot of its provisions contradict the national laws of Russia and violate its interests. For example, Articles 29 and 32 of this Conven‐ tion allow for interferences with computer systems of another state and for operative means regardless of public danger of the performed action without permit from this state [5, p. 44]. According to Miroshnikov, “an essential aspect of Russia’s not joining the Conven‐ tion is non-acceptance of Article 32b. Its unclear formulation allows for interference with information networks of another state without notifying it, based only on a private permit. It is impossible to speak of successful and mutually beneﬁcial cooperation when one party is not even aware of operative or investigation measures that are conducted on its territory in telecommunication networks. This is, however, allowed by Article 32b” [6, p. 47]. Analysis of the content of the Convention of the Council of Europe allows for the conclusion that there is a range of provisions that complicate ratiﬁcation of the conven‐ tion. Firstly, Article 32b, based on which law enforcement bodies have a right for access to computer information on the territory of a foreign state with voluntary agreement of the person who has the authority to provide information. Secondly, absence of the necessity to coordinate actions with authorized state bodies. Thirdly, this normative act contains also other provisions that complicate ratiﬁcation of this Convention in Russia – in particular, traditions of criminal law of Russia do not envisage criminal responsi‐ bility of legal entities. The latter bear responsibility based on the Administrative Oﬀences Code. At that, the Convention obliges all its participants to set criminal respon‐ sibility of legal entities in the national law. For the Russian Federations, such approach is not acceptable, as it would require cardinal transformation and change of domestic criminal law. Despite the fact that the Convention in cybercrime has not been ratiﬁed by Russia, it has not refused from international cooperation in the sphere of ﬁghting cybercrimes

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and continued in in the form of other international organizations – G8, the CIS, the Shanghai Cooperation Organisation, and the UN. Thus, in 2000, Russia signed the “Okinawa Charter on Global Information Society”, adopted by the G8 countries on the island of Okinawa (Japan) on July 22, 2000. This Charter (Article 8) envisages the possibility of joint actions aimed at creation of protec‐ tion from cyberattacks for information society. Besides, it establishes expansion of interaction between countries within the Lyon Group on Transnational Organised Crime [7]. The next legal act that was adopted by Russia in the sphere of international cooper‐ ation for ﬁghting cybercrime was “Agreement on cooperation of participants of the Commonwealth of Independent States in ﬁghting crimes in the sphere of computer information” [8], concluded in Minsk on June 1, 2001. The RF ratiﬁed this Agreement with a warranty that it preserved a right to refuse the query fully or partially if execution of the query would damage its sovereignty or security [9]. The Agreement came into eﬀect on October 17, 2008. It set the legal foundations of law enforcement and judicial bodies of the states – participants of the Agreement for ﬁghting crimes in the sphere of computer information and determined speciﬁc forms of such cooperation: • exchange of information on future or performed crimes in the sphere of computer information and suspected individuals or legal entities; • execution of queries on investigative measures and procedural actions according to international agreements on legal support; • planning and implementation of coordinated measures and operations on prevention, determination, and investigation of crimes in the sphere of computer information; • provision of support in preparation and additional training of personnel, including conferences, seminars, etc.; • exchange of normative legal acts and scientiﬁc literature on ﬁghting crimes in the sphere of computer information. For further implementation of the above Agreement, on October 25, 2013, the Council of heads of the states of the CIS adopted the “Concept of cooperation of partic‐ ipants of the CIS for ﬁghting crimes performed with the usage of information technol‐ ogies” [11]. Apart from cooperation with the CIS countries, the Russian Federation has increased international cooperation within such organizations as the BRICS and the Shanghai Cooperation Organisation, which is caused by creation and development of new plat‐ forms for foreign political and socio-economic interaction with the largest countries of the world (China, India, Pakistan, Brazil, etc.) and creation of an alternative to organi‐ zations G-8 (in 2014, Russia was expelled from G8), NATO, the EU, and the PACE, which conduct the policy of “isolation” towards Russia by implementing political, economic, technological, and other sanctions. That’s why the Shanghai Cooperation Organisation and the BRICS became for the RF new international platforms for eﬀective cooperation in the sphere of information security and ﬁghting transnational cybercrime.

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Thus, on June 16, 2009 in Ekaterinburg, the Agreement between governments of the participants of the Shanghai Cooperation Organisation was concluded in the sphere of provision of international information security (came into eﬀect in Russia on June 2, 2011), which envisages cooperation in the following directions: • implementation of joint actions and measures in the sphere of international infor‐ mation security; • monitoring and joint reaction to threats to information security; • development of joint oﬀers aimed at development of the norms of international law in the sphere of limitation of application and distribution of information weapon; • prevention of threats of application of information technologies by terrorists; • prevention of information crime; • conduct of joint expertise for evaluation of the state of information security; • improvement of international legal base and practical mechanisms of cooperation of the Parties for provision of international information security; • creation of conditions for interaction between competence bodies of the Parties for implementing this Agreement; • interaction within international organizations and forums on the issues of provision of international information security [12]. The advantages of this Agreement is the fact that it clearly deﬁnes the terms, which include main notions, that are to be used in the laws of the participating countries (“information security”, “information war”, “information weapon”, “information crime”, “information terrorism”, “unlawful usage of information resources”, “unsanc‐ tioned interferences with information resources”, etc.) and the list of the main types of threats in the sphere of international information security, their sources and attributes. Implementation of the provisions of the Agreement of the Shanghai Cooperation Organisation in the sphere of provision of international information security is conducted at annual meetings of managers of law enforcement bodies. Cooperation in ﬁghting cybercrime within the BRICS, which goes beyond the borders of Eurasia, provides Russia with wider possibilities for interaction between law enforcement bodies in the studied sphere. At present, international cooperation in the sphere of ﬁghting computer crimes is conducted in the form of consultations of export groups. In particular, on June 16–18, 2015, a meeting of the expert groups of the BRICS on the issues of security in the sphere of usage of information and communication tech‐ nologies (ICT) took place. In the course of the event, its participants exchanged opinions on the problem of security in the sphere of usage of the ICT and discussed the issues of eﬀective interaction in the sphere of ﬁghting crime and terrorism in information space. They emphasized the importance of joint eﬀorts and the key role of the UN in the sphere of development of universal rules and norms of behavior of countries in the information space. The delegations agreed on development of a plan of actions for strengthening of practical cooperation. The Russian party presented a project of inter-government agree‐ ment of the BRICS on cooperation in the sphere of provision of security in the sphere

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of ICT. The parties agreed on the date and place of the next meeting to be coordinated within the BRICS. Despite certain achievements of Russia in this sphere in the form of the CIS, the Shanghai Cooperation Organisation, and the BRICS, the authors agree with Tropina [14] and other scholars [15, 16] that the regional approach, which was implemented for the purpose of veriﬁcation of the norms of criminal law within several countries, would eventually lead to fragmentation of the directions of ﬁghting and prevention of cyber‐ crimes. In the conditions of internationalization of crime groups, the measures for ﬁghting them should be adequate, and the information space, which has no territorial limits, requires global, not regional, eﬀorts of several countries. It should be emphasized that the RF, as a part of the UN, has an active position in supporting the activities of this global international organization on ﬁghting cybercrimes and providing information security by voting for the corresponding declarations and resolutions of the UN, as well as introduction of the corresponding projects of interna‐ tional and legal acts. Thus, the Security Council of the RF and the Ministry of Foreign Aﬀairs of the RF developed in 2011 the project of the concept “UN Convention on provision of interna‐ tional information security” [18], which was introduced in September 2011 for consid‐ eration by the UN General Assembly. The project was supported by India, China, Kazakhstan, Tajikistan, Kyrgyzstan, Armenia, and other participants of the Shanghai Cooperation Organisation, the BRICS, the CIS, and certain countries of Latin America and Africa – however, it was not adopted. Despite the previous failure, on January 9, 2015 the permanent representatives with the UN from the RF and the countries of the Shanghai Cooperation Organisation (Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan, and China) sent to the UN General Secretary the oﬃcial statement with the project of “Rules of behavior in the sphere of provision of international information security”, with a request to distribute the Rules as the oﬃcial documents of the 69th session of the UN General Assembly. The rules include the following important norms: • ban for usage of information and communication technologies for actions that contra‐ dict the task of supporting international peace and security; • ban for usage of information and communication technologies for violation of their social, economic, and political stability; • obligation for cooperation that is aimed at ﬁghting terrorism, which uses information technologies and networks as weapon; • responsibility to restrain distribution of information of extremist and terrorist char‐ acter and information that inﬂames national, race, or religious animosity. The Rules have not been adopted by the UN General Assembly, but the mechanism of consultations at the level of government experts was started, which resulted in the agreement to provide the results of experts’ work on the 72nd session of the UN General Assembly in 2017. Returning to the issue of ﬁghting international cybercrimes at the UN level, it should be emphasized that in the context of development of international cooperation in this

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sphere, adoption of the UN Convention on ﬁghting cybercrime is a necessity, which is acknowledged by most developed and developing countries. Most developing countries of Latin America, Africa, and Asia started creating their alternative projects of regional international acts: • model law of Commonwealth of nations on cybercrime (2002); • model law of the Caribbean countries on cybercrime (project HIPCAR) [19]; • joint project of the EU and the International Telecommunication Union for the states of the Paciﬁc region (project ICB4PAC); [20] • UN project for development of law in the sphere of cybercrime for African countries (project ESCWA) [21]. Continuing analysis of international and legal cooperation between Russia and foreign countries for ﬁghting cybercrimes, it should be noted that the largest practical eﬀect is achieved by Russia’s participation in organization of International police (Interpol). Based on the Decree of the President of the RF dated July 30, 1996, No. 1113 “Regarding participation of the RF in activities of the international organization of criminal policy – Interpol”, the National central bureau of Interpol of the MIA of the RF was created, with territorial branches in most subjects of the RF. For communication and exchange of information between the countries-participants of the Interpol, the global telecommunication system I-24/7 was developed, based on modern information technologies. Besides, for investigating cybercrimes in Russia, the K Department was created; this department deals with such directions as ﬁghting international crimes in the sphere of information technologies; international cooperation in the sphere of preventing crimes performed with the usage of information technologies. Thus, international cooperation in the sphere of ﬁghting cybercrimes, including preventing the activities of transnational organized criminal groups, is conducted by oﬃcers of the National central bureau of Interpol and the K Department of the MIA of the RF, which does not exclude the possibility for participation of other law enforcement bodies (the FSB, the Prosecutor Oﬃce of the RF) in investigating cybercrimes. An example of international cooperation within Interpol could be the fact that in December 2015 the National central bureau of Interpol and the K Department of the Russia’s MIA implemented a complex of measures aimed at preventing the work of the server that was the point of distribution of virus program “Win32/Dorkbot” [22]. In 2015, the bot network Dorkbot included more than a million of computer devices all around the world and was aimed at stealing personal data in the system of E-payments, conduct of DDoS attacks, and provision of installation of virus programs at victims’ computer devices. Thus, it is possible to conclude the following. At present, international cooperation in the sphere of ﬁghting cybercrimes has a block and fragmentary character, which is related to geo-political, economic, and national interests of the states. Unfortunately, there is not UN Convention that would determine the common legal, organization, political, information, scientiﬁc, technical, and other aspects of ﬁghting computer crimes (forms, force, principles, methods, etc.) and would

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set the mandatory list of criminal and legal norms regulating responsibility for cyber‐ crimes.

3

Conclusions

According to the authors, it is necessary for the UN to develop and adopt at least two legal acts in this sphere, namely: the convention on ﬁghting international cybercrimes and the convention on provision of international information security. We think that the ﬁrst convention should be of the special international and legal character and include terms; common organizational and legal principles; list of crimes subject to criminalization in the legal systems of participating countries; system of criminal & legal and criminal procedural norms that regulate punishment for computer crimes and the general procedure for criminal prosecution; complex of criminological, criminalistics, and organizational & technical measures for ﬁghting cybercrimes; the system and mechanism of international interaction between law enforcement bodies in this sphere. In its turn, the second legal document, according to the authors, should be of the wider international & legal and foreign political character. This act should establish principles and rules of provision of international information security in cyberspace and international & legal norms than forbid criminal actions of political nature: planning, preparation, and waging of war in cyber space with the help of IT technologies, i.e., “information war” (“cyberwar”); creation, usage, and distribution of “information weapon” (“cyberweapon”); stealing computer information that is under the regime of state, oﬃcial, commercial, banking, and other secrecy, i.e., “information espionage”; terrorist acts with the help of computer devices and information and telecommunication networks, including their preparation, propaganda, or creation of terrorist groups (cyber‐ terrorism); elimination and blocking of national information, transport, energy, engi‐ neering, production, social, and other systems of national importance with the help of computer devices and information and telecommunication networks (cybersabotage). This convention should envisage the possibility of investigating such crimes in the International Criminal Court, as they are of the global character and may damage the peace and security of humanity. Also, according to the authors, the main forms of international cooperation between law enforcement bodies in ﬁghting cybercrimes should be: • exchange of oﬃcial information on future or performed cybercrimes and ID’s of criminals; • execution of queries on conduct of investigative measures and procedural actions according to international agreements on legal support. • implementation of coordinated measures and operations for prevention, determina‐ tion and investigation of cybercrimes; • interaction in training and additional training of personnel, including by organizing conferences, seminars, etc. • creation of uniﬁed information systems that ensure execution of tasks on prevention, determination, and investigation of cybercrimes.

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• conduct of joint scientiﬁc research on the problems of ﬁghting cybercrime; • exchange of normative legal acts and technological literature on ﬁghting cyber‐ crimes; • putting a suspect on an international wanted list for cybercrimes; • opening a criminal case and criminal extradition.

4

Conclusions

It should be emphasizes that international cooperation is the most important element in the system of measures for ﬁghting cybercrimes in Russia and abroad. Interaction between the states in the sphere of monitoring and control over the usage of IT technologies for peaceful purposes and activities of law enforcement bodies for provision of international information security are a guarantee of successful ﬁghting cybercrimes in international cyberspace and a guarantee of implementing information rights and liberties of human and citizen.

References 1. Speech of Vladimir Putin at the assembly of the FSB of the RF. http://пyтин.ru-an.info/ нoвocти/выcтyплeниe-влaдимиpa-пyтинa-нa-кoллeгии-фcб-poccии/. Accessed 27 Dec 2017 2. Speech of Y.A. Chaika at the 15th assembly of prosecutors general of the participants of the Shanghai Cooperation Organisation. http://genproc.gov.ru/smi/news/genproc/ news-1292552/. Accessed 27 Dec 2017 3. RIA “Novosti”. http://ria.ru/economy/20160413/1409855094.html#ixzz45jCApNtn. Accessed 27 Dec 2017 4. The Convention on crime in the sphere of computer information (ETS N 185) (Concluded in Budapest on November 11, 2001 u/). Convention on Cybercrime. http://conventions.coe.int/ Treaty/en/Treaties/Html/185.htm. Accessed 05 June 2017 5. Prostoserdov, M.A.: Economic crimes in cyberspace and measures for ﬁghting them. Ph.D. thesis, Moscow, 232 p. (2016) 6. Miroshnikov, B.N.: Perspectives of international cooperation within the convention on cybercrime. Inf. Secur. 6(15), 46–48 (2007) 7. The Okinawa Charter on Global Information Society: adopted on Okinawa on July 22, 2000. Diplomatic bulletin, no. 8, pp. 51–56 (2000) 8. Agreement on cooperation of the participants of the CIS in ﬁghting crimes in the sphere of computer information: concluded in Minsk on June 1, 2001. Commonwealth. Information bulletin of the Council of heads of states and the Council of heads of governments of the CIS, no. 1(37), pp. 138–145 (2001) 9. Regarding ratiﬁcation of the Agreement on cooperation between the CIS participants in ﬁghting crimes in the sphere of computer information: the Federal law dated October 1, 2008 No. 164-FZ. Collection of laws of the RF, no. 40, p. 4499 (2008) 10. Agreement on cooperation of the CIS participants in ﬁghting crimes in the sphere of computer information: concluded in Minsk on June 1, 2001. Commonwealth. Information bulletin of the Council of heads of states and the Council of heads of governments of the CIS, no. 1(37), pp. 138–145 (2001)

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11. Regarding the Concept of cooperation of the CIS participants in ﬁghting crimes performed with the usage of information technologies: Decree of the Council of heads of states of the CIS: adopted in Minsk on October 25, 2013. SPS ConsultantPlus. Accessed 23 May 2017 12. Agreement between governments of the participants of the Shanghai Cooperation Organisation in the sphere of provision of international information security (Ekaterinburg, June 16, 2009): adopted by Decree of the Government of the RF dated July 16, 2009 No. 984r. Bulletin of international agreements, no. 1, pp. 13–21 (2012) 13. Report on the presidency of the RF in the BRICS in 2015–2016. http://brics2015.ru/ documents/ 14. Tropina T.L.: Fighting cybercrime: is it possible to develop a universal mechanism? International justice, no. 3, pp. 86–95 (2012) 15. Sklyarov, S.V., Evdokimov, K.N.: Problem issues of international cooperation of Russia in the sphere of ﬁghting cybercrimes. Library of criminalist. Sci. J. no. 4(33), 269–275 (2017) 16. Smirnov, A.A.: International and legal aspects of ﬁghting cybercrimes and cyberterrorism. Issues of strengthening the law and legal order: science, practice, and tendencies: collection of articles/ V.M. Khomich [et al.].– Minsk, Issue 5, pp. 323–329 (2012) 17. Yakimova, E.M., Narutto, S.V.: International cooperation in ﬁghting cybercrime. Crim. J. Baikal State Univ. Econ. Law 10(2), 369–378 (2016) 18. The Convention on provision of international information security (concept). http:// www.mid.ru/foreign_policy/oﬃcial_documents/-/asset_publisher/CptICkB6BZ29/ content/id/191666. Accessed 7 June 2016 19. Cybercrime/e-Crimes: Model Policy Guidelines & Legislative Texts, HIPCAR. http:// www.itu.int/ITU-D/projects/ITU_EC_ACP/hipcar/reports/wg2/docs/HIPCAR_1-5B_Model-Policy-Guidelines-and-Legislative-Text_Cybercrime.pdf. Accessed 07 June 2016 20. ITU-ICB4PAC. http://www.itu.int/ITU-D/projects/ITU_EC_ACP/icb4pis. Accessed 07 June 2016 21. Models for Cybercrime Legislation in ESCWA member countries. http://www.escwa.un.org/ information/publications/edit/upload/ictd-07-8-e.pdf. Accessed 07 June 2016 22. Schjolberg, S.: Proposals for new legal mechanisms on combatting cybercrime and global cyberattacks. An International Criminal Court or Tribunal for Cyberspace (ICTC). http:// www.cybercrimelaw.net/documents/ International_Criminal_Court_or_Tribunal_for_Cyberspace_(ICTC).pdf. Accessed 05 Mar 2017

Problems of Classiﬁcation of Illegal Gambling Activities Aleksandr V. Sukhanov ✉ , Eduard E. Genzyuk, Anna A. Kulikova, and Liana R. Barashyan (

)

Institute of Service Sphere and Entrepreneurship (Branch) of Don State Technical University, Shakhty, Russia [email protected]

Abstract. The article deals with revealing the problems of classiﬁcation of illegal gambling activities. The authors of research are relying on dialectical learning method which combines system functional approach to the investigation of the target and subject of this paper. General scientiﬁc approach research methods were used in the making of this paper: system structured, comparative analysis method, as well as private scientiﬁc method. Keywords: Business activity · Gambling · Gambling business · Organized gang Privity · Criminal Code of the Russian Federation

1

Introduction

The humankind has been familiar with gambling from the earliest times. That said, history allows us to distinguish three basic types of attitudes (approaches) of state to the gambling activities: total prohibition (prohibitionism), regulation (establishing a rele‐ vant procedure), and abolitionism (exclusion from any participation in the regulation of these activities). The world’s millennial experience shows that the policy of total prohibition is virtu‐ ally ineﬀective in a struggle against the propagation of gambling. While there are commodity-money relations and the willingness of a person’s to risk, coupled with his desire for material beneﬁts, gambling activities will exist, motivating in a certain way those people who are ready to organize them and carry them out professionally. The complete removal of the state from regulation and monitoring of the gambling industry is unacceptable as well. Excessive expansion of gambling among the population threatens with serious social problems, as it engenders psychological dependency in certain categories of people in the form of a pathological attraction to gambling that displaces social, professional, material and family values and obligations from a person’s life. Thus, the most balanced is the policy of regulation of gambling activities as a form of leisure activities of the citizens, on the one hand, and an independent type of services in the civil area, on the other. It is this approach that was implemented by the Russian lawmakers in the adoption of Federal Law No. 244-FZ dated December 29, 2006 “On

© Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 505–515, 2019. https://doi.org/10.1007/978-3-030-00102-5_53

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the State Regulation of Gambling Activities and on the Introduction of Amendments to Certain Legislative Acts of the Russian Federation”. Since the entry into force of Article 171.2 of the Criminal Code of the Russian Federation in July 2011, a number of discussion questions about its application have arisen. In the literature on criminal law, both scientists and practitioners have often expressed critical judgments about its framework and low eﬃciency; some authors directly called it a “dead” norm. A strong attempt to remedy the situation was the adoption of Federal Law No. 430FZ “On the Introduction of Amendments to Article 171.2 of the Criminal Code of the Russian Federation and Articles 14.1.1 and 28.3 of the Code of Administrative Oﬀenses of the Russian Federation” dated December 22, 2014, which excluded the criminally constitutive feature which was most often criticized by the law enforcers – acquisition of large income – from disposition of Part 1 of Article 171.2 of the Criminal Code of the Russian Federation, and changed the list of classiﬁcation criteria provided for by Part 2 and Part 3 of this paper. The changes introduced, on the one hand, were an expected, if not predictable measure. The representatives of the law enforcement agencies which are the main subject of the action against the illegal gambling business, persistently stated the prac‐ tical problem: the managers of the “underground” casinos and slot machine halls are not concerned with the recording of income derived from these activities, due to which it is not possible to determine and prove the income which exceeds the value speciﬁed in Part 1 of Article 171.2 of the Criminal Code of the Russian Federation large amount (1.5 million rubles). On the other hand, such “transformation” of an administrative oﬀense in the area of business activities into a penal oﬀense requires critical scientiﬁc analysis and assessment of the prospects for further improvement of the criminal law standard. The research is aimed at determination of prerequisites (social dependence) of the criminal law standard providing for responsibility for illegal gambling activities (Article 171.2 of the Criminal Code of the Russian Federation), a thorough analysis of the body of the crime envisaged by it and formulation of suggestions to raise the eﬀectiveness of use and improve the norm of the criminal law on this basis. This goal is expected to be achieved through a consistent solution of the following tasks: – to identify possible shortcomings of the legal framework of this paper; – to study the law enforcement practices according to Article 171.2 of the Criminal Code of the Russian Federation; – to elaborate recommendations on the classiﬁcation of a crime provided for by Article 171.2 of the Criminal Code of the Russian Federation, and its distinction from the related bodies of the crime; – to formulate proposals aimed at improving the framework of Article 171.2 of the Criminal Code of the Russian Federation. The target of research is a set of social relations associated with legislative consol‐ idation and implementation of the criminal law standard providing for responsibility for illegal gambling activities. The subject of research is actually the criminal law standard

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which regulates responsibility for illegal gambling activities (Article 171.2 of the Crim‐ inal Code of the Russian Federation); ﬁles of judicial and investigative practice and scientiﬁc papers on the issues under investigation.

2

Research Data and Methods

The theoretical basis of research is composed of papers of Aistova, L.S., Kudriavtsev, V.N., Likholetov, A.A. and other Russian researchers. The regulatory basis of research is composed of international law acts, Constitution of the Russian Federation, Criminal Code of the Russian Federation, Civil Code of the Russian Federation, Code of Administrative Oﬀences of the Russian Federation, Federal Laws, substatutory regulatory legal acts and rulings of the Constitutional Court of the Russian Federation. The theoretical implications of research consist in the deepening of the existing scientiﬁc approaches to the assessment of social dependence and the range of application of penal prohibition provided for by Article 171.2 of the Criminal Code of the Russian Federation, in a struggle against illegal gambling activities in the territory of the Russian Federation, as well as the justiﬁcation of the directions of the use of the criminal law with this negative phenomenon. The practical implications of research consist in the fact that the conclusions, recom‐ mendations and proposals contained therein can be used by the courts and law enforce‐ ment agencies to resolve problem situations related to the use of the provisions of the criminal law on responsibility for illegal gambling activities; in law-making activities aimed at improvement of the norms of criminal law; in research work during the further elaboration of problems related to the classiﬁcation of illegal gambling activities within the gambling zones and beyond the gambling zones. The methodological basis of research is composed of dialectical method of scientiﬁc knowledge involving the study of phenomena and processes of the objective reality in their interrelation and development. Such learning methods were used in the making of this paper as historical, comparative-legal, statistical, analysis and synthesis. The use of these and other methods in the work is conditioned by the direction of the subject of research, including its practice-oriented approach to the solution of legal and actually penal problems related to the struggle against the abovementioned socially dangerous acts.

3

Findings

1. Classiﬁcation of a crime provided for by Article 171.2 of the Criminal Code of the Russian Federation, in aggregate with other acts involving illegal gambling activities An important practical component of the research study of criminal law is the develop‐ ment of proposals for overcoming complex situations faced by law enforcement agen‐ cies. Scientiﬁc recommendations contribute to the minimization of errors in case of

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classiﬁcation of crimes – incorrect ascertainment of the fact of presence or absence of the body of the crime. The issue related to the classiﬁcation of crimes provided for by Article 171.2 of the Criminal Code of the Russian Federation, in aggregate with other acts involving illegal gambling activities, is rather complex and largely relevant. According to Part 1 of Article 17 of the Criminal Code of the Russian Federation, the aggregate of crimes shall be treated as the commission of two and more crimes by a person who wasn’t convicted for any of them. Thus, the question often arises in practice as to whether or not the committed act is a single continuing crime, or there was an aggregate of identical criminal acts. The solution to the issue concerning the presence or absence of the aggregate of crimes in the cases of illegal gambling activities should be based on the provisions of the general theory of criminal law on the complex single crime and multiple crimes. A nearly popular opinion has been made in the theory of criminal law according to which a continuing crime may occur in the presence of not only identical actions, but legally uniform actions. The idea of the necessity of having the same goal in the continuing crime was subsequently adjusted by the theory of criminal law through justiﬁcation of the conclusion that the obligatory subjective criterion of a continuing crime is the existence of a form of guilt unifying uniform actions, while the contents of the goal in this case may be changed. The analysis has shown that the aggregate of crimes provided for by Article 171.2 of the Criminal Code of the Russian Federation, was most commonly alleged in those cases when there was proved acquisition of large income in the activities of each revealed illegal gambling establishment. And vice versa, in cases when there was scarcity of evidentiary information about the amount of income, the investigators usually tended to treat these gambling establishments as the elements of the same criminal activity of a person which allowed regarding income earned by the person as a single value. We believe that the intent of the guilty person serves as determining factor in case of distinction of a single continuing crime in the form of illegal gambling activities from the aggregate of such crimes. If the intent initially covered the establishment of several “underground” gambling establishments, this is a single crime. If, on the other hand, the person had consistently developed the intent to establish new illegal establishments, i.e. he/she sought to expand the scope of the illegal gambling business and opened additional underground casinos and slot machine halls, we have good grounds to treat this case as a repetitive commission of crime provided for by Article 171.2 of the Criminal Code of the Russian Federation (i.e. the aggregate of crimes) in the committed act. The episodes that form a continuing crime, even though they contain the signs of a completed crime, have no independent signiﬁcance, since they are only the stages in the implementation of a single criminal intent of the guilty person. This is why the episodes related to the opening and operation of several illegal gambling establishments, even if with due consideration of large income earned they contain the signs of a completed crime, cannot have independent meaning if in the aggregate it was covered by a single intent of a person. Such an approach will allow preventing artiﬁcial elaboration of the aggregate of crimes in the situation where it was

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actually not present, thereby ensuring the correct classiﬁcation of an act which reﬂects the actual level of its social danger. 2. Attempted illegal gambling activities One of the obscure issues in the theory of criminal law and ambiguously resolved issues in judicial and investigative practice is the issue of possible attempted commission of crime provided for by Article 171.2 of the Criminal Code of the Russian Federation. In the context of the edition of norm prior to December 22, 2014, Likholetov, A.A. notes in this regard: “In determining the characteristics of the subjective aspect of crimes provided for by Article 171.2 of the Criminal Code of the Russian Federation, it is necessary to determine the intent of the person to extract income amount of which exceeds 1,500,000 rubles. This is especially important when such income was not earned by the guilty person for reasons beyond their control, since we believe that one should talk about an attempted crime in this case”. Illegal gambling activities belong to continuing crimes by nature. It is commonly known that a continuing crime should be classiﬁed depending on the target pursued by the person, and speciﬁcity (non-speciﬁcity) of the intent of the guilty person. Thus, in the opinion of a number of authors, the actions can be assessed as attempted illegal business operations only if it is possible to prove the intent of the person to extract the income of a particular amount or such amount of income that would be extracted if the illegal business activities were not put under restraint 204. It seems that such an approach makes little sense in the context of the cases of illegal gambling activities. First of all, shouldn’t we, just applying common sense, acknowledge that any person conducting illegal economic activities (including illegal gambling busi‐ ness), intends to extract the maximum possible income from such activities? And this intent for maximum enrichment is, of course, not limited to the amounts that characterize the large and extra large amounts provided for by the Note to Article 169 of the Criminal Code of the Russian Federation. Besides, it must be recognized that the law enforcer will always be able to refer to the circumstance that large or extra large amounts of income would be extracted by the person in future if conducted illegal economic activities were not put under restraint. After all, it is only a matter of time regardless of the nature (scale) of such activities. In this regard, a rather nonintuitive conclusion suggests itself: any elicited fact of illegal gambling activities without the evidenced amount of income earned can be clas‐ siﬁed according to Part 3 of Article 30, Paragraph “b” of Part 3 of Article 171.2 of the Criminal Code of the Russian Federation. It seems obvious however that the possibility of imputation of attempted crime cases provided for by Article 171.2 of the Criminal Code of the Russian Federation, should not be contingent on the availability of evidence with the law enforcer, conﬁrming the intent of the entity to extract income in a certain amount. As already noted, the person does not always have such intent, and it would be a deception to disagree with it. That is why the references of the courts and representatives of the science of criminal law to the assumption of innocence, the lack of evidence of intent of the entity to extract income in a certain amount are not entirely justiﬁed. After the sign of large income was excluded from disposition of Part 1 of Article 171.2 of the Criminal Code of the Russian Federation, the question of attempted illegal

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gambling activities has not lost its relevance, keeping in mind that the signs of large and extra large amounts of income are contained in Part 2 and Part 3 of this Article. It seems that the key to resolving the problem under analysis is a clear understanding of the point of time when the person began to implement the objective aspect of the bodies of the crimes provided for by Paragraph “b” of Part 2 of Article 171.2 of the Criminal Code of the Russian Federation and Paragraph “b” of Part 3 of Article 171.2 of the Criminal Code of the Russian Federation. At present, the structure of Part 1 of Article 171.2 of the Criminal Code of the Russian Federation is such that the action itself – illegal gambling activities – constitutes a completed crime. At the same time, the person technically begins to implement the objective aspect of the crimes provided for by Paragraph “b” of Part 2 of Article 171.2 of the Criminal Code of the Russian Feder‐ ation and Paragraph “b” of Part 3 of Article 171.2 of the Criminal Code of the Russian Federation, since the moment when the amount of income from such activities reaches 1,5 million rubles and 6 million rubles respectively. Despite the lexical identity, the preceding illegal gambling activities are a completely diﬀerent act from the perspective of a sign of social danger. In this regard, in our opinion, in order to ensure the observance of the principle of legality, it is absolutely necessary to abandon the very idea of possible classiﬁcation of the committed act as an attempted illegal gambling activity on a large or especially large scale. 3. Classiﬁcation of illegal gambling activities carried out in privity The issue related to classiﬁcation of illegal gambling activities carried out in privity, including in cooperation with persons who do not implement the objective aspect of the crime provided for by Article 1712 of the Criminal Code of the Russian Federation, but only assist the perpetrator – mastermind, aider and accomplice, has been remaining insuﬃciently addressed in the theory of criminal law. Within the meaning of the criminal law (Article 33 of the Criminal Code of the Russian Federation), to recognize an accomplice in the crime under consideration, it is necessary that this person was deﬁnitely aware of the most important facts of the crime committed by the perpetrator: about gambling activities outside the gambling zone (moreover, the knowledge of a particular location of illegal gambling establishment is not a mandatory condition), about the fact that the perpetrator had no legal foundation for gambling activities (this does not require the accomplice’s knowledge of speciﬁc legislative limitations related to gambling activities in the territory of the Russian Feder‐ ation). According to Part 3 of Article 33 of the Criminal Code of the Russian Federation, a person who organized the commission of a crime or managed its commission, as well as a person who formed an organized gang or a criminal association (criminal organi‐ zation) or who managed them, shall be regarded as the mastermind. This research failed to identify situations when the actions of a person where clas‐ siﬁed with reference to Part 3 of Article 33 of the Criminal Code of the Russian Feder‐ ation as the mastermind of illegal gambling activities. This is not accidental, because such kind of classiﬁcation seems quite possible in itself. It is in this way, for example, that one should assess the actions of a person who didn’t directly implement the objective aspect of a crime provided for by Article 171.2 of the Criminal Code of the Russian

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Federation, but persuaded the other person to commit this crime, gave certain advice, instructions, carried out other information and logistical support of criminal activity of the perpetrator. In such cases, the mastermind may be located at a considerable distance from the actual perpetrator and take no direct participation in the management of activ‐ ities of illegal gambling establishment (the mastermind, in particular, may at this time serve a sentence of imprisonment in one of correctional facilities, etc.). 4. Distinction between illegal gambling activities with related bodies of the crimes An important aspect of classiﬁcation of illegal gambling activities consists in distinction between this act and related bodies of the crimes. As noted by Kudriavtsev, V.N., in order to classify the criminal act correctly, it is necessary to clearly understand the demarcation lines between it and related crimes. By establishing characteristics inherent in a given act only, rejecting those signs that are not inherent in this act, gradually deepening the analysis of the corresponding legal norm and the factual circumstances of the committed act, the law enforcer comes to the only set of features characterizing this crime and distincting it from others. Distinction between illegal gambling activities and illegal business operations (Article 171 of the Criminal Code of the Russian Federation), should be mainly made on the grounds of the objective aspect. This question is covered in reasonable detail in the literature on the criminal law, hence we won’t particularly dwell on it. Moreover, as has been noted earlier, the management of activities of illegal gambling establishment is frequently related to the provision of such services as the selling of alcohol, tobacco products and foodstuﬀs to its visitors. Such activities (retail trade, foodservice industry) eﬀectively constitute business activities. In this regard, if a person carried it out without proper registration and (or) license, then if there is a major damage or large income, the committed act should be additionally classiﬁed according to Article 171 of the Criminal Code of the Russian Federation. Article 171.2 of the Criminal Code of the Russian Federation shall not apply to illegal gambling activities in bookmakers’ oﬃces and betting terminals. Provision has been made for administrative responsibility for gambling activities in bookmakers’ oﬃces and betting terminals without license for natural persons (Part 2 of Article 14.1.1 of the Code of Administrative Oﬀences of the Russian Federation). Taking the abovemen‐ tioned into consideration, the actions of a person who will manage and carry out gambling activities through the use of bookmakers’ oﬃces and betting terminals without the permit (license) obtained in accordance with the established procedure, in our opinion, are covered by Article 171 of the Criminal Code of the Russian Federation as illegal business operations (if there is large income). We should agree with Likholetov, A.A. according to whom it appears that there are no reasonable grounds for elaboration of a special norm designed for such situations.

4

Discussion

The management of gambling activities should be understood as activities the contents of which consist in creation of both the conditions for openingoткpытия and operation of the gambling establishment, and the conditions which ensure its further use in such

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a capacity. Carrying out of gambling activities involve commission of actions, directly associated with gambling. An essential feature of this act is the involvement of a person into the gambling process in one form or another. Unlike the management of gambling activities, their carrying out assumes certain contact with the visitors of the gambling establishment who participate in gambling. The illegality of gambling activities is determined by the aggregate of alternative characteristics: (a) with the use of gaming equipment outside the gambling zone; (b) with the use of information and telecommunication networks, including the Internet; (c) with the use of means of communication, including means of mobile communication; (d) without the permit obtained in the gambling zone in accordance with the established procedure. Furthermore, according to the existing approach, any device or appliance that is actually used for gambling activities, i.e. such games in which the chance of winning completely or largely depends not on the abilities of the players, but on the pure luck, can be recognized as gaming equipment. The actions related to the simultaneous organization of several illegal gambling establishments, if this were covered by a single intent of a person, constitute a single crime. This also extends to the situations when the income earned from each illegal gambling establishment exceeds large income established by criminal legislation. In accordance with the provisions of the science of criminal law on the complex occasional crime and multiple crimes, such actions of a person should be treated as a single continuing crime. To recognize an accomplice in the crime under consideration, it is necessary that this person was deﬁnitely aware of the most important facts of the crime committed by the perpetrator: about gambling activities outside the gambling zone, about the fact that the perpetrator had no legal foundation for gambling activities (this does not require the accomplice’s knowledge of speciﬁc legislative limitations related to gambling activities in the territory of the Russian Federation). If the management of activities of illegal gambling establishment is related to illegal business activities, the committed act should be additionally classiﬁed according to Article 171 of the Criminal Code of the Russian Federation. Establishment of responsibility for illegal gambling activities outside the gambling zones along with pursuit of such activities without the permit obtained in the gambling zone in accordance with the established procedure within the same body of the crime cannot be recognized as well grounded. In our opinion, two criminal law standards should be enshrined in criminal legisla‐ tion: (1) on responsibility for illegal gambling activities as a crime in the area of economic activity; (2) on responsibility for illegal gambling activities as a crime against mental health of population and public morality. This position is due to the dual nature of the provisions of Federal Law No. 244-FZ dated December 29, 2006 “On the State Regulation of Gambling Activities and on the Introduction of Amendments to Certain Legislative Acts of the Russian Federation”. On the one hand, its provisions prohibit gambling in the vast majority of the territory of the country, on the other hand, they establish certain requirements for the order of imple‐ mentation of this type of economic activities in the territories where it is permitted.

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We believe that the deﬁnition of illegal gambling activities committed by a group of persons by previous concert is an aggravating circumstance which is not fully consistent with the scientiﬁcally grounded criteria of elaboration of qualiﬁed bodies of the crimes. Illegal gambling business usually assumes the group nature of illegal activities. It is no accident that in the related bodies of the crimes provided for by Articles 171, 171.1, 172 of the Criminal Code of the Russian Federation, this classiﬁcation criterion is not mentioned, and as for a wide range of crimes in the area of economic activities, it is recommended to abandon it, since it is virtually impossible to commit such crimes single-handedly. Exclusion of a sign of large income from the disposition of Article 171.2 of the Criminal Code of the Russian Federation by Federal Law No. 430-FZ dated December 22, 2014 made actual the issue relating to the possibility of illegal gambling activities as a minor oﬀence (Part 2 of Article 14 of the Criminal Code of the Russian Federation). It is commonly known that this provision of the criminal law is universal, having no formal barriers to its application in case of commission of particular criminal acts. Considering the fact that in accordance with the current legislation, the gaming equipment can be any devices or appliances used for gambling activities, question arises: whether there is the body of the crime in the actions of a person who organized, for example, gambling with playing cards at home? Or should this act in this case be treated as a minor oﬀence falling under Part 2 of Article 14 of the Criminal Code of the Russian Federation, especially if the organizer of this game takes part in it himself/herself, earning no income for the management of such leisure activities. Formally, based on a literal interpretation of the provision of Part 1 of Article 171.2 of the Criminal Code of the Russian Federation, one can recognize the presence of the body of the crime in such actions. However, is this the act that led the lawmaker to the need for application of a penal sanction? It is quite obvious that initially Federal Law No. 244-FZ dated December 29, 2006 “On the State Regulation of Gambling Activities and on the Introduction of Amendments to Certain Legislative Acts of the Russian Federation”, as well as the norms of the criminal law determined by it, were directed at regulating of the activities of systematic and organized nature – action against the socalled illegal gambling business, i.e. illegal provision of services to the unlimited community (population), and not individuals (friends, acquaintances). In this regard, in our opinion, we must clearly distinguish between gambling activities as a form of popular leisure activities and illegal socially dangerous activity aimed (as a goal) for regular receiving of proﬁt due to the books made by numerous customers of the gambling houses. The ﬁrst of them can be perfectly treated as a minor oﬀence which technically contains the essential elements of oﬀence provided for by Part 1 of Article 171.2 of the Criminal Code of the Russian Federation, but is not socially dangerous, and therefore is covered by Part 2 of Article 14 of the Criminal Code of the Russian Federation. That being said, in our proposed criminal law standard regarding the responsibility for illegal gambling activities with the use of gaming equipment outside the gambling zone or with the use of information and telecommunication networks, including the Internet, as well as means of communication, including means of mobile communica‐ tion, one should point to a special goal – “obtaining, either directly or indirectly, pecu‐ niary or other ﬁnancial beneﬁt”.

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Conclusion

Establishment of criminal responsibility for an illegal gambling activity corresponds to scientiﬁcally grounded criteria of criminalization is a socially required measure and is necessary from the perspective of legal practice. The introduction of an individual article on responsibility for illegal gambling activ‐ ities into the Criminal Code of the Russian Federation is much more preferable that the use of Article 171 of the Criminal Code of the Russian Federation “Illegal business operations” with a view to preventing such actions. In addition, this reduces the likeli‐ hood of possible mistakes in law enforcement practice and proclaims the penal prohib‐ ition in the form accessible to the public that gives Article 1712 of the Criminal Code of the Russian Federation much greater preventive potential. Moreover, establishment of responsibility for illegal gambling activities outside the gambling zones along with pursuit of such activities without the permit obtained in the gambling zone in accordance with the established procedure within the same body of the crime is a legislative omission which distorts the concept of an immediate target of a crime provided for by Article 1712 of the Criminal Code of the Russian Federation. Gambling activities outside the gambling zones, as well as with the use of informa‐ tion and telecommunication networks, including the Internet, means of communication, including means of mobile communication, is a form of provision of services causing harm or creating a hazard to social relations in the area of provision of security and mental well-being (health) of population. On the contrary, the direct target of illegal gambling activities without the permit obtained in the gambling zone in accordance with the established procedure are economic activities, which consist in the maintenance of the stable position of the state monetary system through taxation and other ﬁscal measures. It is advisable to make provision for the two criminal law standards related to illegal gambling activities in the Criminal Code of the Russian Federation: 1) on responsibility for these actions in the gambling zone as a crime in the area of economic activities (Article 1712 of the Criminal Code of the Russian Federation) inherent in the extraction of large income; 2) on responsibility for illegal gambling activities with the use of gaming equipment outside the gambling zone or with the use of information and tele‐ communication networks, including the Internet, as well as means of communication, including means of mobile communication, if these acts were committed with a view to obtaining, either directly or indirectly, pecuniary or other ﬁnancial beneﬁt, as a crime against health of population. That said, in order to create conditions for more eﬀective detection of wrongful acts in each of these articles, it is advisable to provide for a note containing a special ground for relief from the criminal responsibility of persons involved in illegal gambling activ‐ ities, if they actively contributed to the solution and (or) the investigation of this crime and to the exposure of the mastermind (masterminds) of illegal gambling.

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References Code of Administrative Oﬀences of the Russian Federation No.195-FZ dated 30.12.2001. Federal Law of the Russian Federation. Legislation Bulletin of the Russian Federation, No. 1 (Part 1), Article 1 (2002) On the introduction of amendments to Federal Law “Concerning Lotteries” and Federal Law “On the State Regulation of Gambling Activities and on the Introduction of Amendments to Certain Legislative Acts of the Russian Federation” dated 27.11.2017 No. 358-FZ. Federal Law of the Russian Federation. Legislation Bulletin of the Russian Federation, No. 49, Article 7330 (2017) On the State Regulation of Gambling Activities and on the Introduction of Amendments to Certain Legislative Acts of the Russian Federation No. 244-FZ dated 29.12.2006. Federal Law of the Russian Federation. Legislation Bulletin of the Russian Federation, No. 1 (Part 1), Article 7 (2007) Criminal Code of the Russian Federation No. 63-FZ dated 13.06.1996. Federal Law of the Russian Federation. Legislation Bulletin of the Russian Federation, No. 25, Article 2954 (1996) Aistova, L.S.: Illegal business operations and gambling. Criminal Law: background, realia, transition to sustainable development: proceedings of the VI All-Russian Congress of Penal Law, pp. 319–321 (2011) Kudriavtsev, V.N.: General theory of classiﬁcation of crimes. Legal Literature, p. 352 (1972) Likholetov, A.A.: Crimes in the Gambling Business Area: Problems of Classiﬁcation and Improvement of Legislation. Business. Education. Law. Gazette of the Volgograd Business Institute, no. 2(23), pp. 280–284 (2013)

Social Precarization in Post-Soviet Countries: Common Features and Diﬀerences Olga V. Mramornova1 ✉ , Natalia A. Ivanova1, Olga Y. Sokolova2, Aynulkhat Z. Musaeva3, and Saﬁa S. Abutalimova4 (

)

1

Yuri Gagarin Saratov State Technical University, Saratov, Russia [email protected], [email protected] 2 Plekhanov Russian University of Economics, Saratov Socio-Economic Institute (Branch), Saratov, Russia [email protected] 3 Dagestan State University, Makhachkala, Russia [email protected] 4 Institute of Socio-Economic Research of Dagestan Scientiﬁc Center of the Russian Academy of Sciences, Makhachkala, Russia

Abstract. Social precarization develops under the inﬂuence of objective reasons of digitalization and globalization of economies in various countries. At the same time, it has a speciﬁc character of its manifestation in each country, conditioned by cultural, historical, religious, economic, political and other peculiarities of states. The article presents a corporate analysis of the forms of social precarization in the Russian Federation and Kazakhstan. Based on the conducted social research, a diﬀerence in the dynamic pattern of the precarization processes in Russia and Kazakhstan has been found. A conclusion has been drawn about the greater intensity of social precarization in Russia compared to Kazakhstan. Keywords: Precariat · Precarization · Social precarization · Globalization Precarious employment · Informal employment · Unemployment Russian Federation (Russia) · Republic of Kazakhstan (Kazakhstan) JEL Classiﬁcation Codes: J21 · J28 · J64

1

Introduction

In recent years, a great number of researches was conducted which were dealing with the problems of social precarization of society as a whole and precarization of employ‐ ment. The world economical and sociological literature identiﬁed the content of the terms “precariat”, “precarization”, “social precarization”, “precarity”, “precarizational labor”, “precarious employment”, and similar concepts (Standing 2014, Bobkov et al. 2016, 2017, Kolosova and Razumova 2015, Ricceri 2015, Toshchenko 2016, Fedorova et al. 2016, etc.). The term “precariat” was introduced into scientiﬁc use by the French social scientist Pierre Bourdieu in 1980s, who investigated the position of seasonal workers

© Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 516–527, 2019. https://doi.org/10.1007/978-3-030-00102-5_54

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characterized by precarization of employment, the lack of guaranteed social beneﬁts, and insecurity during diﬃcult life circumstances. Precariat is a conceptually new forma‐ tion which means the presence of social stratum that represents alienation not only from the products of labor, but from the whole society. These are large social groups expe‐ riencing special, sophisticated forms of exploitation of their labor, their knowledge, their qualiﬁcation and, ultimately, the quality of living. These groups form a large stratum in many countries of the world, amounting up to 30–40% of the total number of workingage population (Toshchenko 2016). The term “precarization” means an objective process of formation of a certain social stratum (precariat) due to the redistribution of previously formed sociodemographic strata of the economically active population on the basis of the gradual displacement of standardized forms of employment by various nontypical, nonstandardized (Maslova 2016). This term is also interpreted as a dangerous process of propagation of social situation of precariat to the increasingly wider strata of society, changing its appearance as a whole (Kolosova and Razumova 2015). In the articles of many Russian economists, the processes of precarization of the population are considered in the aspect of postindustrial transformations of relations between the employment and the labor market. The genesis and the evolution of the concept of “precarious employment” are revealed in the articles of Bobkov, V.N., B.Г. Kvachev, N.V., Loktiukhina, N.V. (Bobkov et al. 2016). The same authors, with the participation of M. Ricceri, adapted the criteria of precarious employment developed by the International Labor Organization to the speciﬁcs of the Russian socioeconomic conditions (Bobkov et al. 2017). Precarization is also analyzed in terms of the problem of social pollution (Fedorova et al. 2016). The emphasis in the Russian economic literature is mainly made on the research of precarization of employment. Western sources describe the extremely diverse forms of social instability (rate of precarization) that can be observed in various countries in the age of globalization. In order to characterize it, such terms as, for example, “ﬂexible life”, “precarious subjectivity”, “ﬂexible city”, “city as a place of increased uncertainty”, etc. are used (Ferreri et al. 2017). The precarization process encompasses increasingly wider social groups, such as the young researchers in the university system of Italy (Bozzon et al. 2017), students from Europe, Latin America and Africa, dissatisﬁed with the neoliberal reforms of education systems (Cini and Guzman-Concha 2017), the reserve army of labor in the agricultural industry of Italy and Spain (Avallone and Ramirez-Melgarejo 2017), the youth of Spain dealing with the high rate of unemploy‐ ment and signiﬁcant uncertainty of projects of life (Alonso and Rodrigues 2017), economically vulnerable populations of post-socialist Europe and Africa experiencing the problem of boredom (excess free time) (Van Den Berg and O’Neil 2017), etc. It is emphasized that neoliberal globalization leads to institutionally implemented precari‐ zation of labor, means of subsistence, and citizenship (Alonso and Rodrigues 2017). G. Standing considers the emergence of the precariat (English term for “precarious” which means “unreliable”), a new global socioeconomic phenomenon, as a negative consequence of the implementation of the neoliberal model consisting in the need to ensure the maximum market competitiveness through, ﬁrst of all, answering the labor

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market ﬂexibility by the governments of developed countries (Standing 2014). Labor market ﬂexibility means the ﬂexibility of salary, ﬂexibility of employment, and ﬂexi‐ bility of positions. However, the achievement of these goals resulted in the increased vulnerability and insecurity of employees. The globalization process contributed to the rapid propagation of precariat in various countries. In our opinion, it is necessary to distinguish between the objective and subjective reasons for the emergence of the precariat. The objective reasons include the develop‐ ment of information technology and the Internet, the transition from industrial to post‐ industrial society. Conventional forms of employment, characterized by the eight-hour shift and daily stay within in the oﬃce, can now be replaced with nontypical forms – remote working, working from home, freelance, etc. New forms of employment give an employee a vast amount of freedom. However, such an employee turned out to be much less socially protected compared to an employee of conventional type who belongs to political parties and has support of trade union. This laid the foundation for the emer‐ gence of precarized working population groups characterized by an unstable nature of employment, earnings, economic insecurity, lack of institutional protection by the state (Katkova et al. 2017). This process was catalyzed by the globalization process. The implementation of neoliberal policy and ensuring labor market ﬂexibility present a subjective reason that contributed to the formation of precariat as a social class. In this regard, we share the viewpoint of Kolosova, R.P. and Razumova, T.O., suggesting that the predetermining factor of the formation of precariat is a drastic change in management tactics and strategy that requires more and more sacriﬁce from the employees (Kolosova and Razumova 2015). The emergence of the precariat meant the emergence of a new negative trend of world development which was diametrically opposed to what was established in recent decades as a logical consequence of the neo-industrial transformation – the socialization of the economy, manifested primarily in strengthening of the social orientation of economic development (Zimina 2016). Precarization meant a fundamental change in the forms of employment and labor mobility, blurring the boundaries between a work‐ place, home and public places, the development of new forms of employment unchar‐ acteristic of industrial age which lead to a signiﬁcant diﬀerentiation of the employed, formation of primary and secondary labor markets. This being said, the latter is char‐ acterized by poor working conditions and the absence of any guarantees of employment. Moreover, the scope of secondary labor market signiﬁcantly expands in all developed countries. Thus, the proportion of employees working in the underemployment condi‐ tions in age group of 20–64 y.o. in the countries of the EU increased from 16.5% in 2005 to 19.0% in 2015. This ﬁgure amounted to 18.9% in 2016 (Eurostat, 2016). The purpose of this article is to examine the genesis and the current state of social precarization and its most important form – precarization of employment in postsocialist countries through the example of Russia and Kazakhstan. The next section describes the materials and methods used, while the third section describes the results the employed analysis and the last section concludes.

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519

Materials and Methods

2.1 Sample Selection The authors have analyzed the research literature and the data of government statistics of the Russian Federation and the Republic of Kazakhstan, the Ministry of Labor Employment and Migration of Saratov region of Russia. A social research was conducted using the survey method in Saratov region (Russia) and West Kazakhstan Province (Kazakhstan); it covered 420 respondents in employment. This data was used to obtain the characteristics of status and dynamic pattern of social precarization in the Russian Federation and Kazakhstan. The research was conducted in 2017. 2.2 Quantitative Research The employees of enterprises and organizations of Russia (n = 210) and Kazakhstan (n = 210) took part in the social research. In Russia, 29% of respondents were men, and 71% were women. In Kazakhstan, 44% of respondents were men, and 56% of respondents were women. During the quantitative phase respondents were inter‐ viewed using a semi-structured questionnaire of 15 thematic units. A special toolkit was used (Fedorova et al. 2016). 2.3 Qualitative Research The questionnaire was structured into four units. The ﬁrst unit included questions concerning both demographic and personal data of employees (e.g., sex, age, status in organization, ﬁeld of activities). The second unit included questions, concerning the type of an employment agreement (ﬁxed-term – indeﬁnite term, written – oral), form of payment of monetary remuneration (transfer to the bank card or “in the envelope” i.e. unoﬃcially). The third unit concerning questions about changes in the personnel policy of the organization over the past year, the facts of breach of agreements by the employer. The fourth unit includes questions related to the assessment of risks by employees asso‐ ciated with their current work (stress level, hazard to their health, opportunity to combine work life and private life, comfortability of working conditions, etc.). The results of the social research were complemented by the data obtained in the course of analysis of research literature and statistical data characterizing precarization processes in Russia and Kazakhstan. 2.4 Methodological Approach Comparative analysis is the main methodological approach. Based on the main criterion – precarization (precarity) of the social status of social groups and employees, an analysis of the precarization processes in Russia and Kazakhstan was carried out. This allowed researchers to recognize the common features of emergence and development of social precarization in both countries, conditioned by the transition from the planned economy to the market economy. This transition gave an additional impetus to the development

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of the precarization processes – the beginning of gender-based discrimination, youth unemployment, the phenomenon of the “working poor”, the huge income diﬀerentiation, the weakening of the means of social mobility due to the rigid social structure formed in the transition period, etc. At the same time, there are certain diﬀerences that are stipulated by historical, cultural and institutional peculiarities of states.

3

Results

Precarization of employment of the population in diﬀerent countries has been studied by foreign and domestic scientists for about 50 years, but the methodology and the uniﬁed approach to its qualitative and quantitative assessment have not been worked out yet; the oﬃcial statistical database has not yet been created either. Precarious employment in various forms is an important criterion for assessing social precarization. According to oﬃcial ﬁgures, 3.1% of employees in Russia were employed as half-timers at the beginning of 2017: at the initiative of the employer - 111.7 thousand people; upon mutual agreement between the employee and the employer – 765 thousand people, were in idle time - 182.8 thousand people (Federal State Statistics Service 2016). Today, the research of gender-based aspects of precarization of employment is becoming increasingly important. The conducted social research led to a conclusion about the lower economic activity of women compared to men. First of all, women abandon full-ﬂedged employment relations due to the care of children or incapacitated relatives; thus, about 5% of men and 35% of women were employed as half-timers for this reason in 2017 in Russia. Informal employment, which puts pressure on the labor market and impedes eﬃcient social and economic development of the country, serves as one of the forms of precarized employment. A change in the scope and the nature of informal employment can be observed both countrywide and region-wide in recent years in the Russian labor market. According to the statistics, 15.4 million people or 21.2% of the total number of employees were employed in the informal economy of Russia in 2016. Compared to 2015, informal employment increased by more than half a million people. The informal employment in the Republic of Kazakhstan amounted to 18.2% in 2016, which is signif‐ icantly lower than in Russia. According to the oﬃcial ﬁgures of the Russian Statistics Committee, a signiﬁcant number of the “informally employed” can be observed in the following regions of Russia: Krasnodar Krai - 734 thousand people, Dagestan - 662 thousand people, and the Rostov Region - 623 thousand people. The main industries in terms of the largest number of informally employed (about 9 million people) are trade, agriculture, construction and repair (Federal State Statistics Service 2016). One of the most pressing problems of precarization of employment relations at the enterprises of Russia is the application of practice shadow payments of salary to the employees. According to the research which was conducted in 2015–2016, the shadow labor market includes 30 million people living in the territory of the Russian Federation (more than 40% of the total number of working-age population), about 22 million people

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of which are those who have unoﬃcial salary in addition to the principal place of work or receive part of salary unoﬃcially as the so-called “envelope salary” (Maslova 2016). An important criterion of precarization of employment relations is the presence and the proportion of employees whose working conditions do not comply with sanitation and hygiene standards. Thus, the percentage of employees working in harmful and (or) hazardous working conditions in Russia in 2015 amounted to: in mining operations 57.1% (62.6% - men and 34.7% women); in manufacturing - 41,1% (47.2% - men; 31.9% - women); in construction – 35.6% (39.3% – men and 17% – women); in transportation – 33.9% (45.7% – men and 13.8% – women). 28,000 employees were harmed in indus‐ trial accidents (including fatal accidents). 1288 employees died. In 2016, 27000 employees were harmed and 1290 employees died (Russia in Figures 2017). Hazardous working conditions which do not comply with sanitation and hygiene standards, adversely aﬀect the level of labor productivity, adversely aﬀect health, the demographic situation in the country, and the quality of living of the population. The authors believe that unemployment is a criterion of social precarization as well. The current situation in Russia, like in the Republic of Kazakhstan, is characterized by the low rate of unemployment in general (1% of registered unemployment in Russia and less than 5% in Kazakhstan); however, the rate of unemployment of youth in rural areas and monotowns is still high. The analysis of age composition of the unemployed is a reﬂection of the fact that the youth in the labor market as well as the people of prere‐ tirement age are the most vulnerable social groups. According to the oﬃcial ﬁgures, the largest percentage - 19.1% of the unemployed in Russia in 2016 - was accounted for by age group of 20–24 y.o.; 16.5% was accounted for by age group of 25–29 y.o. Hence, about 36% of the unemployed is accounted for by persons up to 30 years old (20–29 y.o.). The rate of unemployment in age group of 50–54 amounted to 9.8% (Russia in Figures 2017). We shall analyze similar trends in Saratov region of the Russian Federation. The rate of unemployment in the region is low. At the end of 2017, the rate of registered unem‐ ployment in Saratov region amounted to 0.9% (17). The rate of unemployment in regional center – Saratov – was lower by 0.3% than on the average in the region. The risks of unemployment in the region, as well as countrywide, are relevant to rural popu‐ lation and population of towns to a far greater degree. In 2017, 48 “critical” zones of labor market were found in 22 municipal districts of Saratov region with the total number of working-age population exceeding 100 people, where there were few or no employees. The proportion of citizens temporarily leaving their place of residence in search of work amounted to 40% of the total number of working-age population. The highest rate of unemployment was observed at a level of 11.4% (Ministry of Labor Employment and Migration of Saratov region 2017). The Ministry of Labor Employment and Migration of Saratov region, population employment agencies expend major eﬀorts in order to attract the unemployed and socially vulnerable populations to social labor. However, employment at public or temporary work, although it raises the living standards of these working populations groups to a certain degree, it secures their position in a precarious, precarized population group at the same time.

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The large number of employees who are employed under conditions of precarious employment can be observed in this region. Thus, in September 2017 in Saratov region, underemployment was registered with 2000 people, while 3700 people were working in a part-time capacity; 1600 people were working as half-timers (part-time working week); 400 people claimed that there was idle time at the initiative of the top manage‐ ment. The total number of economically active population in the economy of Saratov region in 2017 amounted to 1172 thousand people (Ministry of Labor Employment and Migration of Saratov region 2017). Hence, the analysis of social precarization in the Russian Federation and the Saratov region indicates the existence of these processes in Russia and its regions and the nonuniform risk of “falling into” the precarized groups depending on the ﬁeld of activities, age, gender, region of residence. When we proceed to the analysis of trends of precarization in the Republic of Kazakhstan, it can be noted that these processes were absent in Soviet times in Kazakh‐ stan, as well as in other Soviet republics. The problems of social instability emerged with the onset of capitalistic transformations. If in 1991 the economically active popu‐ lation of Kazakhstan numbered slightly less than 8 million people, it decreased by almost a million people (up to 7.1 million) by the beginning of the 20th century. In Kazakhstan, the self-employment of population became a frequent practice during the post-Soviet period, which in diﬀerent periods reached up to more than 43% (2000) of the total number of economically active population of the country. Self-employed workers should be considered as the most non-formalized stratum of society. Precari‐ zation of the social status of this population category allows referring them to precariat. In the Republic of Kazakhstan in accordance with the statistical data, self-employed people in the vast majority of cases are agricultural producers, usually having secondary or secondary specialized education and are at employable age. The structure of the selfemployed population is characterized by a pronounced gender-based asymmetry – it is dominated by men, as their total number is 1.2 times larger than the total number of women (Committee on Statistics of the Ministry of National Economy of the Republic of Kazakhstan 2017). However, it is important to note the positive trends as well. Thus, at the beginning of 2017 in the Republic, the number of self-employed who are infor‐ mally employed for the most part, amounted to 2.2 million people. At the same time, the employment rate of the informally employed population in the Republic of Kazakh‐ stan has decreased by 20% for 2016 (Ratel.kz. 2017). The rate of unemployment in Kazakhstan in 2016 amounted to 5%. The total number of unemployed men is 200.3 thousand people or 44.8%; the total number of unemployed women is 247.1 thousand people or 55.2%. The percentage of young people at the age of 15–24 y.o. in the total number of unemployed citizens amounted to 10.2%, while the percentage of young people at the age of 15–28 y.o. in the total number of unemployed citizens amounted to 21.4% respectively. In the Republic of Kazakhstan in 2016, the proportion of people employed in harmful and (or) hazardous working conditions amounted to 22.0% of the total number of employed people. Almost 77 thousand people (4.6% of all employed) were dealing with rough labor. The most signiﬁcant number of employees of the industry sector – 630 thousand people, employees of the manufacturing sector - 290 thousand people - worked in conditions which do not comply with sanitation

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and hygiene standards. In general by the sectors of the national economy, the total number of men employed in harmful working conditions exceeded the total number of unemployed women by 3.1 times. However, in such sectors as public health service and social services, the opposite situation was observed - the total number of women employed in hazardous working conditions exceeded the total number of men employed in hazardous working conditions by 3.8 times. The largest total number of employees employed in hazardous working conditions can be observed in the following regions of Kazakhstan: Karaganda region (40%), Pavlodar region (39.8%), Mangystau region (39.5%), East Kazakhstan Province (26.2)%, Jambyl Province (24.2)%. (Committee on Statistics of the Ministry of National Economy of the Republic of Kazakhstan, Ratel.kz. 2017). A signiﬁcant problem of labor market of Kazakhstan is the problem of gender-based inequality. Women feel outright gender-based discrimination despite the fact that the structures of the Kazakhstan society built with due account to the gender-based approach are free from systemic barriers to enable full-ﬂedged women’s economic and social participation. The professions are still divided into “male” and “female”. Traditionally, the professions of a teacher, a nurse, even a doctor, requiring a lot of knowledge, skills and qualiﬁcations, are considered to be “female”. These professions are characterized by a high signiﬁcance in society. However, the level of remuneration of labor of repre‐ sentatives of these professions is extremely low (Nuketaeva 2014). The late payment of salary is not uncommon as well. Another important problem that characterizes the processes of precarization of the population of Kazakhstan is the integration of repatriated immigrants (ethnic Kazakhs) into the Kazakhstan society1. Most oralmans settled in the southern regions due to the similar traditions and mentality (64.9% reside in South Kazakhstan Province, Almaty region, Mangystau region). Repatriated families experience diﬃculties with employ‐ ment, housing, etc. because of insuﬃcient knowledge of the Kazakh language, mono‐ national communication, low qualiﬁcation, etc. The children of oralmans experience ethnic and cultural problems. The problem of precarization of employment involves the population of monotowns which are home to 16.8% of the urban population. The loss of work leads to the loss of identity, development of mistrust, fatigue, indiﬀerence, depression, and fear in the unemployed. According to the Kazakh authors, the problem of monotowns is not a problem of a particular region, but the issue of existence of Kazakhstan as a civilized state (Alzhanova 2015). In Kazakhstan, there are certain forms of social support of certain population groups, such as oralmans, youth, residents of monotowns, etc. At the same time, precarization as a global problem related to the transition of the international economy to postindustrial development and a new technological mode still remains a pressing problem in the Republic of Kazakhstan.

1

Oralmans are ethnic repatriated Kazakhs who migrate to Kazakhstan from neighboring coun‐ tries (Uzbekistan, China, Mongolia, Turkmenistan, Russia, Kyrgyzstan) and a number of other Asian countries (Iran, Afghanistan, Pakistan, etc.).

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The prevalence of social and labor precarization processes in Russia and Kazakhstan generally corresponds to global trends despite certain cultural diﬀerences. The social research aimed at investigating employment relations and their dynamic pattern in organizations, which was conducted by its authors in 2017, conﬁrms the validity of this conclusion. The ﬁndings of the research showed that the proportion of permanent employees in the total number of respondents (by perpetual agreements) amounted to about 44%; 43% of them concluded ﬁxed-term employment agreements. About 4.5% of respondents have no formal status of salaried employee (work without the conclusion of any written agreement); in such circumstances, the employer actually waives respon‐ sibility for ensuring proper working conditions and observance of the rights guaranteed by labor law. 60% of respondents in Saratov region of Russia claimed that remuneration of labor is transferred in full (100%) to the bank account. However, one fourth of interviewed employees noted that the proportion of shadow payments constitutes more than a half of their salary. 6.6% of respondents claimed that their salary is paid as “envelope salary”; 8.5% of respondents claimed that the most part of their salary is transferred to the bank card, while the other part is handed out in circumvention of the oﬃcial payment channels. In addition, the conducted research showed that the proportion of shadow payments correlates to the form of ownership of an organization, sectoral aﬃliation, enterprise size. As the survey showed, the employees who work at large and state enterprises enter the high-risk area. The majority of respondents (66.7%) gave a negative answer to the question about the breach of agreements by the employer. Only one respondent to the survey in four claimed that there were violations. 54.8% of respondents noted that recently a typical breach of agreements consisted in a groundless cut in salary and an increase of the amount of work without salary increase; 14.9% of interviewed respondents claimed the facts of neglect to pay extra remuneration for overtime work, while 4.3% of respondents reported the late payment of salary; 2.9% of respondents noted that they did not receive the deserved leaves; about 2% of respondents faced arbitrary dismissal. Relying on the ﬁndings of the research concerning the sources of anxiety and nega‐ tive feelings at the current workplace, it can be noted that the majority of employees more than 63% of employees, consider the high level of stress at the workplace and too high intensity of work as the main negative characteristics of their work; 21.5% - absence or poor interaction with the manager; 15.6% of respondents pointed at uncomfortable working conditions and irregular working hours. Such a distribution of estimates indi‐ cates the intensiﬁcation of employees in the present context, their vulnerability in labor area, leading to the emergence of a sense of precarization and economic insecurity on the individual and personal level.

4

Discussion

The conducted social research showed signiﬁcant diﬀerences in the responses of respondents to the questions of questionnaire in Russia and Kazakhstan. Thus, in the Republic of Kazakhstan all respondents to the survey stated that they receive salary to

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their bank account (bank card) (in Russia - only 60% among interviewed respondents). In addition to the above, it should be noted that all the interviewed respondents in Kazakhstan are employed in private enterprises. The term of the employment agreement is a signiﬁcant diﬀerence as well. If the indeﬁnite term employment agreement usually prevails with the Russian employees, then the Kazakh employees currently conclude the employment agreement for 1 year, and, more rarely, – for 0.5 years. Attention is also drawn to a higher level of competition among colleagues at Kazakh enterprises as compared to Russia and fear of losing their job as a result. This fact is stated by 32% of the Kazakh respondents compared with 14% of the Russian respond‐ ents. If the Russian respondents more often (66.7% of respondents state that there were no breach of agreement by the employers, then the Kazakh respondents stated that such breach was available in 63.5% of cases. These breaches in the vast majority of cases include arbitrary dismissal – 55.5%. Besides, the Kazakh respondents (99% of respondents) are forced to take some actions in order to retain their workplace much more often than the Russian respondents (52%). According to them, such actions include the need to work overtime (involuntarily and without remuneration of labor) - 10%; the need to work overtime (involuntarily but for an extra remuneration) - 31.5%; the need to fulﬁll assignments not included in the job description – 26.5%; the need to improve qualiﬁcation at one’s own expense - 15%; the need to carry out impartial orders of the line management - 9%; the need to take part in unfair competition among colleagues - 7.5% of interviewed respondents. The results of the conducted social research in Russia (Saratov region) showed much higher level of paternalism in the organizations which is manifested in the signiﬁcant inﬂuence of informal institutions2. Thus, the Russians in the majority of cases (65.2%) note that there was no breach of agreements by the management, even when working on conditions of informal employment. The Russian respondents feel more strongly about the lack of prospects of profes‐ sional growth (15.2%) as compared to the Kazakh respondents – 1.5%. Serious discrepancies can also be observed in the answers to the question concerning changes in the personnel policy of the organization over the past year. We can observe signiﬁcant response dispersion with the Russian participants: a mechanical reduction in the number of employees – 24.8%, regular reduction in the number of employees every 3–6 months - 26.2%, hiring new employees for a short period only (1 to 6 months) – 6.2%, etc., the response option “Hiring new employees for a short period only (1 to 6 months)” prevails with the Kazakh respondents. This question was answered by 53% of respondents from Kazakhstan.

2

Paternalism as an element of the mindset of the population has been preserved since the Soviet times when the socialist state cared for its citizens like a “caring father.”

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Conclusions

As can be seen from the above, the prevalence of social precarization processes in Russia and Kazakhstan, in spite of certain cultural diﬀerences, generally corresponds to global trends. Precarization of the population as a global problem related to the transition of the international economy to postindustrial development and a new technological mode, is exacerbated in both countries by the transition from the planned economy to the market economy, and the destruction of the institutional framework which was formed in the past. At the same time, the comparative analysis showed a slightly lower intensity of the precarization processes in Kazakhstan compared to Russia - the proportion of infor‐ mally employed tends to decrease, the rate of unemployment of youth is lower; the percentage of employees whose working conditions are characterized by heaviness and health hazard (22.0% in Kazakhstan (Ratel.kz 2017) and 38.5% in Russia (Federal State Statistics Service 2017) in 2016) is lower as well. The presence of a signiﬁcant number of approaches to determination and measure‐ ment of precarization of employment is representative of topicality, complexity and ambiguousness of this phenomenon. In this regard, a pressing problem consists in the identiﬁcation of social groups of population, characterized by the features of social precarization and the development of measures for their social support, the equalization of social conditions in various regions of the country, securing the eﬀectiveness of the means of social mobility. The problems of taking into account the speciﬁcs of the implementation of national strategies and determining the emphases in socio-economic policy, the development of national decent work programs, the achievement of social equity and “inclusive growth” assume great importance.

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Dzhumambaev, S.: Precarization of employment as a real-world problem in the context of the entry of Kazakhstan into the list of 30 highly developed states of the world. In: Foundation for Support of the Education Initiatives. Proceedings of the Central Asian Scientiﬁc Conference “New Opportunities for Schools”, Bishkek (2006) Eurostat (2017). http://ec.europa.eu/eurostat/tgm/refreshTableAction.do?tab=table&plugin=1 &pcode=tps00159&language=en Federal State Statistics Service (2017). http://www.gks.ru/wps/wcm/connect/rosstat_main/ rosstat/ru/statistics/publications/catalog/doc_113508734 Federal State Statistics Service (2016). http://www.gks.ru/free_doc/doc_2016/rab_sila16.pdf Fedorova, A.E., Katashinckikh, V.S., Dvorzhakova, Z.: Precarization of employment relations as a factor of social pollution. Ekonomika Regiona (Economy of the Region), vol. 12, issue 3, pp. 802–814 (2016) Ferreri, M. Dawson G., Vasudevan, A.: Living precariously: property guardianship and the ﬂexible city. Transactions of Institute of British Geographers, vol. 42, issue 2, June, pp. 246– 259 (2017) Kolosova, R.P., Razumova, T.O.: Precarization of employment: introduction to analysis. Alternatives to economic policy in the context of slowdown in economic growth: Collection of articles/ Under the editorship of A.A. Auzan, V.V. Gerasimenko. - M.: Faculty of Economics, Moscow State University named after M.V. Lomonosov, 2015, pp. 559–569 (2015) Committee on Statistics of the Ministry of National Economy of the Republic of Kazakhstan (2016). http://www.stat.gov.kz/faces/homePage/homeDinamika.pokazateli Ministry of Labor Employment and Migration of Saratov region. Oﬃcial website (2017). http:// www.mintrud.saratov.gov.ru/analytical/employment/index.php?SECTION_ID=95 Nuketaeva, D.: Policy and Equality. Gender Relations in the Republic of Kazakhstan. In: Argumenty i Fakty Kazakhstan (Arguments and Facts Kazakhstan), No. 50, p. 24 (2014) Ricceri, M.: Social Precarization and Sustained Development. Reﬂections about dangerous contradictions. Uroven Zhizhi Naseleniya Regionov Rossii (Living Standards of the Population by the Regions of Russia), 2015, No. 1, pp. 3–37 (2015) Rossiya v Tsyfrakh 2017 (Russia in Figures 2017): Brief statistical compendium, Russian Statistics Committee, Moscow: 110 (2017) Ratel.kz. (2017) Analytical web portal. http://www.ratel.kz Standing, G.: The precariat. The new dangerous class. Ad Marginem Press Publishing House, Moscow (2014) Shkaratan, O.I., Karacharovskiy, V.V., Gasiukova, E.N.: Precariat: theory and empirical analysis (based on survey data obtained in Russia, 1994–2013). Sotsiologicheskie Issledovaniya (Social Research), 2015, N 5, pp. 99–110 (2015) Toshchenko, Zh.T.: Precariat – a New Phenomenon in the Labor Market. In: Yadov Readings: The Prospects of Social Science. A Collection of Contribution Reports at the Symposium. Moscow, 2016, pp. 182–191 (2016) Van Den Berg, M., O’Neill, B.: Introduction: Rethinking the class politics of boredom (Editorial). Focaal, vol. 17, issue 78, pp. 1–8 (2017) Zimina, T.: Employee Ownership and Structural Transformation. Ekonomist (The Economist), 2017, No. 5, pp. 83–87 (2016) Katkova, M.A., Mityaeva, N.V., Pchelintseva, I.N., Sankova, L.V., Yanchenko, E.V.: Exaptation of Institutes of development and formation of Institutional traps in the Russian Labor market. Contributions to Economics, pp. 229–235 (2017)

Strategic Alternatives of Regional Intellectual Capital Management Yuri N. Lapygin(&) and Pavel Y. Makarov Russian Presidential Academy of National Economy and Public Administration, Vladimir Branch, Vladimir, Russia [email protected], [email protected]

Abstract. In view of the increasing importance of intellectual capital as a factor of economic growth, it becomes topical the developing methods of managing it on the regional level. The purpose of this study is to develop a practical approach to identifying strategic alternatives for managing the region’s intellectual capital (RIC). To achieve the stated goal, an analysis of the papers on managing the intellectual capital of the region from the positions of the system approach was made, a hypothesis on the essence of management of the region’s intellectual capital was formed, and a framework for selecting strategic alternatives for its management was elaborated with subsequent empirical study of the obtained model on the data on Vladimir Region - the federal subject of Russia. Based on the results of the study, the deﬁnition of the region’s intellectual capital management strategy is proposed to be viewed from the position of ﬁnding a balance between the development of individual RIC elements and the balanced development of all elements in its structure. Proceeding from this, three strategic alternatives for the RIC management are proposed: specialization, integration and adjustment. The proposed set of strategies and the way they are deﬁned can be used as a methodological basis for implementing the RIC management by public authorities and regional administrations. Keywords: Intellectual capital Strategic alternatives Region Human capital Management methodology Generic strategies

1 Introduction One of the modern economy characteristics is the increasing role of intangible components in created production. It concerns not only high-tech productions; realization of common goods and services also quite dependent from intellectual resources of an organization: image, reputation, brand, competences etc. Increasing of intellectual resources’ importance in separate organizations leads to a similar growth of their importance in regional development. As a result, raises the role of regional systems, which are generating, transferring and using of knowledge. In this regard, studying of regional intellectual capital (RIC) management issues becomes rather topical. © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 528–536, 2019. https://doi.org/10.1007/978-3-030-00102-5_55

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The key problem constraining the development of this line of research at the moment, in our view, is the contradiction between analytical papers that justify the requirements for the management of intellectual capital and the poor development of methodological support for this process. One of the ﬁrst steps in solving this problem is the elaboration of strategic management issues, in particular, the deﬁnition of strategies for managing RIC, as well as the signiﬁcance of the purpose of the paper.

2 Theoretical Basis When speaking about the essence of RIC as an object of management, we may assert there is no such an object as “intellectual capital” in the form of a homogeneous resource. According to Andriessen [2] the term itself can be considered a metaphor to label a system of resources combined according to their intangibility. Thus, we share Kozyrev’s and many other authors’ view, who called them non-material or intangible, because the absence of tangible or material substance is their deﬁning attribute [6]. By the virtue of its heterogeneity, it is an accepted practice to identify different elements in RIC’s structure. On a basis of the understanding suggested earlier, we may conclude that in terms of its composition, intellectual capital is a system, the particular structure of which largely depends on the approach adopted by authors using this concept. Certainly, it is possible to clearly deﬁne some elements in intellectual capital composition that have objective essential differences as, for instance, this is done by Roos, Pike and Fernstroem [3] in the ternary structure of intellectual capital, including such elements as human, structural and relational capital. Nonetheless, in practice other concepts are often used as well. For example, the renewal capital proposed by Bontis et al. [3, 4], which essentially is a part of a structural capital, but allows to study the RIC economic reproduction more clearly. Another example is the knowledge capital, proposed by Johansson et al. [5] which described the same as the human capital in ternary model, but allows avoiding the confusion between the term of human capital as a part of intellectual capital and as the human capital concept itself. Stam noted [13] that from its very emergence the concept of intellectual capital implied the dynamic system. That is proved by a number of empirical studies: according to Edvinsson and Yeh-Yun Lin [4] part of intellectual capital elements have a short-term impact on economic growth, others exert long-term impact; Stahle an Bonfour [11] reveal that depending on the level of economic development various elements of intellectual capital produce various effects on economic growth. As a result, the understanding of dynamics of intellectual capital should be regarded as the fundamental aspect of its management. Thus, we understand intellectual capital not only as a logical superstructure over the human capital and other elements, but according to Tatarkin [14] as “a system of relations”, reflecting the dynamics and synergy of their interaction, because in fact, any observed initiative concerning the human capital of a region inevitably concerns other pointed elements, and this fact allows stating the presence of an objective connection between them that is ﬁnally embraced by the concept of intellectual capital.

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We agree with Shikina that intellectual capital management could be deﬁned as “fulﬁllment of some functions targeted at rational formation, use and development of intellectual resources” [10], we may state that the objective of intellectual capital management is to adjust it in a way it would correspond to the needs of regional socioeconomic system by activating the processes of intellectual capital formation. This approach is consistent with the global trends in the theory of intellectual capital management, reflected in the works of Viedma, Stahle and other authors [9, 12, 15] and practice-oriented recommendations on the management of intellectual capital of the regions [1].

3 Methodology Based on the above, the research hypothesis prosed as follows: effective RIC management is that it is in accordance with the needs of the regional socio-economic system. This hypothesis is due to the heterogeneity and dynamism of RIC. Heterogeneity and dynamic nature of intellectual capital allow supposing that it is not its simple presence that is important, but the presence of intellectual capital in particular state, which is optimal for the system possessing it. This allows us to elaborate two opposite trajectories of RIC development: (1) to achieve maximum efﬁciency the structure of intellectual capital should be in accordance with the development logic of its region and with the speciﬁcs of regional economy; (2) as a region is a complex socio-economic system there are no “unnecessary” elements, so regional development should be balanced, and it is impossible to refuse development of any regional intellectual capital elements. Thus, we can speak of a continuum of the regional intellectual capital possible states between the specialization (concentration of efforts on development of intellectual capital core elements), and the integration (balanced development with focus on overall balance and synergy of the intellectual capital structure). The initial ordering of this continuum can be carried out in terms of the system balance: examining the intellectual capital of the region at a time, we get information on its structure at a given moment and then on this basis it is possible to conclude about the way of its further development. So there is one more possible speciﬁc state of intellectual capital besides the mentioned above: it can be unbalanced, which means the situation when the condition of some of intellectual capital elements makes it difﬁcult or impossible to impact on other elements (e.g., insufﬁcient development of the structural capital hinders the possibility of human capital realization and as a consequence there is its outflow to other regions).

Strategic Alternatives of Regional Intellectual Capital Management Balanced

Critical imbalance (when intellectual capital management is almost impossible due to imbalance of its Imbalanced structure

Integration (Balanced development)

531

Specialization (Concentration of efforts)

Low specialization of regional economy

High specialization of regional economy Adjustment (achievement of a balance)

Fig. 1. Framework of intellectual capital development strategic alternatives

Thereby, proceeding from described position, a theoretical framework could be deﬁned (Fig. 1). This allows to derive three strategic alternatives of RIC development: (1) Adjustment or Achievement of a balance – when the structure of the IC is unbalanced, it is possible to speak about elimination of these disproportions as the priority direction of development; (2) Specialization or Concentration of efforts – prior development of IC elements connected with key sectors of regional economy and oriented on formation of distinctive features; (3) Integration or Balanced development – creation of the region’s competitive advantage on basis of synergetic effect of development of all IC elements. Thus, we have formed a framework that allows us to identify strategic alternatives to the development of RIC. In the next section, we will consider the practical application of this approach.

4 Empirical Study Practical implementation of the elaborated set of alternatives includes the following procedures: (1) identifying and detailing the RIC structure; (2) assessment of RIC actual condition; (3) selection of strategic alternative of RIC management. Further we describe it in more detail. For descriptive reasons, each procedure will be considered on the example of one Russian Federation territorial subject (federal subjects of Russia) – the Vladimir region. This region could be considered as the typical region which has high scientiﬁc potential and poorly developed of ways of its transformation to innovations.

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1. The identiﬁcation of intellectual capital structure Based on the results of the analysis, expert poll and comparison with the common RIC models, the following elements of Vladimir region IC were identiﬁed (for convenience, the elements are structured according to the previously mentioned RIC structure proposed by Roos). As a part of the human capital two elements were described. First, it is the population level of education being one of key factors of innovative processes development and competitiveness of region’s economy (further – HC 1 “Education”). For this research this category was taken in consideration in relation to a whole population, without decomposition. The second element of the regional human capital is social wellbeing under which are considered such characteristic as availability of work and equity of the income distribution (HC-2 “Social wellbeing”). The structural capital was decomposed on three subcomponents. First of all, it is two elements which characterize conditions of human capital realization: effectiveness of public authorities (SC-1 “Effectiveness of authorities”) and opportunities of information spread (SC-2 “Spread of information”). The third structural capital component is the scientiﬁc capacity of the region as knowledge creation system (SC-3 “The scientiﬁc potential”). Three components were identiﬁed as part of relational capital. It is possible to refer investment attractiveness of a region which, on the one hand, in many respects depends on the elements listed above, and with another – itself is a signiﬁcant factor of development of innovations, providing ﬁnancing inflow to perspective projects (RC-1 “Investment attractiveness”). Important element of the regions external relations is the condition of export (RC-2 “Export potential”) as a ratio of its international competitiveness that is especially actual, considering industrial character of the Vladimir region economy (it is characterized by a high share (about 30%) of industrial productions in GRP, by such indicator the region takes the 8th place among the Russian Federation territorial subjects). Besides, the Vladimir region is one of the main regions of a tourist route “Golden Ring”; in this regard, we can consider use of its tourist potential as an element of the relational capital (RC-3 “Use of tourist potential”). Due to non-additive nature of intellectual capital, it is necessary to consider mutual influence of its elements. On the basis of an influence assessment it is possible to tell about restrictions at impact on the intellectual capital (e.g., efforts on development of one element can be broken by an unsatisfactory condition of another). Within this paper, mutual influence is assessed by ﬁlling the matrix of cause-effect relationships, using the scale recommended for similar operations in “Wissensbilanz” methodology used by Nagel and Mauch [7], giving range from 0 points (the element has no impact) to 2 points (the element has strong impact). For convenience the matrix was cleared of less signiﬁcant influences based on Pareto principle: since the smallest, 24 elements were removed, the general which share of influence made 14.9% (Table 1). 2. Assessment of Vladimir region’s intellectual capital condition The set of the indicators applied to an assessment is deﬁned proceeding from structure of RIC. As indicators can have different scales, their transformation to a

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Table 1. Assessment of intellectual capital structure (non-signiﬁcant elements which aren’t used in calculations are marked grey). HC-1 HC-2 SC-1 SC-2 SC-3 RC-1 RC-2 RC-3 R1 R1/R2* %** Power** HC-1 1,5 1,5 1 2 1,5 1 0,5 8,5 1,31 21,2 27,7 HC-2 1,1 0,9 1 1,5 1 0 0,8 4,6 1,21 11,5 13,9 SC-1 1 1,2 1,3 1 1,2 0,8 0,3 5,7 1,54 14,2 21,9 SC-2 1,4 0 1,2 1 1,5 0 1 6,1 1,13 15,2 17,2 SC-3 1,5 0,9 1 1 1,7 1,1 0 6,3 0,91 15,7 14,3 RC-1 1,5 0,9 0 1,1 1,4 1 1,8 6,8 0,99 17,0 16,7 RC-2 0 1,1 0 0 0 0,6 0 1,1 0,27 2,7 0,7 RC-3 0 0,8 0 0 0 0,5 1 1 0,36 2,5 0,9 R2 6,5 3,8 3,7 5,4 6,9 6,9 4,1 2,8 40,1 100 * An assessment of element independence (if coefﬁcient more than one, the element has stronger impact, than got itself). ** For receiving a total assessment, independence is multiplied by a share of an element influence in total amount of influences.

comparable form is necessary. For that purpose the method of linear scaling applied which usually applied to calculation of such indicators as HDI (form. 1–2). At direct link of an estimated element with an indicator

IIC ¼

At inverse link of an estimated element with an indicator IIC ¼

X Xi Xmin Xmax Xmin

ð1Þ

X Xmax Xi ð2Þ Xmax Xmin

where: IIC – index of an intellectual capital element; Xj – the actual value of the indicator describing i-th element of the index; Xmin and Xmax – the minimum and maximum values of the indicator describing i-th element; i – quantity of indicators. Within this paper the following interpretation of an index is accepted: 0 – the worst value of an indicator in comparison with other Russian Federation territorial subjects when such comparison is possible (education level, etc.); in cases when direct comparison is impossible, represents the insigniﬁcant value of an indicator; 1 – when direct comparison is possible, represents the maximum value on selection, in other cases reflects a target reference point of regional development (proceeding from regional strategy statement and development projects). Table 2 contains the results of RIC assessment based on data for 2015. 3. Choosing a strategic alterative of RIC management To deﬁne the generic strategy, we will consider the map of the regional intellectual capital on which are compared the estimates of its elements and the level of their mutual influence (Fig. 2). For deﬁnition of priorities in development of the regional intellectual capital we will consider in more detail this system of coordinates.

534

Y. N. Lapygin and P. Y. Makarov Table 2. Assessment of intellectual capital condition, 2015.

Element

Indicator

HC-1 HC-2

Share of population with higher education,% Income inequality, times (income of 10% most over 10% least wealthy population) Unemployment rate, % Efﬁciency of executive authorities activity, index Index of use of ICT for development Share of researchers in employees, % Costs of research and development, GRP % Patent applications, on 10000 people of the population Investment per capita, one thousand rubles Foreign investments per capita, thousand dollars Export per capita, thousand dollars The number of the persons placed in hotels, thousand people

SC-1 SC-2 SC-3

RC-1

RC-2 RC-3

30

3. Develop HC-1

Value 2015 26,5 10,9

Min 25 9,3

Max 34 15,5

Index 0,17 0,60

5,6 0,64

4 0,55

7 0,75

0,45

0,496 0,98 4,33 1,86

0,37 0 0 0

0,53 2 14 3

0,79 0,47

94,0 12,6

0 0

116 400

0,42

0,47 624

0 0

3 1000

0,16 0,62

4. Sustain

25

SC-1

20

SC-2

RC-1 SC-3

15

HC-2

10 5 0 0.00

1. Analyze

RC-3

RC-2 0.20

0.40

0.60

2. No special action

0.80

1.00

Fig. 2. The map of Vladimir region’s intellectual capital, 2015.

Its ﬁrst quadrant is characterized by low estimate of condition and weak impact of elements on intellectual capital system. The element in this quadrant is RC-2. The low estimate of this element’s power is in accordance with their contents – they appear to be under the influence of other factors and reflect a condition of proceeding processes. Any special additional measures for its development, anyway, will consist in the

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solution of initial problems. Technically, SC-3 is also in this quadrant, despite that we consider it in third quadrant, due to its role in innovation system. The second quadrant of indicators is characterized by good condition and a low power. Here we ﬁnd HC-2 and RC-3. Concerning this group it is possible to tell that development of its elements doesn’t demand special actions as at low level of influence and a positive condition elements show that functioning of system proceeds normally, and, as well as elements of the previous group, depend on more influential factors. The third quadrant is characterized by high level of power and a low estimate of a condition. On our map three elements get to these intervals: HC-1, SK-1, OK-1 and SC-3. High level of influence is combined with poor condition turns them into a factor constraining development of other elements. So this quadrant seems to be the point of main attention. The last quadrant is characterized by high rates both of power and condition/There is only one element here – SC-2. It needs less attention to development which, in case of need, can be limited to sustaining activity. As a result, we can conclude, that the condition of the intellectual capital of Vladimir region characterized as unbalanced, due to the negative deviation of three important elements. In this regard the Adjustment strategy could be recommended.

5 Conclusions Thus, we generated a list of strategic alternatives of RIC development and proposed the methods of their choice. The limitation of conducted study is that proposed alternatives, as well as all generic strategies require speciﬁcation and can hardly be applied in a pure form. For example, the implementation of specialization strategy should take into account the need for balanced development of the region, which leads to using elements of integration strategy. Furthermore, the possible intersection of strategies depending on the time-term perspective should be taken into account: e.g. as a part of long-term policy of balanced development of intellectual capital is not excluded the short-term concentration of efforts on its particular components which become growth poles for the others. In conclusion is necessary to note the empirical studies on cases of larger number of regions as an area of further research. Summarizing, we can conclude that proposed strategic alternatives framework provide tools to consider alternatives of the regional intellectual capital development. As such, they are the basis for further study in this ﬁeld, and for practical strategy development of the intellectual capital of the region.

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References 1. Alwert, K., Bornemann, M., Kivikas, M.: Leitfaden für eine Wissensbilanz. AWVInformationen, no. 6, pp. 10–13 (2004) 2. Andriessen, D.: On the metaphorical nature of intellectual capital: a textual analysis. In: The 4th International Critical Management Studies Conference Judge Institute of Management, University of Cambridge, 4–6 July 2005 3. Bontis, N.: National intellectual capital index: a united nations initiative for the arab region. J. Intell. Capital, no. 1 (2004) 4. Garina, E.P., Kuznetsov, V.P., Romanovskaya, E.V., Lapaev, D.N., Yashin, S.N.: Formation of the production system elements and R&D product development processes in the early stages of the project. J. Appl. Econ. Sci. 12(2(48)). 538–542 (2017) 5. Johansson, B. et al.: Intellectual Capital Report for the Kista Cluster. http://edoc.difu.de/ edoc.php?id=MCY2U54P 6. Kozyrev, A.N.: Ekonomika intellektual’nogo kapitala [Economics of intellectual capital]. Nauchnye doklady [Scientiﬁc reports] No. 7(R)–2006. SPb.: NII menedzhmenta SPbGU [Research Institute of Management, St. Petersburg State University] (2006) 7. Kuznetsova, S.N., Garina, E.P., Kuznetsov, V.P., Romanovskaya, E.V., Andryashina, N.S.: Industrial parks formation as a tool for development of long-range manufacturing sectors. J. Appl. Econ. Sci. 12(2(48)), 391–401 (2017) 8. Mizikovsky, I.E., Bazhenov, A.A., Garin, A.P., Kuznetsova, S.N., Artemeva, M.V.: Basic accounting and planning aspects of the calculation of intra-factory turnover of returnable waste. Int. J. Econ. Perspect. 10(4) (2016) 9. Roos, G., Pike, S., Fernstroem, L.: Managing Intellectual Capital in Practice. ButterworthHeinemann, Oxford (2005) 10. Schiuma, G., Lerro, A.: Knowledge-based dynamics of regional development: the intellectual capital innovation capacity model. Int. J. Knowl.-Based Dev. 1, 39–52 (2010) 11. Shikina, N.I.: Strategii upravleniya intellektual’nymi resursami dlya povysheniya konkurentosposobnosti natsional’noy ekonomiki [Strategies for Managing Intellectual Resources to Enhance the Competitiveness of the National Economy]. Povolzhskiy torgovoekonomicheskiy zhurnal [Povolzhsky Trade and Economic Journal.] 4(38) (2014) 12. Stahle, P., Bonfour, A.: Understanding Dynamics of Intellectual Capital of Nations. http:// www.stahle.ﬁ/Stahle_Bounfour_JIC_Final.pdf 13. Ståhle, P., Ståhle, S., Lin, C.: Intangibles and national economic wealth – a new perspective on how they are linked. J. Intell. Capital. 16(1), 20–57 (2015) 14. Stam, C.D.: Ideas and things: understanding the dynamic dimension of intellectual capital. In: The 2nd European Conference on Intellectual Capital, 29–30 March 2010, Lisbon, Portugal (2010) 15. Tatarkin, A.I.: Intellektual’nyy resurs obshchestva i ego rol’ v vosproizvodstvennom protsesse [Intellectual resource of society and its role in the reproduction process]. Ekonomika regiona [Economy of the region] No. 3 (2010) 16. Viedma, J.M.: In search of an intellectual capital comprehensive theory. Electron. J. Knowl. Manage. 5(2), 245–256 (2007)

Possibilities of Import Substitution in the Russian Pharmaceutical Market O. S. Peskova ✉ , T. B. Boriskina, O. V. Urova, and A. V. Fetisov (

)

Volgograd State Technical University, Volgograd, Russia [email protected]

Abstract. The article investigates the possibilities of import substitution in the Russian pharmaceutical market, the problems of the reaction of the Russian phar‐ maceutical industry to foreign sanctions foreign pharmaceutical ﬁrms. Recently, the Russian government’s policy is aimed at the development of its own economy, domestic production that entails new challenges and, at the same time, the pros‐ pects of development of the domestic pharmaceutical industry. Keywords: Pharmaceutical market · Socio-economic development Licensing authorities · Pharmaceutical industry · Pharmaceutical industry Pharmaceutical cluster · Generics

1

Introduction

Development of pharmaceutical industry is capable to solve eﬀectively considerable part of needs of the population for provision of medicines. Pharmaceutical branch in social and economic sector of the Russian Federation is the weakest link. And it is several reasons for that. And the ﬁrst problem which slows down development of branch is a high dependence on imports. It is obvious that if within toughening of the anti-Russian sanctions the western countries block supply channels of drugs, the Russian pharma‐ ceutical market is threatened if by not a full collapse, then very big problems. To deﬁne the reasons of current situation, it is necessary to pay attention on historical heritages of the Russian pharmaceutical industry. In inheritance from the USSR we have got strong pharmacological branch with the developed scientiﬁc and practical base, but for years of reorganization it has managed to degrade: critical wear of ﬁxed assets, their moral obsolescence and insuﬃcient ﬁnancing of researches have led to decrease in competitiveness of domestic preparations and have considerably reduced their share in the market.

2

Pharmaceutical Market

Now the pharmaceutical market of the Russian Federation is included into ten the largest pharmaceutical markets of the world in value terms on absolute measures [3]. The modern pharmaceutical market of Russia is one of the largest markets in the world, taking the 7th place on sales volume in absolute expression, and the considerable part © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 537–544, 2019. https://doi.org/10.1007/978-3-030-00102-5_56

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of sales is provided by production of foreign producers [5]. According to the licensing bodies, currently in the country 560 producers of the HP having the federal license function; 187 enterprises have regional licenses. According to the international stand‐ ards, degree of concentration of pharmaceutical industry in Russia is still exclusively small. Average proﬁtability of pharmaceutical production — about 17%, degree of wears of ﬁxed assets — 60%, utilization of capacity — 78%. 65.1 thousand people are engaged at them. The volume of the Russian pharmaceutical market in 2014 is estimated at 919 billion rubles in the ﬁnal prices (+12% in comparison with 2013, +69% in comparison with 2009), from them 47.3% are the share of the list of vital and essential drugs for 2014 approved by the order of the Government of the Russian Federation of December 7, 2011 No. 2199-r. The output of the Russian medicines in 2014 has made 185 billion rubles (+2.4% by 2013, +93% by 2009) in the prices of the corresponding years. Against growth of the market the share of domestic medicines in the total amount of the market has grown in 2009 up to 24.3% (132 billion rubles) and in 2014 up to 25.2% (231 billion rubles). Share of medicines of a domestic production in government procurement in terms of money in 2014 amounts to 23.7% [2].

3

The Development of the Domestic Pharmaceutical Market

Recently the policy of the Russian government was developed facing a domestic production, and it is of great importance. Of course, it is good, but it is unknown, what is the time it is required till that day when our pharmaceutical industry is able inde‐ pendently to close needs for medicines. In May, 2014 the president of Russia, the leader of ONF Vladimir Putin at the St. Petersburg International Economic Forum has designated need to return domestic market to domestic producer and to liquidate critical dependence on import, the corre‐ sponding instructions have been given to the government. In Russia, for the next decade, a favorable environment for development of the pharmaceutical market is created. During 2015–2020, according to the existing concept of long-term social and economic development of the Russian Federation, the volume of the public expenditures of branch of health care will annually increase. One of the most critical moments in development of the pharmaceutical market is development of the industry. To production of pharmaceutical production it is shown special require‐ ments which number has included scientiﬁc and technical base and level of scientiﬁc developments in pharmacy and medical equipment. In 2009 have decided to rescue a situation and developments of pharmaceutical industry of the Russian Federation till 2020 have developed governmental “Strategy”. Nearly 178 million rubles, and, as envi‐ sioned by authors are allocated for the program, in ﬁve years the share of production of a domestic production on the Russian pharmaceutical market has to grow to 50% (in value terms). For 2015 the government refers the following to the main objectives of development of pharmaceutical industry:

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– Increase in a share of medicines of a domestic production according to the nomen‐ clature of the list of VED to 67% and strategically signiﬁcant medicines and the list of vital and essential drugs. – Ensuring purchase of medicines according to the list of VED of mainly Russian production by adoption of the draft of the resolution of the government of the Russian Federation “About establishment of restrictions for the admission of the medicines coming from the foreign states at implementation of purchases for ensuring the state and municipal needs”. – Implementation of the resolution of the government of the Russian Federation of February 5, 2015 No. 102 “About establishment of restriction of the admission of separate types of the medical products coming from the foreign states for implemen‐ tation of purchases for ensuring the state and municipal needs”. – Development of an order of deﬁnition of a stage of technological process of produc‐ tion of medicines, and also an order of issue of the conclusions about extent of local‐ ization (The Federal law of December 22, 2014 No. 429-FZ “About modiﬁcation of the Federal law “About the address of medicines”) for the purpose of granting to producers with diﬀerent degree of depth of technological process of the diﬀerentiated scale. There is a wish to allocate the main directions of implementation of the tasks espe‐ cially as they form the factors deﬁning on development of a pharmaceutical industry: 1. High scientiﬁcally – technical base and level of own developments in the ﬁeld of pharmacy and medical equipment and also existence of innovative production and hi-tech production equipment in branch. After the adoption of strategy of development of pharmaceutical industry of the Russian Federation for the period till 2020 in various subjects of the Russian Federation pharmaceutical clusters which represent “group of companies of developers, producers, suppliers of the equipment, the research centers, higher educational institutions, science and technology parks, business incubators and other companies which work in adjacent ﬁelds of activity began to be formed actively and are capable to increase competitive advantages of a cluster in general” [2]. In 2010 in the pharmaceutical market of Russia the new concept “pharmaceutical cluster” has appeared. According to strategy “FARMA-2020”, a pharmaceutical cluster — group of geographically localized inter‐ connected innovative ﬁrms — developers of drugs, production companies, suppliers of the equipment, accessories, specialized services, infrastructure facilities: the research institutes, higher education institutions, science and technology parks, business incu‐ bators and other organizations supplementing each other and increasing competitive advantages of the separate companies and a cluster in general. A distinctive sign of eﬀectively operating clusters is an exit of innovative production. Creation of pharma‐ ceutical clusters — one of tasks for achievement of the objectives of “FARMA-2020” especially as the format of clusters has been approved by the president. And local authorities have hurried to report on formation of similar conglomerates. Oﬃcially announced such plans in Volgograd, Moscow, Rostov, Novosibirsk, Samara, Sver‐ dlovsk, Tomsk and, and also in Stavropol Krai, St. Petersburg, in the Urals and in Altai Krai, the republic of Tatarstan [6].

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Among leaders there are also pharmaceutical clusters in the Yaroslavl and Kaluga areas and in Moscow area. For the last several years the Russian and foreign companies have invested in creation of the latest productions in the territory of the country more than 100 billion rubles. The plants in Russia were constructed by such world giants as “Bayer”, “Takeda”, “Novartis”, “Berlin-Chemie”, “Nycomed”, “AstraZeneca”, “Teva”. As a result Russia has received all key production technologies of medicines of both the synthetic and biotechnological nature. One more pharmaceutical cluster (Novouralsk) specializes in biopharmaceutics. It is scientiﬁc and technological park of a full cycle of production – from idea to a proprietary medicine. Exactly here synthesize insulin which is cheaper than import analogs. The ﬁrst Russian analog of insulin can be available for sale in 2016. In April of this year the preparation has arrived on registration of the Ministry of Health for obtaining permission to clinical tests. In Novouralsk, production of antibiotics on the German technologies is also localized and production of domestic antiviral preparations is arranged. The regional authorities assure that the areas of scientiﬁc and technological park will be completely occupied soon by new residents who will sate the market with new qualitative domestic drugs. In May, 2014 opening of new production of inﬂuenza vaccines of a full cycle on the basis of the St. Petersburg scientiﬁc research institute of vaccines and serums of FMBA of Russia in St. Petersburg has taken place. The project has been realized at strategic coop‐ eration with Federal State Unitary Enterprise NPO Mikrogen. In April, 2014 in the Russian Federation the preparation of rituximab in domestic production, developed with assistance of Minpromtorg of Russia in 2010–2012 is registered. within action “Organ‐ ization of trial production of substances and medicines on the basis of the monoclonal antibodies necessary for release of expensive import-substituting preparations of JSC BIOCAD of the State program”. “… important it isn’t simple to develop domestic generics and hi-tech bio-analogues, but, ﬁrst of all, to create innovative preparations that the Russian patients ﬁrst-ever got access to drugs of new generation for reasonable price,” according to Dmitry Morozov, the CEO of biotechnological corporation BIOCAD [1]. The state investments into development of technology and the organization of production with were put by 285 million rubles. In total from the moment of the state registration of a preparation about 130 thousand packings of the developed preparation for the total amount of 5.5 billion rubles, the main part is associated with government procurement, the economy of budgetary funds from purchase of a domestic preparation only in 2014 has exceeded the volume of the state investments into development of a preparation. In October, 2014 medicine nonacog alpha (a recombinant factor of ﬁbrillation of IX) developed within action “Creation of the modern biotechnological center “Generium” of the State program is registered. Following the results of realization of action of CJSC Generium became the producer of a full cycle of three main medicines for treatment of various forms of hemophilia: recombinant factors of ﬁbrillation of VII, VIII and IX. The state program “Development of the pharmaceutical and medical industry” for 2013-2020 has allowed creating competitive and more available analogs of foreign preparations in such areas as oncology, immunology and neurology. There were new production and technological competences: monoclonal antibodies (JSC BIOCAD),

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insulin and their analogs (LLC Gerofarm-bio), cytokine and factors of growth (JSC BIOCAD), recombinant factors of fibrillation (CJSC Generium), recombinant enzymes (CJSC Generium), recombinant vaccines (federal state unitary enterprise NPO Mikrogen, Federal State Unitary Enterprise St. Petersburg Research Institute of Vaccines and Serums and Enterprise for Production of Bacterial Drugs of FMBA of Russia, Federal State Unitary Enterprise The Enterprise for Production the Bakter‐ iynykh and Virus Preparations of Institute of Poliomyelitis and Viral Encephalitis of M.P. Chumakov of the Russian Academy of Medical Science), the recombinant proteins received in E. Coli (competence from Soviet period — JSC BIOCAD, CJSC Generium and other companies). According to analytical agencies, the total amount of private investments into phar‐ maceutical branch during implementation of the Program has exceeded 120 billion rubles. For comparison: the volume of the state investments has made 39 billion rubles. During implementation of the state program more than 30 domestic companies have been modernized, more than 50 billion rubles in creation of new productions are attracted. For example, the LLC Geropharm-bio Company has realized the project on construc‐ tion of plant on production of insulin on a full cycle in the Moscow region. In the Ryazan region the biopharmaceutical plant of the LLC Fort company is open (500 new work‐ places are created, 4.5 billion rubles are attracted). In the Kirov region at the end of 2014 opening of innovative industrial complex of the LLC Nanolec Company has taken place. CJSC R-Farm has realized the project on construction of pharmaceutical industrial complex in Yaroslavl. LLC Infamed (The Kaliningrad Region) has invested more than 1 billion rubles in production of anti-septic tanks, including the unique domestic preparation “Miramistin”. In June, 2014 opening of the new production case of the St. Petersburg scientiﬁc research institute of vaccines and serums of the Russian Ministry of Health in the Lenin‐ grad region has taken place. The LLC NTFF Polisang Company invested 2.5 billion rubles in construction and start of the second turn of producing infusion in St. Petersburg. The Medsintez plant has opened a site on production of preparations of insulin. JSC Rafarma (Lipetsk Region) has ﬁnished construction of the industrial complex including several lines of production of diﬀerent dosage forms with a total cost of the project over 3 billion rubles of JSC Biosintez (Penza) ﬁnishes reconstruction of the case with several ampoule and infusion lines. Construction in the Kaluga region of pharmaceutical plant in the territory of scientiﬁc and technological park of “Grabtsevo” of LLC NovaMedica is carried out. The program promoted increase in investments into branch both from domestic producers, and from the foreign companies. Now such companies as Merck Serono, Johnson&Johnson, Boehringer Ingelheim, Pﬁzer, Abbvie, Amgen, have reported about cooperation with the Russian companies in the sphere of localization of own production on the platform of the domestic compa‐ nies. Novartis, Teva, Novo Nordisk, Sanoﬁ, Nycomed, LLC KRKA RUS, Gedeon Richter, Servier, STADA CIS, CJSC Berlin-Farma (Menarini Group subsidiary), Ferring Pharmaceuticals invested in creation of own productions in the territory of the Russian Federation. The Abbott Company has acquired 100% of shares of the Russian

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company JSC Verofarm and realizes the project on construction of a new production site in. Cover (Vladimir Region). 1. Transition to the GMP standards The main problem in pharmaceutical industry connected with restructuring by modernization of pharmaceutical industry according to the international standards. One of key problems of branch in the context of import substitution remains also transition to the GMP standards which became obligatory since January 1, 2014. But still phar‐ maceutical enterprises have an opportunity to ignore this requirement. As the statistics shows, only 10% of the domestic enterprises have completely passed to the GMP stand‐ ards, 40% of the enterprises are aﬀected by system of ensuring quality, separate produc‐ tion sites work on GMP. In 2014 only 28 companies have obtained licenses, having conﬁrmed compliance of the production GMP. Thus, now only 80% of production in terms of money and 67% in natural conform to the standard. However rate of checks of the enterprises is inadequate to objectives on import substitution and in the present mode can drag on for several years. Today production of the enterprises which haven’t conﬁrmed compliance of GMP competes in the market with the preparations made on GMP. In prime cost of the last huge ﬁnancial means are put. But as a result of GMP, being the rule “not for all”, gives to the enterprise only PR eﬀect. The unfair producer remains in the market, is unproﬁtable to make investments in modernization, and the patient has no the guaranteed choice from drugs of appropriate quality. 2. Production of own substances Since 1996 when in the pharmaceutical market of the Russian Federation there was a tendency to increase in a share of OTC medicines and reduction of a share of prescrip‐ tion medicines. At that time this ratio made 50:50 [www.businesstat.ru]. In such situation for many enterprises there was only exit: to cease to operate own capacities for produc‐ tion of substances and to replace them with production of the ﬁnished pharmaceutical products (FPP). According to some information, today to 3/4 Russian productions of GLS uses the substances made abroad in the production. The Russian enterprises are practically in complete raw dependence from import. Full import substitution of drugs is impossible without development of production of pharmaceutical substances. Most less currency jumps have aﬀected the plants working at the Russian raw materials, it was simplest to them to keep the pre-crisis prices. But needs of a pharmaceutical market of Russia for substances only for 15-20% are provided with internal raw materials. It is caused by high costs of their production and low competitiveness in comparison with the main suppliers of pharmaceutical products - India and China. Nevertheless, a number of the Russian producers have already arranged production of substances; however, it closes requirements only of the separate enterprises and for very limited number of names. About production of substances in full for needs of branch as it was in the Soviet years, the speech doesn’t go yet. By 2020 when the pharmaceutical industry will begin to work in large quantities at domestic raw materials, deﬁnition of criteria of domestic producer will become inevitable. In “Strategy of development of pharmaceutical industry of the Russian Federation till 2020 to this date in Russia is planned production of such volume of pharmaceutical substances which will be able to provide release of a

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half of ready dosage forms (besides in terms of money) will be arranged, including it isn’t less than 85% of drugs from the list vital. 3. Optimization of a government procurement system of medicines According to new conditions since the beginning of 2016 foreign suppliers won’t be able to participate in purchasing auctions for provision of medicines of exempts and medical institutions if two and more suppliers of the drugs made in the territory of EEU apply for the tender. At the same time those who only pack proprietary medicines on the Russian productions (namely in such form in Russia the majority of plants of foreign pharmaceutical companies works) will be expelled from system of state procurements and will be able to sell the products only in retail networks. Producers of a full cycle will receive price preferences. And, of course, these restrictions won’t concern the patented preparations which analogs in Russia aren’t present. So far the import share in the total amount of medicinal state procurements makes about 85%. It is worth expecting that to some extent it, of course, will be reduced; however, there is one essential nuance: according to new rules any productions of a full cycle located in our territory fall under deﬁnition “domestic producer”. The largest foreign companies working in Russia already have managed to be prepared for the future changes, having adjusted full cycles of production of drugs at the plants. And it will grant him full authority to be considered “domestic” at tender auctions and, respectively, to receive all those preferences which rely completely our productions. All these problems are only insigniﬁcant part of tasks which the state should solve if it is interested in creation of a full-ﬂedged pharmaceutical industry and ensuring medicinal safety of the country. Despite numerous diﬃculties, in general for four with small years of action of this program the output of medicines in Russia has increased twice Today will precipitately speak about full import substitution in pharmaceutics. Certainly, it is necessary to accelerate all processes, to realize this idea, but time when we can refuse preparations of import production completely hasn’t come yet. It needs to be accepted as a reality. The last years at us in the country have appeared a pharma‐ ceutical industry, making competitive production.

References 1. Morozov, D.B.: www.forbes.ru/taxonomy/term/1467 2. Report on the purposes and tasks of the Ministry of Industry and Trade of Russia for 2015. http://minpromtorg.gov.ru 3. Ilyin, D.: Import substitution in pharmaceutical sphere. Domestic manufacturers place new productions of medicines and their components. http://moscowtorgi.ru 4. Import substitution as a possibility for modernization of pharmaceutical sphere. http:// www.epochtimes.ru/importozameshhenie-kak-vozmozhnost-modernizatsiifarmatsevticheskoj-otrasli-98989975/ 5. Export opinion on import substitution in pharmaceutical and medical spheres. http:// sojuzpharma.ru/newsid/novosti/Mnenie-ekspertov-ob-importozameshenii-v-farmatcevticheskoj

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6. Shabelsky, V.S.: The strategy of development of pharmaceutical market of the RF [Text]. 20, pp. 429–433 (2014) 7. Peskova, O.S., Boriskina T.B.: State regulation of entrepreneurial activities in the markets of socially important goods and services in modern Russia. Int. Bus. Manage. 10, 6410–6415. https://doi.org/10.3923/ибм.2016.6410.6415. http://medwelljournals.com/abstract/?doi=ibm. 2016.6410.6415

Peculiarities of Protecting the Rights of Participants of Financial Markets in Court Galina E. Ageeva ✉ , Petr P. Lang, Andrei V. Loshkarev, Tatiana V. Chugurova, and Ekaterina N. Churakova (

)

Samara State University of Economics, Samara, Russia [email protected], [email protected], [email protected], [email protected], [email protected]

Abstract. The authors study peculiar features for protection of rights in ﬁnancial market by court of law. The authors highlight an importance of immediate response to arising disagreements in ﬁnancial legal relations and the necessity for an appropriate reaction to them. Financial markets are designated a wide veriety of areas for circulation and distribution of economic goods between the entities. The article pays attention to points of current reform for procedural legislation, which so-termed in academic community as a “procedural revolution”. Taking into account that the purpose of law is to ensure an economic basis performance as well, the authors thoroughly analyzed a case law in the Russian Federation system of commercial and general courts on legal status of crypto currency and its use. In this regard, oﬃcial standpoints of the highest bodies of state authorities are announced and some categories of cases under study are provided. The authors expressed their own opinions about high risk in virtual currency circulation: both from the point of possible loss of funds, and diﬃculties with futher judicial protection of infracted interests. Scientiﬁc research also touched upon such notion elaborated by regulatory enforcement as a “consumer extremism”: an issue is revealed, solutions are oﬀered. The authors also gave opinions that to ensure free free market performance and proper protection of their participants’ rights, today it is very important to raise ﬁnancial and legal literacy of citizens in our country. Keywords: Financial market · Consumers of ﬁnancial services Judicial protection · Case law · Legal proceedings JEL Classiﬁcation Codes: G 19 · K 40 · K 41 · K 42 · K 49

1

Introduction

Financial system, as well as ﬁnancial markets, are currently unstable. They so to speak are between two scales of balance, on the one hand, it’s a steady, harmonious develop‐ ment, and on the other hand, it’s a possible collapse as a result of recent global ﬁnancial and economic crisis. “The Russian experience of crisis managing had shown an importance of fast deci‐ sion-making on ﬁnancial-system stabilization and provision of additional liquidity to ﬁnancial market participants” (Popkova L.A. Rights protection of ﬁnancial market © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 545–552, 2019. https://doi.org/10.1007/978-3-030-00102-5_57

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participants as a new function of the Bank of Russia, 2014). It is essential not only to establish supplementary mechanisms for ﬁnancial market performance and to engage new entities in its activity. In such circumstances, stating scientiﬁcally-developed pecu‐ liarities for rights protection of ﬁnancial market participants, whether natural persons or legal entities, by court of law is extremely meaningful and urgent. The study of noted peculiarities may provide an eﬀective fulﬁllment of ﬁnancial market functions in general. Proceeding from this takeaway, we should immediately invoke a reservation that ﬁnancial market is a very extensive, various-content term, which moreover, character‐ istically exhibit a suﬃcient classiﬁcation diversity. Generally, it can be deﬁned as a system of relationships in regards to the circulation of funds (credit, currency, insurance, investment, security markets, etc.). It’s a kind of concept for ﬁnancial resources redis‐ tribution between diﬀerent entities by certain rules. In terms of present study on peculiar features for protection of rights in ﬁnancial market by court of law, we will review general rules without going into the substantive diﬀerences in the area where economic beneﬁts are circulated. Nowadays, the Russian Federation is undergoing transformations in the administra‐ tion of law, which will change greatly the judicial procedure for rights protection of ﬁnancial market participants. Legal sphere researchers even called suggested transfor‐ mations a “procedural revolution” (Procedural revolution: Plenary session of the Supreme Court initiates to alter Commercial Procedure Code and Civil Procedure Code, 2018). In this article we will focus on the main guidelines of the reform. Discussing ﬁnancial markets and their participants, it is necessary to mention one substantive aspect. Financial market is a complex, broad, diverse-contented term. Finan‐ cial market structure is constantly changing due to an introduction of new kinds of ﬁnancial relationships. For example, the Russian Federation Central Bank (hereinafter referred to as the Bank of Russia) stresses that “the number of enquiries of ﬁnancial market participants and the mass media about crypto currencies, which have become widespread in the world, has increased dramatically” (Data of the Russian Federation Central Bank as of September 4, 2017 “On use of private virtual currency (crypto currency)”). It’s worthwhile noting that the Russian Federation’s crypto currency is not legalized, the Bank of Russia calls it “quasi cash” (Data of the Russian Federation Central Bank as of January 27, 2014 “On use of virtual currencies, in particular bitcoins, during transactions), which is banned in our country. “The Bank of Russia warns that provision by Russian legal entities of services involving exchange of “virtual currency” for rubles and foreign currency, as well as for goods (works, services) will be deemed as potential involvement in dubious operations according to the legislation on AntiMoney Laundering and Counter-Terrorism” (Data of the Russian Federation Central Bank as of January 27, 2014 “On use of “virtual currency”, in particular “bitcoins”). In addition, the Central Bank, deliberately stressing high risks, “reckons early an admission of crypto currency, as well as any ﬁnancial instruments nominated or associated with it, to circulation and use in on-exchange trading and in settlement and clearing infrastruc‐ ture at the territory of the Russian Federation for crypto-currency transaction services and derivatives on them “(Data of the Russian Federation Central Bank as of September 4, 2017 “On use of private “virtual currency (crypto currency)”). Despite these oﬃcial

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explanations of ﬁnancial market mediaregulator, case law related to the turnover of such funds is picking up stream. In terms of this study we will focus on its most signiﬁcant aspects. Studying peculiar features for protection of rights in ﬁnancial market, we also shoild estimate available measures to maintain a balance between ensuring consumer’s rights in ﬁnancial area and preventing abuses. Such attention is justiﬁed by the fact that many ﬁnancial markets are regulated by consumer legislation. Due to granting them more extensive rights, we observe a phenomenon of “consumer extremism” in regulatory enforcement.

2

Methodology

For development of methodological background of this study we employed a compre‐ hensive approach consisting in a simultaneous knowledge of legal considerations with use of several methods. General scientiﬁc methods, like dialectical and method of system cognition, were fundamental. Synergetics was an important constituent of these approaches. In terms of this study it should be stressed an importance of comparative law method, which enabled analyzing the peculiarities of rights protection for participants of various ﬁnancial markets. After that, on the basis of analysis and synthesis, induction and deduction, general scientiﬁc dialectical methods and methods of systematic cognition, we managed to word general peculiarities.

3

Results

Reasoning about judicial procedure for rights protection of ﬁnancial market participants, you ought to clearly understand the features of judicial protection and the basic rules of legal proceedings. Constitution of the Russian Federation (Constitution of the Russian Federation: adopted by national vote on December 12, 1993) precisely enumerates four types of legal proceedings exercised in our country: constitutional, administrative, civil and criminal. Rights protection of ﬁnancial market participants is carried out mainly in the last three forms. Presently, the Supreme Court of the Russian Federation (hereinafter referred to as SC RF) is initiating a global reform, the so-called “procedural” revolution: an abolition of subject-matter jurisdiction, withdrawal from an obligatory declaration in the main categories of cases, expansion of simpliﬁed legal proceedings, provision of “profes‐ sional development” to judicial representatives, etc. Besides, for years has been existing a trend to uniform a procedural legislation. We oﬀer to ﬁx upon the most essential aspects that are important for rights protection of ﬁnancial market participants. Should any dispute arising for review and resolution by court of law, conﬂicting entities primarily determine its jurisdiction or, in other words, the subject matter of the competent authority. There are some rules to designate the type of courts that will be “in charge” of a particular case. However, generally speaking, jurisdiction is deﬁned as follows: if legal relations, where the dispute arises, are related to entrepreneurial or other

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economic activity, and participants are legal entities or entrepreneurs without incorpo‐ ration, then the dispute will be resolved in a commercial court system. If relationships weren’t aimed at systematic proﬁt-making, then the case would be reviewed by general courts. By constitutional law of our country referring a review of dispute to jurisdiction of a court is called court jurisdiction (Clause 47). “Unfortunately, developers of procedural codes did not approve the idea of the Russian Federation Constitution that an issue of case distribution of between courts is a matter of court jurisdiction” (Sultanov “Disputes on lack of subject-matter jurisdiction, 2007”), having ﬁxed the category “subject matter jurisdiction”. Such arrangements have occurred with term “court jurisdiction”. In addition, a rule was established to prohibit disputes over court jurisdiction (Clause 33 of the Russian Federation Civil Procedure Code (Civil Procedure Code of the Russian Federation as of November 14 2002 No. 138-FZ) (hereinafter – CPC RF)). However, this rule is not applicable if there are disputes between general and commercial courts. Wherefore, should judicial errors occur in the form of initiation of proceedings in a case beyond the jurisdiction, an illegal act will be adopted, which can be subsequently cancelled on an unconditional basis. Thus, “uncertainty in determination of a competent court or error of claim submission may lead to irreversible consequences and the loss of possible restoration of violated rights” (Sultanov An issue of judicial acts passed with violation of court and subject-matter jurisdiction, 2010). In connection with above said, we believe that legislative initiative to remove the term of subject matter jurisdiction from procedural legislation keeping court jurisdiction, will be a positive vector of regulatory enforcement. Although not many in the legal science are of the same opinion. Some researchers express concerns that current issues of court jurisdiction will be completely forgotten after removal of subject-matter juris‐ diction (Meshcheryakova and Sizov Topical issues of referring cases to subject-matter jurisdiction and court one of commercial courts, 2016). As for granting right to the courts of both primary jurisdiction and ones of appeal to make a declaration of judicial act only in some categories of cases and in certain circum‐ stances, then this trend of procedural reform seems hardly positive. So, in opinion by some authors, an implementation of this legislative initiative is, at pointed remark by Sultanov, a “step forward and two backward or farewell justice” (Sultanov Step forward and two backward or farewell justice, 2018). In Russia, for years we has observed a trend to uniform a procedural legislation. We would like to note an ambiguous attitude to similar transformations: on the one hand, common goals, tasks and functions of the judicial authorities alllows forging general rules of legal regulation. And on the other hand, the legislator often blindly copies the rules of one procedural regulatory legal act and apply them to adjacent one. We need a more balanced approach. The modern ﬁnancial system does not stand still, the market structure is of constant update. Recently, crypto currency has been actively promoted around the world as a kind of virtual money. For example, in the USA Initial Coin Oﬀering, which is under‐ stood as a form of attracting investments from natural persons, involving the release and further implementation of newly issued crypto-currencies, was set to IPO (Initial Public

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Oﬀering) - the ﬁrst oﬃcial placement of such shares as ordinary ones (Precedent: in the USA investments involving crypto-currency are set to IPO, 2018). In the Russian Federation, crypto currency is not legalized, not recognized as a ﬁnancial instrument, and even considered as evidence of crime commission (Appellate Ruling of Sverdlovsk District Court as of August 14, 2017, Appellate Ruling of Sver‐ dlovsk District Court as of November 8, 2017 and others). The Bank of Russia has repeatedly warned that the participation of Russian legal entities in ﬁnancial transactions related to the payment of works, services provided with crypto currency, is deemed a suspected involvement in illegal activities (Data of the Russian Federation Central Bank as of January 27, 2014 On use of “virtual currency”, in particular “bitcoins”, during transactions). An anonymous nature of all transactions related to the circulation of virtual money and an absence of body or institution controlling their issue and further transactions induces, ﬁrstly, lack of trust on the part of state (high chance that in a similar way “legalization (laundering) of money acquired by criminal means is carried out” (Data report of the Federal Service for Financial Monitoring “On use of crypto currency”, 2014). For example, in St. Petersburg the prosecutor appealed to the court for protection of general public interests due to banning data of bitcoins on the Internet, because it’s not a monetary unit (Appellate ruling of St. Petersburg municipal Court as of February 13, 2017) And secondly, the consequence is a deliberate refusal of state authorities to protect the rights of ﬁnancial market participants deceived in purchase/sale of virtual currency. For example, general courts don’t recover amounts by way of indemnity for unjustiﬁed enrichment when subjects transferred them to other parties voluntarily, in execution of non-existing liabilities, for participation in online projects (Appellate ruling of Samara district Court as of January 15, 2014; Appellate ruling of St. Petersburg municipal Court as of April 28, 2016; Appellate ruling of St. Petersburg municipal Court as of August 18, 2015). General courts decline to support virtual currency buyers, as far as public authorities of our country repeatedly stressed high risks of participation in such ﬁnancial markets. In commercial courts we can also observe ignoring crypto currency in the domestic ﬁnancial system. It is more than not legalized, it can not be an object of civil rights. Thus, with regard to one case, the judge of Moscow Municipal Commercial Court published a detailed declaration on understanding of crypto currency, peculiarities of naming crypto wallet, the rules for issuing digital money, etc. After that, the judge denied the debtor a crypto currency inclusion in bankruptcy assets, because it’s not an object of civil rights, moreover, “it’s outside the Russian Federation law”. In addition, execu‐ tion of crypto currency transactions is not legally enforceable by state” (Ruling of Moscow Commercial Court as of March 5, 2018). Whereas, the cost of crypto currency referred to was substantial. Unless the ﬁnancial market is between two scales of balance, in the area under study we can observe two more sides of necessary balance, which are also extremely impor‐ tant. The point is that relations in the ﬁnancial markets under consideration and resolu‐ tion of any legal conﬂict or dispute over the law may be regulated by Law “On Protection of Consumer’s Rights” (Law of the Russian Federation “On Protection of Consumer’s Rights” as of February 7, 1992 No. 2300-1). Unfortunately, above said is not universally

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recognized for all types of ﬁnancial markets. Thus, “an issue of applying legislation on consumer’s right protection to the relationships of pension contract parties is contro‐ versial and of signiﬁcant practical importance” (Konkov Legislative execution on consumer right protection in relationships of pension contract parties, 2016). If we discuss a social aspect, it is important to note that “for example, half of Russians believe that their rights as consumers of ﬁnancial services are not protected” (Imaeva Consumer right protection in ﬁnancial area: sociologic aspect, 2012). Several times, this aspect attracted attention of the highest bodies of state authorities of the Russian Federation. Pursuant to the Government Resolution approved the strategy for raising ﬁnancial literacy (Resolution of the Russian Federation Government as of September 25, 2017, No. 2039-p “On Approval of Financial Literacy Strategy in the Russian Federation for 2017-2023”), rights protection of ﬁnancial market participants is of consumer protection area. In this context, we would like to especially stress that issues of ﬁnancial and legal literacy are one of the most complicated and urgent for ensuring both free market performance and due right protection of their participants. SC RF in the Review of case law related to consumer right protection in ﬁnancial area (Review of case law related to consumer right protection in ﬁnancial area, 2017) touched upon regulatory enforcement arising from a wide variety of ﬁnancial relation‐ ships. In opinion of SC RF, “area of ﬁnancial services rendered by banks and other institutions at present characteristically exhibit, on the one hand, a growing number of services to the population, and on the other hand, risks associated, in particular, with misconduct of ﬁnancial market participants”. In order to duly protect their rights and legitimate interests, subjects should refer to legislation on consumer protection. Moreover, “administrative liability of companies providing ﬁnancial services, under Part 2 Clause 14.8 of Administrative Oﬀenses Code of the Russian Federation, for inclusion in credit contracts (loan agreements) of terms that prejudice consumer’s rights in comparison with the rules established by legislation in consumer protection area, was recognized lawful” (p. 19 of mentioned Review). Above said again emphasizes the tool for regulation of relations, which participants are consumers of ﬁnancial services. In a similar situation, it should be mentioned that, on the one hand, it’s meaningful to ensure the guarantee of rights protection and their free execution, and on the other hand, an inadmissibility of abusive practice of opportunities provided by current enact‐ ments. The current legislation gave a priority to consumer interests. With regard to his less protected status in relationships of goods distribution, the law is aimed at granting him a wider scope of rights, wider than one for entity delivering goods or services. Unfortunately, scientiﬁc research and regulatory enforcement brief produced a concept missing in current legislation, such as a “consumer extremism” (Consumer extremism: myth or reality? 2018). “International experts recognize the Russian law on consumer rights as one of the most humane in the world. But on the one hand, it protects the rights of innocent purchaser, and on the other hand, it gives freedom to whom use the principle “consumer is always right” in self- interest” (Consumer extremism: myth or reality? 2018).

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Conclusions/Recommendations

Summarizing all above mentioned in this study, we would like to note particularly the following points: ﬁrstly, should any dispute arising in right enforcement of ﬁnancial market participants, an immediate resolution in competent bodies is prioritized. Secondly, due to an introduction of virtual currency in ﬁnancial markets, the so-called “crypto-currency”, it is important to estimate the peculiarities of its circulation. Providing an anonymous nature of transactions, high risk of trust abuse, rights protection issues, as well as non-legalization of crypto-currency in the Russian ﬁnancial market, it is better to withold such transactions for ﬁnancial market entities. Thirdly, in regulatory enforcement there is an urgent need of reforming the legisla‐ tion on consumer protection to reduce possible abuse of consumer’s rights in ﬁnancial market.

References Constitution of the Russian Federation: adopted by national vote on December 12, 1993 (with regard to amendments introduced by the Russian Federation laws on amendments to the Russian Federation Constitution as of December 30, 2008 No. 6-ФКЗ, as of December 30, 2008 No. 7-ФКЗ). Collection of the Russian Federation acts. 2009. No 4. Clause 445 Civil Procedure Code of the Russian Federation as of November 14, 2002 No. 138-FZ (as amended on 07.03.2018). Collection of the Russian Federation acts 2002. No. 46. Clause 4532; 2018. No. 11. Clause. 1583 Law of the Russian Federation “On Protection of Consumer’s Rights” as of February 7, 1992 No. 2300-1 (as amended on 01.05.2017). Gazette of the Congress of People’s Deputies of the Russian Federation and the Supreme Soviet of the Russian Federation 1992. No. 15. Clause 766; Collection of the Russian Federation acts. 2017. No. 18. Clause 2665 Resolution of the Russian Federation Government as of September 25, 2017, No. 2039-p “On Approval of Financial Literacy Strategy in the Russian Federation for 2017–2023. Collection of the Russian Federation acts. 2017. No. 40. Clause 5894 Data of the Russian Federation Central Bank as of September 4, 2017 On use of private virtual currencies (crypto currency). Computer-assisted legal research system ConsultantPlus Data of the Russian Federation Central Bank as of January 27, 2014 On use of virtual currency, in particular bitcoins, during transactions. Computer-assisted legal research system ConsultantPlus Review of case law related to consumer right protection in ﬁnancial area (approved by Presidium of the Russian Federation Supreme Court on September 27, 2017). Bulletin (Gazette) of Russian Banks Association. 2017. No. 16 Appellate ruling of Samara district court as of January15, 2014 to the case No. 33–587/ 2014. The paper was not published. Accessed from: Computer-assisted legal research system ConsultantPlus Appellate ruling of St. Petersburg municipal court as of February 13, 2017 to the case No. 33– 2537/2017. The paper was not published. Accessed from: Computer-assisted legal research system ConsultantPlus Appellate ruling of St. Petersburg muicipal court as of August 18, 2015 to the case No. 33-8156. The paper was not published. Accessed from: Computer-assisted legal research system ConsultantPlus

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Appellate ruling of St. Petersburg municipal court as of April 28, 2016 to the case No. 33-6385/2016. The paper was not published. Accessed from: Computer-assisted legal research system ConsultantPlus Appellate ruling of Sverdlovsk district court as of August 14, 2017. The paper was not published. Accessed from: Computer-assisted legal research system ConsultantPlus Appellate ruling of Sverdlovsk district court as of November 8, 2017. The paper was not published. Accessed from: Computer-assisted legal research system ConsultantPlus Ruling of Moscow commercial court as of March 5, 2018 to the case No. A40-124668/17-71-160 Ф Data report of the Federal Service for Financial Monitoring “On use of crypto currency”, 2014 [Electronic resource]. http://fedsfm.ru/. Accessed 26 Mar 2018 Imaeva, G.R.: Consumer’s rights protection in ﬁnancial area: sociologic aspect. Banking law. No. 6. p. 42 (2012) Kon’kov, K.A.: Legislative execution on consumer’s rights protection in relationships of pension contract parties. Lawyer. No. 20. p. 17 (2016) Meshcheryakova, A.F., Sizov, V.A.: Topical issues of referring cases to subject matter jurisdiction and court one of commercial courts. News of higher education institutions. Povolzhskii region. Social Sciences. 2016. No. 1 (37). 106–108 Popkova, L.A.: Rights protection of ﬁnancial market participants as a new function of the Bank of Russia. Lawyer. 2014. No. 2, p. 61–62 Consumer extremism: myth or reality? [Electronic resource]. 24.RosPotrebNadzor.ru/center/ zashita/. Accessed 26 Mar 2018 Precedent: in the USA investments involving crypto-currency are set to IPO [Electronic resource]. https://digital.report/pretsedent-v-ssha-investitsii-s-privlecheniem-kriptovalyut-priravnenyik-ipo/. Accessed 26 Mar 2018 Procedural revolution: plenary session of the Supreme Court initiates altering Commercial Procedure Code and Civil Procedure Code. [Electronic resource]. https://pravo.ru/ court_report/view/144824/. Accessed 26 Mar 2018 Sultanov, A.R.: Disputes on lack of subject matter jurisdiction. Civil legal proceedings in changing Russia: International research and practice conference. (14–15 September 2007). In: Doctor of Law (higher doctorate), prof. Isaenkova, O.V. (ed.), p. 233. “Science Book” Publishing House, Saratov (2007) Sultanov, A.R.: An issue of judicial acts passed with disregard to court and subject matter jurisdiction. Vestnik of the Federal Arbitration Court of the North Caucasus District, No 1. 2010. No 1. pp. 140–153 2010 Sultanov, A.R.: Step forward and two backward or farewell justice. Vestnik of civil and commercial procedure, No. 1, p. 315 (2018)

On the Compliance of Civil Standards of the Russian Federation with International Standards in the Field of the Fight Against Corruption Dmitry A. Lipinsky1 ✉ , Victoria V. Bolgova2, and Aleksandra A. Musatkina1 (

)

1 Tolyatti State University, Tolyatti, Russia [email protected], [email protected] 2 Samara State University of Economics, Samara, Russia [email protected]

Abstract. The goal of research is to analyze the civil standards of Russia aimed at ﬁghting corruption and based on the rather-legal analysis with the standards of international law, as well as similar standards of various countries, and to draw conclusion regarding their compliance with international standards in the ﬁeld of the ﬁght against corruption. As for the methods – rather-legal, technical, dialectic and historical legal methods were used in the course of research. The subject matter of this paper is the emphasis of social danger of corruption, its compre‐ hensive nature and the need for the ﬁght with the use of comprehensive means. The authors analyze the standards formalized in the Civil Law Convention on Corruption of the Council of Europe, legislative practices in the ﬁght against corruption by means of civil remedies in foreign countries. The civil standards of Russia are compared with the standards of international law and the civil legis‐ lation of other countries. Conclusions – the non-compliance of the civil standards of Russia with the modern international practices in the ﬁght against corruption has been substantiated. Recommendations aimed at improving the measures of the ﬁght against corruption are provided. Keywords: Corruption · International law · Civil law · International conventions Corruption oﬀences · Civil responsibility · Types of corruption oﬀences

1

Introduction

Corruption is a comprehensive phenomenon. It is stipulated by the economical, political, пpaвoвыми пpoцeccaми, the existing crisis in spirituality. The global ﬁnancial crisis has a signiﬁcant impact on the formation and development of corrupt practices, too. Moreover, we can talk about the dialectical connection of these phenomena. Corruption intensiﬁes the consequences of the global ﬁnancial crisis, aﬀects the investment attrac‐ tiveness of countries and macroregions. Singapore is a perfect example of this; it has now turned into the ﬁnancial and trade center of the whole Southeast Asia, but at the moment when independence was gained in the middle of the last century, it ranked among the top states of the world community in terms of the level of corruption, and currently it ranks among the top states with the lowest level of corruption. © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 553–562, 2019. https://doi.org/10.1007/978-3-030-00102-5_58

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One may talk of the system relation between corruption and organized crime; they reproduce each other, creating a kind of a vicious “circle”. This “circle” can only be broken with the use of comprehensive legal, organizational, economical, political and ethical measures that will be implemented at the national and interstate levels. Moreover, within each of these groups of measures, there must be an own microsystem associated with the system elements of another group of anti-corruption measures. In other words, negative consistency should be confronted by positive consistency. The act of corruption can violate the norms of several branches of law at once and harm the whole system of social relations. Corruption “corrodes” the state mechanism, negatively aﬀects the authority of the State. A high level of corruption in a particular country is a risk factor in the decision-making by the World Bank, the International Monetary Fund (IMF) concerning entering into transactions and provision of credits. Corruption pushes scares away foreign investors and causes the outﬂow of capital from the country. Ultimately, corrupt practices of state and municipal employees lead to an impoverishment of the country’s population; they hinder the enforcement of rights and freedoms of a person and citizen. The eﬀorts of scientists from many countries of the world in various scientiﬁc specialties and ﬁelds [1–5] are aimed at researching corruption and developing measures to prevent it, since the ﬁght against it requires a complex approach. The study into the feasibility of application of civil penalties to ﬁght corruption currently requires special attention. An opinion prevails in civil law theory according to which this branch is of a regulatory nature, refers to private law, its main method of legal regulation is dispositive, and it is aimed at the realization of property and related personal non-property rights and freedoms, and, therefore, least of all it is associated with the prevention of oﬀenses that do harm to the whole society, and not of an individual person [6]. Article 1 of the Civil Code of the Russian Federation largely contributes to such understanding of the essence of civil law, as it speciﬁes the tasks, functions and princi‐ ples of civil regulation, originally not pursuing the objectives of repressive inﬂuence on the subject, focusing on the restoration of stable civil commerce. However, part one of the Civil Code of the Russian Federation was developed and adopted in the early nineties of the last century, in the period when, against the euphoric backdrop of democratic reforms in Russia, the issue of the comprehensive ﬁght against corruption was not raised, and its impact on the development of economic relations was not assessed. Over the past seventeen years of the twenty-ﬁrst century, the economic and political realities have changed signiﬁcantly; the processes of globalization and integration in various ﬁelds are actively under way. Corruption has changed as well; its high level indicates the need for comprehensive measures to prevent it. It is becoming apparent that anti-corruption criminal law measures are clearly insuﬃcient. The need for the comprehensive ﬁght against corruption was realized by the world community as well. It is noteworthy that even before the adoption of the UN Convention Against Corruption in Europe in 2003, the regional conventions were signed: Council of Europe Criminal Law Convention on Corruption dated January 27, 1999; Civil Law Convention on Corruption dated November 4, 1999. A short period of time between the adoptions of these documents is a reﬂection of the fact that the problem is identiﬁed as signiﬁcant and requiring comprehensive eﬀorts to solve it.

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It is noteworthy that the Preamble of the Civil Law Convention on Corruption indi‐ cates that it is adopted due to the fact of understanding of the harmful ﬁnancial conse‐ quences of corruption for individuals, companies and states, as well as international institutions. It is particularly emphasized that the member states of the Council of Europe, other states and the European Union “are sure of the signiﬁcance of contribution of civil law into the ﬁght against corruption, in particular, allowing the persons who suﬀered damage to be justly compensated” [7]. In the Preamble, alongside with compen‐ sation (that is, a typical function of civil responsibility), it is said about the ﬁght, that is, the punitory function of civil responsibility. This Convention is currently the only inter‐ national regulatory legal act which provides for the civil penalties for corruption. Convention was accorded wide recognition by the international community, since it was signed by 40 states and has 25 member countries. The Russian Federation did not join the abovementioned act. In general, the stable tradition of the development of civil law theory, relying on the principled position of “non-interference” of civil remedies in the matter of protection of public interests, has not changed. It appears that this situation is inconsistent with the modern needs of legal practice and requires changing and rethinking.

2

Problems and Discussions

2.1 General Overview of Provisions of Civil Law Convention on Corruption Before considering the various procedures of the potential implementation of the Convention into the Russian legislation (if Russia will join the Convention and it will be ratiﬁed), it is necessary to dwell on the special features of this international statute. Unlike the UN Convention Against Corruption, it provides an oﬃcial deﬁnition of corruption. Thus, “for the purposes of this Convention, “corruption” means requesting, oﬀering, giving or accepting, directly or indirectly, a bribe or any other improper advantage or promise that distorts the normal performance of any duty, or the behavior required of the recipient of the bribe, improper advantage or promise of improper advantage” (Article 2). The Convention obliges to provide for the standards stipulating the right of persons who suﬀered damage due to corruption to ﬁle an action with a view to obtaining the full compensation for harm in the national legislation. Compensation can include tangible damage caused, loss of pecuniary beneﬁt, and intangible harm (Article 3). Article 4 determines the typical conditions of civil responsibility: the pres‐ ence of the act of corruption (or its approval); damage done to the plaintiﬀ; the existence of a causal relationship between the act of corruption and actual damage (Article 4). Article 5, which establishes the possibility of ﬁling an action against the state and claiming damages from the authorities [7], is particularly noteworthy. In addition, the Convention regulates the statute of limitations on actions; the legal force of contracts; the protection of employees; reports and audit; obtaining evidence. The second section of the Convention is dedicated to international cooperation and monitoring of imple‐ mentation of provisions of the Convention. The last section of Convention contains concluding provisions.

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A special feature of the Convention is the inability of the participating States to make any reservations or interpretative declarations, that is, in case of accession to the Convention and its ratiﬁcation, it is subject to the execution by the state in its entirety. This Convention is currently the only international regulatory legal act which regulates the civil responsibility for corruption oﬀences. 2.2 An Overview of the International Practices in the Fight Against Corruption Using the Civil Measures The research of E. Burger and M. Holland point out that civil action acts as a supplement to criminal prosecution, and in the context of prevention of oﬀences it is a complemen‐ tary factor which prevents a person from committing a corruption-related crime when he/she realizes that he/she can incur substantial ﬁnancial loss in addition to penal sanc‐ tion [8, p. 63]. The theory points to the need for involvement of legal remedies with diﬀerent sectoral aﬃliation [9] into the ﬁght against corruption. The international prac‐ tices develop in this direction as well. Thus, Article 2043 of the Civil Code of Italy formalizes the right of corruption victims to obtain compensation. The Italian law-maker proceeds from the fact that corruption-related crime entails the emergence of delictual responsibility and conﬁrms the right of the injured person to receive pecuniary compen‐ sation for the harm, including the loss of beneﬁt [10]. In the United States, a number of precedents have been deﬁned, according to which the prosecution for corruption-related crimes only strengthens the right of an injured person to ﬁle a compensatory action [11] in accordance with civil proceedings. In addi‐ tion, the legal arrangements of civil conﬁscation in the U.S. are applicable to any prop‐ erty that was obtained by criminal means, as well as the income derived from this prop‐ erty. The best known Federal Law (which was adopted in 1970 - well in advance of adoption of the fundamental international conventions) is the “Racketeering Inﬂuence and Corrupt Organizations Act” which is better known as the RICO Act. The civil arrangements for the compensation for harm caused by corruption oﬀences are formalized in the Law of the Republic of Belarus No. 305-Z dated July 15, 2015 “On the Fight Against Corruption” [12]. In Germany, the civil responsibility of legal entities for corruption oﬀences is stipulated by Articles 31 and 278 of the German Civil Code that are applied when the damage was done by the actions of an individual holding a managerial position in the relevant company. In addition, civil responsibility can also be applied in cases when an authorized representative uses its oﬃcial position in the company to obtain personal beneﬁt [13]. The national legislation of the European countries uses conﬁscation “In rem” which is performed in accordance with civil proceedings. It is based on the seizure of money, property, securities of a person accused of a corruption-related crime, provided that “their size does not correspond to the legitimate sources of income of this person, and there are reasonable suspicions that it was obtained by criminal means, in particular, through corruption. The introduction of such a legal institution assumes assignation of the burden of proof of the legitimacy of the origin of the property to the interested person” [14]. The international practices in the civil conﬁscation shows that criminal conviction

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of a corrupt oﬃcial is not required, and it is not limited to his/her property, but can be applied to the property of third parties, for example, a spouse and close relatives. The international practices in the ﬁght against corruption show that civil conﬁscation is a signiﬁcant factor in reduction of corruption. Thus, it has been used in Italy since the early eighties of the last century. This measure made it possible to make seizure of over 10,000 items of immovable property owned by the maﬁa formations. The scope of conﬁscation was so wide that at the beginning of 2010 a special agency was created to manage this property. Based on the civil legislation of Norway, extended conﬁscation provides for the possibility of seizing all property if the oﬀender cannot prove the legality of its origin. Moreover, the lack of availability of the defendant for such conﬁscation (being in another country, unknown location) is not the basis for non-application of conﬁscation. We took this data from a special summary of information which was prepared pursuant to the order of the State of the Federal Assembly of the Russian Federation [15]. The Russian law-maker analyzes the international practices in the ﬁght against corruption using the civil measures, but is wary of its implementation to the fullest extent. The international practices in the ﬁght against corruption show that it is almost impossible to defeat using criminal law measures only. In this sense, the experience of Singapore, which at the time of gaining independence in 1965 was considered to be the country with the highest level of corruption, is rather impressive. However, in 2017, Singapore ranks seventh in the ranking of countries in terms of the level of development of corruption (Russia - 141st position, followed by Honduras (142nd position) and Guatemala (143rd position) [16]. The practices in the ﬁght against corruption in Singa‐ pore prove the eﬃciency of a complex approach which includes, in particular, civil legal remedies. The institution of civil conﬁscation is used in China as well, while criminal respon‐ sibility for unlawful enrichment was introduced even before the adoption of the UN Convention against Corruption [17, p. 140]. V. Rimsky in the Report of the Moscow Bureau for Human Rights dedicated, in particular, to the practices in the ﬁght against corruption in China, stated that “if, for instance, the acts of an oﬃcial of the oversight authority were wrongful and inﬂicted harm to a private business entity, the State shall fully compensate it for damage done due to the acts of its oﬃcial, and then shall act to collect these expenses from the family of this oﬃcial in the broadest sense of the word, that is, from all his relatives, and families in China are very large. The state treats customs oﬃcials in a similar way” [18]. The document “Rather-legal analysis of the responsibility of legal entities (corporate responsibility) for corruption-related crimes”, prepared by the expert of the Council of Europe Georgi Rupchev within the framework of the joint project of the European Union and the Council of Europe “Protection of rights of entrepreneurs in the Russian Feder‐ ation from the corrupt practices” remarks the need for complex measures aimed at ﬁghting corruption, civil and administrative measures applied to legal entities are considered to be eﬃcient. Thus, “in 2008, Siemens agreed to pay more than 1.3 billion US dollars to the authorities of the United States of America and Europe to settle the charge of bribery amounting to 1.4 billion US dollars with a view to concluding major

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contracts for the construction of municipal facilities around the world. In addition, the company paid 850 million Euros to lawyers and auditors as remuneration” [19]. According to the analysis of practices of various states, corruption can be counter‐ acted by combining the penal sanctions, administrative actions, and civil penalties. Typical civil penalties in the form of conﬁscation, compensation of losses, and ﬁnes can be applied to both individuals and legal entities. Moreover, civil law consequences which apply exactly in accordance with civil proceedings for individuals or legal entities, are so signiﬁcant that they lead to an understanding of the inexpedience of corrupt practices. 2.3 Civil Penalties for Corruption Oﬀences in the Russian Federation and the Problem of Their Compliance with International Standards and Practices The fundamental law in the area of ﬁght against corruption in the Russian Federation is the Federal Law of the Russian Federation No. 273-FZ dated December 25, 2008 “About Anti-Corruption” [20], Article 13 of which stipulates that the citizens of the Russian Federation, as well as foreign citizens and persons without citizenship shall bear crim‐ inal, administrative, civil and disciplinary responsibility for corruption oﬀences in accordance with the legislation of the Russian Federation. This regulation is referencing with an indication that civil responsibility shall apply in accordance with current legis‐ lation. As the subsequent analysis will show, it is largely a declaration and has no mech‐ anisms for its implementation. It follows from this regulatory legal act that the law-maker was to change the civil legislation, providing real civil penalties for corruption oﬀences in it. This is not to say that the Russian law-maker didn’t take any measures to change the regulation by means of civil responsibility; however, he still presumes that the means of civil regulation play only a secondary role in the ﬁght against corruption oﬀences. The law-maker believes that civil legal remedies should be applied only subsidiarily to public means. The posi‐ tion according to which the special means of civil responsibility for corruption oﬀences are redundant is quite widespread as well, since the civil action can be brought within the criminal proceedings on the case. It would seem that civil responsibility should be treated not only as a supplement to criminal responsibility in the ﬁght against corruption, but also as an independent legal remedy. Having expressed this thesis, we believe it necessary to provide an overview of those amendments in the civil legislation that were conditioned by the adoption of the Federal Law of the Russian Federation “About Anti-Corruption”, as well as ratiﬁ‐ cation of the UN Convention Against Corruption, in which ambiguous understanding and application is evoked by Article 20 which deals with civil conﬁscation, as well as the need for the introduction of criminal responsibility for unlawful enrichment. The Russian law-maker made only “pinpoint” changes in the Civil Code, having supplemented article 235 of the Civil Code with the new grounds for termination of property right: “forfeiture of property for which the evidence of its purchase with lawful income has not been presented in accordance with anti-corruption legislation of the Russian Federation, to the Russian Federation” (Paragraph 8 of the speciﬁed article, was introduced by the Federal Law dated 03.12.2012).

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It is to be recalled that Article 13 of the Federal Law “About Anti-Corruption” refers to civil legislation which gives rise to legal uncertainty, since Article 235 of the Civil Code of the Russian Federation, as we see, again refers to the anti-corruption legislation, which is in point of fact the same law which used to refer to the Civil Code. The legis‐ lative will is expressed in the fact that one should refer to the Federal Law of the Russian Federation No. 320-FZ dated December 3, 2012 “On Control over the Correspondence of Expenditures of Public Servants and Other Persons with Their Incomes”. Based on Article 17 of abovementioned Law, the Prosecutor General of the Russian Federation or his subordinate prosecutors in case of receipt of materials stipulated in Part 3 of Article 16 of this Federal Law, in accordance with the procedure established by the legislation on civil legal proceedings, apply to court with a petition for forfeiture of land plots, other items of immovable property, means of transport, securities, shares (equity shares, shares in the charter (joint-stock) capitals of organizations) for which a person replacing one of the posts speciﬁed in clause with regard to which the person holding one of the posts speciﬁed in Paragraph 1 of Part did not present any information proving their purchase with lawful income, to the Russian Federation. The regulations of the mentioned Article and Paragraph 8 of Article 235 of the Civil Code of the Russian Federation were tested in accordance with constitutional proceedings and upheld. At the same time, the Constitutional Court of the Russian Federation stated that the relevant standards do not prevent the court from hearing any evidence supporting the legality of the funds spent on the purchase of property, dismiss the action in the event of a minor diﬀerence (Ruling of the Constitutional Court of the Russian Federation No. 26-P dated 29.11.2016). In June 2017, the Supreme Court of the Russian Federation prepared a judicial review of cases related to the implementation of Article 17 of the Federal Law of the Russian Federation No. 320-FZ dated December 3, 2012. In the course of analysis of judicial statistics, the Supreme Court of the Russian Federation stated that since January 1, 2013 January 1, 2017 the courts of the Russian Federation completed proceedings over 19 cases, where the claims of the prosecutor were satisﬁed in whole or in part on 12 cases (63%) and were dismissed on 7 cases (37%). At ﬁrst thought, one may get the impression that the institution of civil responsibility for corruption oﬀences was formed in the Russian Federation. However, it appears that it would be too prematurely to make such a conclusion. Fragmentary, non-systemic changes in current civil legislation comply neither with the international practices nor with the goals of the ﬁght against corruption in the Russian Federation. Conclusions The need of modern Russia for the action against corrupt practices requires evolving the system of legal controls, namely: 1. It is necessary to speciﬁcate the list of items in respect to which civil conﬁscation can be applied. 2. The existing mechanisms of civil responsibility do not allow applying civil conﬁs‐ cation to bribegivers who potentially can receive unreasonable economic advan‐ tages. It is necessary to create conditions that would make economically unproﬁtable both the fact of active bribery and the fact of passive bribery.

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3. Amendments that were introduced into civil legislation were not comprehensive. In particular, no changes were made in Article 1069 of the Civil Code of the Russian Federation (responsibility for harm done by the public authorities, local selfgoverning authorities, as well as their oﬃcials) and in Article 1070 of the Civil Code of the Russian Federation (responsibility for damage done due to the wrongful acts of the agencies of the inquiry, preliminary investigation and court). They do not specify the fact that harm can be done as a result of an act of corruption, and the wording “illegal actions” in the absence of a clearly deﬁned legislation as such is abstract. In addition, the range of subjects covered by Article 1069 of the Civil Code of the Russian Federation is limited and disagrees with the list of persons that can be the subjects of the corruption-related crimes. In the latter case, one can refer to the general rules of compensation for harm stipulated by other Articles of the Civil Code of the Russian Federation, but they are not adapted to the realities of the corruption-related crimes. 4. Article 169 of the Civil Code of the Russian Federation (invalidity of a legal trans‐ action made for a purpose inconsistent with the fundamental principles of the legal system or morality) should be amended in terms of formulation of consequences of invalidity. We believe that they must be formulated as imperative. 5. The Russian legislation does not provide for civil responsibility of legal entities for corruption oﬀences. The consequences of invalidation of a legal transaction for a legal entity can barely be called a comprehensive institution of civil responsibility of legal entities. 6. For the purposes of the ﬁght against corruption oﬀences, it is necessary to make active use of the institution of unilateral termination of the agreement, which requires providing for the possibility of such termination at the action of the regulatory agen‐ cies, notwithstanding the coming of a court verdict over a criminal case into legal force. Such a conclusion follows from the existing situation, when the conclusion of sham contracts at obviously artiﬁcially high price or artiﬁcially low prices has become widespread in the ﬁelds of state and municipal purchases. If the legislation would regulate the right to unilaterally terminate the contracts, it would largely guarantee the implementation of public interests and intended expenditure of budg‐ etary funds.

3

Conclusion

The formation of an objective of the comprehensive and consistent ﬁght against corrup‐ tion, on the formation of “zero tolerance” for corrupt practices requires the development of legal anti-corruption remedies. These remedies must deﬁnitely include, in particular, legal remedies. We consider it possible to assume that Russia will join Civil Law Convention on Corruption, and, accordingly, the adaptation of the Russian legislation to world standards should be started well in advance.

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References 1. Shleifer, A., Vishny, R.W.: Corruption. Q. J. Econ. 107(3), 599–617 (1993) 2. Mauro, P.: Corruption and growth. Q. J. Econ. 110(3), 681–712 (1995) 3. Mauro, P.: The persistence of corruption and slow economic growth. IMF Staﬀ Papers 51(1), 1–18 (2004) 4. Heidenheimer, A.J., Johnston, M., eds.: Political corruption: concepts and contexts, 3rd ed. Transaction Publishers, New Brunswick, p. 967 (2007) 5. Michael, J.: Syndromes of Corruption. Wealth, Power, and Democracy, Cambridge, p. 282 (2010) 6. Parskevova, S.A.: The concept and the essence of a civil offence: conceptual problems, p. 340. Training and Information Center, Moscow (2009) 7. The text of Civil Law Convention on Corruption (ETS No. 174). http://www.consultant.ru/ cons/cgi/online.cgi?req=doc&base=INT&n=7783#07036254862323403. Accessed 10 Apr 2017. (Entered into in Strasbourg on 04.11.1999)/ Legal Information System “Consultant+” 8. Burger, E., Holland, M.: Why the private sector is likely to lead the next stage in the global ﬁght against corruption. Fordham Int. Law J. 30(1), 45–74 (2006) 9. Takoﬀ, C.: Key Issues of Civil Law in Corruption Cases in Bulgaria. The civil law consequences of Corruption- an Introduction, in Olaf Meyer. The civil law consequences of Corruption, Nomos. Baden-Baden, pp. 195–205 (2009) 10. Mariani, P.: How damages recovery actions can improve the ﬁght against corruption: the crisis of criminal law policies and the role of private enforcement in an Italian case of judicial corruption [Electronic resource]. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2007 241. Accessed 21 Aug 2017 11. Makinwa, A.: Private remedies for corruption [Electronic resource]. http://repub.eur. nl/#query=from:0;query=sort:auto;ﬁlter=all:Private%20remedies;facet=type:dissertation|; facet=public:;facet=open_access:;facet=issued_date:;facet=aﬃliation_label_;partOf:;facet =host_series_label:;facet=subject_jel_label_partOf. Accessed 20 July 2017 12. National legislative web portal of the Republic of Belarus. http://www.pravo.by/upload/docs/ op/H11500305_1437598800.pdf. Accessed 10 Dec 2017 13. The Group of States against Corruption, July 2005. www.coe.int/. Accessed 10 Dec 2017. [Second Evaluation Round Report on Germany], Paragraph 56 14. Combined ﬁrst and second rounds of the assessment of corruption and ﬁght against it. Report on the results of assessment in the Russian Federation. Approved by the Group of States against Corruption at the 40th Plenary Meeting (Strasbourg, December 1–5, 2008). Translated from the English. Saratov Center for Organized Crime and Corruption Research, p. 89. http:// sartraccc.ru/i.php?oper=read_ﬁle&ﬁlename=Pub_inter/greco.htm. Accessed 11 Mar 2018 15. Summary of information. Regulation of the institution of conﬁscation of funds and property obtained by criminal means in the legislation of the United Kingdom, United States, Germany, Austria, Switzerland, the Netherlands, Japan and other countries. Committee of the State Duma for Security and Commission of the State Duma for the legislative securing of anticorruption, June 2010. http://komitet7.km.duma.gov.ru/site.xp/050057056124051050 049.html. Accessed 11 Nov 2018 16. Oﬃcial website of Transparency International. https://www.transparency.org/whoweare/ organisation. Accessed 22 Feb 2017 17. Smirnova, L.N.: Fight against corruption in the PRC: international practices and a “special chinese model”: synopsis of a thesis. Ph.d. political science (2014) 18. Rimskiy, V.: International anti-corruption practices (Report of the Moscow Bureau for Human Rights). https://refdb.ru/look/3044700-pall.html. Accessed 11 Dec 2017

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19. Rupchev, G.: Rather-legal analysis of the responsibility of legal entities (corporate responsibility) for corruption-related crimes. https://rm.coe.int/16806d8620. Accessed 12 Dec 2017 20. Legislation Bulletin of the Russian Federation, No. 52 (2008). Article 6228 21. Ruling of the Constitutional Court of the Russian Federation dated 29.11.2016 “Concerning the case over testing of the constitutionality of Subparagraph 8 of Paragraph 2 of Article 235 of the Civil Code of the Russian Federation and Article 17 of Federal Law “On Control over the Correspondence of Expenditures of Public Servants and Other Persons with Their Incomes” in connection with subpoena of the Supreme Court of the Republic of Bashkortostan”. Legislation Bulletin of the Russian Federation, No. 50, Article 7169 (2016)

Protecting the Rights of Economic Entities in the Event of Competition Restraint by Public Authorities Marina Y. Kozlova1 ✉ , Igor V. Rostovshchikov1, Viktor A. Rudkovsky1, and Alena N. Volchanskaya2 (

2

)

1 Volgograd State University, Volgograd, Russia {kozlova,rostovschikov,rudkovsky}@volsu.ru Moscow Academy of the Russian Federation Investigation Committee, Moscow, Russia [email protected]

Abstract. The article is dedicated to study of possible protection of violated property rights in the event of competition restraint, which is expressed in imposing the terms of general commercial contracts on behalf of public authori‐ ties. It’s stated that the provisions of Russian competition legislation play only supplementary role in civil and legal protection of violated rights of economic entities, and therefore need an improvement. It’s reasoned that imposing the terms of general commercial contracts to economic entities on behalf of public author‐ ities and subordinate institutions contravene the fundamentals of public order. Such terms cancel out measures of economic promotion provided by federal legislator, undermine trust of economic entities to public authorities. Thus, request on application of consequences of null and void transaction is an eﬀective means of economic entity protection. Keywords: Protection of competition · Unfair contract terms Competition restraint · Foundations of public order · Protection of property rights Violation of competition legislation

Peculiar feature of entrepreneurial activity is a risk related to possible unforeseen losses and lost income1. Diﬃculties and encumbrances on the way of reaching high incomes are generally connected with activity of more successful competitors. However, public authorities often make for entrepreneurs encumbrances, which are more diﬃcult to overcome, than to set up yourself in a competitive battle. Similar encumbrances are generally called administrative barriers, and the state takes diverse measures not to allow entrepreneurial activity restriction. Comprehensive term of administrative barriers doesn’t exist, although there is a whole complex of enactments aimed at their overcoming. Administrative barriers are actions or inactions of public authorities that complicate procedures established under legislation and passed by entrepreneurial subjects, or prevent statutory regulations. 1

Belyh V.S. Legal regulation of entrepreneurial activity in Russia: Monograph. [Pravovoe regulirovanie predprinimatel’skoj dejatel’nosti v Rossii: Monograﬁja]. Moscow: Prospekt, 2005. P. 43.

© Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 563–571, 2019. https://doi.org/10.1007/978-3-030-00102-5_59

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Administrative barriers are widespread when rendering state and municipal services, placing of state order, implementing functions of executive authorities. Administrative barriers lead to various negative consequences, for instance, competition restraint, losses to economic entities. Competition have both a positive, and a negative eﬀect on economic relations. Therewith, totality of positive eﬀects allows esteeming competition as a preferred economic situation, therefore statutory regulation serves to protect competition. Russian legislation proceeds from the premise that competition state should ensure an unavail‐ ability of aﬀecting on commodity market by any entity. Pursuant to Federal law dated July 26, 2006 No. 135-FZ “On protection of compe‐ tition”2 (hereinafter – Law on protection of competition) competition restraint represents an outcome of actions by economic entities, authorities and other bodies that aﬀect negatively on commodity market, which lead to possible unilateral impact of economic entities on general conditions of commodity circulation. Features of competition restraint may be a decreasing number of economic entities acting in a certain commodity market, refusal of entities not included in one group from independent actions in the market, establishing conditions and procedure of commodity circulation and etc. Public authorities have signiﬁcant opportunities for such inﬂuence on market situa‐ tion that ﬁnally lead to competition restraint. That’s why the legislator forbids actions by public authorities that give advantages to some entrepreneurs and infringe upon others interests, otherwise impact competitive situation by altering it. Let’s study one possible situation related to impact of public authorities on competition. When delivering ﬁnished food products of meat (for instance, sausage goods), veterinary institutions issue veterinary accompanying documents. Before July 15, 2015 execution of such documents was a commercial veterinary service and was paid by interested economic entities. On July 15, 2015 a new edition of the Russian Federation Law “On veterinary science” No. 4979-1 dated May 14, 1993 became eﬀective3, and since then execution of these papers had been free by rule of federal legislator. Veterinary Committee of Volgograd region formally satisﬁed this request and excluded an issue of veterinary accompanying documents from Price list of commercial services. However, it introduced a new service, an “identiﬁcation and veterinary and sanitary assessment of conformity (non-conformity) of animals, food stock, food (non-food) products, feed of vegetable and animal origin to requirements of veterinary rules and regulations with the aim of transfer” (hereinafter – identiﬁcation). Performance of state institutions subor‐ dinate to Committee– animal health centers – has been arranged in a way that you can get veterinary accompanying documents only after paying identiﬁcation and document forms. General commercial contracts of economic entities with veterinary stations contained reference at Price list of commercial veterinary services. Administration of the Federal Antimonopoly Service for Volgograd region initiated criminal proceedings 2

3

Federal law No. 135-FZ dated 26.07.2006 “On protection of competition”// Collection of the RF legislation. 2006. No. 31 (part 1.). Clause. 3434. RF Law No. 4979-1 dated 14.05.1993 «On Veterinary»//Gazette of the Congress of People’s Deputies of the Russian Federation and the Supreme Soviet of the Russian Federation. 1993. No. 24. Clause. 857.

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on violation of legislation on competition protection by veterinary committee for Volgo‐ grad region. Antimonopoly body issued a warning to Veterinary Committee for Volgograd region, and identiﬁcation was excluded from List of commercial services. Commercial courts approved justice of issued warning. The courts determined that Veterinary Committee acted beyond the power when establishing identiﬁcation as an obligatory service for provision of state service of issuing Veterinary accompanying documents. Also we revealed that identiﬁcation and issue of veterinary accompanying document form are constituent parts of one process – execution of veterinary accompanying docu‐ ment. Rules of procedure for this state service were absent4. Similar situations lead to that economic entities paying services that to be provided at no charge suﬀer material losses, therefore arise an issue of proper protection for restoration of rights. At ﬁrst sight, should be ﬁled a claim based on paragraph 3 clause 37 of Law on competition protection. Named provision grants the opportunity to Parties whose rights are aﬀected by Antimonopoly violation, to “apply duly to the court, ﬁle a claim in a commercial court, including claims of restoration of violated rights, making amends, i.e. lost proﬁt, compensation for damage incurred to property”. Believed that introduction of private provision into Law on protection of competition implies simpliﬁcation of plaintiﬀ’s proof and applying acts of Antimonopoly bodies as a ground for action. However, it’s not quite so. Expressions used in this article create ambiguities. Thus, arises an issue whether introducing such rules is necessary, if they don’t supplement and don’t precise general rules of civil legislation. It’s not quite understandable whether “restoration of violated rights” is an independent way of protection, or it means request speciﬁed in clause 12 of Civil Code of the Russian Federation on “restoration of provision existing before violation, and suppression of actions violating the right or posing risks to its violation. There is no uncertainty whether the list of means is exhaustive. It’s worth taking into account that deﬁnitive approaches in case law to procedure of application of paragraph 3 clause 37 of Law on protection of competition have not been applied. For instance, the courts diﬀerently assess an ajudication of plaintiﬀ’s actions as violations of Antimonopoly legislation. Well, in some situations fact in proof is no diﬀerent than proof in lawsuit on recovery of damages with reference to general provisions of Civil Code of the Russian Federation. In one court proceeding a plaintiﬀ’s claim was rejected despite an order rendered by Antimonopoly body to defendant. The court decided that causal relation between actions of defendant and plaintiﬀ is absent5. In another case, court sustained a claim, acknowl‐ edged a fact of damage proven, on the ground of circumstances stated with judicial act

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Decision in case No. А12-46394/2016 dated September 30, 2016 [Electronic resource]. URL: https://kad.arbitr.ru/Card?number=%D0%9012-46394/2016 (accessed date: 13.05.2017). Ruling of the Federal Commercial Court of Moscow district dated 10.06.2013 in case No. А40-82507/12-82-758. [Electronic resource]. URL: http://kad.arbitr.ru/Card/ 9904afe8-0174-4fcb-ba61-4ac4fa2fbf00 (accessed date: 11.05.2017).

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on impeachment of decision by Federal Anti-monopoly Service of the Russian Feder‐ ation6. In some instances, neither plaintiﬀs nor court don’t substantiate their demands by reference to Law on protection of competition mentioning only provisions on losses of CC RF as a ground7. Thus, cases on restoration of violated property right in relation to violation of Anti‐ monopoly legislation is distinguished by hard probation, and not in every instance acknowledgement of violation of competition legislation means possible recovery of damages for aﬀected person. Recovery of damages is a measure of civil and law liability, therefore person demanding their recovery must proof set of all elements of civil oﬀense. In legal literature it’s oﬀered to consider issues on level of income acquired due to violation of Antimonopoly legislation, an extent of damage when reviewing cases on above named violation8. However, we suppose that such approach doesn’t match func‐ tions and goals of Antimonopoly authorities. In judicial acts of the RF Supreme Commercial court it’s repeatedly stressed that Antimonopoly body is not entitled to resolve civil and law disputes of economic entities in terms of its competence9. Moreover, in scientific practical commentary to the Law “On protection of competition” edited by I. Yu. Artem’ev, Head of Antimonopoly service of the Russian Federation, is specifically stated that paragraph 3 clause 37 of Law on protection of competition was introduced by “the third Antimonopoly package” for “…promotion of filing a claim by economic entities on making amends to violators of Antimonopoly legislation”10. Thus, p.3 clause 37 of the Law on protection of competition doesn’t supplement, doesn’t clarify provisions of civil legislation on means of violated rights protection, doesn’t exclude plaintiﬀ’s burden of proof, doesn’t alter procedure of proof. This state of matters, undoubtedly, is right, any other would contravene the adversarial principles of commercial process, equality of parties. As reasonably noted by the Federal Anti‐ monopoly service of Russia, “an important auxiliary tool in this case is a decision of

6

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8

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Ruling of the Federal Commercial court of Moscow district dated 30.09.2013 in case No. А40-143297/12. [Electronic resource]. URL: http://kad.arbitr.ru/Card/e83b8c26-819248ﬀ-9dcf-a1292dfcf53d. (accessed date: 11.05.2017). Ruling of the RF Supreme Commercial Court Presidium dated 17.12.2013 No. 9837/13 in case No. А67-8238/2012// Vestnik of the RF Supreme Commercial court. 2014. No. 4. Bashlakov-Nikolaev I.V., Gavrilov D.A., Kinev A.Ju. and etc. Responsibility for violations of the antimonopoly legislation: problems of theory and practice: monograph [Otvetstvennost’ za narushenija antimonopol’nogo zakonodatel’stva: problemy teorii i praktiki: monograﬁja]. Maksimov S.V., Puzyrevskij S.A. (ed.). Moscow: NORMA, INFRA-M, 2. 144 p. Ruling of the RF Supreme Commercial Court Plenum dated 30.06.2008 No. 30 «On some issues arising due to an application of Antimonopoly legislation by commercial courts»// Vestnik of the RF Supreme Commercial Court. 2008. No. 8; Ruling of the RF Supreme Commercial Court Presidium dated 12.07.2006 No. 1812/06 in case No. А33-2953/2005// Vestnik of the RF Supreme Commercial Court. 2006. No. 9. Aleshin K.N., Artem’ev I.Ju., Bol’shakov E.A. and etc.; Scientific and practical commen‐ tary to the Federal Law “On Protection of Competition” (article-by-article) [Nauchnoprakticheskij kommentarij k Federal’nomu zakonu «O zashhite konkurencii» (posta‐ tejnyj)]. Artem’ev I.Ju. (ed.). Second edition. Moscow: Statut, 1. 1024 p.

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Antimonopoly body to the case on violation of Antimonopoly legislation conﬁrming a violation”11. At the same time, requirements enumerated in p.3 clause 37 of Law on protection of competition not always can restore violated rights. For example, sometimes parties of reviewing a case in an Antimonopoly body doesn’t match, as well as parties whose rights are aﬀected as a result of Antimonopoly legislation violation that also may bring diﬃculties in rights protection. Developers of provision of p.3 clause 37 of Law on protection of competition suggested that this to be a basis for collective (group) claims. We mark that group risks is rarely applicable in commercial courts, for example, it brings a diﬃculty of prooﬁng persons participation in one group in one legal relationship. For protection of persons not participated directly in reviewing a case by Antimonopoly body, a more suitable solution is a claim in defense of general public that currently used in the RF Civil Procedure Code that requires corresponding change in deﬁnition of p.3 clause 37 of Law on protection of competition. In purpose of completer protection of persons who didn’t participate directly in case review in Antimonopoly body, but whose rights are violated, it’s worth introducing the following addition to deﬁnition of p.3 clause 37: “economic entities are entitled to apply to a commercial court with declaration on protection of rights, freedoms and legal interests of other parties at their request or in defense of rights, freedoms and legal interests of general public”. With regard to civil and law contracts concluded in violation of competition legis‐ lation, declaration of claim based only on p.3 clause 37 of Law on protection of compe‐ tition can’t restore violated rights. Peculiarity of similar contracts is that they formally conform to necessary require‐ ments and exhibit the features of legal transactions. Antimonopoly body is not competent to recognize the contract void or proceed from voidance of transactions. Therefore, a counterpart may refer to freedom of contract, if it’s a general commercial contract for provision of any services, even stipulated by law, and the services are paid, then contractor need them. For this reason, claim on recovery of damages, or unjustiﬁed enrichment does is not ground for action. It’s required to ﬁle a claim on application of consequences of invalidity of void transaction or claim for declaration of avoidable transaction void and application of consequences of its voidance. It’s seen that such contracts or contract terms are void. Ruling of the RF Supreme Commercial court “On freedom of contract and its limits” mentions the possibility of declaring voidance of unfair contract terms due to clause 169 of CC RF for weaker party or inadmissible application of such terms according to clause 10 of CC RF. Unfair contract terms and possibility of considering them invalid or not applying them take place, if contract draft was oﬀered by one of the parties and contained terms that are expressly exacting for its counterpart and essentially upset a balance of Parties interests, and counterpart was in the state embarrassing agreement of any other content 11

Interpretation No.6 of Russian Federal Antimonopoly Service “Probation and estimate of losses incurred by violation of Antimonopoly legislation” (Approved by protocol of Russian Federal Antimonopoly service Presidium dated 25.05.2016 No. 7). [Electronic resource]. URL: http://fas.gov.ru/documents/documentdetails.html?id=14664 (accessed date: 15.05.2017).

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of several contract terms (i.e. was a weaker party of contract). The RF Supreme Commercial court orders the courts to ﬁnd out whether accession to the terms is invol‐ untary, what is a professional degree of Parties, competition in the market, level of negotiating powers and etc12. In studied situation as an example there are unfair contract terms based on essential violation of balance of interests between contract parties. Accordingly, these transac‐ tions should be deemed void, despite that Russian legal procedure as possible continues an invalidity of concluded transactions. Primarily, it’s necessary to pay attention to that public authorities with use of their powers imitate a legal activity by restricting competition and reaching goals that are diﬀerent from goals and tasks of these bodies. Such actions are treated as circumvention of law. Actions made with purpose of law circumvention derogate a possible attaining of legal result that should be ensured by enforcement of instructions established by law. Category of law circumvention is ﬁxed in clause 10 of CC RF and regarded inad‐ missible exercise of civil rights. A concept of improving general terms of CC RF deﬁned that law circumvention is use of statutory concept not prohibited formally in some circumstances for reaching a goal, negative position of legislator to which resulted from prohibition on use of other statutory concept reaching the same goal13. A.V. Volkov notes that purpose of circumvention is avoidance of impact regulated by enactments on their actual legal relations14. Law circumvention is a phenomenon existing not only in civil relations area. By use of power, state authorities can circumvent the law reaching unconscientious goals, upsetting a balance of economic interests in the market and aﬀecting negatively on the competition. As a whole, law is intended to social relations in a way to ensure both public and private interests that should be in a balanced state. Balance should be fair and propor‐ tional. If we talk about balance of interests in competition area, then we need take into account public interests, interests of economic entities and their groups, and also consumer interests. In simpliﬁed form we can say that state should be interested in performance of eﬀective self-developing economic system, which demands minimal eﬀorts for its regulation. Economic entities (groups of persons) are interested in acquiring a maximum proﬁt. Consumers are interested in purchase of high-quality goods and services at low prices, in terms of provision of true information. State intervention in economic entities activity should be justiﬁed and necessary from the reasonable point for reaching required behavior in accordance with model. Getting 12

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Plenum Decision of the RF Supreme Commercial Court dated 14.03.2014 No. 16 «On freedom of contract and its limits»// Vestnik of the Russian Federation Supreme Commercial court. 2014. No. 5. Concept for improvement of general provisions of CC RF//Vestnik of the RF Supreme Commercial court. 2009. No. 4. P. 63. Volkov A.V. Distinction of circumvention of the law from imaginary and sham transactions [Otlichie obhoda zakona ot mnimyh i pritvornyh sdelok], Сivil Law [Grazhdanskoe pravo]. 4. No 6. P. 6–10.

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balance may be considered as a purpose of legal regulation of public relations in compe‐ tition area. Getting balance implies no clash of interests. Public interest is reﬂected in enactments of private and public law. Often, public and private interest is hardly distinguishable. Therefore, when we talk about balance of interests, then most likely it is not about co-relation of public and private interests, but about an interaction of opposite interests in a particular case. At the same time, at legis‐ lative level public and private interests should have appropriate implementation, private interests should not be limited in favor of public. Balance of interests represents such a state that provides a full-value exercise of legal public and private interests and estab‐ lished as a result of legal regulation and legislative activity. Law abuse on behalf of public authorities is dangerous that in such actions public interests are replaced by others, for example, private interests of individual oﬃcers. Thus, balance of competitive interests is upset, and declared public interests are not implemented. Public order is violated when the subject with authoritative powers consciously circumvents mandatory proscriptions of federal legislation restricting hereby the compe‐ tition. The consequences of this circumvention may be conclusion of civil and law contracts, externally legal, but containing unfair terms aimed at unjustiﬁed acquisition of funds of economic entities. Pursuant to clause 169 of CC RF, transaction made with purpose deliberately contrary to fundamentals of public order and morality is void. Fundamentals of public order is an evaluation category. It’s necessary to reveal whether contract terms imposed by subject of public authority or subordinate institution are indeed unfair and can violate foundations of public order. As stipulated by p.2 clause 15 chapter the ﬁrst of “Fundamentals of the constitutional system” of the Russian Federation Constitution “public authorities, local self-governing bodies, oﬃcials, citizens and their associations are obliged to abide the RF Constitution and laws”. Therefore, public order in state administration is ensured by unconditional abidance by public authorities and local authorities obligatory rules established by federal laws. At the same time, as stressed by Constitutional court of the Russian Federation in ruling dated June 06, 2004 No. 226-O15, clause 169 of Civil Procedure Code states that determining property of antisocial transaction is its purpose, i.e. reaching such result as not only not to comply with law or standards of morality, but contravene – knowingly and expressly for participants of civil law-transactions – fundamentals of public order and morality. Plenum of the RF Supreme Court draws attention to that antisocial transactions not only not conform to requirements of law or other enactments, but violate principal

15

Ruling of the RF Constitutional court dated 08.06.2004 No. 226-О “On dismissal of a request for a hearing a complaint of Open Joint-Stock Company “Uﬁmian reﬁnery” on violation of constitutional rights and freedoms by clause 169 of the CC RF and par. 3 point 11 clause 7 of the RF law “On tax authorities of the Russian Federation”. The document was not published. Access from Computer-assisted legal research system «CondultantPlus».

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foundations of Russian law order, principles of social, political and economical system, and morals16. Fundamentals of legal order may be violated during transaction, if counterpart uses his economic power, actually exploiting another party. Speciﬁcally, a moment of exploi‐ tation, inequity of possibilities takes place in contract terms with participation of public authority or subordinate institution, if they act through circumvention of law and compe‐ tition restriction. Unfair contract terms contravene the nature of contract, therefore their presence doesn’t conform to legal order. Commercial court of Volgograd region when reviewing a claim of economic entity to Veterinary institution on recovery of funds paid for identiﬁcation and forms of veteri‐ nary accompanying documents made a right conclusion that “subsequent introduction in contracts and charging a fee for identiﬁcation and forms had been implemented circumvently (p 11 clause 2.3 of Law “On Veterinary» with the purpose of imposing a duty to pay services of execution of veterinary accompanying documents on the subject of entrepreneurial activity. Speciﬁed conscious behavior…, cancelling out the measures of economic promotion stipulated by federal legislation and undermining trust of economic entities to public authorities is mustn’t recognized as conscientious and conforming to foundations of the Russian Federation legal order”17. You mustn’t forget that Russia pursues an economic policy that based on creating favorable conditions for entrepreneurial activity. For example, in 2016 a Strategy for development of small and medium entrepreneurship in the Russian Federation till 2030 was adopted18. The purpose of Strategy is development of small and medium entrepre‐ neurship as a new driver, on the one hand, of innovation development and improvement of sectoral composition of economy, on the other hand, of social development and ensuring stable high employment rate. Strategy contemplates various events, including development of competition at local markets, which comprises also dropping of admin‐ istrative barriers. In the Russian Federation is in eﬀect a series of enactments one way or another designed to solve an issue of passing administrative barriers. Enactments alternate each other successively, resolve immediate tasks arising at particular stage. State and municipal services are mainly rendered according to regulations, general prin‐ ciple of free services is in force (with necessary exceptions). In these circumstances any actions on behalf of public authorities aimed at acquiring a payment from economic entities for services not stipulated by legislation, but provided as obligatory, unconditionally, contravene economic policy of state, and therewith violate a legal order. 16

17

18

Point 85 of Decision by the RF Supreme Court Plenum dated 23.06.2015 No. 25 «On appli‐ cation of several provisions of par.1 part 1 of CC RF by courts»//Rossiiskaya gazeta. 30.06.2015. No. 140. Ruling of Commercial court of Volgograd region dated May 23, 2017 in case No. А12-73191/2016. [Economic resource]. URL: https://kad.arbitr.ru/Card?number=%D0% 9012-73191/2016. (accessed date: 04.08.2017). Resolution of the Russian Federation Government dated 02.06.2016 No. 1083-р «On approving a Strategy for development of small and medium entrepreneurship in the Russian Federation for the term till 2030». Oﬃcial web-portal of legal information http:// www.pravo.gov.ru, 10.06.2016.

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Therefore, contracts or contract terms are void, if general commercial contract is concluded in terms of violating an Antimonopoly legislation on behalf of public author‐ ities or subordinate institutions. Use of resources provided by authorities in purposes inconsistent with public interests aﬀects negatively on a competition, upsets a balance of public and private interests, and may causes unfair contract terms. Charging a fee for services that, in authorities’ opinion (but not pursuant to the law), is obligatory for rendering state service, and is imposed on counterpart, contravenes a legal order in the event that an economic entity is unable to get a state service in another way. Civil legislation provides a suﬃcient choice of ways for protection of violated prop‐ erty rights. Part 3 of clause 37 of Law on protection of competition doesn’t alter a general procedure for protection of violated rights, doesn’t free plaintiﬀ from burden of proof, but solely encourages the persons whose rights are violated, apply to the court or to the commercial one, after ﬁnding a violation of competition legislation. Moreover, a wording of this article should be updated due to necessity for protection of persons who didn’t participate in reviewing a case by Antimonopoly body, but whose rights are aﬀected by violation.

References 1. Aleshin K.N., Artem’ev I.Ju., Bol’shakov E.A., et al.: Scientiﬁc and practical commentary to the Federal Law “On Protection of Competition” (article-by-article) [Nauchno-prakticheskij kommentarij k Federal’nomu zakonu «O zashhite konkurencii» (postatejnyj)]. Artem’ev I.Ju. (ed.). Second edition, 1024 p. Statut, Moscow, (2016) 2. Bashlakov-Nikolaev, I.V., Gavrilov, D.A., Kinev, A.Ju., et al.: Responsibility for violations of the antimonopoly legislation: problems of theory and practice: monograph [Otvetstvennost’ za narushenija antimonopol’nogo zakonodatel’stva: problemy teorii i praktiki: monograﬁja]. Maksimov S.V., Puzyrevskij S.A. (ed.). NORMA, INFRA-M, Moscow, 144 p (2016) 3. Belyh, V.S.: Legal regulation of entrepreneurial activity in Russia: Monograph. [Pravovoe regulirovanie predprinimatel’skoj dejatel’nosti v Rossii: Monograﬁja]. Moscow: Prospekt, 432 p (2005) 4. Volkov, A.V.: Distinction of circumvention of the law from imaginary and sham transactions [Otlichie obhoda zakona ot mnimyh i pritvornyh sdelok], Civil Law [Grazhdanskoe pravo], no. 6, pp. 6–10 (2016)

Establishing Legal Regulation Standards of Family Relations in the RF in the USA in the Conditions of Financial and Economic Crisis D. A. Kokova1, Z. A. Zumakulova1, Z. B. Khavzhokova1, and N. N. Reshetnikova2 ✉ (

2

)

1 Kabardino-Balkarian State University Named After K.M. Berbekov, Nalchik, Russia Rostov State University of Economics, Don State Technical University, Rostov-on-Don, Russia [email protected]

Abstract. This article considers legal regulation standards of family relations in the Russian Federation and in the United States of America in terms of unstable ﬁnancial and economic interaction between two countries, as related legal insti‐ tutions are understood in diﬀerent legal systems; studies the interrelation and interdependence of regulation of private-family relations in world globalization, international relations and economic situation. Within the frame of comparative legal analysis we revealed diﬀerences and similarities in the establishment and development of family law principles, and in what manner these results can aﬀect the search for new, more eﬀective legal regulators in family law through global cooperation and communication. Keywords: Globalization · International relations Financial and economic crisis · Family law · Family relations Romano-Germanic law system · Common law countries · Principles of law Family and law rights and responsibilities · Mixed marriages Cross-border adoption · Legal case · The Russian Federation Constitution The USA constitution

In terms of constant political disputes between countries, amid a backdrop of a newly developing ﬁnancial and economic crisis, relations between citizens of diﬀerent coun‐ tries, including family ones, can’t but to be aﬀected by these circumstances. Negative economic and ﬁnancial assumptions intermediate a lot of current issues related to the search of levers to regulate private-family relations. Globalization, integration, multi‐ culturalism is a matter of fact for today, which in turn predetermines an increasing number of marriages between people living on the territory of diﬀerent countries, as well as cases of international adoption. These are just the situations most likely subjected to impact of ﬁnancial and economic forces that are equally dependent on the level of international relations. Globalization processes present people with necessity of both interpenetration of cultures, and legal regulation in a particular area, including family law. Existence of certain legal institutions, which regulation takes place in diﬀerent terri‐ tories, is indisputable, and they represent a special object for research in terms of comparative law. In family law, similar state of aﬀairs becomes more urgent, in the light © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 572–577, 2019. https://doi.org/10.1007/978-3-030-00102-5_60

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of the aforementioned mixed marriages and cross-border adoption, and various issues arising from in the qualiﬁcation of certain concepts and mechanisms for their legal regulation. Principles of law in general, and in family and legal area in particular, as a universal method of regulation are familiar to the system of any country. But their meaning and understanding is diﬀerent from one legislator to another. These discrepancies are espe‐ cially so obvious when it entails common law countries and the Romano-German legal family. A comparative analysis of family law principles in the Russian Federation and in the United States of America is of some interest from the point of view of search for universal methods of regulation as a result of revealing similar and distinctive features. Principles of this branch of law play an important role to determine and implement family-legal subjective rights and legal obligations in Russian family law. In Clause 1 of the Russian Federation Family Code the following foundations of family law are ﬁxed as main ones: 1. Family, motherhood, paternity and childhood in the Russian Federation are under public protection; 2. Recognition of marriage contracted only in civil status registration oﬃces; The regulation of family relations is carried out in accordance with the principles of voluntary marriage of a man and a woman, the equality of rights in the family, the resolution of family disputes by mutual consent, the priority of family upbringing of children, care for their welfare and devel‐ opment, ensuring a priority protection of rights and interests of minors and incapable members of family; Any restriction of citizen rights on entering into marriage and in family relations on grounds of social, ethnical, national, linguistic or religious identity is prohibited. Principles reﬂect the guidelines of state policy in one or another area. At diﬀerent stages of development of family law people tried to deﬁne its principles. In modern literature on family law there is no certainty what should be attributed to the principles of family law. Of course, we mustn’t be conﬁned to the provisions of Cl. 1 of the Russian Federation Family Code, because this approach reduces law to enact‐ ments, though family law principles are also embodied in the Russian Federation Constitution, in particular in Clauses 7, 38 and others.1 In addition, according to par. 4 of Cl. 15 of the Russian Federation Constitution, generally recognized principles and rules of international law and international contracts of the Russian Federation are an integral part of its legal system. In science there are various approaches for establishing family law principles. First of all, it seems necessary to focus our attention on generally recognized prin‐ ciples of international law concerning family one. The Supreme Court in Plenum Reso‐ lution as of 10.10.2003 No. 5 “On Application of generally recognized principles, inter‐ national law rules and international contracts of the Russian Federation by common courts” made a clariﬁcation that generally recognized principles of international law should be deemed as fundamental compulsory rules of international law accepted and recognized by international community of states in general, departure from which is 1

Kokova D. A. On principles of family law (article) Vestnik of Tver State University. Series “Law”- 2014. No. 2. P. 119-122

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unacceptable. These include, in particular, the principle of universal respect for human rights and fulﬁllment in good faith of international obligations. The content of these principles and rules of international law can be revealed especially in papers of the United Nations and its specialized institutions. For example, clause 3 of the UN Conven‐ tion on the Rights of the Child enshrines the principle of the best care for child’s interests (in all actions against children whether taken by public or private institutions dealing with matters of social security, by courts, administrative or legislative bodies; priority is given to the best care for child’s interests). Thus, all enactments contained in national forms of law, as well as their interpretation, should be aimed at the best possible care for child’s rights. Besides, it is worth noting the international principles of family law enshrined in various international treaties of the Russian Federation, especially in the Convention for the Protection of Human Rights and Fundamental Freedoms, the European Convention on the Exercise of Children’s Rights. Also, certain provisions representing the principles of family law can be found in the Russian Federation Constitution. In accordance with paragraph 1 of Cl. 38 of the Russian Federation Constitution, motherhood, childhood and family are under public protection. This means that there are legal constitutional grounds for standing out the principle of public support of family, motherhood and childhood, at the same time it can be hardly applied to family law principles. “Public protection of motherhood, childhood and family have a complex socio-economic and legal nature, it is provided by state through taking various measures on encouragement of motherhood, protection of mother’s and child’s interests, family strengthening, ensuring family rights for everyone.” Foremost, this prin‐ ciple is addressed to state and imposed on it, therefore it is very controversial to refer it to family law principles. However, provisions of Par. 2 of Cl. 38 of the Russian Federation Constitution stipulating that care for children and their upbringing is an equal right and duty of parents should be completely attributed to the principles of family law. Cl. 1 of the Russian Federation Family Code contains the main principles of family law including: (1) the need of building family relationships on mutual love and respect, mutual assistance and responsibility of all its members to the family; (2) impermissibility of arbitrary interference of anyone in family aﬀairs; (3) ensuring unhindered exercise of rights by family members (4) the possibility of judicial protection of these rights, (5) the recognition of just registered marriage, (6) voluntary nature of marriage, (7) equality of spousal rights in family, (8) resolution of interfamilial disputes by mutual consent (9) priority of family upbringing of children, care for their welfare and development, (10) provision of priority protection of minors interests and incapable family members, (11) prohibition of any restrictions for citizens entering into marriage and family relations on grounds of ethnical, national, religious, and linguistic identity. Certainly, the above mentioned list is not exhaustive, since the principles of family law are not limited to the framework of the RF FC. Cl. 5 of the RF FC establishes additionally justice, reasonableness and humanity as principles of family law. Separately, one should be told about a principle such as a priority protection of rights of minors and incapable, as well as care for welfare and development of children.

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Proceeding from the above stated, it should be concluded that the principles of family law represent a special form that is more legally eﬀective in comparison with other ones2. Their role in the family law is especially great, since many rights and duties require clariﬁcation in the process of law enforcement, and therefore, the consideration of these principles. Beginning an analysis of family law coordination in the United States of America, we would like to note that a regulator such as principles of law for common law countries became more comprehensive due to broad judicial discretion, since judge’s opinion (obiter dictum) (as an integral part of judicial case) widely depends on his scientiﬁc reasoning. And in this sense, namely the focus on the principles of law, in particular of family one, steps forward. Although the law regulating family relations has been developing in a certain direc‐ tion through the adoption of various legislative acts, in a historical prospective the totality of these enactments has been greatly inﬂuenced by English marital and family law and traditions, often including some surviving religious precepts (for example, in issues of recognition of common law marriages). Classiﬁcation of the family law principles varies within the framework of theory, but it is necessary to point out several distinctive features: speciﬁcs of regulation in the USA is deﬁned by case nature and decentralized regulation.3 In general, American family law is regulated by the following sources: (1) The United States Constitution - For a long time, in family law matters the Consti‐ tution was perceived solely through delineation of competence at federal and state levels (the 10th Amendment to the US Constitution and the judicial case of Labine v. Vincent)4. Despite a popular belief that the Constitution establishes an exclusive right of states in resolving family and legal disputes, it is the highest legislative act deﬁnes a number of fundamental principles that are extremely important for family rela‐ tions, namely: (a) Due Process and Equal Protection Clauses to the Fourteenth Amendment. (b) The First Amendment’s freedom of association (c) The inalienable right for personal privacy (Griswold v. Connecticut) (d) The constitutional guar‐ antee for right to family life (regarding all aspects of marriage and family relations) (Zablocki v. Redhail, Loving v. Virginia, Moore v. City of East Cleveland, Skinner v. Oklahoma ex rel. Williamson) (2) Federal legislation addressed directly to family issues, from maintenance obliga‐ tions to establishment of child custody. - Today, a uniﬁed regulation through the adoption of a single law in a particular area is preferable. As an example, the basic precepts contained in statutory acts such as Defense of Marriage Act (DOMA) of 1996; The Family Support Act of 1988; The Family Violence Prevention and 2

3

4

Ershov V. V. Juridical nature of common and civil and law principles/ V. V. Ershov: Extended abstract of dissertation of Candidate of Law (research doctorate) Moscow, 2009. - 22 p. Hamilton, Vivian E., Principles of U.S. Family Law (April 2006) https://ir.lawnet.fordham. edu/cgi/viewcontent.cgi?article=4182&context=ﬂr The Oxford Handbook of the U.S. Constitution Mark V. Tushnet, Mark A. Graber, Sanford Levinson pp. 2-10

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Services Act (FVPSA) of 1984; The Family and Medical Leave Act (FMLA) of 1993; Keeping Children and Families Safe Act of 2003; The Safe and Timely Interstate Placement of Foster Children Act of 2006; The Missing Children’s Assis‐ tance Reauthorization Act of 2013; The Kilah Davenport Child Protection Act of 2013; Preventing Sex Traﬃcking And Strengthening Families Act Of 2014;5 It is also necessary to mention the participation of the United States in ratiﬁed international treaties in family law, such as the Convention on the Civil Aspects of International Child Abduction of 1980; Convention on the Protection of Children and Cooperation in Respect of Intercountry Adoption 1993; (3) Constitutions and the case law of each state. - A big role in establishing principles in this area was played by a number of legal cases formed at the level of separate states at diﬀerent time. It is important to note a few of them that have had a signif‐ icant impact on the establishment of principal provisions for American family law and that clearly exhibit the distinctive features of family and legal regulation in this state: The principle of granting a fundamental right to marriage (Zablocki v. Redhail); The principle of equality of fathers and mothers (Stanley vs. Illinois); The principle of ethnical non-discrimination in marriage (Loving v. Virginia) The prin‐ ciple of independent decision-making on abortion by a woman (Roe v. Wade); The principle of polygamy prohibition (Potter v. Murray City), later the USA Supreme Court delivered a judgment prohibiting a criminal prosecution of polygamists (Brown v. Buhman), although not abolishing the impossibility of polygamous marriages registration; the principle of validity and essence of the marriage contract (Brusseau v. Borelli); The principle of granting equal rights to same- and oppositesex couples in marriage (United States v. Windsor; Obergefell et al., v7 Hodges, Director, Ohio Department of Health, et al.)6 Within frames of above-mentioned peculiarities of regulating homogeneous rela‐ tions in diﬀerent legal systems, one of the main examples that clearly exhibits the inter‐ dependence, but the opposition of Russian and American family law is the Federal Law “On enforcement actions against individuals involved in violations of fundamental rights and freedoms of human, rights and freedoms of the Russian Federation citizens” as of 28.12.2012 N 272-ФЗ (Dima Yakovlev’s Law). An incident that served a basis for the adoption of this enactment reveals not only the issues of law correlation between two countries, but also displays a direct dependence of legal regulation development in private-family relations on political and ﬁnancial and economic situation. The Russian Federation on behalf of public authorities precisely justiﬁes the adoption of this law by observing the principles, among others, of family law, such as a consti‐ tutional protection of minors’ rights, the implementation of the National Action Strategy for Children 2012-2017 eﬀective at that time, etc. While the American side opposed the

5 6

Casenote Legal Briefs for Family Law, Keyed to Weisberg and Appleton Casenote Legal Briefs Grace Ganz BLUMBERG (2004), Legal Recognition of Same-Sex Conjugal Relationships: The 2003 California Domestic Partner Rights and Responsibilities Act in Comparative Civil Rights and Family Law Perspective, 51 UCLA L. REV.

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principle of non-discrimination, and others as a violation in observing principles such as granting the right to family life,7 Surely, estimate of this situation, from the point of view of law and international relations and simultaneous observance and protection of interests of Russian children, is a diﬃcult task. Nevertheless, if we identify common points based on a comparative law analysis of family law principles that, ﬁrst of all, not contradict international law principles, we can ﬁnd the most appropriate way of regulation of similar topical issues. And thus, despite existing diﬀerences and clashes in two legal systems, we can make a conclusion that principles are basic for a uniﬁed system establishment. They reﬂect steady ideas in what manner the rights and duties should be reproduced as they perceived. Simultaneously, these ﬁndings depend on developmental level of society, national and moral values, time period. By means of principles we can become aware of purpose of each right and obligation, to deﬁne their logical place in the legislation, and also discover relevance and practicability of new legal rules development.

References Vasilyev, E.A., Komarov, A.S.: Civil and commercial law of foreign countries: textbook. 4th edn., revised and enlarged, vol. 2. International relations, Moscow (2006) Gongalo, B.: Principal foundations of family legislation. Family and housing law, No. 2 (2006) Il’ina, O.Y.: Some aspects of interrelation of marriage and family. Contemporary law, No. 5 (2006) Nizamiev, O.N. (ed.) Commentary to the RF Family Code (clause-by-clause) (2010) Lyuvushkin, A.N., Serebryakova, A.A.: Family law: textbook, p. 14, Ulyanovsk (2011) Shumilov, V.M.: Legal system of the USA: textbook, 2nd edn., revised and enlarged. International relations, Moscow (2006) Wardle, L.D., Nolan, L.C.: Family Law in the USA Kluwer Law International (2011) Brian Bix The Oxford Introductions to U.S. Law: Family Law Oxford University Press, 1 edn. (2013) Hamilton, V.: Principles of U.S. Family Law. Fordham L. Rev. 75, 31 (2006) Tushnet, M.V., Graber, M.A., Levinson, S.: The Oxford Handbook of the U.S. Constitution. Oxford University Press (2015) Weisberg, D.K., Appleton, S.F.: Casenote Legal Briefs for Family Law, 5 edn. Aspen Publishers (2013) Blumberg, G.G.: Legal Recognition of Same-Sex Conjugal Relationships: The 2003 California Domestic Partner Rights and Responsibilities Act in Comparative Civil Rights and Family Law Perspective. UCLA L. Rev 51 (2004)

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https://www.blunt.senate.gov/public/index.cfm/news?ID=d11e632d-a9e0-4de8-b2fc-e59818 88e2c5

Budget Limitations in the Process of Formation of the Digital Economy Aleksei V. Bogoviz1(&) , Alexander N. Alekseev2 and Julia V. Ragulina1

,

1 Federal State Budgetary Scientiﬁc Institution “Federal Research Center of Agrarian Economy and Social Development of Rural Areas – All Russian Research Institute of Agricultural Economics”, Moscow, Russia [email protected], [email protected] 2 Plekhanov Russian University of Economics, Moscow, Russia [email protected]

Abstract. The purpose of the work is to determine the influence of budget limitations on the process of the digital economy formation and to determine the perspectives of overcoming the budget limitations of the digital economy formation in modern Russia. For that, the authors use the methods of regression and correlation analysis, which allow determining the character and strength of dependence of the value of digital economy indices, which reflect the country’s readiness for digital transformation (according to the IMD), on the value of budget deﬁcits of countries of the world (according to the IMF). For ensuring the authenticity of data, the research objects are countries of the G7 and countries of BRICS. It is determined that the higher the deﬁcit of state (federal) budget, the lower the level of country’s readiness for digital transformation and the lower the progress in the digital economy’s formation. The authors ﬁnd out that high and increasing deﬁcit of the federal budget in the RF leads to serious budget limitations of the process of the digital economy’s formation, which, together with deﬁcit of private investments, is a reason for critically low planned expenditures for implementation of this process. For prevention of increase of Russia’s underrun the process of the digital economy’s formation from developed countries due to deﬁcit of ﬁnancing, the authors offer a model of overcoming the budget limitations of digital economy’s formation. This model showed perspective directions of attraction of private investments into the process of the digital economy’s formation in Russia, including involvement of small and large entrepreneurship into this process, as well as foreign investors. Keywords: Budget limitations Deﬁcit of the federal budget Digital economy Modern Russia

1 Introduction The digital economy is one of the most perspective directions of growth and innovational development of modern economic systems. Despite large market perspectives, related to growing demand for digital technologies and digital products and © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 578–585, 2019. https://doi.org/10.1007/978-3-030-00102-5_61

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determining potentially high proﬁtability of investment projects in the sphere of the digital economy, these projects usually require large state participation. Firstly, it is related to the necessity for formation and development of normative & legal provision, regulation, and infrastructure of the digital economy. Secondly, projects in the sphere of the digital economy are important for the national economic system, as they ensure support and increase of its global competitiveness in the longterm in the conditions of the global tendency of digitization. Thirdly, unprecedented novelty of the digital economy leads to high risk component of investments into the digital projects. Due to this, even with high proﬁtability, most private investors are careful with digital technologies and use them only under the condition of state support and/or state guarantees. Therefore, the state has to bear large expenditures for participation in digital investment projects. Due to this, the issues of investment support for the process of formation of the digital economy are topical for the modern economic science and practice. The working hypothesis of the research is the authors’ idea that budget limitations play an important role in the process of formation of digital economy, determining ﬁnancial possibilities for its implementation. The purpose of the work is to verify the offered hypothesis and to determine the perspectives of overcoming the budget limitations of formation of the digital economy in modern Russia.

2 Materials and Method The problem of budget limitations of modern economic systems, which includes the issues of increase and reduction of deﬁcit of the state budget and national debt, is studied in the works (Bogoviz et al. 2017b), (Caruso and Di Domizio 2017), (Fuentes Saguar and Mainar Causapé 2017), (Hayakawa and Venieris 2017), (Osipov et al. 2017), (Rösel 2017), (Trang et al. 2017), and (Trusova et al. 2017). The process of formation of the digital economy from the scientiﬁc and practical point of view is studied in the works (Bogoviz et al. 2017a), (Chakpitak et al. 2018), (Cheng and Foley 2018), (Goldstein 2017), (Teoh and Mahmood 2017), (Kravets et al. 2013), Kuznetsov et al. 2016), (Popova et al. 2015), (Przhedetskaya and Akopova 2016), (Sibirskaya and Shestaeva 2016), (Bogoviz et al. 2018a, b, c), and (Ragulina et al. 2018). At the same time, despite the large number of existing publications on the given topics, the ﬁnancial component of the process of formation of the digital economy and budget limitations are poorly studied. Here they are studied with application of the methods of regression and correlation analysis, which allow determining the character and strength of dependence of the values of indices of the digital economy, which reflect the level of the country’s readiness for implementation of digital transformation (according to the IMF), on the value of the budget deﬁcit of countries of the world (according to the IMF). For provision of authenticity of data, the objects of the research are countries of the G7 (according to the IMF, major advanced economies) and developing countries (BRICS). The research is performed on the basis of the 2017 data, which are systematized by the authors and are given in Table 1.

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Table 1. Indicators of budget limitations and the process of formation of the digital economy in the G& countries and BRICS in 2017. Index of the Budget State State digital deﬁcit, % expenditures, income, economy, of GDP % of GDP % of points GDP Canada 38.87 41.26 2.39 88.55 France 53.28 56.52 3.24 70.68 Germany 45.12 44.49 −0.63 80.68 Italy 46.64 49.07 2.43 66.64 Japan 32.55 36.53 3.97 72.86 UK 36.41 39.24 2.83 87.41 USA 31.01 35.06 4.05 94.01 Brazil 31.63 40.73 9.10 50.22 China 27.41 31.14 3.73 62.10 India 20.87 27.26 6.39 46.58 Russia 31.58 34.17 2.58 46.43 SAR 29.65 33.15 3.51 51.86 Source: compiled by the authors based on: (IMD 2018), (IMF 2018).

Index of the digital economy, position 8 28 18 30 25 9 2 44 34 51 52 42

3 Results

Digital economy index

As a result of the analysis, the following regression curve was compiled (Fig. 1).

-2.00

100.00 80.00 60.00 40.00

y = -3.5216x + 80.962 R² = 0.2355

20.00 0.00 0.00

2.00

4.00 Budget deficit

6.00

8.00

10.00

Fig. 1. Regression curve that reflects dependence of the index of the digital economy on the value of budget deﬁcit in 2017. Source: compiled by the authors.

Figure 1 shows that increase of budget deﬁcit by 1% of GDP leads to decrease of the index of digital economy in the studied countries by 3.52 in 2017 with correlation of 23.55%. This shows moderate connection (weak correlation) and negative influence of the budget deﬁcit on the country’s readiness for implementation of digital transformation. Let us view the ﬁnancial component of the process of formation of the digital economy in detail by the example of modern Russia.

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In the federal program “Digital economy of the RF”, adopted by the Decree of the Government of the RF dated July 28, 2017, No. 1632-r, two directions of attraction of private investments into the process of formation of the digital economy in modern Russia are planned (Government of the RF 2018): – implementation of 30 large (RUB 100 million) projects in the sphere of the digital economy; – implementation of 10 large ($ 3 million) projects in top-priority directions of international scientiﬁc and technical cooperation in the sphere of the digital economy. Total volume of planned private domestic investments will constitute RUB 1.71 billion, foreign investments – RUB 3 billion, which is RUB 4.71 billion in total. At that, the measures for four directions are planned for implementation of the program (ComNews 2018): – normative regulation of the digital economy: the volume of state ﬁnancing – RUB 0.284 billion, of which RUB 0.269 billion from the federal budget; – formation of research competences and technological results in the sphere of the digital economy: the volume of state ﬁnancing – RUB 50.17 billion, of which RUB 48.13 billion from the federal budget; – creation and development of the information infrastructure: the volume of state ﬁnancing RUB 436.6 billion, of which RUB 100.5 billion from the federal budget; – provision of information security: the volume of state ﬁnancing – RUB 34.04 billion, of which RUB 22.3 billion from the federal budget. That is, total volume of state investments into implementation of the program “Digital economy of the RF” should constitute RUB 221.094 billion, of which RUB 171.199 billion (77.43%) will be allocated from the federal budget. At that, the volume of private investments, which is calculated above, will constitute 2.13% of the volume of state ﬁnancing of the program. Therefore, the main load for implementation of the program “Digital economy of the RF” will be set on the state. At that, over the recent years, there has been the deﬁcit of federal budget of the RF, which dynamics for 2013-2017 are shown in Fig. 2. As is seen from Fig. 2, in 2016 the deﬁcit of the federal budget of the RF reached its maximum, constituting RUB 3,142 billion (3.659% of GDP), having increased in the nominal expression by 4 times, as compared to 2013. In 2017, the budget deﬁcit reduced slightly (by 24.31%, as compared to 2016) to 2.584% of GDP, but still exceeded the 2013 level by 3 times. Probably, the deﬁcit of federal budget became the reason that the total volume of expenditures for implementation of the top-priority federal program for formation of the digital economy in Russia constitutes 0.24% of the 2017 GDP. On average, expenditures for R&D in the global economy constitute 2.228% of GDP, in Israel – 4.27% of GDP, South Korea – 4.23% of GDP, Japan – 3.28% of GDP, etc. (World Bank 2018). Deﬁcit of ﬁnancing of the process of formation of the digital economy in modern Russia could be a reason of large increase of the terms of implementation of the corresponding federal program and impossibility to achieve target results. For solving

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3500.00 3000.00 2500.00 2000.00 1500.00 1000.00 500.00 0.00

2814.09

3142.37 2378.58

848.65 845.06

2013 2014 2015 2016 2017 (1.195% of (1.067% of (3.381% of (3.659% of (2.584% of GDP) GDP GDP) GDP) GDP) Budget deficit, RUB billion

Fig. 2. Dynamics of the deﬁcit of the federal budget of the RF in 2013-2017, RUB billion. Source: compiled and created by the authors based on: (IMF 2018).

this problem, we offer the model of overcoming the budget limitations of formation of the digital economy в modern Russia, which reflects perspective directions of attraction of alternative private investment resources for successful implementation of this process. As is seen from Fig. 3, we offer three perspective directions of overcoming ﬁnancial barriers (deﬁcit of the federal budget and private investments) on the path of formation of the digital economy in modern Russia. The ﬁrst direction is related to implementation of large domestic investment projects. Application of the mechanism of public-private partnership will allow for equal distribution of ﬁnancial load and risks between the state and private business and to provide entrepreneurial structures with access to preferential possibilities (infrastructure, R&D, etc.). The second direction is implementation of small domestic investment projects. Despite the small volume of each project separately, investment flows into development of digital technologies in their totality may reach large scale within this direction. For that, stimulation of digital modernization of domestic entrepreneurship and application of the clustering mechanism are recommended. The third direction envisages attraction of direct foreign investments into digital economy of Russia. This requires information and consultation support from foreign investors, which allows informing them on the planned and implemented investment projects in the digital sphere of the Russian economy, and creation of a competitive investment (primarily, tax regime) climate in the digital sphere. As a result, expansion of the volume and increase of the share of private investments in the process of formation of the digital economy and provision of its large-scale and quick implementation in modern Russia will be reached.

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Goal: overcoming financial barriers (deficit of the federal budget and private investments) on the path of the digital economy formation in modern Russia -information and consultation support for foreign investors; Implementation of large -creation of competitive domestic investment projects investment (primarily, tax regime) climate in the digital sphere for foreign investors. Attraction of direct foreign

investments

Implementation of small domestic investment projects

-application of the mechanism of public-private partnership.

-stimulation of digital modernization of domestic entrepreneurship; -application of the clustering mechanism.

Result: expansion of the volume and increase of the share of private investments in the process of formation of digital economy and provision of its full-scale and quick implementation in modern Russia

Fig. 3. The model of overcoming budget limitations of formation of the digital economy in modern Russia. Source: compiled by the authors.

4 Conclusions Thus, the working hypothesis was proved by the authors. It was shown by the example of developed and developing countries that the larger the deﬁcit of state (federal) budget, the lower the level of the country’s readiness for conduct of digital transformation and the lower the progress in formation of the digital economy. The authors also determined that high (2.584% of GDP in 2017) and increasing (on average by 46.25% per year in 2013-2017) deﬁcit of the federal budget in the RF predetermines serious budget limitations of the process of formation of the digital economy, which, combined with the deﬁcit of private investments, is a reason for critically low planned expenditures for implementation of this process (0.24% of the 2017 GRP for seven years – 2018-2014). For preventing the growth of Russia’s underrun in the process of formation of the digital economy from developed countries of the world due to deﬁcit of ﬁnancing, the authors offer a model of overcoming the budget limitations of formation of the digital economy. This model shows perspective directions of attraction of private investments into the process of formation of the digital economy in Russia, including involvement of domestic small and large entrepreneurship, as well as foreign investors. A certain limitation of this model is the framework character of these perspective directions and possible tools of their practical implementation. That’s why during further studies on the basis of the performed work it is recommended to develop a practical strategy of overcoming the budget limitations of formation of the digital economy in modern Russia, which adapts the offered model to current peculiarities of

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economic activities and reflects the described measures that are to be implemented by state regulators. Acknowledgments. The research was performed with ﬁnancial support of the RFBR within the project No. 18-07-00275.

References Bogoviz, A.V., Bolonin, A.I., Lobova, S.V.: State audit as a mandatory condition of budget policy effectiveness. Advances in Intelligent Systems and Computing, vol. 622, pp. 65–70 (2018a) Bogoviz, A.V., Prokoﬁev, M.N., Yaroshchuk, A.B.: Recommendations for conduct of state audit of the budget policy in modern Russia. Espacios 38(57) (2017a) Bogoviz, A.V., Ragulina, Y.V., Komarova, A.V., Bolotin, A.V., Lobova, S.V.: Modernization of the approach to usage of region’s budget resources in the conditions of information economy development. Eur. Res. Stud. J. 20(3), 570–577 (2017b) Bogoviz, A.V., Ragulina, Y.V., Sirotkina, N.V.: Systemic contradictions in development of modern Russia’s industry in the conditions of establishment of knowledge economy. Advances in Intelligent Systems and Computing, vol. 622, pp. 597–602 (2018b) Bogoviz, A.V., Sozinova, A.A., Ostrovskaya, V.V.: Approaches to managing economic growth of socio-economic systems. Stud. Syst. Decis. Control 135, 131–137 (2018c) Caruso, R., Di Domizio, M.: Military spending and budget deﬁcits: the impact of US military spending on public debt in Europe (1988–2013). Def. Peace Econ. 28(5), 534–549 (2017) Chakpitak, N., Maneejuk, P., Chanaim, S., Sriboonchitta, S.: Thailand in the era of digital economy: how does digital technology promote economic growth? Studies in Computational Intelligence, vol. 753, pp. 350–362 (2018) Cheng, M., Foley, C.: The sharing economy and digital discrimination: the case of Airbnb. Int. J. Hosp. Manag. 70, 95–98 (2018) ComNews. Four direction of “digital economy” received road maps (2018). https://www. comnews.ru/content/111209/2018-01-10/chetyre-napravleniya-cifrovoy-ekonomiki-poluchilidorozhnye-karty. Accessed 9 Apr 2018 Fuentes Saguar, P.D., Mainar Causapé, A.J.: A social accounting matrix approach to appraise sectors with a zero deﬁcit public budget. Rev. Galega Econ. 26(2), 89–96 (2017) Goldstein, H.: Editorial: the digital economy act and statistical research. J. R. Stat. Soc. Ser. A Stat. Soc. 180(4), 945–946 (2017) Hayakawa, H., Venieris, Y.P.: The invisible hand of rent seeking: capitalism, democracy, and the budget deﬁcits. J. Rev. Glob. Econ. 6, 380–394 (2017) IMD. World digital competitiveness ranking 2017 (2018). https://www.imd.org/wcc/worldcompetitiveness-center-rankings/world-digital-competitiveness-rankings-2017/. Accessed 9 Apr 2018 IMF. Revenues and expenditures of state budgets of the G7 countries and BRICS in 2017 (2018). imf.org. Accessed 9 Apr 2018 Kravets, A.G., Gurtjakov, A.S., Darmanian, A.P.: Enterprise intellectual capital management by social learning environment implementation. World Appl. Sci. J. 23(7), 956–964 (2013) Kuznetsov, S.Y., Tereliansky, P.V., Shuvaev, A.V., Natsubize, A.S., Vasilyev, I.A.: Analysis of innovate solutions based on combinatorial approaches. ARPN J. Eng. Appl. Sci. 11(17), 10222–10230 (2016)

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Osipov, V.S., Bykanova, O.A., Akhmadeev, R.G., Kosov, M.E., Bogoviz, A.V., Smirnov, V.M.: External debt burden and its impact on the countries’ budgetary policy. J. Appl. Econ. Sci. 12 (2), 342–355 (2017) Popova, L., Litvinova, T., Ioda, E., Suleimanova, L., Chirkina, M.: Perspectives of the growth of economic security by clustering of small innovational enterprises. Eur. Res. Stud. J. 18 (Special issue), 163–172 (2015) Przhedetskaya, N.V., Akopova, E.S.: Imperative of state in the process of establishment of innovational economy in the globalizing world. Eur. Res. Stud. 19(2), 79–85 (2016) Ragulina, Y.V., Bogoviz, A.V., Alekseev, A.N.: Modeling the management of innovational processes in regional economy. Advances in Intelligent Systems and Computing, vol. 622, pp. 568–573 (2018) Rösel, F.: The political economy of ﬁscal supervision and budget deﬁcits: evidence from Germany. Fiscal Stud. 38(4), 641–666 (2017) Sibirskaya, E.V., Shestaeva, K.A.: The contents of innovative in the Russian Economy. In: Lula, P., Pojer, T. (eds.) Knowledge - Economy - Society. Contemporary Aspects of Economic Transformation, pp. 27–37. Cracov Uniwersity of Economics, Krakow, Poland (2016) Teoh, C.S., Mahmood, A.K.: National cyber security strategies for digital economy. J. Theor. Appl. Inf. Technol. 95(23), 6510–6522 (2017) Trang, N.T.N., Tho, T.N., Hong, D.T.T.: The impact of oil price on the growth, inflation, unemployment and budget deﬁcit of Vietnam. Int. J. Energy Econ. Policy 7(3), 42–49 (2017) Trusova, N.V., Kalchenko, S.V., Tsap, V.D., Ternovsky, V.A., Levchenko, O.P.: Restrictions of ﬁnancing the budget deﬁcit of Ukraine. Int. J. Econ. Res. 14(14), 353–364 (2017) World Bank. Research and development expenditure (% of GDP) (2018). https://data.worldbank. org/indicator/GB.XPD.RSDV.GD.ZS?view=chart&year_high_desc=true. Accessed 10 Apr 2018 Government of the RF. Decree dated July 28, 2017, No. 1632-r regarding adoption of the program “Digital economy of the Russian Federation” (2018). http://static.government.ru/ media/ﬁles/9gFM4FHj4PsB79I5v7yLVuPgu4bvR7M0.pdf. Accessed 9 Apr 2018

Circumstances Mitigating Punishment in the Russian Criminal Law Lyudmila A. Spektor ✉ , Anna A. Kulikova, Aleksandr V. Sukhanov, and Aleksei A. Shishkin (

)

Institute of the Service Sphere and Entrepreneurship (Branch) of Don State Technical University, Shakhty, Russia [email protected]

Abstract. The research is aimed at solving the conceptual problems of legal regulation of the general principles of the imposition of punishment with due consideration of circumstances mitigating punishment. Circumstances mitigating punishment are formalized in Article 62 of the Criminal Code of the Russian Federation, which is called “The imposition of punishment in the presence of the mitigating circumstances”, and in point of fact is an institute promoting the posi‐ tive post-crime behavior. This Article describes the institute of mitigating circum‐ stances in general; it was examined from the perspective of formal logic - the deﬁnition of concepts that serve as its constituent elements is provided, the nature and the essence of this institute have been identiﬁed. The methodological basis of the research is composed of: philosophical (universal) methods (metaphysical and dialectical); general scientiﬁc methods (observation, comparison, descrip‐ tion, deduction, induction, analysis, synthesis, abstraction, generalization, ideal‐ ization, analogy, modeling, system approach, structured functional, postulatory and other methods); speciﬁc scientiﬁc methods (statistical, historical, speciﬁc sociological, etc.); private-law (strictly legal) methods (technical and compara‐ tive legal). This Article contains the analysis of the institute of mitigation of punishment, its concept and its functions, the classiﬁcation of circumstances mitigating punishment has been presented. The authors have analyzed the circum‐ stances mitigating punishment, are formalized in the General Part of the Criminal Code of the Russian Federation, their correlation with privileged circumstances. Keywords: Circumstances mitigating punishment · Punishment Criminal responsibility · Individualization of punishment Privileged circumstances

1

Introduction

One of components of just punishment is its individualization, and the main instruments of individualization of punishment in the Russian criminal law are the institutes of circumstances mitigating and aggravating punishment. At the same time, consideration must be given to the fact that the institute of mitigating circumstances, due to incentive character of its standards, is not only the means of individualization of punishment, but the instrument of criminal policy that is able to make a considerable impact on the © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 586–602, 2019. https://doi.org/10.1007/978-3-030-00102-5_62

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behavior of the subject of crime. Having realized this, the lawmaker formalized in the Criminal Code the circumstances that entail mandatory mitigation of punishment. In modern criminal law, the circumstances mitigating punishment are formalized in the General Part; this is not to say, however, that their role is limited to the impact on the imposition of punishment. The mitigating circumstances come into play in the diﬀerentiation of criminal responsibility and in the application of doctrines of liberation from criminal responsibility; in addition, some of them are used in the Special Part during the formation of particular constituent elements of an oﬀence or their variety. At the present time, the Criminal Code of the Russian Federation contains no concept of circumstances mitigating punishment, which makes it diﬃcult to understand their legal nature and essence. The deﬁnition of the concept of mitigating circumstances is of great importance for the understanding and improvement of the Russian legislation. In order to deﬁne the concept and understand its essence one should primarily iden‐ tify its semantic value. Semantically, the verb “mitigate” means “weaken” “moderate”. In other words, to mitigate means to lower the strength or activity of something, to reduce or limit some phenomenon. In order to mitigate the punishment, there must be circum‐ stances which make it possible to do this. A circumstance is a phenomenon which accompanies some other phenomenon or related to it, or these are the circumstances that deﬁne the state or the existence of some‐ thing. Legal literature contains an opinion according to which the circumstances that are applicable to the criminal case are treated as “a part of all those things that characterize an oﬀence”, and that mitigating circumstances impact social danger of the act. This opinion has some basis in legislation. In accordance with Article 6 of the Criminal Code of the Russian Federation, the punishment must correspond to the nature and the level of social danger of oﬀence, the circumstances of its commitment and the identity of the oﬀender. However, in the deﬁnition presented above, the circumstance bears to the oﬀence, but not to the concept of the identity. However, the content of the concept “circumstance” is signiﬁcantly narrowed with this deﬁnition. In this case, it includes all that characterized an oﬀence, but this does not come down to it. Thus, the following types which belong to the positive post-crime behavior are formalized in Subparagraphs “j” and “k” of Part 1 of Article 61 of the Criminal Code of the Russian Federation. They are outside the scope of the commission of oﬀence, but the lawmaker designates them as circumstances. Hence, the concept “circumstances mitigating punishment” is broader than the concept “the circumstances of the oﬀence”. In this regard, Kruglikov, L.L. proposes to deﬁne mitigating circumstances as objective and subjective factors relating to the oﬀence and/or to the identity of the oﬀender that are indicative of the higher or lower level of social danger of an oﬀence and the identity of the oﬀender, or characterize the identity only. The analysis of standards of the criminal legislation shows how the legal nature of mitigating circumstances is perceived by the lawmaker. That said, it is necessary to bear in mind that genuine legal nature and its reﬂection in law by no means always coincide.

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It is extremely important to understand and take into consideration its social and histor‐ ical nature in the formalization of a particular phenomenon in law. We should strive to make the law reﬂect the real nature of this phenomenon as fully as possible.

2

Research Data and Methods

The methodological basis of the research is composed of: philosophical (universal) methods (metaphysical and dialectical); general scientiﬁc methods (observation, comparison, description, deduction, induction, analysis, synthesis, abstraction, gener‐ alization, idealization, analogy, modeling, system approach, structured functional, postulatory and other methods); private-law (strictly legal) methods (technical and comparative legal). The theoretical basis of the research is composed of the articles of famous scientist in the ﬁeld of criminal law: Alikperov, Kh.D., Bazarov, R.A., Borodin, S.V., Braynin, Y.M., Galiakbarov, R.R., Galperin, I.M., Dagel, P.S., Durmanov, N.D., Egorov, V.S., Zvecharovskiy, N.E., Ignatov, A.N., Karpets, I.I., Kriger, G.A., Kruglikov, L.L., Krutikov, L.L., Kovalev, M.I., Koniakhin, V.P., Korobkov, G.D., Kuznetsova, N.F., Kurinov, B.A., Lesnievski-Kostareva, T.A., Melnikova, Y.B., Miasnikov, O.A., Naumov, A.V., Panko, K.A., Sabanin, S.N., Sabitov, R.A., Savkin, A.V., Santalov, A.I., Stanovskiy, M.N., Tagantsev, N.S., Tishkevich, I.S., Foynitskiy, I.Y., Chechel, G.I., Chugaev, A.P., et al. The regulatory basis of the research is made of the Criminal Code of the Russian Federation.

3

Findings

3.1 Functions of Circumstances Mitigating Punishment A generally accepted position is that the circumstances mitigating punishment set out in the list of Article 61 of the Criminal Code exercise two functions: obliging and orienting. The criminal law standards of Article 61 of the Criminal Code, being manda‐ tory, must be adopted by the court in delivering judgment with respect to the oﬀenders, due to which the court may not disregard mitigating circumstances in the imposition of punishment. The discretion of the court is manifested only in determining what impact on the imposed punishment is made by the presence of a mitigating circumstance or their aggregate. The second function is orienting. After a sort of circumstances listed in this Article, the court may recognize other similar circumstances as mitigating circumstances and take them into consideration in the imposition of punishment based on the right provided to it by Part 2 of Article 61 of the Criminal Code. As shown in practice, the courts are using this opportunity rather actively. The circumstances that are most often taken into consideration as mitigating circumstances include job inexperience and the lack of necessary skills as a condition which contributed to the commission of oﬀence, the absence (or insigniﬁcant amount) of harm, the poor

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state of health of the person being condemned, his/her mental retardation (not excluding responsibility), disability, having dependent relatives, certiﬁcate of good conduct of the person before and after the commission of oﬀence (in the family, at home, at work), his/ her former merits (labor awards, participation in the defense of Fatherland), advanced age, etc. At the same time, it should be noted that general principles of the imposition of punishment are subordinated to the task of maximum individualization of punishment. This means determining the measure and the amount of just punishment under the law, corresponding to the nature and the level of social danger of the committed oﬀence and the identity of the oﬀender which ensures achieving the goals related to the redemption of a criminal, as well as prevention of the commission of new oﬀences, both by the convicted and others. In our opinion, such mitigating circumstances as helping the investigation and providing medical and other assistance to the victim are inherently incentive and fulﬁll the third function of circumstances mitigating punishment – incentive. The mitigating circumstances are a means of concrete deﬁnition of the nature and the level of social danger of the committed act and the identity of the oﬀender; they signiﬁcantly reduce the level of social danger of the committed act and (or) the identity of the oﬀender, and, in this regard, regulate the matters related to the imposition of a legal, reasonable and fair punishment. The presence of mitigating circumstances is indicative of the lower level of danger of the oﬀender and gives ground to the court to impose less severe punishment, i.e. closer to its minimum, or a minimum punishment within the scope of sanction of Article according to which an oﬀence is treated. The punishment can be mitigated within the framework of a single type of punishment in the imposition of a diﬀerent, milder type of punishment in case of alternative sanction. In exceptional cases, these circumstances may serve as a basis for the imposition of a milder punishment compared to the punish‐ ment provided for in legislation (Article 64 of the Criminal Code) for conditional sentence (Article 73 of the Criminal Code). The imposition of punishment with due consideration of mitigating circumstances is determined by the court in each speciﬁc case on the basis of all case ﬁles relating both to the act and to the identity of the oﬀender. 3.2 Correlation between Circumstances Mitigating Punishment Formalized in the General Part of the Criminal Code of the Russian Federation and Privileged Circumstances Formalized in Articles of the Special Part of the Criminal Code of the Russian Federation Two types of mitigating circumstances are distinguished in theory of criminal law: (1) that serve as constituent elements of an oﬀence and impact the labeling process (provided for in the Special Part of the Criminal Code) (2) that do not serve as constituent elements of an oﬀence which impact the measure of punishment (provided for in the General Part of the Criminal Code). Such a division is possible on the basis of the norms of the Criminal Code, since the mitigating circumstances received diﬀerent functional purpose in the criminal law.

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Considering the location of a particular group of mitigating circumstances in the Crim‐ inal Code, they can be conditionally called as follows: (a) common (being the instrument of individualization of punishment) and (b) special (serving as a means of diﬀerentiation of criminal responsibility). The circumstances that are contained in Chapter 10 of the Criminal Code belong to the category of circumstances-means of individualization of punishment by the court. The circumstances that characterize the acts of the accused and his/her identity resulting from these acts shall be treated as privileged circumstances. The speciﬁed circumstances in semantics shall be understood as the facts and occur‐ rences related to this phenomenon that accompany it and make it more speciﬁc; in logic – the aggregate of speciﬁc conditions or the conditions that are signiﬁcative of the state, the status of something. Hence, only such circumstances that are directly related to the committed act, as well as the identity of the oﬀender and are somehow related to the committed oﬀence, can serve as privileged circumstances. The social nature of privileged circumstances is taken into consideration in the crim‐ inal law. Thus, “the lawmaker selects in each case those circumstances that particularly strongly impact the social danger of this oﬀense, and speciﬁes special constituent elements along with the rest on the basis of them.” The presence of this social charac‐ teristic explains why exactly these circumstances were selected as a means of diﬀeren‐ tiation of responsibility out of the number of those related to the oﬀence and the identity of the oﬀender. Partial coincidence of names and the contents of mitigating and privileged circum‐ stances poses to scientists and practitioners the question of the correlation of the groups of circumstances under consideration. Diﬀerent opinions on this matter can be found in legal literature. Melnikova, Y.B. believes that the nature of privileged circumstances is uniﬁed with the nature of miti‐ gating circumstances provided for in the General Part of the Criminal Code. At the same time, for example, Dolinenko, L.A. believes that “mitigating circumstances, being indi‐ cated in the Special Part of the Criminal Code, perform a speciﬁc function: they result in the creation of a variety of the constituent elements of an oﬀence, and, accordingly, to the deﬁnition of a diﬀerent sanction, a diﬀerent “speciﬁc” punishment. Taking into account this role, mitigating circumstances in these cases are special characteristics of the constituent elements of an oﬀence, i.e. they change into another type.” This explained viewpoint was subjected to a considerable amount of criticism by many experts. In our opinion, the position of opponents of combining mitigating circumstances looks more convincing. However, certain advantages are present in the arguments of each side. In order to arrive at the correct answer to the question raised, it is necessary to identify the social foundation which stipulates the selection of one of the two forms of their legalization in the Criminal Code by the lawmaker. Considering the origin of various types of mitigating circumstances, we come to the conclusion about the uniformity of their occurrence. Criminalization of an act is based on the isolation of common signiﬁcant and distinctive features - functional constituent elements that reveal the essence of an act as an independent type of criminal behavior.

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In such a case, privileged constituent elements are left aside and are not taken into consideration in the formation of the concept of an oﬀense. However, the lawmaker cannot disregard them completely, since the constituent element of oﬀense represents the personality of the oﬀender. Positive traits of a person, not reﬂected in the criminal act, are taken into consideration as well. In order to ensure justiﬁed and uniform appli‐ cation punishment of criminal legislation in practice, the lawmaker secures the circum‐ stances that should be used as mitigating and qualiﬁcatory respectively in the General Part and in the Special Part of the Criminal Code. The presence of privileged circumstances in addition to functional circumstances changes the social perception of an oﬀence, - its social danger decreases. Hence, in this case, a special group of characteristics emerges, combined by the ability to reduce the level of social danger of an oﬀence. This property of the speciﬁed characteristics in legal terms means that in order to achieve the goals of justice, the law regulates the application of milder punitive measures to a person who committed a crime under such circumstances. Hence, there is a suﬃcient number of coincidences that lead researchers to think about the unity of mitigating and privileged circumstances constituent elements, as well as their legal nature. In this regard, it is necessary to determine the existence of diﬀer‐ ences that would give grounds for a clear distinction of the compared phenomena, and also to ﬁnd out how much they are essential. Since the criminal law does not contain any clear deﬁnition of mitigating circumstances, during legal formalization of oﬀences, they are in diﬀerent status. In this regard, Kruglikov, L.L., for example, emphasizes that privileged circumstances are included in the constituent elements of an oﬀense and serve as its characteristics, whereas the circumstances mitigating punishment do not, with all the consequences arising from this. Such an approach is visible in the opinions of the majority of criminal lawyers, therefore it can be called generally accepted. Hence, the nature of privileged circumstances is dual. On the one hand, they serve as constituent elements of an oﬀence, they are naturally endued with a certain set of traits of its characteristics. They are able to inﬂuence the classiﬁcation of the committed act, which creates a new sanction which is reﬂective of the entire speciﬁc character of application of a particular criminal law standard. On the other hand, these circumstances are mandatory in terms of the need and adequacy of characteristics for recognition of a particular socially dangerous act as an oﬀence, they form a certain addition to the char‐ acteristics of the main constituent elements. The dual legal nature of these circumstances is manifested in the fact that they: (a) are the constituent elements of an oﬀence; (b) are a necessary addition to the main constituent elements of an oﬀense. These circumstances are used by the lawmaker for the creation of a less dangerous variety of an act, and, accordingly, for the deﬁnition of new punishability limits in the law, i.e. mitigated compared to the one established for the main constituent elements of an oﬀence. Consequently, privileged circumstances serve as a means of diﬀerentiation of responsibility in the criminal law. The diﬀerences between the mitigating circumstances in the General and Special Parts of the Criminal Code are primarily caused by the fact that circumstances mitigating punishment, are formalized in the General Part of the Criminal Code, are not the

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characteristics of a particular constituent elements of an oﬀence, while mitigating circumstances in the General Part are able to make an impact on the designation of a particular degree of social danger of an oﬀence and the identity of the oﬀender, and, accordingly, on the type and amount of punishment within the scope of sanction provided for a particular type of crime (the measure of punishment within the scope of sanction of Article), mitigating circumstances of the Special Part exercise a diﬀerent speciﬁc function, since they belong to a number of circumstances of the constituent elements of an oﬀence. The latter, in the aggregate with other circumstances form a qualitative characteristic of an oﬀence described in Articles of Special Part of the Crim‐ inal Code, such mitigating circumstances result in the creation of a variety of the constit‐ uent elements of an oﬀence, and, accordingly, to the deﬁnition of a diﬀerent sanction, becoming the special constituent elements. Hence, mitigating and privileged circumstances have diﬀerent legal status, i.e. perform various functions. One should accept the opinion of Kruglikov, L.L. and other experts identifying and emphasizing the property of privileged circumstances to serve as a means of diﬀerentiation of criminal responsibility. The lawmaker uses them for the creation of a less dangerous variety of an act. The problem to be solved consists in the legalization of a new milder sanction in each speciﬁc case rather than in the construction of constituent elements of oﬀences, the representation of facts that change the classiﬁ‐ cation of the committed act. The circumstances mitigating are quite diﬀerent: they ensure the process of indi‐ vidualization of punishment. At the same time, it should be borne in mind that this statement contains some conventionality in view of the fact that many privileged constit‐ uent elements in real oﬀences are manifested in a broad range of their severity. Naturally, the court in the imposition of punishment ﬁnds out and takes into consid‐ eration a particular expression of privileged circumstances, which makes them similar to the means of individualization of punishment. As for the second group of factors, than consideration of circumstances mitigating punishment in determining the qualitative and quantitative parameters of punishability for the oﬀences suggests their eﬀect of diﬀer‐ entiation of responsibility. However, there are no grounds to additionally attribute the revealed special features to the functions of privileged and mitigating constituent elements, respectively, since these features are auxiliary in terms of their eﬀect; they are not main; they do not designate their role. Privileged constituent elements, similar to qualiﬁcatory constituent elements, are meant for diﬀerentiation of criminal responsibility, are associated with the entire complex of penal consequences of an oﬀence, and not with punishment alone. At the same time, it should be noted that the ability to serve as a means of individualization of punishment is not inherent in all privileged constituent elements. Hence, it is not their distinctive feature in general. Mitigating circumstances, on the contrary, make an impact on punishment only and cannot diﬀerentiate responsibility as such. The application of a new sanction is caused speciﬁcally by privileged or qualiﬁcatory circumstances. The mitigating circumstances, by contrast, are reﬂected in it, correcting partly its content to the extent that they should be taken into consideration in the imposition of punishment.

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The functional diﬀerence between the mitigating circumstances was fairly accurately explained by Kruglikov, LL, who believes that a particular factor possessing a multitude of traits equally relating it to circumstances and those of the General and Special Parts of the Criminal Code is capable of have a various impact on the assessment of criminal acts. Being inherent in a particular group of oﬀences, it “is indicative of signiﬁcant reduction of the level of danger of the committed act and the identity”. Therefore, it is classiﬁed as a list of circumstances mitigating punishment. “At the same time, in certain types of crime… its impact on social danger is abruptly reduced and particular impact on social danger… can be explained by the speciﬁc character of a particular type of crime, of those characteristics, which this factor “comes into contact” with, “they seem to create a background against which the impact… on the level of danger is the most prominent.” Being a distinctive feature of such oﬀenses, it becomes a qualiﬁcatory constituent element. Thus, the similarity between mitigating and privileged circumstances consists in their interrelation with the committed oﬀence and the identity of the oﬀender which makes an impact on the volume of responsibility and the amount of punishment. Inference should be drawn that privileged circumstances are very similar to miti‐ gating circumstances in terms of orientation of eﬀect, i.e. they improve the state of a person who committed the socially dangerous act. The revealed similarities of the compared circumstances can be supplemented with several new similarities. Both priv‐ ileged constituent elements and elements mitigating punishment mitigate not only the level of harm caused by the oﬀense, but also an indicator of social danger of the identity of the oﬀender; either create this reduction in a mandatory (unconditional) way; besides, either are endowed with a strictly deﬁned orientation of eﬀect. However, a similar orientation of mitigating circumstances formalized in the General Part of the Criminal Code, and privileged circumstances, doesn’t aﬀord ground for drawing a conclusion about the uniformity of their legal nature. The investigation of legal nature of mitigating circumstances shows that privileged circumstances have distinctive characteristics compared to the mitigating circumstances formalized in the General Part of the Criminal Code both in terms of their essence and in terms of distinctive features. Qualiﬁcatory constituent elements acquire the meaning of the means of diﬀerentiation of criminal responsibility, and mitigating circumstances acquire the meaning of the means of individualization of punishment. The fulﬁllment of these functions emphasizes their isolation from each other, which does not allow them to be confused and, even more so, to identiﬁed. One of prerequisites for the formulation of a qualitative concept is the accuracy of the terminological designation of the phenomenon. The name should adequately repro‐ duce in consciousness the objective essence of the real-world processes reﬂected by the concept, excluding an expanded or limited perception of the scope of their actions and functions. It has for a long time been debated in the science of criminal law about what is aﬀected by mitigating circumstances, what they mitigate – guilt, responsibility or punishment. Given the eﬀect of circumstances under investigation, it is the punishment

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that serves as the object of mitigation; that’s why in the criminal law it would be right‐ fully to talk about circumstances mitigating punishment which is reﬂected in current criminal legislation. In order to obtain the scientiﬁcally grounded concept of circumstances mitigating punishment, the study of their legal nature alone is not enough. One should carry out a comprehensive analysis. First, one should associate the concept under investigation with the related legal concepts and principles of criminal law; second, one should analyze the relevant criminal law standard in terms of its position in legislative system, identify its correlation with other standards and institutes of criminal law. It is important to deﬁne the position of “mitigating circumstances” as a core element of criminal law system. The need for such an analysis is caused by the very fact of availability of circum‐ stances mitigating punishment as a criminal law phenomenon, the completeness of the perception of which depends on the deﬁniteness of its intra-branch status. In research studies on this topic, the standards regulating the mitigating circum‐ stances are endued with the value and the properties of the institute of criminal law. Thus, Krasikov, Y.A. designates mitigating circumstances as an institute; he provides no facts to substantiate his statement however. The justiﬁcation for the above aspect should be based on general-theoretical pilot projects. System approach to the analysis of law involves not only its division into the branches of law, but also further diﬀerentiation inside the branches into institutes, subinstitutes and standards regulating qualitatively homogeneous social relations. It should be emphasized that there is no unanimity of opinion on the deﬁnition of the content of a legal institution in Russian law in the ﬁeld of theory of law. Discussions are held around this concept and they can be conveniently classiﬁed into two groups. The ﬁrst group is based on the opinion of Alexeev, S.S., according to which legal institute is a set of legal standards within the branch of law, which provides for a comprehensive independent regulation of a group of social relations or the implemen‐ tation of a special function in this regulation, containing in it a speciﬁc legal formation, separate general provisions, principles, and generally isolated within the normative act as a chapter or another heading. Lazarev, V.V. deﬁnes the institute of law as the main element of the system of law which constitutes the aggregate of legal standards with the following distinctive features: (1) uniformity of the actual content; (2) legal unity of standards; (3) normative apartness; (4) completeness of governed relations. The absence of shared vision of the content of concept of legal institute in the studies on the theory of law could not but aﬀect the stability and validity of the application of this concept in the science of criminal law. The point of view of Klenova, T.V., who believes that “one may talk about the institutes of the General Part and the Special Part with a certain degree of convention‐ ality”; “the standards and individual prescriptions of law belonging to the same institute are generally stipulated in Articles of both the General Part and the Special Part of the Criminal Code of the Russian Federation”, is especially noteworthy. As for the concept of the institute of the General Part, one should accept the deﬁnition provided by Koniakhin, V.P. “The institute of the General Part of criminal law – is a structural element of criminal law system formalized in a particular Article, group of

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Articles, Chapter or Section of the General Part of Criminal Law which presents the aggregate of regulatory prescriptions designed to regulate a separate group of relations occurring in connection with or as a result of the establishment of the most general conditions (characteristics) of punishment and punishability of socially dangerous acts”. A detailed study of standards relating to circumstances mitigating, allowed identi‐ fying the following characteristics: (a) formalization of circumstances mitigating punishment, in the group of Articles of the General Part of the Criminal Code, mainly in the same Section (Section III. Punishment). The following has been identiﬁed: the list of circumstances mitigating punishment (Part 1 of Article 61 of the Criminal Code); consideration of them in the imposition of punishment (Part 3 of Article 60 of the Criminal Code) and in determining the conditional sentence (Part 2 of Article 73); special aspects of their consideration (Part 2 of Article 61 of the Criminal Code); prohibition of a “dual” consideration of mitigating circumstances (Part 3 of Article 61 of the Criminal Code); rules for the imposition of punishment in the presence of mitigating circum‐ stances (Article 62 of the Criminal Code); alternative regulations designed for regulation in special situations (Part 2 of Article 64); (b) circumstances mitigating punishment, present the aggregate of regulatory prescrip‐ tions designed for regulation of a separate group of relations occurring due to the imposition of just punishment within the scope of sanction. One should accept the opinion of Koniakhin, V.P. who proposed the classiﬁcation of the institutes by the degree of normative generalization qualifying the institute of circumstances mitigating punishment as a speciﬁc institute. That is, the institute of circumstances mitigating punishment is a speciﬁc institute of the General Part of the Criminal Code, since it corresponds to the uniﬁcation of the regulatory prescriptions formalized at the level of Articles within Chapter 10 of the Criminal Code, “Imposition of punishment”. Thus, the criminal law standards relating to circumstances mitigating punishment, in its aggregate form an independent speciﬁc institute of the General Part of the Criminal Code that is a signiﬁcant and integral component of a generic institute of the imposition of punishment and a speciﬁc institute of punishment in general. It should be emphasized that, in a narrow sense, the institute of circumstances mitigating punishment covers only general and special rules for the imposition of punishment, regulating its mitigation in the Criminal Code (Articles 60, 61, 62, 64, 65, 67, 68). In a broad sense, the institute of circumstances mitigating punishment as an institute of the Russian criminal law can be presented as a system of general and special rules for the imposition of punishment speciﬁed in Chapter 10, as well as standards speciﬁed in other Criminal Codes stipulating the criteria and the limits for the imposition of punishment in the presence of the miti‐ gating circumstances on persons found guilty in the commission of an oﬀence. In a special research dedicated to qualiﬁcatory circumstances, Lesnievski-Kostareva, T.A., proves the conclusion about the formation of a functional comprehensive institute of qualiﬁcatory (and privileged) constituent elements in the criminal law. The basic function of qualiﬁcatory (and privileged) circumstances consists in diﬀerentiation of criminal responsibility, that’s why, according to the author, it is the one that forms the

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structure of qualiﬁcatory constituent elements and determines the directions for its development. In her later work Lesnievski-Kostareva, T.A. classiﬁes the following items as the properties of criminal law institute: (a) availability of an independent subject of legal regulation and a single function; (b) availability of plurality, a set of legal norms; (c) legal unity of standards under consideration; (d) legal implementation or legislative separation of standards. While we accept the author’s opinion regarding the fact that qualiﬁcatory constituent elements form an independent institute in the criminal law, please note that in contrast to the basic function of qualiﬁcatory constituent elements, mitigating circumstances as such form the means of individualization of punishment by the court. This diﬀerence in criminal law meaning of mitigating and qualiﬁcatory circumstances does not allow us to talk about the unity of their structural and branch aﬃliation, and, accordingly, to recognize the existence of a single institute of mitigating circumstances of the General and Special Parts of the Criminal Code. In scientiﬁc research, there is an opinion according to which circumstances miti‐ gating and aggravating punishment are treated as a uniﬁed institute of criminal law. It is not possible to concur in this point of view due to the following reasons. Unlike qualiﬁcatory circumstances and so-called “privileged” circumstances uniform in nature and diﬀering only in their eﬀect, the nature of circumstances mitigating punishment is more complex when compared to the nature of aggravating circumstances. Their list is public and includes the factors that are not directly reﬂected in the committed acts. It is associated with the implementation of the principle of humanity and the solution of the issue of correction of the convict, prevention of the commission of new oﬀences by him/ her in the criminal law. Therefore, circumstances mitigating and aggravating punish‐ ment form two independent institutes of criminal law. However, within the framework of mitigating and aggravating circumstances – constituent elements of oﬀence (qualiﬁ‐ catory constituent elements), one may talk of their common nature and similarity or their legal status (except for orientation of eﬀect). Hence, mitigating circumstances in the criminal law represent two independent institutes: (1) circumstances mitigating punishment (provided for in the General Part of the Crim‐ inal Code of the Russian Federation) that which serve as a means of individuali‐ zation of punishment; (2) circumstances that serve as constituent elements of particular oﬀences (provided for in the Special Part of the Criminal Code) that serve as a means of diﬀerentiation of criminal responsibility. 3.3 Goals of Circumstances Mitigating Punishment Mitigating circumstances are provided for in the Criminal Code for the following objec‐ tives. The ﬁrst objective of circumstances mitigating punishment formalized in Part 1 of Article 61 of the Criminal Code, consists in the fact that depending on the judgment they mitigate punishment in case of its individualization. The second objective that is pursued by the lawmaker in case of inclusion of these circumstances as mandatory

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characteristics of constituent elements of a number of oﬀences is to identify the oﬀences with the smaller degree of social danger (compared to the main constituent elements of an oﬀence) and reﬂect it in sanction of a criminal law standard in the form of a milder punishment. Circumstances mitigating punishment are interrelated with the committed oﬀence, as well as with the identity of the oﬀender, and have an impact on the volume of respon‐ sibility and the amount of punishment and improve the state of the oﬀender. In spite of “similar orientation” of mitigating circumstances formalized in the General Part of the Criminal Code, and circumstances that serve as constituent elements of an oﬀence; nevertheless, they have diﬀerent legal nature. Consideration of mitigating circumstances is a constituent part and at the same time a stage of individualization of punishment which in the criminal law science is deter‐ mined as a “principle that consists in consideration of the nature and the level of social danger of the committed oﬀence, the identity of the oﬀender, aggravating and mitigating circumstances that make it possible to successfully manage to ultimately achieve correc‐ tion and re-education of the oﬀender through punishment, as well as to prevent the commission of new oﬀences both by the convicted and by another person”. Melnikova, Y.B. notes that the individualization of punishment involves, on the one hand, imposition of just punishment commensurable with the gravity of oﬀence and social danger and the identity of the oﬀender, and on the other hand – identifying the measure of a criminal law impact that would contribute to the implementation of punish‐ ment goals to the greatest possible extent. Given the fact that the process of individu‐ alization of punishment shall mean the selection by the court of such type and amount of punishment in accordance with law which would correspond to the nature and the level of social danger of the committed oﬀence, the data that characterizes the identity of the oﬀender, mitigating and aggravating circumstances provided for in Article 61 and Article 63 of the Criminal Code, it is important to bear in mind that the individualization process is inextricably linked with the consideration of mitigating and aggravating circumstances. The point of introduction of circumstances mitigating punishment to the criminal legislation, according to Kruglikov, L.L., consists in the reﬂection of their connection with the committed act, with the guilt, with social danger of the committed act and the identity, and in the aspiration of the lawmaker to make the process of indi‐ vidualization of punishment more speciﬁc; therefore, the area of the imposition of punishment is a traditional area of application of mitigating circumstances. One should accept the opinion of Traynin, A.N. who notes that the individualization of punishment is certainly not a ﬁeld of legislation, but a ﬁeld of judge only. During the imposition of punishment, the court primarily takes into consideration the degree of social danger of an oﬀence. According to Brainin, Y.M., “the degree of social danger is an identifying characteristic that is signiﬁcative of gravity of a particular oﬀence”. Hence, the degree of social danger is dictated by various circumstances of the committed act relating to various constituent elements of an oﬀence. That’s why circum‐ stances mitigating punishment, serve as an additional indicator of the degree of social danger with regard to the constituent elements of oﬀence that are described by the lawmaker.

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It can be believed that each and all circumstances of the oﬀence recognized as miti‐ gating, are associated with the degree of social danger of the committed act and – at the same time (albeit not equally) – with the degree of danger of the identity of the oﬀender that should be taken into consideration by the court in the imposition of punishment. However, there are such mitigating circumstances that do not characterize the degree of danger of either the committed act or the oﬀender; nevertheless, they make an impact (signiﬁcant at times) on the punishment imposed by the court. Their consideration in the individualization of punishment is admissible since the statutory list of mitigating circumstances is public (provisional). Thus, according to Part 2 of Article 61 of the Criminal Code, “can be taken into consideration during the imposition of punishment as mitigating circumstances that are not provided for in part 1 of Article 61 of the Crim‐ inal Code”. The lawmaker’s position is caused by the fact that the law cannot provide for all real world situations at the present stage of the development of legislation. It is important to note that all mitigating circumstances formalized in Part 1 of Article 61 of the Criminal Code, including those outside the list, are equisigniﬁcant during the impo‐ sition of punishment. We consider the following statement to be true: although in the actual fact the vast majority of mitigating circumstances characterizes a certain degree of danger of an oﬀense and/or the person who committed it, but some “in some cases cannot be asso‐ ciated with committed oﬀenses directly and do not characterize the degree of its social danger and danger of the oﬀender, but should be taken into consideration in accordance with the requirements of humanism, as well as the goals and objectives of punishment in the criminal legislation”. The state declaring the principle of humanity cannot disre‐ gard the fact that the type and amount of punishment of a particular oﬀender can impact the fate of the other persons. Hence, the court, when making ﬁndings of guilt on behalf of the state, must take into consideration all the circumstances of the case and do its best to minimize the undesirable eﬀects of the punishment, as well as to aim for “reducing the amount of negative consequences that are necessarily related to the application of punishment and impact the eﬀectiveness as well”. However, a completely diﬀerent opinion can be found in legal literature. Noting the extensive practical application of such circumstances as marital status, having dependent sick and old relatives, etc., Demidov, Y.A. believes that such practice is contrary to law, since only those circumstances that are related to the characteristics of the degree of social danger can be treated as mitigating circumstances. Such a position, in our opinion, leads to a violation of the requirements of the individualization principle. To individu‐ alize a punishment means to determine the amount of responsibility of the oﬀender in accordance with general principles of the imposition of punishment (Article 60 of the Criminal Code). And if exactly those circumstances that were found by the court to be mitigating in accordance with Part 2 of Article 61 of the Criminal Code, aﬀord ground for the individualized imposition of punishment, the court is not only entitled but obliged to take them into consideration. The imposition of punishment, contrary to the principle of individualization of punishment would be a violation of the principles of legality, justice and humanity. Hence, mitigating circumstances, not associated with social danger of the committed oﬀence and/or the identity of the oﬀender, mostly not provided for in Part 1 of Article 61 of the Criminal Code, are taken into consideration in practical

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terms quite reasonably, since it is these circumstances in certain cases that form a basis for the imposition of individualized punishment. Hence, the following main traits which are inherent in circumstances mitigating punishment can be distinguished: – mitigating circumstances are the factors which are characteristic of the committed oﬀence and (or) the identity of the oﬀender. – the term “mitigating circumstances” includes such circumstances that do not only relate to the committed oﬀence and/or the identity, but characterize them to a certain extent, or do not relate to the committed oﬀence or the identity, but should be taken into consideration pursuant to Part 3 of Article 60 of the Criminal Code of the Russian Federation. The circumstances that were recognized by the court as mitigating must bear all characteristics that are inherent in mitigating circumstances established by law. By making the analysis of circumstances mitigating punishment, the researchers generally treat them as a means of individualization of punishment. However, it is necessary to disclose another aspect, which is rarely investigated in the literature, in particular, the instrument for the reduction of the degree of social danger of the committed act and/or the identity of the oﬀender if there are mitigating circumstances in the case.

4

Classiﬁcation of Circumstances Mitigating Punishment

The knowledge of the mechanism of inﬂuence is a must in legislative activity in order to exclude cases of unreasonable inclusion of separate circumstances in a group of miti‐ gating circumstances. This is relevant to the judicial practice due to the fact that the list of mitigating circumstances established by law is public, and the court can take into consideration other mitigating circumstances during the imposition of punishment. A correct understanding (clear vision) of the instrument for the reduction of the degree of social danger of the committed act and/or the identity of the oﬀender by the court will allow avoidance of errors in the imposition of a particular punitive measure with due consideration of mitigating circumstances. In order to reveal this aspect, it is necessary to perform the classiﬁcation of circum‐ stances mitigating punishment. The speciﬁed problem is one of the challenging issues of theory of circumstances mitigating punishment. Due to the fact of the absence of legislative division of mitigating circumstances into types in legal literature, various options for their grouping. However, according the analysis of the points of view of various authors, classiﬁcations overall have major deﬁciencies and contradictory character. Thus, some authors group miti‐ gating circumstances according to all four constituent elements of an oﬀence. In addi‐ tion, Karpets, I.I. and some other authors believe that mitigating circumstances may be relevant to the object, objective element, the subject and subjective element of a criminal oﬀence. Be deﬁning the relation of these circumstances to all four constituent elements

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of an oﬀence using the qualifying criterion, research workers do not speciﬁcate exactly what kind of mitigating circumstances belong to the object of a criminal oﬀence. This classiﬁcation was repeatedly criticized by the experts. Kuznetsova, N.F. and Kurinov, B.A. reasoned objection that there are no object-related mitigating circum‐ stances. At the same time, the authors themselves classiﬁed mitigating circumstances into two groups: (1) mitigating circumstances which are classiﬁed as a committed socially dangerous act; (2) mitigating circumstances which characterize the identity of the subject of crime. Another classiﬁcation of mitigating circumstances is provided by Babaev, M.M. Analyzing them from the standpoint of the causes and conditions which can contribute to the commission of oﬀenses by the minors, he distinguishes three groups of mitigating circumstances: (1) circumstances relating to the objective and subjective properties of the committed socially dangerous act; (2) circumstances relating to the identity of the subject of crime; (3) circumstances relating to the causes and conditions which are associated with this criminal behavior. However, the proposed classiﬁcation had no followers in the theory of criminal law. Zhalinskiy, A.E. classiﬁes the circumstances mitigating punishment as such which are related: (a) (b) (c) (d)

to the identity of the oﬀender to the behavior of the oﬀender after the commission of oﬀence to the behavior of injured person to the causes and conditions of oﬀence.

At the same time, as reasonably noted by Kachan, M.I., the author’s emphasis on mitigating circumstances related to the behavior of the injured person is unnecessary, since they can be classiﬁed as the causes of the commission of oﬀence. According to Kachan, M.I. mitigating circumstances can be conveniently classiﬁed into three groups: – characterizing the oﬀence (Subparagraphs “e”, “f”, “g”, “h” of Part 1 of Article 61 of the Criminal Code of the Russian Federation); – characterizing the identity of the oﬀender (Subparagraphs “b”, “c”, “d” of Part 1 of Article 61 of the Criminal Code of the Russian Federation); – characterizing the behavior of the oﬀender during or after the commission of oﬀence (Subparagraphs “k”, “l” of Part 1 of Article 61 of the Criminal Code of the Russian Federation). It should be noted that none of abovementioned classiﬁcations can be put into prac‐ tice; however, for the purposes of our research, classiﬁcation provided by Kachan, M.I. appears to be the most useful.

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The assignment of mitigating circumstances to a particular classiﬁcation group is conditional, since many of them simultaneously characterize both objective and subjec‐ tive elements of the committed oﬀense, as well as the identity of the oﬀender. Besides, the list of mitigating circumstances is public and the court has the right to recognize any circumstance not speciﬁed in law as a mitigating circumstance. Such circumstances cannot be identiﬁed in advance with a view to including them into a certain group; it is therefore diﬃcult to ﬁnd a general criterion for the scientiﬁcally grounded and practically applicable classiﬁcation. No matter how we try to supplement the list of mitigating circumstances available in the law, it will never become exhaustive, since the combinations of particular constituent elements of individual oﬀense, the identity of the oﬀender and other circumstances are so individual and speciﬁc, and they reduce and modify the punishment for the committed oﬀence. The “eﬀect” of mitigating circumstances begins when all constituent elements of an oﬀence were revealed, and the existence of grounds for preventing the prosecution of a person was not proved. Therefore, an important and distinctive feature of mitigating circumstances consists in the fact that they can impact the punishment towards its reduction within the scope of the sanction of Article. However, if they are taken into consideration by the court as exceptional circumstances in accordance with Article 64 of the Criminal Code these circumstances can make a more dramatic impact on the reduction of punishment – to take it outside the scope of sanction of Article. Hence, mitigating circumstances, as rightly noted by Tkachenko, V.I., are taken in consideration in case of imposition of a milder punishment within the scope of sanction, and, in exceptional cases, going beyond the sanction. The formal traits of mitigating circumstances can also include their ability to make a noticeable corrective action on the particular types and punitive measure, which conﬁrms their isolation in a separate independent institute of criminal law. The emer‐ gence of circumstances with contrary orientation of impact on the measure of punish‐ ment in criminal law is not a mere coincidence: “…the aggravating circumstances are out of the question since the mitigating circumstances are out of the question”, and on the contrary, - a selection of mitigating circumstances in the law is justiﬁed only to the extent that they are confronted by aggravating circumstances. Hence, circumstances mitigating punishment act as the necessary objective and subjective reasons, indicating the lesser degree of social danger of an oﬀence and/or the identity of the oﬀender, relating to the oﬀence and/or the identity of the oﬀender and creating the need for their consideration in the imposition of punishment. The circum‐ stances under investigation have the ability to signiﬁcantly mitigate the punishment due to their signiﬁcant impact on the degree of social danger of an oﬀence and the identity (or the identity only) of the oﬀender or due to the requirements of the principle of humanity.

5

Conclusion

In modern criminal law, the circumstances mitigating punishment are formalized in the General Part; this is not to say, however, that their role is limited to the impact on the

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imposition of punishment. The mitigating circumstances come into play in the diﬀer‐ entiation of criminal responsibility and in the application of doctrines of liberation from criminal responsibility; in addition, some of them are used in the Special Part during the formation of particular constituent elements of an oﬀence or their variety. At the present time, the Criminal Code of the Russian Federation contains no concept of circumstances mitigating punishment, which makes it diﬃcult to understand their legal nature and essence. The mitigating circumstances are a means of concrete deﬁnition of the nature and the level of social danger of the committed act and the identity of the oﬀender; they signiﬁcantly reduce the level of social danger of the committed act and (or) the identity of the oﬀender, and, in this regard, regulate the matters related to the imposition of a legal, reasonable and fair punishment.

References 1. Melnikova, Y.B.: Diﬀerentiation of responsibility and individualization of punishment, Krasnoyarsk, 120 p. (1989) 2. The Criminal Law of Russia. General Part: A Textbook for Higher Educational Establishments. Publishing Editor - Kruglikov, L.L., 567 p. (2000) 3. Krasikov, Y.A.: The imposition of punishment: Conditionality and Individualization Criteria: A Learning Guide, 78 p. Moscow Juridical Institute (1991) 4. Issues of the theory of state and law. Under the editorship of Alexeev, S.S., 448 p. (1987) 5. Klenova, T.V.: Foundations of the theory of codiﬁcation of criminal law standards, Samara, 244 p. (2000) 6. Koniakhin, V.P.: Theoretical foundations of architecture of the General Part of the Russian Criminal Law, Saint Petersburg, 348 p. (2002) 7. Lesnievski-Kostareva, T.A.: Diﬀerentiation of Criminal Responsibility. Theory and Legislative Practice, 400 p. (2000) 8. Traynin, A.N.: Constituent Elements of an Oﬀence in Accordance with the Soviet Criminal Law, 388 p. (1951) 9. Brainin, Y.M.: Principles of the application of punishment in accordance with the Soviet criminal law. Scholarly notes of the Kyiv State University, Kyiv, No. 66, p. 72 (1953) 10. Karpets, I.I.: Individualization of Punishment in the Soviet Criminal Law, 152 p. (1961) 11. Kachan, M.I.: Special aspects of regulation of circumstances mitigating punishment in foreign criminal law. “Chernye Dyry” v Rossiyskom Zakonodatelstve (“Black Holes” in the Russian Legislation), No. 1, pp. 251–252 (2008) 12. Zhalinskiy, A.E.: Imposition of punishment. Comment to the Criminal Code of the Russian Federation with clause by clause proceedings and judicial practice. Under the editorship of Nikulin, N.I. M., p. 242 (2002)

Regarding the Issues of Implementation of International Laws on Fighting Corruption by the Russian Federation Dmitry A. Lipinsky ✉ , Aleksandra A. Musatkina, and Pavel A. Rumyantsev (

)

Tolyatti State University, Tolyatti, Russia [email protected], [email protected], [email protected] Abstract. The purpose of the study is to analyze the implementation of the international law rules to counter corruption into the Russian Federation legisla‐ tion, as well as to identify possible non-conformities to international standards. The methods of the study are legalistic, dialectical, comparative law, historical law. The scope of the study is to investigate the implementation of the “UN Convention Against Corruption” and other international enactments by the Russian Federation. We demonstrate not only a positive dynamics in the Russian legislation reﬂecting the implementation of the international law rules, but also failure to comply with the formal requirements of international anti-corruption standards. The article studies world experience to combat corruption. In conclu‐ sions we prove to comply with international standards of Russia: to shorten the list of oﬃcials with privileges from criminal and administrative persecution, and also to reduce their extent; to introduce a complete prohibition on gifts accepted by oﬃcials; to adhere to the European “Civil Law Convention on Corruption” and to ratify it respectively; envisage real, but not formal mechanisms for seizure of civil oﬃcers property that do not correspond to their declared income. Keywords: Corruption · International public order International anti-corruption standards · Human rights · Financial crisis Corruption crisis

1

Introduction

Corruption as an intrastate phenomenon had long ago become an interstate one. It is explained by globalization, which unfortunately have the reverse eﬀect, namely the development of transnational organized crime, bribery of both intrastate and interna‐ tional oﬃcials, the penetration of organized crime not only in the intrastate, but also into an international mechanism for public relations regulation. The high level of corruption in any country undermines its authority on the interna‐ tional stage, increases the risks of concluding international private and public treaties with it. Terrorist organizations through bribery of public oﬃcials try to purchase weapon, ammunition and techniques to design them, including mass annihilation one, which threatens the peace and security of the mankind.

© Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 603–611, 2019. https://doi.org/10.1007/978-3-030-00102-5_63

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Corruption of intrastate and international oﬃcials encumbers the market freedom, fair competition and restriction of monopolistic activities. The most dangerous part of corruption, elite, transnational and political, does not exist as a usual transfer of money or other property directly to the oﬃcial. It disguises various kinds of transactions, the provision of beneﬁts and privileges to oﬃcials, and is often accompanied by conducting the banking activities, which in turn are aimed at granting a legal status to the remuner‐ ations acquired. As a result, intrastate and international organizations are involved in corrupt transactions, which can ultimately contribute to the ﬁnancial crisis. Corruption is a large-scale, system phenomenon, involving diﬀerent public struc‐ tures, private sector, non-government institutions. If earlier we have said that corruption leads to decay of public mechanism, now we can declare its negative impact on the international public order, as well as whole groups of countries where the most popu‐ lation is below the oﬃcial poverty line, provided both consolidation (integration) of the state apparatus with organized crime. The international community acknowledged the danger of corruption and adopted a number of fundamental conventions, agreements and other acts aimed to combat it. Particularly, among them we should name the “Global Program Against Corruption”, which was suggested in June 2001 by the United Nations Scientiﬁc and Research Insti‐ tute for discussion by the United Nations members [1]. Corruption has become the object of study for various international centers and organizations. Especially, it is studied by the IMF, the World Bank, the International Chamber of Commerce, through calculating the risks of conducting any transactions and bargains (deals). Control of corruption level is one of the performances used by the World Bank to estimates any state [2, 3]. International research centers investigate in what manner the international law rules are implemented in national legislation. Since 2004, the international community on December 9 annually has celebrated the World Anti-Corruption Day announced by the UN General Assembly (resolution No. A / RES / 58/4 of November 21, 2003). It is noteworthy that the next day follows the “Human Rights Day” that, as stated in the literature, underlines the same importance of ﬁght against corruption as human rights, because it is diﬃcult to assert their implementation at the time of corrupt practice by oﬃcials, since they are liable to observe and protect rights and freedoms [4]. It is note‐ worthy that the oﬃcial publication of the UN Convention against Corruption contains a preamble, where corruption is an inﬂuence and a reason that undermines the supremacy of law, human rights and worsens the quality of life. Corruption is called the source of reproduction of organized crime, terrorism and poverty of the population [5]. The danger of corruption for the world community is all precisely and unambiguously expressed in the preamble to the said convention, which notes that corruption aﬀects the economy of all states, because it is associated with organized and economic crime, money laun‐ dering. It is speciﬁcally stressed that the member countries of this Convention are concerned about corruption related to wide assets that may constitute a signiﬁcant share of the resources of countries and put at stake (jeopardize) the political stability and sustainable development of these countries. Institutions of the world civil community carry out researches in this area. For example, in 1993 a non-government international organization “Transparency Interna‐ tional” was founded to investigate corruption (its oﬃce (headquarters) is also in Russia).

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On existing data the Russia has the same level of corruption as Guyana, Sierra Leone and Azerbaijan. The corruption index calculated by “Transparency International” not only shows the corruption of any country, but also has a practical value, in particular, it is a basis for investment decisions and refusal of transactions with transnational compa‐ nies. Finally, stability of the country, its investment attractiveness, and, consequently, welfare of the population also depends on the level of corruption. According to “Trans‐ parency International”, dark side of corruption in Russia is estimated about $300 billion annually [6]. It is diﬃcult to counter corruption, including transnational one, only by intrastate and interstate measures, because international oﬃcials may be also involved in commit‐ ting corruption crimes. Therefore, we need here coordinated activities with involvement of the civil world community institutions of [7, p. 21].

2

Problems and Discussions

The above-mentioned global program against corruption has deﬁned a new trend in the development of international law. In particular, a number of fundamental Conventions was adopted. And a set of provisions to combat corruption was enshrined in the UN Convention “Against Transnational Organized Crime” of 2000 [8]. This is due to the dialectical relation between organized crime and corruption, when corruption “repro‐ duces” organized crime, and the latter can’t exist without corruption. The basic document in this area is the “UN Convention Against Corruption”, which was adopted at the UN General Assembly on October 31, 2003. The Russian Federation ratiﬁed this convention by Federal Law No. 40-FZ as of March 8, 2006 “On Ratiﬁcation of the United Nations Convention against Corruption” [9]. This convention was preceded by the adoption of international acts at regional level: “Council of Europe Criminal Law Convention on Corruption” as of January 27, 1999, which was ratiﬁed by the Russian Federation Federal Law No. 125-FZ “On the Ratiﬁcation of the Criminal Law Convention on Corruption” as of June 25, 2006 [10]. Another one important docu‐ ment was the European “Civil Law Convention on Corruption” signed on November 4, 1999 and entered into force on November 1, 2003. Russia is not a member state of this convention, and accordingly there was no issue of its ratiﬁcation, but the Republic of Belarus ratiﬁed this convention on December 26, 2005, and other countries of the Union of Independent States (Kazakhstan, Kyrgyzstan, Uzbekistan) too. Russia, not being a member of the International Organization for Economic Coop‐ eration and Development (OECD), accessed to 2012 Convention on Combating Bribery of Foreign Public Oﬃcials in International Business Transactions on the basis of Federal Law No. 3-FZ “On the Accession of the Russian Federation to the Convention on Combating Bribery of Foreign Public Oﬃcials in International Business Transactions” as of February 1st, 2012 [11]. In our study, we are not going to consider (review, study, research) all and any international anti-corruption enactments. Firstly, we will study the positive changes in the Russian legislation due to performance of international obligations on combating corruption. Secondly, we will reveal a non-performance of international obligations, as

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well as their formal one, when introduced anti-corruption rules of law are not speciﬁcally enforced. Before passing on to the negative aspects, it is necessary to dwell on a number of positive phenomena that were conditioned by the ratiﬁcation of the UN Convention against Corruption. Thus in 2008, the Federal Law No. 272-FZ “On Combating Corrup‐ tion” [12] was adopted; its draft had been postponed over 10 years for many reasons. The law was essential due to both the crime situation in Russia, and its international obligations, including the ratiﬁcation of the above-mentioned UN Convention. If we refer to the history of this issue, the very ﬁrst draft of the law “On Combating Corruption” was submitted for approval to the legislative authorities of the Russian Federation by President Boris Yeltsin in 1998. Such a long term of passing a bill shows that public authorities and its representatives (civil oﬃcers) did not want to put restric‐ tions on themselves. After all, the law stipulated a number of restrictions for public and municipal oﬃcers, their liability for committing corruption oﬀenses. We speciﬁcally pointed out that present law was the basis for public relations regulation in combating corruption. Mostly, it had a framework nature and envisaged system changes in other enactments, which occurred after its adoption. Thus, anti-corruption rules were intro‐ duced in some enactments regulating various types of public service, namely: Federal Law No. 79-FZ “On Public Civil Service of the Russian Federation” as of June 27, 2004; Federal Law No. 25-FZ “On municipal service in the Russian Federation” as of March 2, 2007, etc. Severally, the Federal Law No. 172-FZ “On anti-corruption expertise (expert evaluation) of enactments and drafts of enactments” was adopted on July 17, 2009 [13]. The next step was the adoption of the Federal Law No. 44-FZ as of April 5, 2013 “On Contract systems in the sphere of procurement of goods, works and services for provisioning governmental and municipal needs” [14], which provides for a more open and transparent system of public procurement. We want to note that Russian legislators began to fulﬁll the requirements stipulated by international obligations. The criminal legislation was revised, in particular chapter 30 of the Russian Feder‐ ation Criminal Code: “Crimes against public authorities, interests of public and local self-government bodies”. So, the circle of persons to whom this chapter applies, has been changed. In particular, the subjects of criminal liability for bribery and other corruption crimes are now performing organizational/management and administrative/ business functions in public and municipal institutions, state corporations, state compa‐ nies, as well as in joint-stock companies whose controlling share belongs to the Russian Federation and also entities or municipal institutions. International obligations of Russia have led to the fact that the subjects of bribery have become foreign oﬃcials and ones of a public international organization. Moreover, a bribe for illegal actions (lack of action) got (taken) by them is deemed in the Russian criminal legislation an especially aggravated crime (oﬀense) with the maximum penalty of eight years of imprisonment (part 3 of Clause 289 of the Russian Federation Criminal Code). In accordance with international obligations, a foreign oﬃcial in Russian criminal law means an appointed or elected person holding a position in the legislative, executive,

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administrative or judicial body of a foreign country or another person performing any public function for a foreign country, including for a public agency or a public enterprise. An oﬃcial of a public international organization is an international civil oﬃcer (employee) or any person entitled by this organization to act on his behalf. Imposing a liability on these oﬃcials, the Russian Federation Criminal Code protects them too, since an especially aggrieved person (a foreign oﬃcial) is mentioned in clause 304 (provo‐ cation of bribes or corrupt payment). Even before the ratiﬁcation of the United Nations Convention against Corruption, the Russian legislator in the Russian Federation Administrative Oﬀense Code provided for (introduced) liability for corruption encroachments: bribery of electors, referendum participants (Clause 5.16); non-submission or non-publication of a report, data on the receipt and expenditure of funds allocated for the preparation and conduct of elections, referendum (Clause 5.17); illegal use of funds in election campaign funding (clause 5.18); use of illegal ﬁnancial maintenance in funding of election campaign, a referendum campaign (Article 5.19), etc. As a positive aspect we can also name Russia’s openness to the institutions of world civil community in combating corruption. Thus, since 1999, the Russian branch of “Transparency International” has been operating as an autonomous non-proﬁt organi‐ zation, and its receiving centers are open in the cities of Moscow, St. Petersburg, Barnaul, Vladimir, Kaliningrad and Veliky Novgorod. Scope of activity is to build anti-corruption legal awareness of citizens and oﬃcials; to provide a legal assistance in corruption cases; to carry out sociological research; to implement civil control; to contribute to open discussion of draft laws; to conduct authorized (legalized) public events to prevent corruption. The Russian center “Transparency International” is accredited by the Ministry of Justice of the Russian Federation as an independent expert implementing anti-corruption evaluation of enactments. Pursuant to the Russian Federation Federal Law No. 8-FZ as of February 9, 2009 “On Provision of Access to Data on Activity of Public and Local Self-Government Authorities” their openness, availability, informative value and transparency has increased. The state began to pay attention to independent monitoring of own websites for compliance with their federal legislation. Two authors of this paper (D.A. Lipinsky and A. A. Musatkina) carried out government research activity won by an open elec‐ tronic auction on the topic: “Monitoring of websites of Samara region representative bodies for compliance with the federal legislation”. The sites of representative bodies were subjected to research: ten cities; twenty districts; and more than two hundred rural settlements. Due to evaluation scale, sites of representative bodies matched to anticorruption legislation from 70 to 89 per cent. As a result, recommendations for their improvement were given. After repeated monitoring, the compliance varied in the range from 90 to 100 per cent. The monitoring controls whether there is the following data: on income details; availability for citizens (feedback); on auctions, procurement activ‐ ities; on resolutions of representative bodies; availability of legal and regulatory frame‐ work; availability of activity (progress) report; on competitive procedures; availability of texts of international treaties and conventions on websites; citizen’s right to petition; the possibility of electronic petition; adapted site for disabled people (vision-impaired) and others.

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Except the positive aspects, there are also issues of international conventions imple‐ mentation. Thus, any member state of the Convention can make reservations or state‐ ments on interpretation. According to the United Nations Convention against Corrup‐ tion, Russia made eight statements. However, according to Clause 20 Russia did not make any statements, from which it follows that this provision should be implemented. Clause 20 of the United Nations Convention against Corruption stipulates: “subject to its Constitution and the fundamental principles of its legal system, each State Party shall consider adopting such legislative and other measures as may be necessary to establish as a criminal oﬀence, when committed intentionally illicit enrichment, that is, a signif‐ icant increase in the assets of a public oﬃcial that he or she cannot reasonably explain in relation to his or her lawful income”. Without making any statement under this clause, the Russian Federation did not take any measures that would be aimed at implementing this rule of international law. Illicit enrichment is not a criminal oﬀense. According to the Russian legislator, an obstacle to implementation is Clause 49 of the Russian Feder‐ ation Constitution establishing the presumption of innocence principle, but this UN convention does not mention that criminal liability should be established in the absence of guilt, and the presumption of innocence principle should not be respected. It seems that this position of the Russian legislator is pointless and unreasonable. According to the Resolution of the Russian Federation Ministry of Justice, Clause 20 of the Conven‐ tion is implemented in the Federal Law No. 320-FZ “On Control of Compliance for Expenditures of Persons Who Replace Public Positions and Other Persons with Their Incomes” as of December 3, 2012. The Russian Federation has chosen civil and law mechanisms to implement this provision of the Convention. So, in 2012 Paragraph 8 of Part 2 of Clause 235 of the Russian Federation Civil Code was amended to provide that the court’s decision to forfeiture of property to the Russian Federation income in respect of which the evidence to acquire it with use of legal income due to the Russian Federation legislation on combating corruption is the grounds for termination of property rights in public interests. However, the law raises a number of questions regarding the list of persons. It uses the term “public and municipal positions (posts)”, but does not refer to public and municipal oﬃcers who report their incomes and expenditures only if the position replace by them is on the lists adopted at various levels. This law does not stand up to anti-corruption criticism for a number of reasons. At ﬁrst, there is no clearly stated list of persons. At second, relatives are limited to a husband, a wife and minor children. In Russia there is a popular proverb: “the higher the post of civil oﬃcer, the more rela‐ tives he has” or “the number of relatives increases with climbing the career ladder”. The presumption of innocence principle is enshrined in the constitutions of countries such as France, Spain, Poland, Lithuania and Belgium, but their legislation envisages liability for illicit enrichment; when an oﬃcial cannot reasonable explain non-compli‐ ance of his declared income and property. It can be noted that the rules on criminal liability for illicit enrichment are not unique or exclusive in the world practice of criminal law combat against corruption. For example, after ratiﬁcation of the said convention Lithuania provided for Clause 189-1 in the Penal Code that actually ﬁxes a liability for illegal enrichment [15]. In Denmark, Clause 20 of the Convention is implemented under Clause 144 of the Penal Code, which provides that “whoever performing his duties in public service in Denmark or in a foreign

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country, or in an international organization, illicitly receives, requires or accepts a promise to receive future remuneration or any other beneﬁt, is punishable by a ﬁne or imprisonment” [16]. Low corruption countries can use not criminal, but other mechanisms of liability for illicit enrichment. Thus in the United States, pursuant to Act on Ethics Law for Govern‐ ment Employees”, it is required to submit annual reports on the ﬁnancial situation. Intended introduction of false data is a crime with punishment of a ﬁne and imprisonment for up to ﬁve years. The reports can be indirect (secondary) evidences of illicit enrich‐ ment and serve as grounds for seizure of undeclared income, property and other assets. For comparison, in Russia an intended corruption of data on civil oﬃcer incomes leads only to his discharge. Clause 21 of the United Nations Convention against Corruption provides bribery in the private sector, as it states that “each State Party shall consider adopting such legis‐ lative and other measures as may be necessary to establish as criminal oﬀences, when committed intentionally in the course of economic, ﬁnancial or commercial activities …”. Further, the Clause regulates government’s duty to establish liability for oﬃcials with administrative, power or organizational/administrative authorities in commercial bodies. In Russia, the implementation of this provision of the UN Convention is carried out on the basis of Chapter 23 of the Criminal Code (crimes against the interests of public service in commercial and other organizations). This chapter stipulates the following legal elements of a crime: abuse of authority; abuse of authority in the performance of the state defense order; abuse of authority by private notaries and auditors; exceeding of authority by a private detective or an employee of a private security organization; commercial bribery; mediation in commercial bribery; small commercial bribery. However, our attention was attracted by a sharp imbalance between the sanctions imposed for similar crimes in the public sector, and the sanctions ﬁxed in this chapter. Even for aggravated crimes, the maximum punishment is up to three years of impris‐ onment. Herewith, there is ﬁne as an alternative. Besides, for these types of crimes a criminal case is initiated at the request of aggrieved organization, i.e. there is no manda‐ tory nature to initiate criminal proceedings. We believe that here it is a formal compli‐ ance with the provisions of the UN Convention against Corruption. As we have already speciﬁed, Russia is a State Party to the “European Convention on Criminal Liability for Corruption”. The Convention stipulates that the monitoring is carried out by a group of states against corruption (hereinafter GRECO) [17]. The results of this monitoring show that Russia has not made the assignment of corruption acts to the category of crimes. There is no complete prohibition of donations (gifts) to govern‐ ment oﬃcials. The monitoring displays that most of privileges of public oﬃcers are unreasonable and excessive [18]. As a result of corruption, an international trade suﬀers losses of multibillion dollars, but Russia has not yet ratiﬁed the civil-law convention against corruption adopted by the Council of Europe in 1999. Corruption is a complex phenomenon aﬀecting various spheres of public life, and measures to combat should be complex and intersectoral. Here we should also apply civil law rules. The Convention stipulates some important measures to combat corruption:

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• People who have suﬀered damage as a result of corruption act have the right to full reimbursement. Financial damage, loss of income and intangible losses are subject to reimbursement; • The defendant may be a person who committed a corruption act, legalized it or did not take reasonable measures to prevent it; • The defendant may be a state whose oﬃcial is guilty of committing a corrupt act; • ensuring indemniﬁcation to individuals harmed by corruption acts (Clause 35). It is useful to introduce similar rules in the Russian civil legislation, specifying the content of clauses 1069 and 1070 of the Russian Federation Civil Code.

3

Conclusions

Despite the fact that a number of important enactments have been adopted in the Russian Federation to combat corruption, it cannot be claimed that the requirements of interna‐ tional standards are fully implemented. In order to bring Russian legislation in compli‐ ance with the requirements of international anti-corruption standards, we need: • To shorten the list of oﬃcials with privileges from criminal and administrative perse‐ cution and to reduce their extent; • To introduce a complete prohibition on acquiring gifts by oﬃcials; • To adhere to the European “Civil Law Convention for Corruption” and to ratify it respectively; • To make criminal sanctions for commercial bribery in the private sector commen‐ surate with nature and degree of public danger; • To provide for real, but not formal mechanisms for seizure of civil oﬃcers property that doesn’t correspond to their declared income; • Ensure the operation of Clause 20 of the United Nations Convention against Corrup‐ tion in the national legislation In our opinion, these measures will positively impact on the eﬃciency of combat against corruption, decrease its level, raise the Russian Federation credibility and contribute to its investment opportunity.

References 1. Annex I of the Global Program against Corruption. http://www.unicri.it/Prodoc %20corruption.htm. Circulation date 10 Mar 2018 2. Hostetler, C.: Going from bad to good: combating corporate corruption on world bankfounded infrastructure projects. Yale Hum. Rights Dev. J. 14(1), 231–232 (2011) 3. Gathii, J.T.: Deﬁning the Relationship Between Human Rights and Corruption. University of Pennsylvania Journal of International Law, pp. 143–144 (2009) 4. Wouters, J., Ryngaert, C., Cloots, A.S.: The Fight Against Corruption in International Law. Working Paper No. 94, July 2012. https://ghum.kuleuven.be/ggs/publications/working_papers/ new_series/wp91-100/wp94-jwouterscryngaert-acloots.pdf. Circulation date 11 Mar 2018

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5. Foreword, A.K.: The United Nations Convention against Corruption, New York (2004). The document in Russian is available on the website. https://www.unodc.org/documents/treaties/ UNCAC/Publications/Convention/08-50028_E.pdf. Accessed 15 Mar 2018 6. Oﬃcial website of “Transparency International”. https://www.transparency.org. Accessed 10 May 2013 7. Argando, A.: The United Nations Convention Against Corruption and Its Impact on International Companies. Working Paper No. 656, October 2006. http://papers.ssrn.com/sol3/ papers.cfm?abstract_id=960662. Accessed 15 Mar 2018 8. Bogush, G.I.: The United Nations Convention Against Corruption. Bulletin of Moscow University. Series. 11. Law, No. 3, pp. 21–31 (2006) 9. Collection of the Russian Federation legislation. 2006. No.12. Cl. 1231 10. Collection of the Russian Federation legislation. 2006. No. 31. Cl. 3424 11. Collection of the Russian Federation legislation. 2012. No. 6. Cl. 622 12. Collection of the Russian Federation legislation. 2008. No. 52. Cl. 6228 13. Collection of the Russian Federation legislation. 2009. No. 29. Cl.3609 14. Collection of the Russian Federation legislation. 2013. No. 14. Cl.1652 15. The Criminal Code of the Republic of Lithuania in Russian. http://law.edu.ru/norm/norm.asp? normID=1243877&subID=100107735,100107736#text. Accessed 10 Mar 2018 16. The Criminal Code of Denmark in Russian. http://law.edu.ru/norm/norm.asp? normID=1241524. Accessed 1 Mar 2018 17. On the Group of States against Corruption (GRECO) in English. http://www.coe.int/t/dghl/ monitoring/greco/general/about/en.asp. Accessed 26 Sep 2017 18. United ﬁrst and second rounds of evaluation. Greco RC-I / II (2010) 2E. Addition to the report on the implementation of GRECO recommendations by the Russian Federation. Adopted at the 58th Plenary Meeting on December 7, 2012. Published in the Russian Federation on March 15, 2013. Full text in Russian. http://genproc.gov.ru/anticor/doks/greco071212.pdf. Accessed 26 Mar 2017

Characteristics of Certain Crimes Against Peace and Security of Mankind as “Essential Threats” Oksana Y. Grechenkova ✉ and Yulia A. Kuzmenko (

)

Institute of Service Sphere and Entrepreneurship (Branch) of Don State Technical University, Shakhty, Russia [email protected], [email protected]

Abstract. The authors evaluate security of mankind as a special state of mankind’s protection on the whole, regardless of the state of war or peace. Crimes against peace and mankind, such as genocide or ecocide, can be performed during war and peace. A point of view of a generic object of the national criminal protec‐ tion is substantiated. Keywords: Ecocide · Genocide · Ecological crimes · Responsibility

1

Introduction

Legal understanding of “peace and security of mankind” can be determined on the basis of realizing the opposite states of human society and prescriptions of the national legis‐ lation of Russia. The latter is more acceptable, as the eﬀective international law acknowledges the possibility of acknowledgment of provisions of national legislation as “proper law” (Clause “c” Part 1 of Article 21 of the Rome Statute of the International Criminal Court). It is well-known that peace is the state characterized by absence of war. At that, it is not important whether war is declared de jure or not: according to the 1974 deﬁnition of aggression, the state of international peace is the absence of war de facto. Thus, the state of peace, as an interest protected by international law, is the state characterized by absence of military action between the states (groups of states).

2

Security of Mankind as an Interest Protected by Criminal Law

Security of mankind, as an interest (object) protected by criminal law, is a state of protection of mankind on the whole or demographic groups from threats to their physical existence coming from the subjects of criminal law. Security of mankind is not bound by presence or absence of the legal state of war or military conflict. The acts of genocide took place in the period of wars – world wars and local wars. However, history knows the examples of genocide of a certain demographic group of people during peace time – moreover, these actions were conducted by the ruling groups against the population of their own country (Kampuchea, Rwanda, etc.). The international law emphasizes that the legal qualification of the act of genocide as a © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 612–621, 2019. https://doi.org/10.1007/978-3-030-00102-5_64

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crime against security of mankind (humanity) does not depend on the fact whether it is conducted during peace or war, or whether it is a manifestation of external or internal policy of the state (Article I of the Convention on genocide). A situation with ecocide, which is seen as a war crime in case of application of the practice of ecocide as a method of war (Article 8 of the Rome Statute) is similar. On the other hand, the Preamble of the Convention on inﬂuence on the environment states that not only military but “any other hostile use of such means could have negative conse‐ quences for humans’ well-being”. Thus, ecocide can be conducted during peace time (without any military conﬂict) and threaten the physical existence of an undetermined circle of people. So it could be concluded that crimes against security of mankind create an independent group of crimes against peace and security of mankind, which in the criminal legislation of Russia includes genocide (Article 357) and ecocide (Article 358 of the Criminal Code of the RF in the current edition, 2017). Distinguishing the system of crimes against peace and security of mankind is based on acknowledging the following interests as a generic object of these crimes: provision of peace and security of the whole mankind as such. Peace and security of mankind is a generic object for the Russian criminal law, as Chapter 34 and Part XII of the CC of the RF coincide. Based on these aspects, the authors support the opinion that interests of peace and security of mankind, as a generic object of the national criminal and legal protection, should be the following: – interests of provision of peaceful co-existence of states and peaceful solving of inter‐ national arguments; – interests of provision of physical existence of undetermined group of people (mankind on the whole or demographic groups) from any threats, the source of which is a human factor; – interests of observation of the rules of military conﬂict of international and noninternational character (Kibalnik 2004). While the classiﬁcations of crimes against peace and security of mankind can be based on the main direct object of crime, it is possible to speak of existence of the following generic groups of these crimes in the Russian criminal law: (1) crimes against international peace: planning, preparation, initiation or waging of a war of aggression (Article 354 of the CC of the RF); public calls for initiation of a war of aggression (Article 354 of the CC of the RF); development, production, accumulation, purchase, or sales of weapons of mass destruction (Article 355 of the CC of the RF); attacking the establishments or persons that are under interna‐ tional protection (Article 360 of the CC of the RF); (2) crimes against security of mankind: genocide (Article 357 of the CC of the RF); ecocide (Article 358 of the CC of the RF); (3) war crimes: application of forbidden means and methods of war (Article 356 of the CC of the RF); mercenarism (Article 359 of the CC of the RF).

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We think that one person’s (many persons’) performing crimes against international peace, humankind, or war crime should receive an independent legal evaluation every time – i.e., these actions should be qualiﬁed per totality. In other words, no crime can “absorb” another one. The basis for this conclusion is acknowledging the interests of provision of interna‐ tional peace and security of mankind and observation of the rules of war and military conﬂicts as the main direct objects of crimes against peace and security of mankind and distinguishing the corresponding generic groups of these crimes. Such position is supported by the leading Western authors, though the basis for division of crimes against peace and humankind is seen “in the context of performance” of these crimes. Thus, according to a well-known American lawyer M.C. Bassiouni, the term “crimes against mankind” unites all atrocities performed in the large scale. To a certain degree, crimes against humankind are “mixed” with crimes against the world and war crimes. But crimes against humankind are legally diﬀerent from war crimes: “they are used not only in the context “war”, “the time of war and peace is indiﬀerent for these crimes” (Bassiouni 1999). This provision is conﬁrmed in decisions and activities of the modern international martial courts ad hoc. Let us view an excerpt from the later events: thus, the indictment for the Yugoslavian ex-president contains accusations of crimes against humankind and a separate clause of accusation of aggression and violation of laws of war. Thus, the International courts for former Yugoslavia and Rwanda distinguish the notions “crime against international peace”, “crime against security of mankind (humanity)”, and “war crime” (Grechenkova 2014). However, the crime of ecocide has a certain speciﬁcs in deﬁnition of its direct object. The preamble of the Rio Declaration says of the necessity for achievement of interna‐ tional agreements which “would ensure observation of interest of everybody and protec‐ tion of integrity of the global system in the sphere of environment and development”. Therefore, “everybody’s right” for a favorable environment is an inseparable condition for development of the whole mankind, and protection of the environment cannot be viewed separately from “sustainable development” of mankind as such (4th principle). According to some researchers, public danger of ecocide is determined by all “attrib‐ utes” of its content: in particular, it is necessary to pay attention to the attribute of mass destruction of all animals and plants that ensure ecological balance and support for all ecosystems; “poisoning” of objective biological conditions of the living activities of population of regions, countries, and the Earth on the whole – atmosphere and water resources. “Public danger of the action grows in the modern conditions, characterized by development of science, technologies, and technique, due to which any subject with access to them can cause an ecological catastrophe for a country, continent and, perhaps, the Earth” (Zhalinsky 2005). In the Russian national law, the right for favorable environment is also acknowledged as one of the fundamental interests that ensures secure existence and progress of the peoples of Russia and the whole mankind. For example, the preamble of the Federal Law of the RF “Regarding protection of the environment” dated January 10, 2002 says that this law determines the legal

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foundations of the state policy in the sphere of environment protection that ensure a well-balanced solution of socio-economic tasks, preservation of favorable environment, biological diversity, and natural resources “for the purpose of satisfying the needs of the current and future generations, strengthening of legal order in the sphere of environment protection, and provision of ecological security”. Therefore, the interest of provision of ecological security is a component of the interests of security and existence of mankind on the whole. Based on the above, we think that the direct object of ecocide as a crime against security of mankind should be interests of provision of physical existence of mankind on the whole and of the unspeciﬁed circle of people on a certain territory. At that, a component of the legal interest of security of mankind should be the right for safe ecological environment, which is favorable for existence and development of unspeci‐ ﬁed circle of people. A certain peculiarity of ecocide as a crime against security of mankind consists in the fact that it is subjectiﬁed. Usually, the literature says that the subject of ecocide consists of the elements of the environment that are speciﬁed in Article 358 of the CC of the RF (fauna and ﬂora, atmosphere, water resources). In their turn, due to provisions of the international criminal law and decisions of international courts, any act of ecocide, related to another crime against peace and security of mankind, requires the total qualiﬁcation according to the corresponding norms of Chapter 34 of the CC of the RF. For example, performance of any act of ecocide requires additional qualiﬁcation when it is: (a) performed in the course of military conﬂicts – according to Article 356 of the CC of the RF (application of forbidden means and methods of war); (b) supposed to eliminate a demographic group of people (fully or partially) – Article 357 of the CC of the RF (genocide); (c) performed in the course of waging a war of aggression – Part 2 Article 353 of the CC of the RF. This provision is conﬁrmed by not just distinguishing the generic groups of crimes against peace and security of mankind but also by the rules of qualiﬁcation of crimes that come from the upper limits of sanctions, set by the corresponding norms of the CC of the RF. As a matter of fact, the upper limit of the sanction in the form of imprisonment in Article 358 of the CC of the RF and in the above norms is set as twenty years of impris‐ onment (in case of genocide, the punishment could be life term or death penalty). There‐ fore, the acts of ecocide in the course of a war of aggression, application of forbidden means and methods of war, and genocide require total qualiﬁcation of the crimes for the purpose of adequate and just legal assessment. It is expedient to view the issue of the role of ecocide in the system of crimes against peace and security in the criminal legislation of other countries. The constitutional law of other countries contains the priority of norms of interna‐ tional law over internal legislation. Therefore, criminal legislation of these countries is derived from the norms of international criminal law.

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In the civil-law countries, a usual legal rule is inclusion of international agreements and liabilities into the internal legal system of the countries. For example, Article 25 of the Constitution of Germany sets that “generally acknowl‐ edged norms of international law are a component of the federal law”, and “they have an advantage over the laws and create rights and liabilities for the persons residing in Germany” (Morshchakova 1991). Such prescriptions are found in Article 96 of the Constitution of Spain: “Legally concluded and oﬃcially published international agreements are a part of the internal legislation of Spain”. The clearest regulation of application of the norms of international law as sources of internal legislation is peculiar for Article 55 of the Constitution of France, “Agreements that are properly ratiﬁed have the power that exceed the power of internal laws, from the moment of their publication, under the condition of application of each agreement by another party” (Maklakov et al. 1989). In the common-law countries, there is constitutional rule that international law is a part of the internal legal system. Thus, the British legal doctrine is based on acknowledging “the existence of general agreement that… international law is a part of British law”. Moreover, “All rights, authorities, obligations, responsibilities, and limitations that are established by Agree‐ ments or come from them… should be applied in the UK without further legal acts and should be included into the legislation” [96]. Such international and legal document was called “self-executable agreement” in the British legal doctrine. However, application of the common law of “self-executable agreement” in the internal criminal jurisdiction of the UK and other countries is conducted in a diﬀerent way. According to the most popular doctrinal position, the provision of the right to determine whether an international norm is a part of the British law belongs to the British court. Such position is criticized by the British lawyers, who think that the national executor of law cannot decide independently whether an international agreement is mandatory for the UK or not – only in this case “the UK will enter a circle of countries that observe the international standards of liberties and justice” (Bingam 1996). The existing practice of application of the international law in the national criminal jurisdiction is peculiar not only for the UK but also for other common-law countries, including the USA. For example, according to Article 6 of the US Constitution, “This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land” (Zhidkov and Laﬁtsky 1993). It would seem that proclaiming the priority of the norms of international law by the Constitution of the USA supposes their direct or implemented action on the US territory. At that, the ﬁrst variant concerns the action of “self-executable” agreement, which does not have to be “established” by the internal legislator. The executor of law of all common-law countries does not acknowledge the practice of action of self-executable agreement and requires implementation of the latter into the national law of the state. Thus, L. Henkin states that “a lot of international obligations of the USA… are viewed as “non-self-executable” and should be included into the

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national law through legislation or the act of executive bodies, so… it is not an agreement but an implementing act, which is a country’s right” (Henkin 1980). However, let us note that in the common-law countries there is a tendency for normative (statutory) control of crimes against peace and security of mankind without the adequate judicial precedents. Thus, for example, the Genocide Act was passed in 1969 in the UK, which copied the provisions of Article II of the Convention on genocide and set the minimum punishment of 14 years of imprisonment regardless of the presence of victims of the genocide. The US Senate, while passing the 1986 Convention on prevention of genocide and punishment for it, announced that the Convention was not “self-executable” in the USA, like all international agreements signed by the USA. Due to this, Chapter 50A “Geno‐ cide” appeared in part 18 “Crimes and criminal process” of the US Code, which copied the text of the corresponding articles of the Convention on genocide. Based on the given opinions and examples, it is possible to state that the norms of the international criminal law on the whole (and on crimes against peace and security of mankind, in particular) could be evaluated as direct sources of internal criminal law of foreign states. According to the US legislation, a license owner is responsible for damage to the environment. Due to this, a large share of expenses for liquidation of the consequences of an accident in the Gulf of Mexico was taken by British Petroleum, but other license owners also took some expenses - thus, Mitsui transferred USD 1.1 billion into a special fund that was created by the company for payment of compensations to those who suﬀered from the accident. According to the settlement concluded with Anadarko, the latter company paid USD 4 billion to British Petroleum as a compensation for the accident (Grechenkova 2017). However, in the countries with the diﬀerent system of internal law there are certain diﬀerences in the issue of the international and legal norms’ becoming the sources of criminal law. That is, the diﬀerence lies not in the principle of acknowledging the inter‐ national law a source of the national law but in the means of inﬂuence of the international and legal norms on the provisions of the national criminal laws. As was emphasized, in the civil-law countries, a common legal rule is the inclusion into the internal legal system the international agreements and liabilities. At that, inter‐ national and legal norm can be direct, but very often it is implemented into the national criminal legislation. In the common-law countries, such method of action of the international act of the criminal and legal character as its direct application on the territory of these states is excluded. The norm of the international law might be a source of the criminal law during its implementation into the national criminal legislation of the common-law countries. At that, a very important aspect is implementation of the international and legal prescrip‐ tion not only into the statutory law but also into the legal precedent. The concept of the modern criminal law of the most civil-law countries is based on the ideas of the primacy of the general human values (international) over the national and, therefore, subjection of the national legal systems to the law of the international society. The peculiarities of the legal state include not only primacy of law but also its correspondence to the international law. Of course, it concerns the whole sectorial legis‐ lation of developed countries, including criminal.

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These provisions were established in the latest criminal legislation of the European countries. France. A conceptual idea of the new Criminal Code of France is realization of the primacy of the international law over the national law. The international and legal norms became the source of the French Criminal law due to their implementation into the internal legislation. At that, it was performed through implementation of the interna‐ tional norm, i.e., its adaptation according to the national peculiarities. Such adaptation often has a unique expanding character, as compared to the norm of international agree‐ ment. Due to signing of the range of international agreements, the norms on crimes against international peace and mankind were included into the French Criminal Code – at that, the highest punishment (life term) is set for the crime performed during war “against those ﬁghting the ideological system for which ideals the crimes against mankind were performed”. An advantage of the French Criminal law is responsibility for these crimes for both individuals and legal entities (§ 213-3). And advantage of the German Criminal law is direct reference that “international Conventions” have a higher power over the national legislation, i.e., the constitutional provision on the priority of the norms of international law is copied in the criminal legislation. Moreover, pursuant to international obligations, “International criminal code” was passed in Germany in 2002, which became a part of the German criminal legislation. Analysis of the special part of the German Criminal Code allows concluding on the implementation of the norms of the international law on crimes against peace and security of mankind. Very often, during implementation of the norm of international law in Germany, a special law on execution of a certain international act of the criminal and legal character is passed. Also, the German CC contains the whole system of crimes that constitutes the complex understanding of the criminal nature of ecocide. Thus, Article 330 says about the increased responsibility for a whole range of actions envisaged in other norms (§§ 324–329 – polluting water reservoirs, air, and soil; illegal handling of hazardous mate‐ rials and waste, “threat to the protected territory”) if they: – performed damage to a water source, soil, or protected territory so that the damage can be eliminated only with emergency measures or after a long period of time; – threaten the public water system; – perform damage to the level of animals or plants that are under the threat of extinction; – put another human in danger of death or severe damage to health or damage to health of a large number of people; – cause death to another human. The possibility of direct application of the international law during determination of the criminal character of a certain action in the national law is conﬁrmed by Article 5 of the 1997 Polish Criminal Code. It states the limits of eﬀect of the Polish Criminal law, which is not applied if the international agreement, which party is Poland, envisages otherwise.

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Article 185 of the Polish Criminal law contains the norm of criminal responsibility for polluting the natural environments, and violation of the rules of handling the hazardous materials, which led to: – destruction of ﬂora or fauna in a signiﬁcant scale; – death of a human or damage to health of “a lot of people”. The above provisions of the constitutional and criminal legislation of a range of the European countries and the USA allows stating that despite the terminological diﬀerence and peculiarities of perception of the international norms, the common-law and civillaw countries have a certain unity as to regulation of the foundations of responsibility for crimes against peace and security of mankind on the whole and ecocide in particular. At that, criminal legislation of most European countries, while not using the term “ecocide”, is based on acknowledgment of a high level of danger of this crime, based on creating a threat to life and health of unspeciﬁed group of people. A result of this legal phenomenon is the generally acknowledged priority of the norms of international law, reﬂected in the constitutional and criminal legislation of Russia and other civilized countries of the world. Thus, the fundamental idea that the modern criminal and legal systems of Russia and Western countries have a lot in common is proved (Fletcher 1998).

3

Methods and Subject of the Research

The theoretical and methodological basis of the research consists of the studied of foreign and Russian scholars. The work uses the dialectical method which allows tracking the provisions of the criminal laws of Germany, Russia, Poland, and France and speciﬁcs of the conceptual basis of understanding the place of ecocide in the system of crimes against peace and security in the criminal legislation of the above countries. Also, the legal (dogmatic) method is used, which allows studying the provisions of the criminal law by their treatment by scholars and formulating the provisions of the criminal law as to the acts of ecocide. This method allows determining the terminological diﬀerence and peculiarities of treatment of international norms in the common-law and civil-law countries in the regulation of the basis of responsibility for crimes against peace and security of mankind on the whole and the crime of ecocide in particular. The methodological basis is the systemic approach, which orients the study at opening the direct object of ecocide, which allows evaluating the right for safe ecological (surrounding) environment, favorable for existence and development of unspeciﬁed group of people. The systemic approach allows seeing existence of generic groups of crimes against peace and security of mankind and determining the role of ecocide in the system of crimes against peace and security in the criminal legislation of other countries. Consideration of the global problems and the threat of acts of ecocide led to the necessity for attracting the methods of the structural and functional approach. The tools for determining the speciﬁcs of the selected objects are the comparative & historical and the comparative methods, which allow determining and comparing the levels of devel‐ opment of the studied problem and possible threats to peace and security of mankind

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and opening the content of the right for favorable surrounding environment, comparing the constitutional and criminal law of Russia and other countries.

4

Results

A direct object of ecocide, as a crime against security of mankind, is the interests of provision of physical existence of mankind on the whole and of unspeciﬁed group of people on a certain territory. At that, a part of the legal interest of security of mankind should be the right for safe ecological (surrounding) environment, which is favorable for existence and development of unspeciﬁed group of people. It is possible to state that the norms of international criminal law on the whole (and on crimes against peace and security of mankind, in particular) could be evaluated as direct sources of the internal criminal law of foreign countries. However, in the countries with the diﬀerent system of internal law there are certain diﬀerences in solving the issue of the international and legal norms’ becoming the source of criminal law. That is, the diﬀerence consists not in the principle of acknowledgment of international law a source of the national law but in the method of inﬂuence of the international and legal norms on the provisions of the national criminal laws.

5

Conclusions

So it is possible to make some conclusions. Firstly, a person (persons) performing crimes against international peace or human‐ kind or war crime should receive independent legal treatment, i.e., these actions should be qualiﬁed in totality. In other words, none of these crimes can “absorb” another one. A basis for this conclusion is acknowledgment of the interests of provision of inter‐ national peace and security of mankind and observation of the rules of war and military conﬂicts as the main direct objects of crimes against peace and security of mankind and distinguishing the corresponding generic groups of these crimes. Such position is supported by the leading Western authors, “in the context of performance” of these crimes. Secondly, the interests of peace and security of mankind, as a generic object of the national criminal and legal protection, are the following: – interests of provision of peaceful co-existence of states and peaceful solution to international conﬂicts; – interests of provision of physical existence of unspeciﬁed group of people (mankind on the whole or demographic groups) from any threats that may come from the human factor; – interests of provision of rules of military conﬂicts of the international and non-inter‐ national character. Thirdly, due to the provisions of international criminal law and decisions of inter‐ national courts, any act of ecocide, related to performance of other crime against peace

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and security of mankind requires total qualiﬁcation according to the corresponding norms of Article 34 of the CC of the RF. The above provisions of the constitutional and criminal legislation of a range of European countries and the USA allow stating the following. Despite the terminological diﬀerence and peculiarities of perception of the international norms, the common-law and civil-law countries have a certain unity in regulation of the foundations of respon‐ sibility for crimes against peace and security of mankind on the whole and ecocide in particular. At that, criminal legislation of most European countries, while not using the term “ecocide” directly, do acknowledge the high level of social threat of this crime, based on creation of a threat to the interests of life and health of unspeciﬁed group of people. Thus, the generally acknowledged priority of the norms of international law is estab‐ lished, which is reﬂected in the constitutional and criminal legislation of Russia and other civilized countries of the global society. All this conﬁrms the fundamental idea that the modern criminal and legal systems of Russia and Western countries have a lot in common.

References The Criminal Code of the Russian Federation dated June 13, 1996, No. 63-FZ (as of June 7, 2017). http://www.consultant.ru/document/cons_doc_LAW_10699/ Kibalnik, A.G., Solomonenko, I.G.: Crimes against peace and security of mankind. SPb (2004) Bassiouni, MCh.: Crimes Against Humanity in International Criminal Law, 2nd edn. Kluwer Academic Publishers, New York (1999) Grechenkova, O.Y.: The problem of ﬁghting ecocide as a crime against peace and security of mankind, ISSaE (branch) of DSTU, 98 p. (2014) Zhalinsky, A.E., (ed.): Scientiﬁc and practical commentary to the Criminal Code of the Russian Federation, Moscow (2005) Morshchakova, T.G.: The Federal Republic of Germany. Constitution and legal acts, Moscow (1991) Maklakov, V.V., Entin, V.L.: The French Republic. Constitution and legal acts (1989) Bingam, T.H.: The European convention on human rights: time of incorporation. T.H. Bingam, Legal advocate, No. 4 (1996) Zhidkov, O.A., Laﬁtsky, V.I.: The United States of America. Constitution and legal acts, Moscow (1993) Henkin, L.: Essays on the Development of International Legal Order, Leyden (1980) Grechenkova, O.Y.: Understanding the role of ecocide in the system of crimes against peace and security of mankind in the criminal legislation of foreign countries. Eurasian J. Law, 1(104) (2017) Fletcher, J., Naumov, A.V.: The main concept of the modern criminal law, Moscow (1998)

Public Prosecutor’s Waiver of Prosecution as a Sub-institution of the Russian Criminal Procedure Law Anna A. Kulikova ✉ , Liana Barashyan, Viktoria S. Kirilenko, and Eduard E. Genzyuk (

)

Institute of Service Sphere and Entrepreneurship (Branch) of Don State Technical University, Shakhty, Russia [email protected]

Abstract. This paper presents the issue of prosecutor’s waiver of prosecution as an institution of the criminal procedure law and as legal proceedings of the public prosecutor in the court proceedings, as well as the grounds, conditions, procedure and the consequences of the statement of waiver of prosecution and its judicial consideration by the court of ﬁrst instance, related law enforcement errors, as well as the possibility to waive prosecution in the court of appeal. Keywords: Public prosecutor · Grounds · Conditions The procedure and the consequences of waiver of prosecution Court of ﬁrst instance · Court of appeal

1

Introduction

Public prosecutor’s waiver of prosecution is not a novel for the Russian criminal proce‐ dure. The power to waive unsubstantiated accusation was assigned to the prosecutor for the ﬁrst time as early as in the Statute of Criminal Proceedings of 1864. Thus, in this regard, A. Koni noted that “an obligation of the prosecutor who ﬁnds the excuses of the defendant to be justiﬁable, to waive support of the bill of indictment, disproved by the judicial investigation, by honestly reporting this fact to the court, is one of the best expressions of that spirit of live impartiality which the authors of Judicial Statutes wanted to establish in judicial activity”. The public prosecutor’s waiver of prosecution in the modern Russian criminal process derives from the social value of the criminal proceedings, which consists in the fact that the criminal prosecution and the imposition of just punishment on the guilty persons equally comply with the appointment of the criminal proceedings as the waiver of the criminal prosecution of persons who are not guilty (Part 2 of Article 6 of the Criminal Procedure Code of the Russian Federation). In this regard, waiver of prose‐ cution should be regarded as a signiﬁcant procedural mechanism which implements the purpose of the criminal proceedings as it pertains to the prevention of criminal prose‐ cution of persons who are not guilty, which, on the one hand, is an attribute adversary of the adversarial criminal procedure, and on the other hand, ensures a proper balance © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 622–636, 2019. https://doi.org/10.1007/978-3-030-00102-5_65

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of interests of the state and the individual who was subjected to criminal prosecution during the court proceedings in a criminal case, as well as individuals and organizations that are the victims of crime. This research paper is aimed at carrying out a comprehensive system analysis of public prosecutor’s waiver of prosecution based on the results of study of the statutes of the international and criminal procedure law, scientiﬁc works in philosophy, general theory of law, criminal law, criminalistics, as well as developing the proposals on the improvement of legislation regulating the procedure for the public prosecutor’s waiver of prosecution in the Russian criminal proceedings, which involves fulﬁllment of the following tasks: – identifying the essence of public prosecutor’s waiver of prosecution in the modern criminal proceedings; – identifying the place and the role of public prosecutor’s waiver of prosecution in the system of criminal procedural functions; – analysis of essential features of the term “public prosecutor’s waiver of prosecution” and development of its authors deﬁnition; – characteristics of the types of the public prosecutor’s waiver of prosecution; – diﬀerentiation of public prosecutor’s partial waiver of prosecution from related legal proceedings (change of accusation, amendment of accusation). The object of research consists in the criminally-remedial relationship arising between the public prosecutor and the court, as well as other participants of the criminal proceedings on the part of the prosecution and the defense due to the formation of the public prosecutor’s opinion that the introduced evidence does not conﬁrm the charges ﬁled against the defendant. The subject of research consists in the statutes of the international and Russian law regulating the grounds and the procedure for statement of waiver of prosecution by the public prosecutor and its legal consequences, as well as other regulatory legal acts maintaining law and waiver of prosecution; legal and other professional literature on the topic of research.

2

Research Data and Methods

The theoretical basis of research is made of selected scientiﬁc works and publications of such scientists as Zhumakanova, N.A., Kulenko, O.I., Smirnov, A.V., Teliatnikov V.I. et al. The legal and regulatory framework of research is represented by the provisions of the current criminal legislation, penal legislation and criminal procedure legislation of the Russian Federation. This research is also based on the provisions of the Constitution of the Russian Federation, federal laws, as well as other regulatory legal acts of the Russian Federation that directly or indirectly regulates the ﬁeld of public prosecutor’s waiver of prosecution under the conditions of operation of the relevant revision of the Criminal Procedure Code of the Russian Federation.

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The introduction of amendments and additions into the Criminal Procedure Code of the Russian Federation by the lawmaker predetermined the change the nature of mutual relations of participants of the criminal proceedings on the part of the prosecution. The prosecutor who was conventionally a legally competent superintendent of criminal prosecution both during the pre-trial proceedings and during the court proceedings, has lost a large part his powers which couldn’t but aﬀected the quality of pre-trial investi‐ gation, and, hence, the eﬀectiveness of public prosecution of case in court. The prose‐ cutor’s deprivation of right to fully or partially waive prosecution during the adoption of indictment resulted in the increase of the legal eﬀect of possible exercise of these powers by him at the stage of court proceedings in a criminal case. Theoretical and practical implications of research consist in the fact that it is a complex historical and legal research of the public prosecutor’s waiver of prosecution, its essence and concept, types, as well as procedure for its statement and procedural implementation, arising legal consequences. The provisions that were formulated in the research can serve as a basis for the constructive scholarly dispute and further research into this problem. Methodological basis of this research is represented by the universal dialectical method of scientiﬁc cognition as well as historical and legal method, comparative legal method, formal logical method, sociological method, and system structured method.

3

Findings

3.1 The Essence of the Public Prosecutor’s Waiver of Prosecution The prosecution institution in criminal procedure law regulated a group of social rela‐ tions developed between the prosecuting authorities (private prosecutor in private crim‐ inal cases) and a person against whom the charges were ﬁled, during the pre-trial proceedings and trial proceedings in a criminal case. The prosecution institution includes such sub-institutions as a sub-institution of presentation of accusation, sub-institution of termination of prosecution (criminal prosecution) in pre-trial proceedings, sub-insti‐ tution of case prosecution in court, sub-institution of waiver of prosecution. In this regard, the sub-institution of the public prosecutor’s waiver of prosecution represents a set of criminal procedural rules regulating part of the social relations within the prose‐ cution institution of that arise between the public prosecutor, the court, and other parties to the trial as a result of a statement of waiver of prosecution by the public prosecutor. The next aspect in the identiﬁcation the essence of the public prosecutor’s waiver of prosecution is the analysis of its position and value in the system of procedural functions of the Russian criminal proceedings. The theory of criminal procedure law has no unanimity of opinion on the kind of function exercised by the prosecutor acting as a public prosecutor in court. In the meantime, public prosecutor’s waiver of prosecution appears to simultane‐ ously have both the features of supervisory authority of the prosecutor and the features of supervisory authority within the implementation of the prosecution function. In particular, an attribute characterizing public prosecutor’s waiver of prosecution as a supervisory authority consists in the fact that decision on waiver of prosecution is made

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by the public prosecutor in case of illegality or groundlessness of the supported charges, and not in case of their inexpediency. On the other hand, decision on waiver of prose‐ cution can only be made by the public prosecutor if he/she believes that there is no procedural possibility of reception of any additional evidence required for conﬁrmation of supported charges, which characterizes such decision as decision made within the scope of implementation of the prosecution function. An argument for the fact that public prosecutor’s waiver of prosecution is not exclu‐ sively a supervisory authority of the prosecutor, is the fact that such waiver in terms of its legal eﬀect is equivalent to the decision of interrogating oﬃcer or investigator on the termination of criminal case in pre-trial proceedings. At the same time, the academic literature contains such point of view according to which the criminal prosecution in pre-trial proceedings and case prosecution in court are independent functions that “must be separated as inconsistent in one in order to ensure the necessary level of neutrality of the prosecutor participating in the court hearing of the case”. Waiver of prosecution for a public prosecutor serves as a need, an obligation, the opinion in the fulﬁllment of which is formed as a result of investigation (study) of crim‐ inal case ﬁles and evidence required for delivery of such judgment, provided that it is impossible to receive new evidence conﬁrming the charges ﬁled against the defendant during the judicial investigation. Proceeding from the fact that the public prosecutor’s waiver of prosecution is oppo‐ site to the prosecution function in its area of focus, there arises an appropriate question whether it can be then considered as an implementation of the defense function, which in its direction is also opposite to the prosecution function? Public prosecutor’s waiver of prosecution in the conditions of the current Criminal Procedure Code of the Russian Federation can be considered as a defense of the defendant, where “defense” is not used in a narrow sense, but denotes legal proceedings of defense lawyer in the criminal proceedings, a “defense” in a wide sense, in which this term is used in Article 6 of the Criminal Procedure Code of the Russian Federation, providing for the “protection of a person from illegal and unsubstantiated accusations, adjudication, limitation of his/her rights and freedoms” as a purpose of the criminal proceedings (Paragraph 2 of Part 1 of Article 6 of the Criminal Procedure Code of the Russian Federation). The defense of the defendant in this wide sense in the form of public prosecutor’s waiver of prosecution appears to be the implementation of supervi‐ sory authorities of the prosecutor within the scope of his criminal prosecution. The last aspect in the identiﬁcation the essence of the public prosecutor’s waiver of prosecution is the deﬁnition of legal eﬀect which such waiver has for the court as a state authority that is authorized to deliver the ﬁnal judgment in a criminal case. In accordance with the current Criminal Procedure Code of the Russian Federation full or partial waiver of prosecution on the part of the public prosecutor during the court proceedings entails complete or partial termination of criminal case or criminal prose‐ cution on the grounds stipulated by Paragraphs 1 and 2 of Part 1 of Article 24 and Paragraphs 1 and 2 of Part 1 of Article 27 of the Criminal Procedure Code of the Russian Federation.

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Reconsideration of his attitude towards the legal eﬀect of the public prosecutor’s waiver of prosecution for the court by the lawmaker is seemingly related to the procla‐ mation of the adversarial principle as a principle that deﬁnes the type of the modern criminal proceedings. Under conditions of adversariality, the accusation as legal proceedings of the prosecuting authorities is a “driving force of the criminal proceed‐ ings”. At the judicial stages of the criminal proceedings, the adversarial principle restricts the procedural initiatives and the limits of legal proceedings of the court by the subject and the scope of charges supported by the prosecuting authority represented by the public prosecutor. In particular, the adversarial principle, as speciﬁed in the Consti‐ tutional Court of the Russian Federation in its Ruling No. 18-P of December 8, 2003, is expressed in the fact that “initiation of criminal prosecution, the statement of accusation and its support in court are achieved by the authorities and oﬃcials speciﬁed in law, as well as the injured persons, while veriﬁcation and evaluation of soundness and reason‐ ableness of their opinions on the merits of accusation is under the court jurisdiction” (Paragraph 7). Full or partial waiver of prosecution by the prosecuting authorities in court proceed‐ ings in a criminal case means complete or partial termination of the prosecution function, which under the conditions of adversary criminal proceedings entails the complete or partial termination of the protection function, and in general, the complete or partial termination of the argument of the parties in criminal proceedings. The indispensable consequence of the loss of the judicial matter, as well as the argument as interdependent legal proceedings of the prosecution and the defense, is the impossibility of further implementation of the court’s function of resolution of the criminal case on its merits. In this regard, the approach of the lawmaker towards normative consolidation of the demand from the court to deliver its judgment which is irrelevant to the question of guiltiness or guiltlessness of the defendant as a result of public prosecutor’s waiver of prosecution, namely a judgment on the termination of criminal case in full or in a partic‐ ular part, appears to be logical. Meanwhile, the change of the legislative approach to the deﬁnition of the legal eﬀect of the public prosecutor’s waiver of prosecution for the court was ambiguously perceived by the processualist scientists. Literal interpretation of the speciﬁed deﬁnitions of the Supreme Court suggests that there is no technical diﬀerence for the highest judicial agency as to the form in which the ﬁnal judgment was delivered in a criminal case in which the public prosecutor waived prosecution: in the form of decision on the termination of criminal case or in the form of the judgment of partial acquittal. And despite the fact that the violations of criminal procedure legislation were evident, they, according to the Supreme Court of the Russian Federation, were not signiﬁcant, since they didn’t aﬀect the legality, validity and fairness of judgments in general (Part 1 of Article 381 of the Criminal Procedure Code of the Russian Federation). It should be reminded that the Constitutional Court of the Russian Federation in its Ruling No. 7-P of April 20, 1999 expressed its legal stance on this matter before the date of implementation of the Criminal Procedure Code of the Russian Federation, which consisted in the fact that the kind of legal consequences which should be provided for in case of public prosecutor’s waiver of prosecution eliminating the continuation of

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proceedings in a criminal case fully depends on the lawmaker (Paragraph 3). Hence, from the conceptual point of view, any judgment of the court which doesn’t contain any opinion on the guiltiness of the defendant in that part of prosecution in which the public prosecutor waived it, according to the Constitutional Court of the Russian Federation, is without prejudice to the Constitution of the Russian Federation. In the development of legal provisions regulating the procedure for the public pros‐ ecutor’s waiver of prosecution in the Criminal Procedure Code of the Russian Federa‐ tion, the lawmaker chose the option of immediate termination of criminal case by the court in case of such waiver. This meant that the statement of reasonable waiver of prosecution by the public prosecutor entailed the delivery by the court of the ruling (order) on the termination of criminal case (criminal prosecution) in full or in a relevant part without clariﬁcation of any additional circumstances related to the essence of accu‐ sation, at any stage of the court proceedings. However, as early as in 2003, the Constitutional Court of the Russian Federation, upon consideration of a complaint about veriﬁcation of constitutionality of provisions of Part 7 of Article 246 and Paragraph 2 of Article 254 of the Criminal Procedure Code of the Russian Federation, made Ruling No. 18-P, in which it stated that “public pros‐ ecutor’s waiver of prosecution or a change of his prosecution towards its mitigation, as well as delivery of the corresponding judgment by the court, can only be valid upon completion of investigation of criminal case ﬁles which are relevant to such judgments and hearing to the opinions of the participants at the court session on the part of the prosecution and the defense on this subject” (Paragraph 7). Subsequent legal proceedings of the court after the statement of waiver of prosecu‐ tion by the public prosecutor appear to be not functional but law-enforcing. In particular, it is aimed at enforcement of rights and legitimate interests of other participants of the criminal proceedings of the injured person in the ﬁrst place, apart from the public pros‐ ecutor. Thus, in accordance with the abovementioned Ruling of the Constitutional Court of the Russian Federation, failure to investigate the necessary criminal case ﬁles and state their opinion to all participants of the criminal proceedings would restrict their rights such as the right to speak in a debate, the appeal against the judgment delivered by the court, including on the termination of the case as a result of the public prosecutor’s waiver of prosecution, and to prove its illegality, groundlessness and unfairness in a higher court. Otherwise, according to the Constitutional Court of the Russian Federation, not only the procedural rights of the participants in the court proceedings, but their constitutional rights guaranteed by Article 21 (Part 1), 45, 46 (Part 1) and 52 of the Constitution of the Russian Federation would be violated. This Ruling of the Constitutional Court of the Russian Federation is clearly in the nature of a compromise: on the one hand, it does not state the restriction or infringement of procedural rights of the injured person in case of public prosecutor’s waiver of pros‐ ecution, but, on the other hand, the possibility of immediate termination of criminal case by the court due to the fact of public prosecutor’s waiver of prosecution is eliminated. At the same time, the expediency of further court proceedings, within which, from the formal point of view, the administration of justice in a criminal case in case of public prosecutor’s full waiver of prosecution must continue, causes doubt. It appears that the abovementioned Ruling of the Constitutional Court of the Russian Federation essentially

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provides for a legal ﬁction which consists in the court’s obligation to investigate criminal case ﬁles, regardless of the results of which the court is not able to deliver any other judgment other than judgment on the termination of criminal case (criminal prosecu‐ tion). Unfortunately, Russian Legislation has no legal mechanics of appealing the judg‐ ments of the Constitutional Court of the Russian Federation, since in accordance with Article 79 of the federal constitutional law “On the Constitutional Court of the Russian Federation”, the judgments of the Constitutional Court of the Russian Federation are ﬁnal and are not subject to any appeal, and their legal force of acknowledgment of the legal act to be unconstitutional cannot be overcome by the repeated adoption of the same legal act. Hence, we have to note that the order of the Constitutional Court of the Russian Federation on the need of investigating the case ﬁles required for termination of criminal case resulting from public prosecutor’s waiver of prosecution acquired the meaning of the principle (general principles) of court proceedings unprovided for by the criminal procedure legislation, cancellation or change of which will only be possible in the form of a new judgment of the Constitutional Court of the Russian Federation, providing for reconsideration of own legal stance on the matter. Meanwhile, given the existing legal stance of the Constitutional Court of the Russian Federation, the statement of the fact that immediately before rendering of decision on the termination of criminal case (criminal prosecution), as a result of investigation of necessary criminal case ﬁles and hearing to the opinions of the parties, the court has the same amount of information about the circumstances of the committed crime in the criminal case under consideration, as it had before the delivery of judgment, appears to be justiﬁed. This means we can say without prejudice that court decision on the termi‐ nation of criminal case (criminal prosecution) as a result of public prosecutor’s waiver of prosecution is in actual fact made under the same legal conditions as the judgment of acquittal. The procedure for delivery of the abovementioned judgments is the same. In accordance with Part 2 of Article 256 of the Criminal Procedure Code of the Russian Federation ruling or order on the termination of criminal case is delivered in the consul‐ tation room in the form of a separate service document. Taking the above into account, the literature on criminal procedure contains opinions on the advantages of judgment of acquittal for the defendant compared to decision on the termination of criminal case (criminal prosecution). Legislative regulation of legal eﬀect of public prosecutor’s waiver of prosecution for the court in countries with similar criminal procedure systems is of particular impor‐ tance. Finally, the legislative regulation of legal consequences of revealing of exculpatory grounds for termination of criminal case in the Russian criminal proceedings by the court during the court proceedings stipulated by Paragraphs 1 and 2 of Part 1 of Article 24 and Paragraphs 1 and 2 of Part 1 of Article 27 of the Criminal Procedure Code of the Russian Federation is of conceptual importance. Thus, if there are any exculpatory grounds for termination of criminal case, but there are no formal public prosecutor’s waiver of prosecution, the court shall have no right to make a ruling (order) on the termination of criminal case, while in accordance with Part 8 of Article 302 of the Criminal Procedure Code of the Russian Federation “shall continue criminal trial

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according to the normal procedure until it is resolved on the merits. In instances stipu‐ lated by Paragraphs 1 and 2 of Part 1 of Article 24 and Paragraphs 1 and 2 of Part 1 of Article 27 of this Code, the court shall deliver the judgment of acquittal”. 3.2 Concept of the Public Prosecutor’s Waiver of Prosecution The authors of literature on criminal procedure made several attempts to deﬁne the term “public prosecutor’s waiver of prosecution”. Thus, Kriukov, V.F. deﬁnes waiver of prosecution as “a statement made by the prosecutor at the court session in which he fully or partially expresses his negative attitude towards accusation in the form of denial of its legality and validity, gives his reasons to the impossibility of maintaining it with regard to the defendant, and informs of complete or partial termination of prosecutive action in a criminal case which gener‐ ates legal procedural consequences for all participants in the process.” Kirillova, N.A. suggests using the following deﬁnition – it is a “legal stance of the public prosecutor formed as a result of investigation of criminal case ﬁles regarding the absence of a criminal act, component elements of a crime, noninvolvement of the defendant in the commission of crime or violation described in Articles 147, 448 of the Criminal Procedure Code of the Russian Federation of the procedure for initiation of criminal case (indictment), expressed in a court session in the form of the reasoned statement of complete or partial termination of criminal case (criminal prosecution) and entailing the consequences prescribed by law”. In doing so, the author deﬁnes the analyzed term through the generic term “legal stance of the public prosecutor”. Most of the proposed deﬁnitions of public prosecutor’s waiver of prosecution appear to be reﬂective of certain aspects and features of the procedure for the waiver of pros‐ ecution, without, however, expressing the essence of this legal phenomenon in general. Essential features of the term “public prosecutor’s waiver of prosecution” are as follows: 1. The subject of waiver. In accordance with Part 2 of Article 246 of the Criminal Procedure Code of the Russian Federation, the public prosecutor acts as a subject of waiver of prosecution in public and private-public criminal cases, as well as in private criminal cases, of such cases were initiated by the investigator or interrog‐ ating oﬃcer with the consent of the prosecutor. In accordance with Paragraph 6 of Article 5 of the Criminal Procedure Code of the Russian Federation, public prosecutor is a prosecuting oﬃcial who supports charges in a criminal case in court on behalf of the state (Criminal Procedure Code of the Russian Federation as amended on June 5, 2007). It must be noted that the lawmaker’s approach to the issue of granting the powers of the public prosecutor to various oﬃcials since the adoption of the Criminal Procedure Code of the Russian Federation was repeatedly revised. Thus, the new revision of Para‐ graph 6 of Article 5 of the Criminal Procedure Code of the Russian Federation stipulated that the oﬃcial of the investigative authority could act as a public prosecutor in court by order of the prosecutor, except for the prosecuting oﬃcial. Subsequently, shortly before the date of implementation of the Criminal Procedure Code of the Russian

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Federation, several amendments were introduced in it, which stipulated that the inves‐ tigator was granted the right to support charges in court as well. 2. The object of public prosecutor’s waiver of prosecution is the accusation which in the science of criminal procedure is conventionally viewed in 2 senses: in substantive sense and in procedural sense. From a substantive point of view, the accusation is a prosecutive thesis which contains the statement and legal classiﬁcation of the act prohibited by criminal law that was committed by a particular person. From the procedural point of view, the accusation means legal proceedings aimed at establishing and substantiating of guiltiness of a particular person in commission of an act prohibited by criminal law, in court. 3. The legal stance of the subject of waiver of prosecution with regard to the charge as the object of this legal act is expressed in full or partial denial of prosecution in material sense and termination of legal proceedings upon its substantiation in court. Full or partial denial of prosecution by the public prosecutor as a legal stance is the result of his inner conviction. Formation of opinion of the public prosecutor on the illegality or groundlessness of supported charges is a complex psychological process which occurs at the level of consciousness of the public prosecutor in the form of logical operations. This opinion cannot be based on the intuition of the public prosecutor. 4. Legal consequences of the public prosecutor’s waiver of prosecution consist in rendering of decision on the termination of criminal case (criminal prosecution) by the court and accrual of the defendant’s right for rehabilitation. Termination of criminal case (criminal prosecution) in case of statement of waiver of prosecution at the preliminary hearing stage by the public prosecutor is regulated by Article 239 of the Criminal Procedure Code of the Russian Federation. Thus, Part 1 of Article 239 of the Criminal Procedure Code of the Russian Federation stipulates that in case of prosecutor’s waiver of prosecution in accordance with the procedure speciﬁed in Part 7 of Article 246 of the Criminal Procedure Code of the Russian Federation, the judge shall made a ruling on the termination of criminal case. Termination of criminal case at the stage of the court session is regulated by Article 254 of the Criminal Procedure Code of the Russian Federation. In accordance with Paragraph 2 of Article 254 of the Criminal Procedure Code of the Russian Federation, the court shall terminate the crim‐ inal case in a court session in case of prosecutor’s waiver of prosecution in accordance with Part 7 of Article 246 of the Criminal Procedure Code of the Russian Federation. 3. Types of the public prosecutor’s waiver of prosecution The law-maker has established by law 2 main types of public prosecutor’s waiver of prosecution in Part 7 of Article 246 of the Criminal Procedure Code of the Russian Federation which were identiﬁed as early as in the Soviet science of criminal procedure: full and partial waiver. The scope of charges serves as the basis for this classiﬁcation. Full waiver of prosecution means waiver of prosecution to the full extent. Accordingly, partial waiver of prosecution means removal or its particular components of the scope

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of charges. Full or partial reduction of the scope of charges entails complete or partial change of statement and legal classiﬁcation of the prosecution. Full waiver of prosecution means a total transformation of the legal stance of the public prosecutor in a criminal case into the opposite stance - from the absolute statement of the commission of a particular crime by the defendant to the complete denial of such commission. In case of partial waiver of prosecution legal stance of the public prosecutor shall be subjected to transformation which is dependent on the degree of proof of crim‐ inal charges. It is the degree of proof of criminal charges that has an eﬀect on the consciousness of the public prosecutor and forms his opinion on guiltiness or guiltless‐ ness of the defendant in commission of particular crimes of those that were incriminated. Full and partial waiver of prosecution on the part of the public prosecutor are dialec‐ tically dependent and are subject to the inﬂuence of such basic law of dialectics as a transition from quantitative changes to qualitative changes. According to this law, the accumulation of “gradual quantitative changes in a special moment for each individual process necessarily leads to signiﬁcant fundamental qualitative changes.” For the purposes of the public prosecutor’s waiver of prosecution, the operation of the law of transition from quantitative changes to qualitative changes is expressed in the fact that a number of consecutive partial waivers of prosecution may result in denial of prose‐ cution in full, i.e. in the full waiver of prosecution. On the other hand, full waiver of prosecution assumes, based on this law, the integrity of the partial waivers from each component (episode) of the supported charges. Full waiver of prosecution on the part of the public prosecutor is an extremely rare phenomenon in the judicial practice and is usually associated with a failure to prove criminal charges against a person for the commission of a single crime. More often than not, a noninvolvement of the defendant in the commission of a crime is established in such cases during the court proceedings, which means that it was committed by another person, while the defendant himself either committed another crime which he wasn’t accused of, or did not commit any crime at all. In order to initiate criminal proceedings against the defendant whose prosecution was waived by the public prosecutor, for the commission of another crime, the adequate data of which was revealed during the court proceedings, a new criminal case with the corresponding component elements of a crime must be initiated per standard procedure by the agency of inquiry, interrogating oﬃcer or investigator, pre-trial investigation of it must be carried out, this person must be brought up for trial as a defendant, and this criminal case must be sent up to the court for consideration on its merits. Similar procedure should also be corresponding in case of establishment of fact of commission of crime by another person during the court proceedings in which the public prosecutor waived prosecution. If such person was not identiﬁed during the court proceedings, then in accordance with Part 3 of Article 306 of the Criminal Procedure Code of the Russian Federation, the court in the delivery of ruling or order on the termi‐ nation of criminal case on the grounds of noninvolvement of the defendant in the commission of crime shall deal with the matter of sending the criminal case to the head of the investigative authority or to the head of the agency of inquiry for pre-trial inves‐ tigation and identiﬁcation of a person who is subject to be brought to trial as a defendant.

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Due to the fact that full waiver of prosecution on the part of the public prosecutor in the science of criminal procedure does not raise any special problematic issues, it seems justiﬁed to pay more attention to the theoretical and applied aspects of the partial waiver of prosecution on the part of the public prosecutor and his diﬀerentiation from related legal proceedings (change of accusation, amendment of accusation) in this Paragraph. Partial waiver of prosecution on the part of the public prosecutor, as mentioned above, is, in a general sense, a waiver of criminal prosecution. Therefore, for a proper understanding of the procedural sense and the scope of the partial waiver of prosecution in the court proceedings, it is important to note that termination of criminal prosecution in pre-trial proceedings can be complete or partial. Provision for partial termination of criminal prosecution in pre-trial proceedings is made in Part 2 of Article 175 of the Criminal Procedure Code of the Russian Federation, in accordance with which, if the presented accusation wasn’t conﬁrmed in any particular part during the preliminary investigation, then the investigator shall make a Ruling which terminates criminal prosecution in the relevant part. Partial termination of crim‐ inal prosecution means termination of proceedings in a criminal case as it pertains to the accusation of a particular person of commission of certain criminal episodes out of the total number of crimes for which the charges were ﬁled against him. Complete termination of criminal prosecution in pre-trial proceedings is eﬀected in case of termination of proceedings in a criminal case in which criminal proceedings were initiated against several persons who committed a crime in privity (Paragraph 1 of Part 1 of Article 153 of the Criminal Procedure Code of the Russian Federation) as defendants, or in case of misprision of crime which wasn’t promised in advance (Para‐ graph 3 of Part 1 of Article 153 of the Criminal Procedure Code of the Russian Feder‐ ation) with regard to one of defendants. Complete termination of criminal prosecution with regard to this defendant doesn’t entail termination of criminal case in general (Part 4 of Article 27 of the Criminal Procedure Code of the Russian Federation) with continued criminal prosecution of the other defendants. That being said, partial waiver of prose‐ cution in the court proceedings may consist in full waiver of prosecution of one of several criminal defendants, which doesn’t entail waiver of prosecution of the other defendants per se, which means full waiver of prosecution in a criminal case. The modiﬁcation of criminal charges by the public prosecutor in the court proceed‐ ings should be understood to mean the modiﬁcation of legal classiﬁcation of a crime within the same component elements of a crime or within the homogeneous component elements of crimes if it doesn’t result in aggravation of situation with the defendant and doesn’t infringe his right for protection. In this regard, the legal stance of the Supreme Court of the Russian Federation regarding what constitutes a change of accusation which aggravates the situation with the defendant is of interest. Thus, in Ruling No. 55 “On judicial judgment” of November 29, 2016, the Supreme Court of the Russian Federation stated that accusation is consid‐ ered to be more grave when: (a) another statutory provision of criminal legislation is applied (Article, part of Article, or Paragraph), the sanction of which provides for a more severe punishment; (b) the accusation includes additional facts (episodes) which were not incriminated to the defendant and entail the change of classiﬁcation of crime to the law which

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stipulates greater sentence or increasing the actual scope of charges, although not changing the legal evaluation of the committed acts. Hence, any procedural change which doesn’t cover the legal consequences listed above is a permissible change of accusation. At the same time, the wording of Part 8 of Article 246 of the Criminal Procedure Code of the Russian Federation, which stipulates that the charges only be modiﬁed by the public prosecutor towards their reduction is clearly inconsistent with the above‐ mentioned legal stance of the Supreme Court of the Russian Federation, as well as Part 2 of Article 252 of the Criminal Procedure Code of the Russian Federation, according to which modiﬁcation of criminal charges in the court proceedings is allowed if it doesn’t result in aggravation of situation with the defendant and doesn’t infringe his right for protection. Hence, the criminal charges in the court proceedings, according to the legal stance of the Supreme Court of the Russian Federation and general conditions of the court proceedings, can be modiﬁed not only towards mitigation, but also without changing the gravity of accusation.

4

Discussion

The conducted research into the rapid emergence, formation and development of legal and scientiﬁc provisions concerning public prosecutor’s waiver of prosecution in the Russian criminal proceedings, the current state of the sub-institution of waiver of pros‐ ecution, as well as legal regulation of the procedure for the public prosecutor’s waiver of prosecution in case of proceedings in the court of ﬁrst instance allows drawing the following conclusions: 1. In the draft Criminal Procedure Codes developed by the State Legal Administration of the President of the Russian Federation and the Ministry of Justice, the approach to legal regulation of public prosecutor’s waiver of prosecution was diﬀerent. The Draft Criminal Procedure Code of the State Political Directorate made provision for the right of the injured person for subsidiary accusation; the court proceedings in a criminal case were only terminated in case of waiver of prosecution both by the public prosecutor and by the injured person. According to the Draft Criminal Procedure Code of the Ministry of Justice, prosecutor’s waiver of prosecution, ﬁrstly, ignored the opinion of the injured person, and, secondly, didn’t entail imme‐ diate termination of criminal case by the court. As a result, the Draft Criminal Procedure Code of the Russian Federation which was adopted at the ﬁrst reading on June 6, 1997 by the State Duma of the Russian Federation was based on the provisions of the Draft Criminal Procedure Code of the State Political Directorate. 2. Public prosecutor’s waiver of prosecution should be regarded as a sub-institution of such institution of criminal procedural law, as a prosecution institution. The subinstitution of the public prosecutor’s waiver of prosecution represents a set of criminal procedural rules regulating part of the social relations within the prose‐ cution institution of that arise between the public prosecutor, the court, and other

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4.

5.

6.

7.

8.

9.

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parties to the trial as a result of a statement of waiver of prosecution by the public prosecutor. The essence of the public prosecutor’s waiver of prosecution in the Russian crim‐ inal proceedings consists in complete or partial termination of the prosecution function, which under the conditions of adversary criminal proceedings entails the complete or partial termination of the protection function, and in general, the complete or partial termination of the argument of the parties in criminal proceed‐ ings. The indispensable consequence of the full or partial loss of the judicial matter, as well as the argument as interdependent legal proceedings of the prosecution and the defense, is the impossibility of further implementation of the court’s function of resolution of the criminal case on its merits which predetermines delivery of the ﬁnal judgment by it which sets forth the results of the change of the scope of the court proceedings. The only judgment of the court under the conditions of the adversary criminal procedure in case of public prosecutor’s waiver of prosecution can be the decision on the termination of criminal case (criminal prosecution). Full waiver of prosecution means a total transformation of the legal stance of the public prosecutor in a criminal case into the opposite stance - from the absolute statement of the commission of a particular crime by the defendant to the complete denial of such commission. Full waiver of prosecution not only liquidates its scope, but fully eliminates its statement and legal classiﬁcation. Public prosecutor’s partial waiver of prosecution should be understood to mean the proceeding decision on: (1) partial termination of criminal prosecution of a person who is the only defendant in a criminal case; (2) partial or complete termination of criminal prosecution of a person who is one of several defendants in a criminal case. The general conditions of public prosecutor’s waiver of prosecution are the struc‐ tural elements of its inner contents, namely: (1) opinion of the public prosecutor; (2) grounds for waiver of prosecution; (3) motives for waiver of prosecution; (4) reasons for waiver of prosecution. The opinion of the public prosecutor on the need to waive prosecution is suggested to be understood as the conﬁdence in the absence of reasonable and procedural grounds for case prosecution, as well as in the impossibility of emergence of such grounds as a result of further trial based on evaluation of evidence available in a criminal case. The justiﬁcation for public prosecutor’s waiver of prosecution should contain a reference to the grounds for termination of criminal case (criminal prosecution), as well as the arguments proving the conclusion that introduced evidence is not enough for substantiation of accusation or a brief analysis of evidence deﬂecting accusations in full or in a particular part. The lawmaker didn’t restrict the public prosecutor’s capability to waive prosecution regulatory at any stage of proceedings in the court of ﬁrst instance with regulatory means. The prosecutor’s waiver of prosecution at the preliminary hearing stage is only possible when the public prosecutor believes that the introduced evidence does not conﬁrm the accusation ﬁled against the defendant, which to the moment of this

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stage of court proceedings in a criminal case is deﬁnitive and cannot be disproved as a result of analysis of available evidence in the case during the court proceedings. 10. Legal consequences of the public prosecutor’s waiver of prosecution include: (1) analysis of relevant case ﬁles; (2) court hearing to the opinions of the participants at the court session; (3) evaluation of proper substantiation of waiver by the court; (4) rendering of decision on the termination of criminal case (criminal prosecution) by the court. 11. The opinions of the participants at the court session on the part of the defense which they set forward due to the fact of public prosecutor’s waiver of prosecution, is aimed at serving own procedural interests consisting in correct deﬁnition of the grounds for termination of criminal case (criminal prosecution).

5

Conclusion

Judging from the legal nature of public prosecutor’s waiver of prosecution and taking into consideration its essential features, we suggest using the following deﬁnition of this term: public prosecutor’s waiver of prosecution – a proceeding decision of the public prosecutor on the complete or partial termination of implementation of the function of criminal prosecution which results from the purpose of the criminal proceedings and made as a result of the experienced need to waive support of illegal or unsubstantiated accusation of the defendant and entails the loss of adversariality by the criminal proceed‐ ings in full or in a particular part, which predetermines the impossibility of further implementation of the function of resolution of the criminal case by the court on its merits, and, as a result, making a decision on the limitation of the scope of the court proceedings by means of termination of criminal case or criminal prosecution and entails full or partial rehabilitation of the defendant.

References 1. Convention for the Protection of Human Rights and Fundamental Freedoms: concluded in Rome on 04 November 1950. Legislation Bulletin of the Russian Federation, no. 2 (2001). Article 163 2. Recommendation of the Committee of Ministers of the Council of Europe No. R (85) 11 of 28 June 1985 “Committee of Ministers - to the member states concerning the situation with the injured person within the scope of criminal law and criminal procedure”. Rossiyskaya Yustitsiya, no. 7 (1997) 3. Constitution of the Russian Federation: oﬃcial text, p. 32. Publishing House of the Siberian University, Novosibirsk (2015) 4. On the Constitutional Court of the Russian Federation No. 1-FKZ of 21.07.1994. Federal constitutional law. Rossiyskaya Gazeta, no. 138 (1994) 5. Federal Law No. 2202-1 “On the public prosecution service of the Russian Federation” of 17.01.1992. Rossiyskaya Gazeta, no. 229 (1995) 6. Criminal Procedure Code of the Russian Federation. Rossiyskaya Gazeta, no. 249 (2001) 7. Criminal Code of the Russian Federation. Legislation Bulletin of the Russian Federation. no. 25, Article 2954 (1996)

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8. On the application of provisions of the Criminal Procedure Code of the Russian Federation regulating the proceedings with the participation of members of the jury by the courts: Resolution of the plenum of the Supreme Court of the Russian Federation No. 23 of 22 November 2005. Rossiyskaya Gazeta, no. 272 (2005) 9. On judicial judgment: Resolution of the plenum of the Supreme Court of the Russian Federation No. 55 of 29 November 2016. Rossiyskaya Gazeta, no. 277 (2016) 10. In the case of veriﬁcation of constitutionality of provisions of Paragraphs 1 and 3 of Part 1 of Article 232, Part Four of Article 248 and Part One of Article 258 of the Criminal Procedure Code of the Russian Soviet Federated Socialistic Republic resulting from the requests from the Irkutsk district court of the Irkutsk Region and Soviet district court of Nizhni Novgorod: Ruling of the Constitutional Court of the Russian Federation No. 7-P of 20 April 1999. Rossiyskaya Gazeta, no. 80 (1999) 11. Comment to the Criminal Code of the Russian Federation: in 2 volumes (clause-by-clause), 2nd edn. Prospekt Publishing House, vol. 2, 704 p. (2015) 12. Kudriashov, R.V.: Grounds for public prosecutor’s waiver of prosecution and their practical application. Gosudarstvo i Pravo: Teoriya i Praktika (The State and the Law: Theory and Practice): proceedings of the III International Scientiﬁc Conference (Chita, July 2014). Publishing House Molodoy Uchenyi, Chita, pp. 67–69 (2014) 13. Waiver of prosecution in the system of criminal procedural acts. Synopsis of a thesis. Candidate of Juridical Sciences. Saratov, 26 p. (2015) 14. Smirnov, A.V.: Social purpose of the criminal proceedings: a truth or a conciliation of the parties? In: Ugolovnoye Sudoproizvodstvo (Criminal Proceedings). Yurist Publishing House, no. 1, pp. 5–11 (2016) 15. Tatyanin, D.V.: Public prosecutor’s waiver of public prosecution in the system of criminallyremedial legal relationship. Topical issues of the criminal procedure and criminalistics of Russia and the CIS states. In: Proceedings of the International Research-to-Practice Conference dedicated to the 85th anniversary of the birth day of Professor, Doctor of Juridical Science, honored worker of the Higher School of Yuri Danilovich Livshits of 4 April 2014. Tsitsero Publishing House, Chelyabinsk, Part I, pp. 268–272 (2014)

Public Prosecution in Criminal Procedure: Modern Goals and Tasks Aleksei A. Shishkin ✉ , Eduard E. Genzyuk, Lyudmila A. Spektor, and Viktoria S. Kirilenko (

)

Institute of Service Sphere and Entrepreneurship (Branch) of Don State Technical University, Shakhty, Russia [email protected]

Abstract. The authors study the essence of oﬃcial prosecution as a criminal procedure category, procedural role of participation of public prosecutor, and modern technologies of presenting evidentiary information in activities of public prosecutor. Keywords: Prosecution · Public prosecutor · Responsibility Prosecutor’s oﬃce · Law

1

Introduction

Court procedure includes the institute of preliminary hearing of a case, when the issues related to appointment of a session and admission of certain evidences are viewed. In these sessions, participation of prosecutor is mandatory. The criminally-remedial code does not have the institute of return of criminal cases from court proceedings to additional investigation. These and other innovations of the law raise responsibility of public prosecutor and requires from each prosecutor to provide good organization of work, high professionalism, and impeccable tactics of court investigation. Activity and professional skill of public prosecutor in presentation, study, and evaluation of evidence is a decisive factor in provision of inevitability of punishment for the performed crime. Special requirements to prosecutor are set by participation in trial by jury, which will soon start functioning in Russia. The purpose of the research consists in complex analysis of public prosecution in the Russian criminal court procedure and analysis of modern technologies of presenta‐ tion of evidentiary information in activities of public prosecutor, which envisages completion of the following tasks: – determining the essence of public prosecution as a criminally-remedial category; – characterizing the procedural role of participation of public prosecutor; – analyzing modern technologies of presentation of evidentiary information in activi‐ ties of public prosecutor.

© Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 637–645, 2019. https://doi.org/10.1007/978-3-030-00102-5_66

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Materials and Research Methods

The theoretical basis of the research consists of the selected scientiﬁc work and publi‐ cations of such scholars as O.Y. Baev, V.N. Grigiryev, A.S. Esina, V.F. Kryukov, and N.V. Laskina. The normative and legal basis of the research includes the provisions of the existing criminal, penal, and criminally-remedial laws of the Russian Federation. The research is based on the provisions of the Constitution of the RF, federal laws, and other normative and legal acts of the RF that directly or indirectly regulate the sphere of public prose‐ cution. Theoretical and practical value of the research is determined by the fact that its results could be a basis for further research work on consideration, study, and analysis of the issues and perspectives of uniﬁcation of legal norms in the sphere of public prosecution. The methodological basis of the research is presented by a complex of methods of scientiﬁc cognition that are peculiar for the modern criminal legal science. The main method of the research is the dialectical method of cognition, which combines the systemic and functional approach to study of the object. Also, the following methods were used: systemic & structural, comparative analysis, statistical, and study of materials of criminal cases and court decisions. Using these and other methods in the work is predetermined by the topic of the research, including its practice-oriented approach to solving legal problems in this sphere.

3

Results

3.1 Essence of Public Prosecution as a Criminally-Remedial Category As one of the basic criminally-remedial notions, “prosecution” is related to the essence and nature of criminal court procedure and, accordingly, is a phenomenon that largely generates all criminally-remedial activities and opens the mechanism of implementation of the norm of material (criminal) law within criminally-remedial activities. The Russian Federation Code of Criminal Procedure (Part 22 Article 5) regulates that prosecution is a statement on completion of an action that is forbidden by the Crim‐ inal Code of the RF, set in the order envisaged by the criminally-remedial law; Part 6 Article 5 of the Russian Federation Code of Criminal Procedure established that public prosecutor is an oﬃcial of prosecutor’s oﬃce who supports prosecution from the state. Part 2 Article 35 of the Law “On the Prosecutor’s Oﬃce” deﬁnes that prosecutor conducts criminal prosecution in court and is a public prosecutor. It should be noted that supporting public prosecution (and criminal prosecution) could be viewed in two aspects: as separate procedural activities, conducted by prose‐ cutor, and as a separate function of prosecutor’s oﬃce. The eﬀective criminally-remedial laws also contain separate norms that allow separating this type of prosecutor’s activi‐ ties, but separating support for public prosecution as a separate function of prosecutor’s oﬃce is not acknowledged by all scholars. These activities, according to some, do not have independent functional essence and are conducted within implementation of the function of criminal prosecution; other scholars think that they lie within implementation

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of the function of participation in courts’ considering cases. This understanding is stimulated by certain norms of the eﬀective criminally-remedial laws. Thus, for example, provisions of Part 1 Article 20 of the Russian Federation Code of Criminal Procedure regulate that criminal prosecution includes prosecution, and Part 2 Article 35 of the Law “On the Prosecutor’s Oﬃce” puts these norms in the part “Participation of prosecutor in court procedures”. Also, it should be noted that supporting public prosecution is a separate function of prosecutor’s oﬃce, but, unlike criminal prosecution, has a derivative character, as the viewed activities conforms to criteria of the main directions regarding normative estab‐ lishment and distinction in the total volume of prosecutor’s activities, reﬂection of social purpose of prosecutor’s oﬃce, and presence of long national and historical traditions of their implementation. The main directions of achievement of this goal are criminal prosecution, supporting public prosecution, and management of pre-trial process of preparation of materials for further court proceedings. These types of activities are distinguished separately in all national models of organization of prosecutor’s activities and, as a result, are reﬂected at the level of international and legal principles as an immanent or universal sign of prosecutor’s activities in criminal procedure. Modern court investigation is based on the element of competition and equality of parties. In criminally-remedial laws, the principle of equality of parties is speciﬁed in Article 244 of the Russian Federation Code of Criminal Procedure. Court session includes public or private prosecutor, claimant, civil claimant, and representatives of complainant. The main function of party of charge is prosecution. Part 47 Article 5 of the Criminal Procedure Code of the RF provides an unclear deﬁnition of the notion “party of charge” – enumeration of participants of criminal court procedure; the notion of party in criminal procedure is not given. A party of prosecution in court investigation is a circle of participants of criminal court procedure: private prosecutor, complainant, civil claimant, and their representa‐ tives, who have certain rights for defending their interests; as to prosecutor – authorities that are aimed at protection of rights and legal interests of parties and organizations that were damaged by the crime. The most important procedural act that is made at the pretrial stages of criminal procedure is criminal indictment. Its legal essence is expressed in the fact that it deﬁnes the object and limits of court proceedings. Conclusions containing in criminal indictment as to factual circumstances of the case and their legal qualiﬁcation reﬂect internal conﬁdence in their substantiation. Thus, criminal indictment is a conclusion of investigatory bodies on guilt of speciﬁc person or persons in the speciﬁc crime. Statement of criminal indictment by prosecutor and sending the criminal case to court according to the rules envisaged by Articles 221, 222, 226, and 228.8 of the Russian Federation Code of Criminal Procedure are the moment from which public prosecution as to speciﬁc person (persons) is started. After conﬁrmation of criminal indictment, prosecutor’s criminal prosecution is conducted in the form of prosecutive activities. At that, at the state of preparation to court proceedings, prosecutor performs the function of criminal prosecution in the form of prosecution, and in the ﬁrst degree court and upper level courts – in the form of supporting prosecution and conﬁrmation of preliminary results of investigation, which

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is a form of implementation of the function of criminal prosecution, and on the other hand – the initial moment of implementation of prosecutive function. Thus, the position of supporting prosecution as one of the forms of conduct of crim‐ inal prosecution in court stages of criminal procedure seems to be justiﬁed. Certain scholars come to the conclusion on impossibility for logical limitation of the main functions of prosecutor – in particular, criminal prosecution and prosecutive activ‐ ities as to pre-trial part of criminal court procedure. However, these activities could be divided. Implementation of prosecutor’s authorities, provided to him for solving the issues on the criminal case, which came from investigator according to Articles 221, 226 of the Russian Federation Code of Criminal Procedure, could be assigned to the authorities that are implemented within criminal prosecution. In their turn, procedural possibilities, which implementation is possible after conﬁrmation of the act, belong to authorities aimed at implementation of prosecutive activities. Thus, conﬁrmation of by prosecutor of criminal indictment is a ﬁnal act of pre-trial criminal prosecution and the initial act of public prosecution. Concluding the above, it is possible to state that the goals of any subject of criminal procedure, which are closely connected to its main goal, are achieved by each subject of criminal procedure diﬀerently. However, the main problem is that the main goal of criminal procedure is not established by the legislator, and there’s misunderstanding regarding the status and goals of a certain body of power that conducts criminal prose‐ cution within preliminary investigation and within court proceedings. 3.2 Procedural Role of Participation of Public Prosecutor Interconnection, interaction, and mutual dependence of the three main directions of criminally-remedial activities – prosecution, defense, and justice – envisages their establishment with participants of criminal court procedure. The function of prosecution is to be performed by prosecutor, who acquires the status of public prosecutor at the stage of court proceedings. Supporting public prosecution is the main direction of all activities of prosecutor in court. The institute of prosecution always attracted attention of scholars and practi‐ tioners, because prosecution is the core of the process and because Article 5 of the Russian Federation Code of Criminal Procedure establishes the deﬁnition “prosecution” but does not deﬁne the term “public prosecution”, though it is present in certain articles of the law. In criminally-remedial science, in law and in practice, the category “public prose‐ cution” is traditionally seen as totality of actions of prosecutor, who proves before the court the statement of guilt of the defendant in a certain crime and who opposes another party that performs the function of defense from prosecution. The term “public prose‐ cution” is used in the law only when there’s a necessity to regulate authorities and activities of prosecutor in court. The basis for deﬁnition of the notion “public prosecu‐ tion” is the category “prosecution”, which, in its turn, is understood diﬀerently. Russian scholars analyzed the category “prosecution” in these aspects and oﬀered variants of one complex deﬁnition of prosecution. At the same time, a lot of researchers did not take into account the fact that prosecution is a form of public-legal activities that

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connects the subjects of these activities by mutual rights and obligations. A desire to consider prosecution only from one aspect – in statics as a legal relation or in dynamics as activities – led to one-sidedness in the applied approach. In scientiﬁc works, a lot of scholars considered the idea of studying prosecution in two aspects: formal (procedural) and material. However, they were not successive with that. Prosecution in material and legal aspect is treated as formulation of prosecution and totality of illegal factors, statement of crime. In the procedural aspect, prosecution is seen as activities or totality of actions of prosecutor in court. However, prosecutor in court proceedings could be also another subject – complai‐ nant, who performs the function of prosecution not only for criminal cases that are opened by his complaint but also for all cases, having the rights of a procedure party. In the conditions of court proceedings, the deﬁnition of “public” as to prosecution conducted by prosecutor has not so much procedural (prosecution, as a direction of activities, regardless of its subject, is not diverse) as public-legal aspect, which distin‐ guishes prosecutor from the number of all other participants of court proceedings. Bases on this and in view of legislative deﬁnition of public prosecutor (Part 6 Article 5 of the Russian Federation Code of Criminal Procedure), it is possible to conclude that the subject that conducts activities for its support is an oﬃcial representatives of prosecutor’s oﬃce. Our conclusion coincides with provisions of the Federal Law “On the Prosecutor’s Oﬃce”, according to which, prosecutor, conducting criminal prosecution in court, is a public prosecutor (Part 2 Article 35), and criminal prosecution is one of the directions of activities of prosecutor’s oﬃce (Part 2 Article 1), in systemic connection to Part 31 Article 6 of the Russian Federation Code of Criminal Procedure. In addition to this, the Order of the Prosecutor General of the RF dated December 25, 2012, No. 65 “Regarding participation of prosecutors in court stages of criminal court procedure” says that partic‐ ipation in court stages of criminal court procedure is one of the most important functions of prosecutor’s oﬃce. The purpose of prosecutor, as a public prosecutor, is accusation of defendant in committing a crime in the course of court proceedings, and the tasks that determine the contents of activities, by solving which he is to achieve the set goal – proving, in partic‐ ular, providing the court with evidence suﬃcient for a decision. Pressing charges means proving – with the help of evidence – the statement that defendant is guilty in committing a crime and has to be punished. In Chapter 6 of the Russian Federation Code of Criminal Procedure, the legislator distinguished participants of party of charge: prosecutor, head of investigating body, investigator, complainant, private prosecutor, civil claimant, complainant’s representa‐ tive, private prosecutor, and civil claimant. Therefore, these persons are authorized to conduct prosecutive activities. However, it is necessary to consider peculiarities of criminally-remedial activities of these participants when determining the possibility of them supporting prosecution in criminal court procedure, as the fact of assigning a speciﬁc person to participant of party of charge cannot conﬁrm that he can or has to support public prosecution in a criminal case.

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At the same time, this goal of public prosecutor does not exclude him providing in court proceedings the evidence that excuse or attenuate responsibility of defendant. Prosecutor has to perform his in criminal court procedure objectively and impartially. The above allows distinguishing a range of signs of public prosecution: – it is a form of criminal prosecution; – its subject is prosecutor, including the Prosecutor General of the RF, prosecutors, their deputies, or other authorized oﬃcials of the prosecutor’s oﬃce; – its essence is targeted activities for proving the guild of defendant in committing a crime; – these activities are conducted in the conditions of competition with opposition from defense; these activities are conducted by prosecutor objectively and impartially. Having systematized these characteristics of public prosecution, we deem it neces‐ sary to deﬁne it as a form of criminal prosecution which essence is objective and impartial criminally-remedial activities of prosecutor in court stages of criminal procedure for proving the guilt of defendant in committing a crime in the conditions of competition and opposition of defense. 3.3 Modern Technologies of Presenting Evidentiary Information in Activities of Public Prosecutor In the conditions of a competitive process, public prosecutor is set with responsibility to prove the guilt of defendant. This means consecutive systemic presentation of various evidence—evidentiary information for participants of court proceedings. Usage of large volumes of textual, audio-visual, and other information should not have a chaotic char‐ acter. Perception of information and its further evaluation by participants of court proceedings, in particular, by jury, depend on the means of its presentation. According to the Russian Federation Code of Criminal Procedure (Article 74) evidence for a crim‐ inal case is any data based on which the court, prosecutor, and investigator set – in the order envisaged by the criminally-remedial laws – presence or absence of circumstances that are to be proved in proceedings for the criminal case and other circumstances that are important for the criminal case. The data containing in evidence consist evidentiary information. Presenting evidentiary information is activities by public prosecutor of the tactical character for bringing the data containing in materials of the criminal case and the data received in the course of court investigation to participants of court proceedings. We think that solving the problem of presenting evidentiary information is one of the urgent tasks of using criminalistic knowledge in court proceedings, as if evidentiary information is not presented in the proper way, it will not be accepted by participants of court investigation and, eventually, this will not lead to objective decision. It is very diﬃcult to do it professionally if prosecutor does not have proper information & tech‐ nical and methodological basis. In court proceedings, public prosecutor uses the infor‐ mation of evidentiary value, containing in the materials of criminal case, and information obtained in the course of court investigation.

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Important evidentiary information could be obtained by public prosecutor by certain actions – e.g., studying the area or premises, veriﬁcation of statement in the ﬁeld, investigative experiment, etc. However, it is rare in practice due to certain diﬃculties. As a result, large potential and signiﬁcant advantage of court investigation are not used. This, in its turn, inﬂuences completeness and objectivity of studying the circum‐ stances of a crime. Public prosecutor is interested in establishing the true picture of what happened, so he has to help the court in overcoming the above diﬃculties. For supporting public prosecution in court at high professional and organizational & technical level, prosecutor’s oﬃce should have increased personnel which is property equipped. At present, most of prosecutors and specialists are transferred to the Investigative Committee at the Public Prosecutor’s Oﬃce of the Russian Federation, so activities of party of charge in court proceedings may remain without proper provision. As a result, a party of prosecution cannot use large possibilities of criminal science, which would technically deprive public prosecution and inﬂuence the quality of court investigation. At that, there is an objective necessity for satisfying this need. For example, it is possible to create the corresponding departments for criminalistics support for criminal cases in court in the departments that ensure prosecutor’s partici‐ pation in court proceedings, as the process of proving envisages usage of not only sepa‐ rate skills and knowledge but the complex of criminalistic knowledge for application of modern technological means and methods in proving at the sage of consideration of criminal case in court. Let us describe a range of situations that show the objective necessity for usage of various technological and information & analytical means and methods of work with information in activities of public prosecutor. The prosecutor who’s appointed for pressing charges in the case would lose to defense without full information containing the materials of the criminal case. That’s why it is expedient to transfer the materials of criminal case into the electronic form and to use their electronic version. The reproduction reshooting of materials of criminal case could be performed by public prosecutor with a compact digital camera.

4

Discussion

Public prosecution is the institute that ensures the action of the mechanism of public criminal prosecution; the purpose of criminal procedure – protection of rights and legal interests of citizens and organizations, state and society on the whole. An exclusive right for public prosecution belongs to prosecutor’s oﬃce. Public prosecution is a form of public prosecution that is conducted by prosecutor in various forms for application of criminal law to persons who committed a crime and aimed at protection of interests of person, society, and state. Public prosecution is a law-enforcement process in which the position of prosecutor or other oﬃcial body for proving the guilt of a person in committing a crime in the order envisaged by the law is implemented. Public prosecution cannot be compared to a complaint. In the procedural sense, prosecution is criminal prosecution. Criminal prosecution is the activities conducted by prosecutor and other bodies of criminal prosecution

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(participants of party of charge) for starting prosecution as to the speciﬁc person and proving his guilt in court. Criminal prosecution in pre-trial stages of criminal court procedure is activities aimed at preparation and substantiation of procedural and material & legal claims of prosecutive authorities. In court, criminal prosecution has the form of supporting pros‐ ecution by public or private prosecutor. Criminal prosecution is implementation of the function of prosecution and activities for preparation of evidence that is necessary for supporting public prosecution in court. The legal status of public prosecutor in ﬁrst instance court is based on the system of principles of criminal court procedure. Activities of public prosecutor are a unity of three interconnected main components: prosecution, control, and legal defense. Prosecutive, controlling, and legal defense functions of the prosecutor’s oﬃce at the stage of court proceedings, being interconnected, are the factors that ensure solving criminal case on the basis of law, completeness and objectivity of criminal court procedure, and public defense of interests of persons and organizations that were damaged in the performed crime. Change of the criminally-remedial law changes the legal status of public prosecutor in the ﬁrst instance court. Prosecutor’s responsibility to present a party of prosecution determined his mandatory participation in court proceedings. Accordingly, partial or full refusal of public prosecutor from prosecution in the course of court proceedings, and change of prosecution in favor of mitigation leads to change of qualiﬁcation of the crime. At that, such decision of court could be appealed by participants of court proceed‐ ings or senior prosecutor in the appeal or cassational order. These changes, on the one hand, expand authorities of public prosecutor, but, on the other hand, increase his responsibility and ensure better protection of rights of the complainant. Criminally-remedial laws insuﬃciently limits procedural authorities of “prosecutor” and “public prosecutor”. Thus, the right of prosecutor’s deputy to support public pros‐ ecution in court, which is envisaged by the Federal law “On the Prosecutor’s Oﬃce of the RF”, is not directly set in the norms of the Russian Federation Code of Criminal Procedure. Thus, it is expedient to implement changes into the law that would envisage the right of prosecutor or another authorized oﬃcial of the prosecutor’s oﬃce to conduct criminal prosecution in the form of pressing charges in court.

5

Conclusions

For more eﬀective support for public prosecution and reduction of cases of change of qualiﬁcation, it is necessary to solve the issue of overcoming the gap between organi‐ zation of control at the pre-trial stage and support for public prosecution in court, as these stages feature diﬀerent representatives of the prosecutor’s oﬃce. Due to competition in court proceedings and possible opposition from defense, the prosecutor has to build strategy and tactics of his activities in court. The strategy uniﬁed pre-trial and trial activities of prosecutor that is aimed at most eﬀective execution of functions of prosecutor’s oﬃce in criminal court procedure. The strategy determines the idea of public prosecutor for achievement of the goal and establishment of objective

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truth on the case, obtaining authentic knowledge on the case’s circumstances, and, based on this, correct decision by the court. The tactics of supporting prosecution consists in using the evidentiary material for presenting it to court, proving and substantiating lawful and just prosecution, and establishing objective truth on the case. The tactics of court proving, which is a basis of the tactics of prosecution, is a totality of means and methods of presenting and studying evidence and treatment of legal norms and logical operations that are used for achievement of the set goal. Preparation for supporting public prosecution is an important element of the tactics of prosecution. The procedural function of public prosecutor is proving prosecution – i.e., presenting the evidence that proves guilt of the defendant, systematization and analysis of evidence, and building a case against defense. The party of charge determines completeness and objectivity of studying factual circumstances of the criminal case. Acknowledging evidence as inadmissible negatively inﬂuences the party of prosecution, as the main evidences are set in prosecutive decision. The lacking evidences could be restored by using the public prosecutor’s right to apply for motion to summon witnesses, expert, or other persons. Expansion of the circle of sources of evidence and set of court actions that could be performed by parties and court during court proceedings opens new possibilities for establishment of truth for the case. Public prosecutor, together with other participants of the process, takes part in investigatory actions and controls observation of require‐ ments of criminally-remedial law that are set to the corresponding investigative proce‐ dures. The Russian Federation Code of Criminal Procedure gives public prosecutor the right for requests for investigative procedures in court. For a timely and justiﬁed request on an investigatory action or correct conclusion for a request from another participant of the process, public prosecutor should know procedural order and tactical peculiarities of all investigative procedures, which are envisaged by the law, and the tasks that could be solved with their help.

References 1. Baev, O.Y.: Prosecutor as a subject of criminal prosecution: Study guide. Eksmo, No. 11, p. 116 (2015) 2. Grigoryev, V.N.: Prosecutor’s supervision: Study guide. Eksmo, p. 144 (2014) 3. Esina, A.S.: Characteristics of prosecutor’s function – public prosecution. Norma, p. 96 (2015) 4. Kryukov, V.F.: Participation of public prosecutor in preliminary part of court proceedings. PROSPEKT, p. 60 (2014) 5. Laskina, N.V.: Prosecutor’s supervision. Study guide for universities. Yustitsinform, p. 104 (2013)

Management of the Global Financial System

An Individual in the Contemporary Public Administration Aleksandr M. Starostin1 ✉ , Elena N. Tovanchova1, and Yulia L. Shepeleva2 (

)

1

Rostov State University of Economics, Rostov-on-Don, Russia [email protected], [email protected] 2 Department of Criminal Procedure of the First Advanced Training Faculty Institute for Advanced Studies, Moscow Academy of the Investigative Committee of the Russian Federation, Moscow, Russia [email protected]

Abstract. The paper deals with the urgent issues referred to the system of contemporary public administration of the Russian Federation and the place a person occupies in the system. The study is aimed at achieving the following goals: (1) to characterize an individual in the system of public administration based on the anthropological approach in aspirative and essential discourses; (2) to analyze the requirements for a civil servant in terms of the given approach; (3) to draw conclusions about the qualities that a person must have proceeding from the peculiarities and requirements of a modern system of public administration; (4) to reveal and outline possible ways of overcoming corruption in the sphere of public administration. To attain the objectives of the study, the authors widely used methods of system analysis and analysis of the regulatory framework, in close correlation with the available statistical data on the issues studied. Special attention was paid to the professional qualities of civil servants, which form the basis for the development of the human resources capacity of the public admin‐ istration system. The study of the abovementioned aspects allowed the authors to identify the major system requirements for civil servants, as well as to consider the essential side of the state apparatus. Supposing an individual to be a part of the public administration system, the authors also observe corruption, one of the main problems of the contemporary authorities. In the paper, this negative phenomenon is characterized from the standpoint of the normative legal approach, personnel management, and the state personnel policy in general. The authors presented their grounded point of view on the role of public consciousness in the prevention of corruption. Keywords: Public administration · Civil servant · Individual Public consciousness · Personnel policy · Corruption JEL Classiﬁcation Code: Z18

Taking into the consideration the speciﬁcs of the state civil service in the Russian Feder‐ ation, in order to determine the role and place of an individual in this system, ﬁrst of all, it is necessary to turn to its notion. In the Russian Federation the state civil service is the professional work of the Russian Federation citizens consigned to ensure the exercise © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 649–656, 2019. https://doi.org/10.1007/978-3-030-00102-5_67

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of the powers of the state authorities. It establishes the special legal status of a civil servant, including entitlements and obligations, social guarantees, responsibilities, as well as restrictions and prohibitions related to this type of the professional activity. To study the role of an individual in public administration, it seems expedient to apply an anthropological approach based on methods of ethnography (Bocharov 2007). For a long period of time, a person engaged in public administration was considered as a certain structural element; he was a «small ﬁsh» in the «big pond of rational bureauc‐ racy». However, in the contemporary system of power relations a professional executive must take much more initiative. At the same time, the historically formed public opinion, its anti-bureaucratic attitude still views him as «a mute object». Nevertheless, taking into account that the state service provides a number of social guarantees that other members of the society don’t possess, as well as a number of prohibitions and restrictions related to his speciﬁc activities (Salnikov 2014), a civil servant acquires a ﬁrmly estab‐ lished status of a «special» person. For instance, there are restrictions imposed on public statements on certain issues that are the subject of his professional activities. Besides, there is a wide range of economic restrictions. Notwithstanding, the public consciousness formed such stereo‐ types, as «oﬃcial – bureaucrat» and «oﬃcial – bribe-taker». Often, any representative of state authorities is initially thought of as the bearer of negative characteristics, despite the real results of his professional activities, his way of life and social conduct. Therefore, it seems that while studying the modern «bureaucratic mentality» the researchers can use the qualitative methods of «cultural studies», representing a socio-anthropological study of industrial or even post-industrial society. Aspritive discourse of an oﬃcial in the context of an anthropological approach: 1. First of all, it is necessary to consider the requirements imposed on the physiological (biological) state of the oﬃcial. In accordance with Article 16 Sub-article 4 of Federal Law No. 79-FZ «About the Public Civil Service of the Russian Federation», a citizen cannot be admitted to civil service, and a civil servant cannot be in the civil service in the case of a disease that prevents entry or performing the civil service and conﬁrmed by the conclusion of a medical institution. Next, a civil servant must possess speciﬁc qualities, explained by the so-called «aquarium eﬀect». The given requirement is stipulated by the special social status of a civil servant, especially the higher authorities, as a civil servant and his private life in particular usually attract increased attention. Therefore, in a certain sense public service is not just a profession, but also a way of life that should be characterized by restraint, rigor, responsibility, and full control over personal behavior. It is obvious that only a mentally and physically healthy person has the set of such qualities. The civil servant is obliged, both in communication with citizens, and in the exercise of his powers or in out-of-oﬃce relations, to observe certain rules of conduct: to treat citizens and colleagues politely, to demonstrate impartiality, adherence to principles, the desire to understand the substance of the matter, the ability to listen and understand the opponent; equal treatment of all citizens and legal entities; weighted judgments and

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management decisions. The compliance of a civil servant with these requirements is based on a high level of psychological and stress resistance. 2. Professional requirements. In addition to the general access of citizens to the civil service, Federal Law «About the Public Civil Service of the Russian Federation» articulates such important principles competence and professionalism. It implies deep knowledge in the relevant ﬁeld of public life, management theory, and knowledge of rights and their application in the sphere of civil servants’ activities. G.V. Atamanchuk points out the existence of two levels of professional qualities of a civil servant crucial for the development of public administration personnel (Atamanchuk 2004): (1) The initial or primary qualities that an applicant for the civil service must have. They imply the following aspects: – common cultural, including life attitudes, values and goals, good communica‐ tion skills, aesthetic and ethical skills, a culture of speech; – professional, businesslike, i.e., knowledge of the peculiar features of manage‐ ment in a certain area of public life, proven in practice labour activity, discipline, experience of state and public work, knowledge of responsibility for the labour results, skills in improving his/her qualiﬁcations; – personal, including honesty, moral stability, independence, highly developed will, initiative, reliability, determination, and sociability. (2) The qualities formed directly in the process of carrying out state activities, promoting his/her careers and working experience: – common cultural, like thorough knowledge of the history of the country and the key intellectual achievements of the present, a high level of speaking skills, the ability to conduct mass events, leadership qualities and responsibility for them, scale thinking ability; – businesslike, including self-discipline, the ability to set the direction of the activities of others and to control it further, a consistent and persistent solution of problems, deep knowledge of social, scientiﬁc and technical achievements, their practical application; – personal qualities, comprising observance of one’s own principles, masculinity, persuasion skills, ability to oppose personal gain; perfect behavior in diﬀerent situations. (3) The social projection and adaptation of a civil servant is conditioned by individual’s social qualities and social preferences. It is motivated by a system of social values, outlook, social preferences, and social expectations. The socialization of civil servants comes about under the inﬂuence of both subjective and objective factors. The sense of justice, consisting of thoughts and feelings about what is fair and unfair and what people deserve from and owe others, occupies a special place in there. It is a consequence of the fact that socialization is carried out in the process of practical activity, cognition and self-knowledge of legal reality. The most important aspect of the professional socialization is the formation of the individual’s life position,

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based on the social experience. It is most intensively formed under the inﬂuence of structural elements, corresponding sense of justice levels and a certain set of legal ideas, values, knowledge, reference points, attitudes, and feelings transferred to them. It has a great signiﬁcance, since authorities’ activity is characterized by a combination of strict normative regulations with rather wide possibilities for making volitional decisions based on a subjective interpretation of both the legal situation and the legal norms regu‐ lating it. One of the major carriers of this information, which helps to implement the oﬃcial powers successfully, is the sense of justice. At the same time, civil servants’ degree of assimilation of legal ideas and knowledge depends not only on the nature of the profes‐ sional functions performed by them, on the level of professional and legal activity, but also on the state and the development of the public, group and individual (both his own and other members of his professional group) professional sense of justice (Sonin 2008). Such types of legal consciousness, as social and professional (group, individual), act as important external and internal factors of civil servants’ socialization. The model of professional socialization of a civil servant’s personality is speciﬁc as well, since it is largely based on the features of his professional activity, which is inher‐ ently an activity to ensure the powers of the state. A civil servant is not a passive object of external inﬂuence of legal consciousness, but an active subject of the professional and legal socialization and processing of relevant legal information. The inﬂuence of legal ideas and other components of the sense of justice should be accompanied by the process of perception, processing and assimilation the required legal information. At the same time, a civil servant forms his own system of legal ideas, knowledge, feelings and attitudes individually, on the basis of the level of his legal consciousness. It seems eﬃcient to consider the essential side of the state apparatus, after analyzing the aspiritive discourse of an oﬃcial in the context of an anthropological approach and identifying the main system requirements for him. Speaking about the essential discourse of an oﬃcial in the context of an anthropo‐ logical approach, it is necessary to pay attention to such a negative phenomenon peculiar to the system of state powers as corruption. As is rightly noted in a range of scientiﬁc researches on the discussed problem, «corruption is as a social phenomenon characterized by the bribery of persons entrusted with a position of authority, civil servants and other governmental employees, often to acquire tangible and intangible beneﬁts for acting in an oﬃcial capacity using their oﬃcial status, authority, opportunities, relations» (Malkov et al. 2006; Bagmet 2016). The corruption should be regarded as a systemic phenomenon, since it is currently spread not only in the sphere of state power and administration, but to some extent occurs in other spheres of the society (for instance, in education and healthcare). Since 2011, investigators of the Investigative Committee of the Russian Federation have veriﬁed about 200,000 reports of corruption crimes, initiated about 120,000 crim‐ inal cases, of which nearly 50,000 were sent to court (Bastrykin 2016). According to the information provided by the Investigative Committee of the Russian Federation, 3,360 individuals with special legal status were brought in as defendants in court cases on corruption-related crimes. They include 1,113 heads of

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municipalities of local self-government bodies, 1,133 deputies of local authorities, 395 investigators and heads of investigative bodies, 82 prosecutors, 58 deputies of legislative bodies of constituent entities of the Russian Federation, 23 judges (Bastrykin 2016). However, at present the government of the Russian Federation takes a large number of measures to ﬁght against corruption. In this connection there were adopted some important normative acts, including Federal Law No. 273-FZ «On Counteracting Corruption» of December 25, 2008 (the last edition from December 22, 2014). The law speciﬁes the basic principles of counteracting corruption, legal and organizational basics for preventing and counteracting it, minimization and (or) elimination of consequences of corruption oﬀenses. The Russian Federation’s National Security Strategy through 2020 (Russian Feder‐ ation Presidential Edict No. 537 dated 12 May 2009 (the edition from July 1, 2014)) indicates the improvement of legal regulation, prevention and counteraction to corrup‐ tion as the predominant direction of ensuring the state and society’s security. National anti-corruption plans are developed on a regular basis in accordance with Article 1 Subarticle 1 Federal Law No. 273-FZ «On Counteracting Corruption» of December 25, 2008. On April 1, 2016 the President of the Russian Federation signed the Decree No. 147, approving another National Anti-Corruption Plan for 2016-2017 (hereinafter – the National Plan). In our opinion, an impact on public consciousness to create citizens’ negative attitude towards corruption, as a social phenomenon, is a key factor in combating and prevention of corruption. Certain measures have already been taken. The National Plan lays the legal foundation of forming a negative attitude toward corruption in the public mind, along with the general tendency and direction of this document to toughen the oﬃcials’ responsibility for committing corruption oﬀenses. For instance, public associations and organizations are recommended to «develop feature and documentary ﬁlms, radio and television programs, Internet videos and other media products that promote the forma‐ tion of an active rejection of all forms of corruption in the society, enhance the prestige of the civil service, and promote the observance by all members of the society the requirements of anti-corruption standards» (Decree of the President of the Russian Federation No. 147 of April 1, 2016). Social anti-corruption advertising will undoubtedly contribute to the formation of the citizens’ anti-corruption sense of justice, as at present the attitude towards corruption among the population of Russia is still controversial: 61% of Russians criticize those who take bribes and 41% decry those who give them, 39% of respondents admit that they can bribe an oﬃcial in a particular situation (Corruption and bribery in Russia 2015). As P.A. Kabanov rightly points out, the tolerance of Russian citizens to corruption and the willingness to bribe oﬃcials to solve personal issues is a key aspect of its exten‐ sion. In general, corruption as a social phenomenon is sharply condemned by the society, and information about the next arrest of a government representative on suspicion of committing a corruption oﬀense provokes an active positive response from the popula‐ tion, but if it is necessary to satisfy their own interests, citizens are increasingly choosing bribes to solve the problems (Kabanov 2004). Many researchers emphasize the necessity of changing the population’s attitude towards corruption. In particular, Z.I. Brizhak notes that «cultural and educational

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measures aimed at the formation of persistent intolerance to all corruption practices, are able to minimize corruption activity» (Brizhak 2015). Based on the analysis of the Russian legal and regulatory framework, we can conclude about the necessity of preventive measures, along with the speciﬁed political, economic, legal and organizational measures to ﬁght against corruption. Therefore, the state should pay particular attention to the prevention of corruption, taking into account the main directions of counteracting corruption, formulated in the National Plan. In this regard, it should be pointed out that the Russian Federation has acceded to the United Nations Convention against Corruption (adopted in New York on October 31, 2003; the Convention entered into force in the Russian Federation on 8 June, 2006) and to the Criminal Law Convention on Corruption (adopted in Strasbourg on January 27, 1999; the Convention entered into force in the Russian Federation on February 1, 2007). The abovementioned convention provides for the obligation of State Party to adopt a set of preventive measures on preventing and combating corrupt practices. In partic‐ ular, Article 13 of the Convention declares that each State Party shall undertake public information activities that contribute to non-tolerance of corruption, as well as public education programs, including school and university curricula. We are of the opinion that the problem of anti-corrupt conduct takes a priority among anti-corruption measures. During the reform of the state and municipal authorities, a large number of measures are introduced to prevent and combat corrupt practices. They include improving the regulatory framework, as well as creating a positive image of a civil servant. However, we suppose the material resource factors of anti-corrupt conduct take a special place there. As we understand it, the notion «anti-corrupt conduct» is applied to the professional competence, being its fundamental component and a certain quality of a civil servant. Anti-corrupt conduct comprises an array of acquired competencies, legal traditions, and behavior stereotypes. Developing this idea scholars come to the conclusion that corrupt conduct is polymotivated, being generated by several motives (Antonyan 2016). The ﬁrst, external, motive includes self-interest and the pursuit of material wellbeing. The second, internal, motive consists of a number of psychological attitudes (indi‐ vidual psychological needs, value orientations, and motives). According to S.P. Kushnarenko and V.D. Pristanskov «two factors can be viewed as corruption determinants connected with the civil service: the state of the civil service and the peculiarities of the state personnel policy» (Kushnarenko and Pristankov 2004). At the same time, the ﬁrst determinant of corrupt conduct of governmental and municipal employees is inextricably linked with the second, as it is the personnel policy whose primary goal is a hiring procedure, including a competent selection and personnel place‐ ment. As state of the civil service in general, its ﬁrst priority is to create conditions ensuring the appointment to public oﬃce persons with the required professional and businesslike qualities, as incompetence and unprofessionalism engender corruption. The oﬃceholders neglect serving society and the state and start using public power illegitimately

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to beneﬁt a private interest and needs. As stated by Kurakin, they «consider their position as a means of satisfying personal interests at the expense of the interests of the society» (Kurakin 2002). In our view, the notion of state personnel policy combines the two key factors of corrupt conduct that were mentioned above – external and internal. However, as we have already noted, regulation is one of the ways to overcome corruption in state and munic‐ ipal authorities. Nevertheless, the current legislation in this sphere provides a fairly rigid mechanism of legal responsibility for corrupt acts and tends to further toughening of the requirements imposed on persons who replace state and municipal service posts. At the same time, social guarantees provided for civil servants must be commensurate with the norms of responsibility for committing corrupt oﬀenses. «The continuous increasing of cost of living upon condition of a ﬁxed salary and the established prohibitions on obtaining additional income, objectively forces the civil servants to look for ways of replenishing their personal budget. Bribery is the most common source of illegal ﬁnancing» (Kushnarenko and Pristankov 2004). In this regard, one of the priority areas of the state personnel policy should be the expansion of social guarantees, material incentives for the civil servants, along with the formation of a favorable psychological climate in the team that excludes a probability of corruption manifestation and the formation of a persistent internal negative attitude towards corruption by a civil servant. In conclusion, we should note that the eﬀectiveness of public administration, the success of the implementation of ongoing reforms, including administrative ones, is largely determined by the personality of a civil servant, his/her professional, psycho‐ logical, social, and biological resource. Contemporary society requires new models of public administration, forcing both a civil servant and the public administration system to opt for more ﬂexible and open strategies and managerial decisions. In this regard, there arises the need for the formation of a motivated person of an innovative type, taking into account both the inﬂuence of the socio-cultural environment and the potential opportunities to inﬂuence it.

References Antonyan, Y.: Typology of corruption and corruption behavior. In: Scientiﬁc and Practical Conference Sociology and Corruptio, Russia, Moscow, pp. 37–41 (2003) Barinov, S.: Formation of anti-corruption behavior as a scientiﬁc and pedagogical problem and the subject of research. In: Counteraction to corruption-related crimes: materials of the International Scientiﬁc and Practical Conference on the outstanding Russian scientist Nikolai Sergeevich Alekseev, Moscow, 27 October 2016, under total. Ed. A.I. Bastrykin. Academy of the Investigative Committee of the Russian Federation, Russia, Moscow, p. 34 (2016) Bocharov, V.V., (ed.): Anthropology of power. Reader on political anthropology: In: 2 tons/comp. and otv. SPb, p. 559 (2007) Atamanchuk, G.: Theory of Public Administration. Lecture course, Omega-L, Moscow, p. 75 (2004) Bagmet, M.: Anti-corruption in the system of internal aﬀairs: a monograph, p. 3. Yurlitinform, Moscow (2016)

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Bastrykin, A.: There are no untouchable corrupt oﬃcials in Russia! In: Counteraction to Crimes of Corruption Orientation: Materials of the International Scientiﬁc and Practical Conference Devoted to the Outstanding Russian Scientist Nikolay S. Alekseev, Moscow, 27 October 2016, under total. Ed. A.I. Bastrykin. Academy of the Investigative Committee of the Russian Federation, Russia, Moscow (2016) Brizhak, Z.: Actual aspects of combating corruption in health and education. Sci. Educ.: Econ. Econ. Entrep. Law Manag. 10(65), 79–83 (2015) Kabanov, P.: Political corruption in Russia: the concept, essence, causes, warning, Kazan, pp. 125–126 (2004) Corruption and bribery in Russia (January 16, 2015). Public Opinion Foundation. http://fom.ru/ Bezopasnost-i-pravo/11912. Accessed 27 Oct 2017 Malkov, V.: Criminology: a textbook for universities, Moscow, p. 354 (2006) Kurakin, A.: Public Service and Corruption, Russian Investigator, No. 6, p. 8 (2002) Kushnarenko, S., Prishstankov, V.: Corruption and its criminal manifestations: the features of criminal prosecution. Criminological and forensic aspects of research, review of investigative and judicial practice. Practical manual, “Special literature”, St. Petersburg, pp. 27–30 (2004) Salnikov, V.: Anthropological and socio-cultural aspects of public administration. Region: Syst. Econ. Manag. 2(25), 101–106 (2014) Sonin, A.: Functions of legal consciousness in the process of professional socialization of civil servants. Philos. Law 1, 117–119 (2008) Presidential Decree No. 537 of May 12, 2009 (as amended on July 1, 2014): On the National Security Strategy of the Russian Federation until 2020, Consultant Plus (Access mode: local. Date of renovation: 27.10.2017) Decree of the President of the Russian Federation of 1 April 2016 No. 147: On the National Plan for Combating Corruption for 2016 – 2017, Consultant Plus (Access mode: local. Date of renovation: 27.10.2017)

Balance-Cognitive Approach to ForesightDevelopment of Management Audit Eﬃciency Digital Economic Systems in the Context of Strategic Drift Galina I. Sidunova and Anna V. Shokhnekh ✉ (

)

Volgograd State Socio-Pedagogical University, Volgograd, Russia [email protected]

Abstract. The article discusses the balance-cognitive approach to foresightenvelopment of administrative audit of eﬃciency of digital economic systems in terms of strategic drift. Keywords: Balance-cognitive approach · Foresight development Audit management · Digital economy · System · Strategic drift Simulation model

Problems of human development in the digital environment are crucial in the information society. Man as the object of study of modern science creates the fateful events that are developing at lightning speed, leaving a trail of signiﬁcant scientiﬁc research, where he needs to adapt, adjust, and change. Today, to predict the future, and to try to inﬂuence the course of events that will take place is the dream of mankind. However, the complexity of human perception of the lightning of information determines the need to ﬁnd answers to many questions. There are such research areas and deﬁnitions, as: – – – –

the digital economy; the foresight-development; the strategic drift; balance-cognitive approach to the study and perceptions of new phenomena and processes (Fig. 1).

However, all of these concepts and research cannot be considered as brand new. Integration of language deﬁnitions lets talk about the “old” with “new” language. It should be noted that: Firstly, the importance of developing digital economic systems - is obvious, as it originates long before the public recognition of the institution; Secondly, the approach of the foresight development - inevitably, as reﬂected in all socio-economic systems.

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Fig. 1. New directions of scientiﬁc research of the early 21st century in management

The huge ﬂow of information does not allow a person to quickly navigate to achieve cognitive balance, not having “an inferiority complex because of lack of knowledge”1. With the perception of the deﬁnition of “digital economy” appear signiﬁcant to an understanding of the attributes: (1) solvency of the virtual “crypto currency”, “bit coin” - new money opening questions about the “reliability” or “the next profanation” of currencies; (2) reliability of the virtual savings in the digital payment system; (3) accuracy of the electronic communication with state, regional, and municipal authorities; 4) compliance and authenticity of digital signature; 5) reliability of e-Commerce in a digital environment and digital social networks; 6) reliability of electronic human resource management, capital, land; 7) signiﬁcance of neuro-cognitive modeling of food security through hydroponics and Aeroponics… Today to inﬁnity can be lost in such questions that have no concrete answers. The more apparent the complexity of the adaptation of the head in the lightning fast changing socio-economic system with regard to the obligations and responsibility to the process of managerial decision-making. Currently, it is diﬃcult to form the legal environment of digital economic systems, which clearly standardized and legalized the existing rules of the foresight development. The lack of clear indicators and indicator-targets in the new digital environment leads

1

On the basis of theory Jean William Fritz Piaget was a Swiss psychologist and philosopher known for his work on the study of psychology, the Creator of the theory cognitive develop‐ ment.

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to an imbalance of the processes of achieving strategic objectives in foresight-develop‐ ment (Fig. 2). 1) paradoxically-imaginary way of foresight-development Options foresightdevelopment 2) really-scientific way of foresightdevelopment

Fig. 2. Variants of the foresight of the development of economic systems

Paradoxically-imaginary way can be termed as “paradoxical-imaginary path the foresight of the development of the Nasreddin Hodja”. Of course, all know the parable about the Khoja Nasreddin got to his village the gold in the form of long-term investment in the foresight development. In hard times of drought and famine Khoja Nasreddin made a promise to the Shah to teach a donkey to speak in 25 years, and took it for 1 bag of gold from two promised. As a guarantee of the reliability conditions of the contract of Khoja Nasreddin put his life. He agreed to the penalty, if a donkey talks in 25 years. Also, Khoja Nasreddin drew future greedy Shah. Undoubtedly, a talking donkey will have to attract the crowd of curious pilgrims who want to see the “talking miracle”. Therefore, people from all lands will come “in a great place”, leaving their savings (in modern language - the project is called “investment foresight-the development of tourism and service”). Fearing for the valuable lives of his countrymen, his friends began to dissuade him from entering into such a losing deal… Our hero replied, “O my brothers! With this gold we will be able to survive the famine and to overcome diﬃculties. But do not worry for me! For 25 years is bound to come in one of three situations: the ﬁrst - or the donkey dies; the second, or the Shah dies; the third or I will die….”. Thus ends the foresight development “paradoxically-the imaginary path of Khoja Nasreddin”. Of course, you can still give thousands of such examples both from ﬁction and from reality. As opposed to “paradoxically-the imaginary path the foresight of the development of Nasreddin Hodja,” you can put “real-scientiﬁc way foresight for development”. Using the tools of foresight development allows you to design a real scientiﬁc path which is reﬂected in the scenario of the project, road maps, General foresight of devel‐ opment with the addition of speciﬁc programs-instructions for action in the future. The anticipation and build three to ﬁve options for the possible occurrence of a future event, pre-planning and formulation of alternative budget foresight development deﬁnes ﬁnancial, labor-intensive and time value long-term strategic objectives, with a length of 25–30 years [6]. Studies show that foresight development is the ultimate objective, namely the desired future digital economic system, i.e. those socio-economic and technical parameters

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which it is important to strive for. A feature of the process of constructing the desired future is the planning from the desired future (Fig. 3). Development indicators

Desired future

2015

2016

2017

2047

Years

- event;

- analysis of past mistakes; - extrapolaon; - the alternave of planning and foresight-development; - the process of leveling the risk of dri by the errors of previous years ; - the process of foresight-development.

Fig. 3. Simulation model of foresight development, given the risks of strategic drift digital economic systems

Analysis of the reasons for the ineﬀectiveness of any software gives you the oppor‐ tunity not to repeat mistakes in creating trust for the future, based on the identiﬁed distortions of the past. This approach allows us to develop alternative scenarios and trends desired future, to collect the necessary decision-making information, as well as, shape a new culture of cooperation between science and business. Really-scientiﬁc way foresight-development intended to include management audit in the process of strategic build foreseeable future. In the mode of the past, current, prior, anticipated time of the management audit involves the formation of performance indi‐ cators and indicators-benchmarks achieve the goal of the foresight development. Based on the theory of Piaget, founder of cognitive development of the individual, balance and cognitive perception of new information - is the fourth stage in memory, thinking and consciousness. Trim the new information allows you to complete the stage extensions of previously existing schemes.

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It should be noted that a simple and ingenious theory explains piaget’s cognitive perception of the world in the process of its development. Piaget argued that all infor‐ mation perceived by the person in the form of well-established schemes that are obtained in the process of learning - stage 1 perception of the world. The second step is the process of adding new categories that assimilate schema - expanding knowledge enabling them to adapt and to change. The third stage is accommodation - the perception and adoption of new information in the appropriate, already formed consciousness scheme. The ﬁnal fourth stage involves the balancing condition after learning. The balancing process enables you to update the perception of the world based on the new material [7]. In a study of balance-cognitive approach to foresight the development of adminis‐ trative audit of eﬃciency of digital economic systems assume vision risk of strategic drift. Management development, implementation and monitoring of results policies become the subject of leveling of risks in terms of changing internal environment and external environment. In such turbulent conditions is an important cultural and cognitive components of the economic of the economic system to balance the mechanism of development and socio-economic growth in the digital environment. Considering strategic management as a key Foundation of business online foresight development, it is necessary to focus on the essential complexity of modern socioeconomic achievements, where the drift is manifested as stop development, “running in place”, “retreat”, the “congestion management system”, “subjection to the myths and legends of the past success of the economic system”. The complexity of output of the stagnant situation is reﬂected in the lack of “loyalty” approaches to managing strategic change in the digital environment. The concept of strategic drift introduced by Irish sociologist Hanji Charles, who received the title of Professor in business development and taught at the London business school. He formed his well-known classiﬁcation of types of organizational culture and has become one of the most inﬂuential management theorists [1]. In his deﬁnition of strategic drift is a small imperceptible changes in the strategies (the eﬀectiveness of the development of the digital economic system) in the course of its implementation, which are at ﬁrst invisible to managers, but gradually accumulate and become evident at the stage when it’s too late to change anything [1]. The risks of strategic drift is a phenomenon, situation, process, which are formed in the period of strategic change management where all the eﬀorts and funds managers, employees, strategic partners, aimed at overcoming barriers to the development, growth, proﬁtability, goal achievement. It should be noted that the conditions under which unexpected diﬃculties (come the risks of strategic drift) be the numerical mode (common) statistical discrete series, and hence can be formed at any time in the organization, promoting the development of the strategic changes in economic systems. Strategic drift can be deﬁned as the current predicament in which the economic system has deviated from the target and does not reach the result expected from strategic management. In scientiﬁc and practical literature the root cause of strategic drift is the inability to adapt to changing conditions in the industry, sector, macroeconomic processes. Trans‐ formation of the external environment triggers a new demand of consumers of products, goods, works, services, information, and also the need for innovative technological

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capabilities. If the economic system is not to adapt to changing conditions, it will have to cede to competitors who were able to adapt to the changing demand and needs [6]. The risk of strategic drift leads to a loss of momentum that determines a waste of time, ﬁnancial and production resources, thus increases the overall cost of the process of achieving the goal (Fig. 4).

Fig. 4. Conditions of strategic drift (source: compiled by the authors)

One of the major reasons for the occurrence of the risk of strategic drift is the loss of competitive advantage in the digital economy. Because of the complexity of the cognitive perception of the digital environment formed the conditions of the strategic drift that hinder the process of balancing new information in the existing scheme of eﬃciency of the economic system. The deﬁnition of “digital economy” was ﬁrst introduced by Nicholas Negroponte, a Professor at the University of Massachusetts in 1995 and was widely spread abroad. In Russia “the phenomenon of the digital economy” reﬂected in 2017. The Programme was adopted “Digital economy of the Russian Federation” approved by the Government of the Russian Federation from 28.07.2017 g № 1632-p, which resulted in mass debate in the scientiﬁc community of the current situation and hypotheses about the directions of intensive development of digital economies. The objectives of the implementation of the “Digital economy of the Russian Federation” is: the creation of an ecosystem for the digital economy, where data in digital form is a key factor of production in all spheres of social and economic life to ensure the eﬀective interaction of business, academic community, States and citizens; the creation of necessary and suﬃcient conditions for the institutional and infrastructural nature, the elimination of barriers to the creation and development of high-tech businesses, as well as preventing

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new barriers, restrictions in traditional and new industries, high-tech markets; improve competitiveness in the global market of individual industries and the economy as a whole. Studies show that the global problem is the unwillingness of the economic system to become digital. Foresight-development of management eﬃciency audit of the digital economic system aimed at the analysis of the possible minimization of the use of paper data carriers in any form. The authors suggest setting the management audit indicators-benchmarks the digital economic systems with the strategic drift, comprising: (1) analysis and assessment of the availability of funds for encoding, archiving with the use of digital media; (2) analysis and assessment of the availability of signature and exchange of docu‐ ments in the digital electronic environment; (3) control of the maximum level of application of electronic digital trading platforms for economic transactions, receipt of services, exchange of information etc.; (4) formation of indicators, reference points, showing the conditions unnecessary, harmful strategic actions; (5) analysis and evaluation of a ﬂexible environment in economic systems, where middle and lower management can eﬀectively participate in the process of making strategic decisions; (6) analysis and evaluation level the use of communication facilities where managers have to be willing to listen to the views of subordinates, to welcome and encourage feedback; (7) analysis and assessment of the availability of the methods of forming skills and intuition that allow the managers in the economic system clearly deﬁne the nature of the new tasks and prioritize them according to importance; (8) analysis and evaluation of planning methods of forecasting complex targeted, well-deﬁned sets of strategies the eﬀectiveness of the digital economic system; (9) the method of control at each stage of the strategy, the foresight of the develop‐ ment; (10) development and application of the mechanism of formation of reactive adjust‐ ments of the conditions of implementation of the strategy; (11) analysis and assessment of the availability of the feedback system on outcome of the management audit. In foresight-development of management eﬃciency audit of the digital economic system must include the analytical procedures that will identify conditions for the occurrence of strategic drift. On the basis of the tenets of Zainka (R. Zaionc 1968) it is possible to propose a process for management of audit, which will reﬂect the position and status of the digital economic system as it moves in foresight development (Fig. 5) [8].

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Fig. 5. Procedure of management audit, reﬂecting the position and status of the digital economic system as it moves in foresight development.

Balance-cognitive approach to foresight the development of administrative audit of eﬃciency of digital economic systems in terms of strategic drift allows you to identify and mitigate risks in the achievement of goals. As a special form, audit management eﬃciency digital economic systems is not only a discussion of the advisability made by

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management solutions, but also a test form that will allow you to assess the abundance of resources and feasibility of the stated objectives of the foresight of the development to prevent entrance to “Strategic Drift”.

References 1. English-Russian economic dictionary. http://rus-eng.com/anglo_russkiy_ekonomicheskiy_ slovar/page/Handy_Charles.30427 2. Aviation: ENCYCLOPAEDIA, ed. by G.P. Svishchev. Great Russian encyclopedia (1994). http://dic.academic.ru 3. Vikhansky, O.S., Naumov, A.I.: Management: XXI century: collection of articles. Infra-M: Master, 352 p. (2016) 4. The program of development of the Russian Federation “The Digital economy of the Russian Federation” approved by the Government of the Russian Federation from 28.07.2017 g, № 1632-p 5. RIA News. https://ria.ru/science/20170616/1496663946.html 6. Sedunova G. I., et al.: Inﬂuence the risk of strategic drift in foresight-development of economic systems: monograph Ufa: AETERNA, 174 p. (2017) 7. The theory of cognitive development Jean Piaget: key concepts (electronic resource). http:// aboutyourself.ru/kogn-psi/teoriya-kognitivnogo-razvitiya-zh-piazhe-klyuchevye-ponyatiya.html 8. Heckhausen, H.: Motivation and Activity, vol. 1, pp. 165–168. Pedagogika, Moscow (1986) 9. Shokhnekh, A.V., et al.: Modelling of the optimal mechanisms of the budget management strategies, analysis and control economic eﬃciency of the business. Audit Financ. Anal. 5, 332–338 (2016) 10. Ansoﬀ, H.I.: Strategic Management, p. 142. Macmillan, London (1979)

System Regulation of Key Directions of Modern Financial Policy in the Conditions of Financial Globalization Elizaveta O. Tappaschanova1, Salikh A. Baizulayev1, Ekaterina S. Kovanova2 ✉ , Elmira G. Shurdumova1, and Saida A. Zhirova3 (

1

)

H.M. Berbekov Kabardino-Balkar State University, Nalchik, Russian Federation 2 State University named after B. B. Gorodovikov, Elista, Russian Federation [email protected] 3 Berbekov Kabardino-Balkar State University, Nalchik, Russian Federation

Abstract. In the context of globalization of the world ﬁnancial system, the national ﬁnancial system of the country requires the search for forms of interac‐ tion, directions that satisfy world requirements, and the preservation of the most important original and eﬀective ﬁnancial institutions and instruments conforming the national interests. Improving the eﬃciency of the country’s ﬁnancial system in the context of globalization is inextricably linked with the system of regulation of the key areas of modern ﬁnancial policy of the state, and the eﬀectiveness of its functioning depends on the goals and objectives that arise from the long-term ﬁnancial strategy of Russia. The study shows that the further deepening of ﬁnan‐ cial globalization processes and the growing isolation of ﬁnancial markets from the real economy increase the risks of crisis situations in the monetary and ﬁnan‐ cial sphere. As a result, the state’s need for the development and implementation of eﬀective mechanisms to ensure national economic security, capable of preventing or mitigating the negative impacts of monetary and ﬁnancial destabi‐ lization, is increasing. Keywords: Financial globalization · Financial policy · Economic security Strategic management JEL Code: E 44 · E 60 · O20

1

Introduction

Globalization of the world economy has been increasingly prominent in the ﬁnancial sphere, as the capital critically impacts on the economic development of business enti‐ ties. Financial globalization is the development of global ﬁnancial markets and deter‐ mines the activity of international ﬁnancial organizations. According to this approach, the problem of regulation of the main directions of modern ﬁnancial policy becomes relevant for all countries, acquires universal and global character. In this sense, economic security is becoming a very pressing problem for business entities that are forced to adapt to changes in the ﬁnancial policy of the state. System regulation of the key © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 666–672, 2019. https://doi.org/10.1007/978-3-030-00102-5_69

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directions of modern ﬁnancial policy is aimed at ensuring a high degree of security and sustainable development of business entities in a cyclically changing environment.

2

Methodology

The problem of ﬁnancial policy regulation in the context of globalization is not new one. Currently, during the period of market transformations in the ﬁnancial markets, the matter of ensuring the system of regulation of ﬁnancial policy has acquired special features, bringing to the fore the participants of ﬁnancial globalization with their tasks of providing their own economic security. As a methodological basis of the study, a set of existing basic research methods, including comparison, modeling. In addition to these methods such general scientiﬁc and special research methods as analysis, synthesis, systematic and integrated approach, statistical processing were also used, which allowed to formulate scientiﬁc conclusions and to obtain new scientiﬁc results in the conditions of cyclic development of the economy. In this regard, the functional and content segmentation of the ﬁnancial system of the country in the context of globalization is proposed to use as one of the approaches to the decomposition of the ﬁnancial system. The essence of this approach lies in the initial identiﬁcation of key segments of the ﬁnancial system, the interaction of which is provided by eﬀective mechanisms of ﬁnancial regulation, planning and targeted control over the dynamics of the ﬁnancial system, without which it will not be able to perform its functions in accordance with its general purpose. In the subsequent stages, the main segments are structured in a more detailed way, taking into account that they include a complex set of instruments, procedures and rules aimed at solving the particular prob‐ lems of ﬁnancial regulation.

3

Results

The formation of the global ﬁnancial market is based on the internationalization of operations and participants, the growth of speed and quantitative volumes of interaction between participants. The trends identiﬁed above lead to a separate consideration of the process of ﬁnancial globalization, which has become an important feature of the processes of globalization of the world economy. Financial globalization in its most general form can be described as a phenomenon of signiﬁcant growth of the international ﬁnancial ﬂows. World Bank experts believe that ﬁnancial globalization is a process of integration of the national ﬁnancial market with global markets and institutions. This process leads to an increase in the volume of transnational capital movement, the active entry of national borrowers and lenders to the global ﬁnancial market, the use of inter‐ national ﬁnancial intermediaries in the form of international banks, consulting and auditing companies in the implementation of operations in international markets. The economic policy of the state plays an important role in the processes of ﬁnancial globalization. Financial innovations manifested in the emergence of new forms of ﬁnancial instruments, also acted as a driving force for development of ﬁnancial global‐ ization at the turn of XX-XXI centuries. Since the end of the 1980s, the process of

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globalization has become a deﬁning feature of the development of the world economic system. The term “ﬁnancial globalization” was introduced into scientiﬁc circulation By T. Levitt in 1983 to describe the process of development of global markets of goods and services under the inﬂuence of technology (Levitt 1983). Until now, there is no consensus among experts in deﬁning and understanding the processes and consequences of globalization. Diﬀerent approaches to the deﬁnition of the concept, scope, application areas and related trends are preserved. In its most general form, the globalization of the world economy can be described as a process of gradual transformation of diﬀerent segments of the world market into a single global market, the formation of global production chains, the strengthening of the international division of labour and cooperation. The important feature of globalization is the free and growing movement of goods, services, people, capital and information. Globalization is mani‐ fested by the increasing volume and diversity of international transactions in goods, services and global capital ﬂows, as well as by the increasingly rapid and widespread diﬀusion of technology (IMF 2000). The convergence of national economies, speciﬁc to the globalization, is largely due to the growth of ﬁnancial ﬂows, which allows to single out the ﬁnancial globalization as a process of growing interdependence of national ﬁnancial markets around the world and the formation of the global ﬁnancial system (Kose et al. 2009). The World Bank experts believe that ﬁnancial globalization is a process of integra‐ tion of the national ﬁnancial market with global markets and institutions (Schmukler 2004). Financial policies at the macro and micro levels play an important role in the processes of ﬁnancial globalization. The ﬁnancial policy of the state is focused on activities aimed at the mobilization and rational use of ﬁnancial resources by means of tax, budget, insurance, investment and income policy. In the context of ﬁnancial globalization, special attention is paid to the improvement of each component of the state ﬁnancial policy. Let us focus on the key areas of the state’s ﬁnancial policy in the context of ﬁnancial globalization. The tax policy is an important part of Russia’s financial policy. The tax policy is directed to creating conditions of taxation acceptable both for the state and for the market participants, ensuring the improvement of the financial situation of the real economic sector. The main forms of the tax policy regulation by the state are: – – – – –

comprehensive reform of the tax legislation in order to optimize the tax base; monitoring of tax and customs beneﬁts; increase in tax collection rate; tightening of tax administration; restructuring of ﬁnes and penalties for payments to the budget.

The budget policy of Russia directed to the improvement of expenditure eﬃciency and new emphasis of budget allocations on the implementation of priority directions of the state policy. The key areas of tax policy regulation on the part of the state are: – ensuring the balance and stability of the budget system; – optimization of the structure of the federal budget expenditures;

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– – – –

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optimization of the pension system; establishment of new infrastructure ﬁnancing mechanisms; improving the rational planning of the budget process; development of the tax system.

The ﬁnancial policy of the state includes the insurance policy, which is carried out in the following main areas: – – – – – –

development of draft laws to improve insurance activities; deﬁnition of legal conditions of insurance companies of diﬀerent forms of ownership; active development of various types of insurance; liability insurance; participation in solving social problems; creation of associations of insurance market entities to address issues of insurance business development, protection of interests of insurers.

Investment policy is of particular importance in modern conditions, which is entirely aimed at increasing investment activity by stimulating domestic demand for domestic products, the production of import-substituting products, the improvement of the ﬁnan‐ cial sector. The important areas of the regulation of investment policy as part of Russia’s ﬁnan‐ cial policy are: – increasing the role of the development budget as a source of ﬁnancial support for the state investment policy; – creation of conditions for investment of savings of the population; – development of mortgage lending; – attracting foreign direct investment. – In the area of income policy, it is envisaged that: – payment in full of the current salary to budget workers, the monetary allowance to the military personnel, other state social transfers; – development of mechanisms to compensate the income of the poorest segments of the population; – curbing of unemployment growth and creating conditions for employment; – implementation of pension reform; – streamlining the system of social beneﬁts and payments. System regulation of the key directions of modern ﬁnancial policy contributes to the country’s ﬁnancial potential, but at the same time actualizes the problem of the formation of a rational ﬁnancial enterprise policy. Analyzing the concept of ﬁnancial policy at the micro level, the Russian economist S.V. Barulin notes: “Private ﬁnancial policy is a set of strategic and tactical measures in the ﬁeld of formation and use of ﬁnancial resources and income of economic entities” (Barulin 2017). V.V. Bocharov expands the terminological content of the concept and deﬁnes the ﬁnancial policy as the purposeful use of ﬁnance to achieve the strategic and tactical objectives of the enterprise (Bocharov 2009).

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In the theory and practice of ﬁnancial management the ﬁnancial policy of the company is considered as a set of measures aimed at maximizing ﬁnancial resources, reducing costs and improving the eﬃciency of ﬁnancial enterprise activities. Currently, many enterprises spend ﬁnancial resources on solving conﬂicting prob‐ lems at diﬀerent levels of management, so the task of choosing the optimal mechanisms that allow to achieve the goals in the shortest possible time and with the lowest cost remains urgent. Directions of regulation and adaptation of ﬁnancial policy of the enterprise in the conditions of ﬁnancial globalization should be directed ﬁrst of all to: – development of the optimal concept of management of ﬁnancial ﬂows of the enter‐ prise, providing a combination of high proﬁtability and protection against commer‐ cial risks; – identiﬁcation of the main directions of use of ﬁnancial resources for the current period and for the near future; – ﬁnancial analysis aimed at achieving goals and solving production tasks; – choice of ways of ﬁnancing for the enterprise; – evaluation of real investment projects and ﬁnancial assets of the company. Financial globalization provides some opportunities for the use of capital of business structures, including innovative production. In this context, there are issues related to the economic security of business entities. The important question is the speciﬁcation of the organizational structure of economic security under the conditions of ﬁnancial globalization. The economic security of business entities is designed to provide the strategic enter‐ prise security for a long period of time. When considering the organizational structure of economic security, a wide range of interrelated elements should be taken into account. They form a systematic space in which the processes that ensure the stable functioning of the enterprise function and develop. The deﬁnition of the economic security strategy for the enterprise is one of the subsystems of strategic business management (Popkova and Ostrovskaya 2015). Thus, economic security in the context of ﬁnancial globalization is a set of conditions and factors that ensure the strength and stability of the economy of the business entity, the capacity to constant renewal and self-improvement. The strategy of economic security in general is to provide the most eﬃcient use of resources for the prevention of the threats and the sustained enterprise operation. The functional strategies of the struc‐ tural subdivisions of the enterprise should include measures to ensure the safety of their activities, which are linked and do not contradict the objectives of the security strategy of the whole enterprise (Vorontsova et al. 2019). Economic security of the enterprise is associated with the condition of being protected from the negative impact of external and internal threats, destabilizing factors, which assures the sustainable implementation of the main commercial interests and objectives of the statutory activities (Kolesnikov et al. 2016). The model of management response to the threat caused by ﬁnancial globalization, according to I. Ansoﬀ contains: “Two qualitatively diﬀerent ﬂows of costs that the company carries out, eliminating the threat. The ﬁrst stream of dangers is the direct loss

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from continuing unproﬁtable activities. The second stream represents the necessary costs associated with the liquidation of loss-making activities. In the economic aspect, the task of management response to the threat to the enterprise is to minimize the total losses of the business from the impact of the threat in value terms” (Ansoﬀ 2009). A diﬀerent approach should be taken in the strategy of ensuring economic security of enterprises. It consists, on the one hand, in the assessment and forecasting of the development of ﬁnancial resources of the business, timely identiﬁcation of possible sources of external threats to the security of the enterprise and its employees, prevention of penetration of competitors’ economic intelligence structures to the enterprise and monitoring of eﬃciency of the enterprise ﬁnancial system. On the other hand, an impor‐ tant point in providing economic security in the context of ﬁnancial globalization is the timely development of a new range of products, the formation of competitive pricing policy, the development of new production methods, increasing the competitiveness of products, which in turn determines the competitiveness of the territory (Vorontsova et al. 2015). Product programs contained in the strategy of economic security of the enterprise should be formed taking into account the cyclical nature of the development of the external market environment and strategic zones of the enterprise

4

Conclusion/Recommendations

Thus, it can be concluded that the ﬁnancial policy is, on the one hand, the mobilize and make rational use of ﬁnancial resources at the state level, and, on the other hand, to maximize the ﬁnancial resources, reducing the costs and improve the eﬃciency of the ﬁnancial activities at the enterprise level. The development of ﬁnancial policy requires a clear formulation of goals and targets of ﬁnancial management, deﬁnition and use of methods and means of their implementation. In the context of ﬁnancial globalization, this is manifested in the system of forms and methods of mobilization and optimal allo‐ cation of ﬁnancial resources. When forming ﬁnancial policy, it is necessary to take into account the strategy of ensuring economic security of the enterprise. In general, we can conclude that ﬁnancial globalization means, ﬁrst of all, the formation of a single global ﬁnancial market. The objective laws of the world economy development stipulate that Russia cannot and should not stay away from the processes of ﬁnancial globalization. However, it should be noted that ﬁnancial globalization is also manifested in the glob‐ alization of ﬁnancial risks. At the state level, in this regard, it is necessary to pay special attention in modern conditions to the development of adequate ﬁnancial and investment policy. At the enterprise level, realizing the inevitability of involvement in the processes of ﬁnancial globalization, it is important to take care of the development of economic security strategy of the enterprise. This will make it possible, without detracting from the beneﬁts of participation in the global ﬁnancial system, to eliminate the negative factors as much as possible and to form production systems that can stabilize and ensure the growth of productivity in enterprises.

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References Levitt, T.: The globalization of markets. Harvard Bus. Rev. 61, 92–102 (1983) Making the Global Economy Work for All. IMF Annual Report 2000, p. 234 (2000) Kose, M.A., Prasad, E., Rogoﬀ, K., Wei, S.-J.: Financial globalization: a reappraisal. IMF Staﬀ Papers. 56(3), 1 (2009) Schmukler, S.: Beneﬁts and Risks of FinancialGlobalization: Challenges for Developing Countries. Development Research Group., World Bank, June 2004 Barulin, S.V.: Finance: Textbook, 640 p. KnoRus, Moscow (2017) Bocharov, V.V.: Financial analysis: study guide. Peter, SPb, 240 p. (2009) Popkova, E.G., Ostrovskaya, V.N.: The problem of economic security in the context of globalization. Kazan Econ. Bull. 1(15), 108–113 (2015) Vorontsova, G.V., Dedyukhina, I.F., Kosinova, E.A., Momotova, O.N., Yakovenko, N.N.: Perspectives of development of managerial science in the conditions of information society. In: Advances in Intelligent Systems and Computing, vol. 726, pp. 980–988 (2019) Kolesnikov, Y.A., Epifanova, T.V., Usenko, A.M., Parshina, E., Ostrovskaya, V.N.: The peculiarities of state regulation of innovation activities of enterprises in the global economy Contemporary Economics, vol. 10, No. 4, pp. 343–352 (2016) Ansoﬀ Igor, H. (2009) Strategy Management: Classic Edition. Piter, SPb, 344 p. (2009) Vorontsova, G.V., Kovaleva, A.A.: Competitiveness of territories. Bull. North Cauc. Hum. Itarian Inst. 1(13), 9–16 (2015)

The Dynamic Model of Increase of Population’s Health Level in Russian Regions Natalia A. Shchukina1,2(&), Irina A. Tarasova3, Tatiana E. Kozhanova3, and Oksana A. Avdeyuk3 1

Plekhanov Russian University of Economics, Moscow, Russian Federation Financial University Under the Government of the Russian Federation, Moscow, Russian Federation [email protected] 3 Volgograd State Technical University, Volgograd, Russian Federation [email protected], [email protected], [email protected] 2

Abstract. The authors study economic and mathematical tools of solving the problem of complex evaluation and increase of the level of public health of region’s population. The decisive factors are the main indicators of health. The information basis includes statistical data for 2000–2014. Linear models of integral indicators of health of population of the RF and Volgograd Oblast are built. Based on the received values of complex evaluation of population’s health, the dynamic task of increasing the values of the integral indicator of public health of the population of Volgograd Oblast is formed and solved. The phase variable of the dynamic model is the main indicators of health that are taken into account during creation of the integral indicator, and managing variables are investments into the region’s main capital for the main types of economic activities. The presented dynamic model allows for complex evaluation of region’s population health in the current and forecasted periods. The offered scenario approach could be used during evaluation of various variants of implementing the strategy of regional development. The presented model of integral indicator allows for complex evaluation of the region’s population health and could be viewed as a tool for decision support during multi-variant scenario analysis of the strategy of regional development in the sphere of healthcare. Keywords: Mathematical modeling Population’s health Integral indicator of health Dynamic programming Management task Complex evaluation of health JEL Classiﬁcation Codes: C020

C610

1 Introduction At present, there are more than hundred deﬁnitions of the notion “health” (Medik et al. 2001; Young 1998). During evaluation of health, three levels are distinguished (Kindig and Stoddart 2003): health of an individual (individual health); group health (health of social and ethnic group; administrative territories); public health (health of society). © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 673–682, 2019. https://doi.org/10.1007/978-3-030-00102-5_70

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Characteristics of group and public health are viewed as an integral notion of individual health and are the totality of interconnected data, expressed by quantitative and qualitative indicators. The basis for most mathematical models in the sphere of healthcare is the results of statistical research, which use the tools of the theory of probabilities and mathematical statistics and ensure acceptability of the developed model (Grigoryev 2014; Tsinker et al. 2013; Friedman and Starﬁeld 2003; Chiang 1965). Calculations are too complex, but emergence of modern statistical packages, packages of symbol mathematics, and imitation modeling allows creating the programs that simplify manipulations with complex expressions (Tokmachev 2010; Reis et al. 2015). In certain cases, it is convenient to use one criterion for evaluation of health – integral indicator, which takes into account complex influence of various factors and generalizes information on various aspects of the state of population’s health. The necessity for development of the integral indicators of population’s health was pointed out by well-known scholars Amosov (1978) and Lisitsyn (1982). The models that are related to evaluation of population’s health with the help of one criterion are very important among the mathematical models in the sphere of healthcare (Medik and Tokmachev 2003; Meshechkin and Bogatyreva 2011). This work is devoted to creation of a dynamic model of the task of maximization of the level of population’s health, determined with the help of the integral indicator by the example of Volgograd Oblast.

2 Methodology 2.1

The Linear Model of the Integral Indicator of Population’s Public Health

The simplest models are the linear models of evaluation of indicators of health, which advantages include the fact that increase of the integral indicator is proportional to increase of each influencing factor. In the general form, the linear model of the integral indicator can have the following form (Kiryanov and Tokmachev 2009): IntInd ¼ A B þ c ¼

n X

Ki Indi þ c;

ð1Þ

i¼1

where A and B are generalized components of the mode, which positive increase raises and reduces the increase of the integral indicator, and the value c = const is the average value of the integral indicator in the linear model. The indicators of health Indi are the factors that influence the integral indicator, Ki – weight coefﬁcients. The integral indicator reaches its maximum value IntIndmax when A = Amax and B = 0, and minimum value IntIndmin with A = 0 и B = Bmax. For calculating the integral indicator, it is necessary to determine the limits of the stretch of change of indicator ½IntIndmin ; IntIndmax , then, based on expert evaluation, determine the contribution Wi of each indicator of health Indi , which are included into

The Dynamic Model of Increase of Population’s Health Level

the model; at that,

n P

675

Wi ¼ 1. Weight coefﬁcients Ki of each considered factors in the

i¼1

model (1) are determined as ratio of its contribution into the model to its average value for the observed period, i.e., Ki ¼ Wi =Indi . For evaluation of population’s health of various regions and their comparison, it is expedient to use the norm integral indicator IntInd 2 ½0; 1. Then the average value of the sum A + B, which guarantees its change in this stretch, is determined according to the empirical formula: A þ B ¼ 1:1=ð1 þ nÞk

ð2Þ

where n – number of sub-systems in the system without their own sub-systems, k 2 ½0:2; 0:3 – number that depends on the level of scatter of the system’s parameters. For evaluation of public health of the Russian population, the work (Kiryanov 2007) recommends accepting the value k = 0.24, and number n corresponds to the number of subjects of the RF. Let us view the linear model of the integral indicator of population’s health (1), which is built on ﬁve indicators: ð3Þ where – general coefﬁcient of birth rate (infants born alive), – average expected life span (at birth), – general incidence of disease according to visits to healthcare establishments, – general coefﬁcient of death rate and – primary disablement (general). Let us use the methodology of calculating the integral indicator of health that is given in (Medik and Tokmachev 2003), for determining the integral indicator of public health of population of the RF and Volgograd Oblast in 2000–2014 based on model (3). 1. According to formula (2), let us ﬁnd A þ B ¼ 1:1=ð1 þ 83Þ2:4 ¼ 0:37981, where the value n = 83 corresponds to the number of subjects of the RF (without Sevastopol and the Republic of Crimea). 2. For model (3), the values Wi constitute 25% or 12.5% of the sum A þ B, so, . Therefore, . 3. With the help of received values of contributions of indicators of health and their average values, calculated on the basis of statistical data (Federal State Statistics Service), we ﬁnd the weight coefﬁcients of the model of integral indicator of the Russian population’s health:

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Where , – average values of the corresponding indicators for the studied period, calculated by the authors according to statistical data (gks). 4. Let us calculate the value of constant c in model (3). We think that for normed value of the integral indicator, the average value corresponds to IntInd ¼ 0:5A 0:5 B þ c ¼ 0:5, whence we calculate c ¼ 0:5 0:5ðB AÞ ¼ 0:5 0:5ð0:237381 0:142429Þ ¼ 0:547476. Calculations of the integral indicator of health of Volgograd Oblast are conducted similarly. Thus, the built linear models of the integral indicator of public health of the population of the RF and Volgograd Oblast in 2000–2014 according to (3) take the form: ð4Þ

ð5Þ

Fig. 1. Dynamics of integral indicators of health of the population of the RF and Volgograd Oblast

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Dynamics of change of the values of integral indicators of public health of the population of the RF and Volgograd Oblast, calculated according to the formulas (4) and (5) for 2000–2014, are presented in Fig. 1. As is seen from Fig. 1, in 2003–2005 there was reduction of the integral indicator of public health of the population of the RF and Volgograd Oblast from the level IntIndRF ð2003Þ ¼ 0:437396 and IntIndVolg ð2003Þ ¼ 0:434900 to minimum values for the studied period IntIndRF ð2005Þ ¼ 0:378105 and IntIndVolg ð2005Þ ¼ 0:389093, accordingly. At that, it should be noted that over the whole studied period of observations, the values of the integral indicator of health of the population of Volgograd Oblast and the RF did not reach their average value c = 0.547476, though in 2005– 2014 there was a tendency for increase of this indicator. 2.2

Dynamic Model of Increase of the Level of Health of the Population of Volgograd Oblast

Most factors that influence the indicators of population’s health depend not only on effectiveness of the system of healthcare but also on the population’s way of life, socioeconomic conditions of living, quality of the environment, and its socio-economic development. These factors could be divided into several groups: factors of healthcare; money income of population; factors of education, culture, and sport; consumption of various types of food products; meteorological factors; quality of air environment; quality of drinking water. Each of the above groups of factors includes a lot of attributes, which influence on demographic indicators of population’s health was determined in (Subramanian et al. 2002; McDowell et al. 2004; Molla et al. 2003; Kaplan 1996; Torrance 1976; Murray et al. 2002). Let us view the dynamic task of increasing the value of the level of public health of the population of Volgograd Oblast for 2000–2014. Let us formulate the task in the form of multi-step process of decision making and solve it with the help of the Bellman’s optimality principle. Phase variables are the indicators of health, which influence the integral indicator in the model (5): – general coefﬁcients of birth rate (living infants), – average expected life span, – general disease rate of the population according to visits to healthcare establishments, – general coefﬁcient of death rate and – primary disablement (general). The managing variables are investments into the ﬁxed capital of Volgograd Oblast as to certain types of economic activities: x1 – investments into education, RUB million; x2 – investments into healthcare and provision of social services, RUB million; x3 – investments into provision of other communal, social, and personal services, RUB million; x4 – investments into processing industry, RUB million; x5 – investments into agriculture, hunting, and forestry, RUB million. We consider that phase variable could be presented in the form of multiplicative Cobb-Douglas production function from managing variables and the corresponding value of phase variable in the previous moment of time, i.e.:

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The primary values of phase variables that correspond to the studied indicators of health are their factual values for 2000. Using the values of the integral indicator, calculated by model (5), and statistical data on the volume of investments into ﬁxed capital of Volgograd Oblast for certain types of economic activities, the least square method is used for ﬁnding the ﬁnal expressions for phase variables of the dynamic model:

For mathematical setting of the task of dynamic programming, we shall consider that the sum of investments into ﬁxed capital of Volgograd Oblast according to the studied types of economic activities in each studied period should not exceed its factual 5 P value, i.e., xi ðtÞ X ðtÞ, where X ðtÞ – sum of investments into ﬁxed capital in the i¼1

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period t, t = 1,2,…,14. For the region to be able to conduct all types of economic activities in the planned volume, it is necessary for the value of investments into the corresponding type of economic activities in each time period to equal (at least) a certain threshold value. This lower threshold of the values of investments for all studied types of economic activities is its minimal value for the whole studied period 2000– 2014, i.e., xi ðtÞ min xi ðtÞ. 0 t 14

Thus, we have mathematical setting of the task of increasing the level of the integral indicator of health of Volgograd Oblast population: ð6Þ

ð7Þ

ð8Þ

ð9Þ

ð10Þ

ð11Þ

ð12Þ

x1 ðtÞ 93:66; x2 ðtÞ 81:60; x3 ðtÞ 73:10; x4 ðtÞ 6402:90; x5 ðtÞ 495:19; ð13Þ 5 X

xi ðtÞ X ðtÞ; t ¼ 1; 2; . . .; T; T ¼ 14;

ð14Þ

i¼1

At that;

5 X i¼1

ximin min X ðtÞ ¼ 7260:97: 0 t 14

ð15Þ

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Equations (6)–(15) are a mathematical setting of the task of optimal management with target function (6), phase variables (7)–(11), primary conditions (12), and the system of limitations (13)–(15). For solving the task of dynamic programming of maximization of the level of public health of population, let us built Bellman recurrent equations: F ðyðT Þ; T Þ ¼ IntInd ðT Þ; F ðyðtÞ; tÞ ¼ max F ðf ðyðtÞ; xðt þ 1ÞÞ; t þ 1Þ; t ¼ 0; 1; . . .; T 1; where f ðyðtÞ; xðt þ 1ÞÞ – vector-function of the phase of changes, which are determined according to expressions (7)–(11).

3 Results As a result of solving the set task of dynamic programming (6)–(15), we have found out the best way of distribution of investments into the region’s ﬁxed capital for the main economic activities – for the purpose of achievement of the maximum value of the integral indicator of population’s health for 2000–2014. Figure 1 shows the graph of the value of the integral indicator of public health of Volgograd Oblast population, which has been determined according to model (5), and the graph of values of the integral indicator of health, which have been obtained as a result of solving task (6)–(15). As is seen from presented graphs, the values of the integral indicator that were obtained as a result of solving the task of dynamic

Fig. 2. Graphs of factual values of the integral indicator and values that were obtained as a result of solving the task of dynamic programming.

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programming allow increasing the values of the integral indicator to 2014. At that, during distribution of investments into the region’s ﬁxed capital according to the types of economic activities, it is necessary to increase the share of investments into healthcare and provision of social services and to reduce the share of investments into processing industry, as compared to factual values. Figure 2 shows that in 2014 the estimate value of the integral indicator of population’s health during the whole period of observation exceeds its average value c = 0.547476 and constitutes IntInd ð14Þ ¼ 0:563771. The created model of the integral indicator of population’s public health adequately reacts to changes of managing variables and could be used for further studies of the state of health of the studied region and of other territories. Dynamic task (6)–(15) allows studying scenarios of increasing the values of the integral indicator of health with various limitations as to the value of investments into the region’s ﬁxed capital.

4 Conclusions One of the tools for solving the task of differentiation of regions according to the general level of population’s health could be the model of integral indicator, built by the main indicators of health, which are published annually by the Federal State Statistics Service, as on the basis of special indicators, developed by separate regions. Improvement of the offered model and the practice of evaluation of its quality on the basis of the model’s indicators, as well as evaluation of effectiveness of activities of executive bodies, will stimulate solving the task of well-balanced development of region. Usage of calculation capabilities of high-tech program complexes in analysis of effectiveness of managing the level of public health of region’s population will allow increasing its values signiﬁcantly. The results of the offered methodology of evaluation of population’s public health allow conducting calculation of the forecast value of the integral indicator, which could be used during development of the variants of mid-term and current plans of region’s development.

References Medik, V.A., Tokmachev, M.S., Fishman, B.B.: Statistics in medicine and biology. vol. 2. Applied statistics of health. Medicine, 352 p. (2001) Young, T.K.: Population Health: Concepts and Methods, p. 466. Oxford University Press, New York (1998) Kindig, D., Stoddart, G.L.: What is population health? Am. J. Pub. Health. 93(3), 380–383 (2003) Grigoryev, A.I.: Health of Russian population: influence of the environment in the conditions of changing climate: monograph, Nauka, 428 p. (2014) Tsinker, M.Y., Kiryanov, D.A., Klein, S.V.: Statistical modeling for evaluation of the influence of factors of the environment on the indicators of health of the Russian population. Health of population and living environment, No. 11, pp. 10–13 (2013)

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Friedman, D.J., Starﬁeld, B.: Models of population health: their value for US public health practice, policy, and research. Am. J. Pub. Health. 93(3), 366–369 (2003) Chiang, C.L.: An index of health: mathematical models. Vital Health Stat. 2(5), 25 (1965) Tokmachev, M.S.: Statistical forecast of health of region’s population on the basis of mathematical and computer modeling. Bulletin of Yaroslav the Wise Novgorod State University, No. 6, pp. 56–61 (2010) Reis, S., Seto, E., Northcross, A., Quinn, N.W.T., Convertino, M., Jones, R.L., Maier, H.R., Schlink, U., Steinle, S., Vieno, M., Wimberly, M.C.: Integrating modelling and smart sensors for environmental and human health. Environ. Model Softw. 74, 238–246 (2015) Amosov, N.M.: Thoughts on health. Molodaya Gvardiya 192 p. (1978) Lisitsyn, Y.P.: Population health and the modern theories of medicine. Medicine, 287 p. (1982) Medik, V.A., Tokmachev, M.S.: Modeling of integral indicators of population’s health evaluation. Healthcare of the Russian Federation, No. 3, pp. 17–20 (2003) Meshechkin, V.V., Bogatyreva, N.I.: Mathematical modeling of the task of increasing the level of health of Kemerovo Oblast population with application of the integral indicator. Bull. Kemerovo State Univ. 3(47), 76–85 (2011) Kiryanov, B.F., Tokmachev, M.S.: Mathematical models in healthcare: study guide. Yaroslav the Wise Novgorod State University, Veliky Novgorod, 279 p. (2009) Kiryanov, B.F.: Regarding the problem of determining weight coefﬁcients of parameters of the linear models of the integral indicators of systems’ quality. Bulletin of Yaroslav the Wise Novgorod State University, No. 44, pp. 33–37 (2007) Subramanian, S.V., Belli, P., Kawachi, I.: The macroeconomic determinants of health. Annu Rev Public Health, No. 23, pp. 287–302 (2002) McDowell, I., Spasoff, R.A., Kristjansson, B.: On the classiﬁcation of population health measurements. Am. J. Pub. Health. 94(3), 388–393 (2004) Molla, M.T., Madans, J.H., Wagener, D.K., Crimmins, E.M.: Summary measures of population health: Report of ﬁndings on methodologic and data issues. National Center for Health Statistics, Hyattsville, Maryland, 75 p. (2003) Kaplan, R.M.: New health promotion Indicators: the general health policy model. Health Prom. 3 (1), 35–49 (1996) Torrance, G.W.: Health status index models: a uniﬁed mathematical view. Manag. Sci. 22(9), 990–1001 (1976) Murray, C.J.L., Salomon, J.A., Mathers, C.D.: A critical examination of summary measures of population health. In: Murray, C.J.L., Salomon, J.A., Mathers, C.D., Lopez, A.D, (eds.) Summary Measures of Population Health: Concepts, Ethics, Measurement and Applications. World Health Organization, Geneva, Switzerland, pp. 13–40 (2002) Federal State Statistics Service. http://www.gks.ru/wps/wcm/connect/rosstat_main/rosstat/ru/ statistics/publications/

The Dilemmas of Macroeconomic Management: Impact on Global Financial Stability Tatiana Malova1(&) and Marina Pivovarova2 1

2

Moscow State Institute of International Relations, Moscow, Russia [email protected] Financial University under the Government of the Russian Federation, Moscow, Russia [email protected]

Abstract. The global ﬁnancial system have been changed qualitatively during the ten years after global ﬁnancial crisis. Slow growth of the world economy amid low interest rates become macro-economically important, deﬁning conditions for sustainable economic growth and development in the future. In its turn, macroeconomic management has a signiﬁcant impact on global ﬁnancial stability. In this regard, the academic interest in the subject is increasing. There is a need to uncover and describe the latent challenges to ﬁnancial stability arising as a result of the policy of the ZIRP (zero interest rate policy), changes in the direction of price movements in the global economy, the intensiﬁcation of protectionism and politicization of international economic relations. The authors propose to study these issues on the basis of the “dilemma of macroeconomic regulation” concept. The implementation of this methodological instrument allows for a fresh take on the duality of macroeconomic regulation in conditions of increasing complexity of linkages and dependencies between all participants of the global economic process. This article is aimed at identifying the dilemmas of macroeconomic regulation, emerging from the speciﬁc context of the postcrisis period, as well as at the analysis of their impact on the prospects of global ﬁnancial stability. The identiﬁcation is based on the system analysis, the idea that ensuring the global ﬁnancial stability in the post-crisis period requires consideration of dilemmas of macroeconomic regulation is conﬁrmed. Keywords: Dilemma of macroeconomic management Financial stability Unconventional instruments Zero interest rate policy Deflation Protectionism Politicization of the world economy JEL Classiﬁcation Codes: E42

E50 E62 F36 F40

1 Introduction The world economy and particularly its ﬁnancial sector are undergoing profound changes, compared to approximately 40 years of a relative stability. Today the deep shifts which change radically the global economy are caused mainly by a rapid spread © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 683–691, 2019. https://doi.org/10.1007/978-3-030-00102-5_71

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of digital technology, increasing competition, complexity of relationships and dependencies in an uncertain and unstable global environment. In April, 2018 the International Monetary Fund (IMF) forecasted that the global growth would amount to 3.9%. A combination of several factors is a reason for such growth. Stock market witnessed volatility rise. Borrowing conditions remain to be attractive. However, favourable ﬁnance conditions are accompanied by short and medium-term risks of the worsening of the situation. Investors fear tensions in the geopolitical sphere (IMF 2018a). Scientiﬁc and practical interest for further study of the conditions for ensuring sustainable ﬁnancial situation in the world is explained by the formation of a new global reality. At the same time potential threats to ﬁnancial stability, arising due to the use of unconventional monetary policy measures, become more complicated. Therefore, the relevant research area can be deﬁned as a study of the macroeconomic management distinctive features in the post-crisis period, as well as identiﬁcation of their impact on ﬁnancial stability. As of now, the matter of the necessity and potential application of a comprehensive, coherent and coordinated approach to the formulation of macroeconomic policies in the face of increasing medium-term risks is debated not both by the specialists and the regulators (Gaspar et al. 2016). Theory of negative interest rates is not yet developed in the framework of economic theory. The results of the “experiment” initiated by central banks are not totally clear (Burenin 2016). In the economic literature, there is a lack of agreement among researchers on the usefulness of unconventional monetary policy principles (Blinder et al. 2017). Their efﬁciency evaluation is also ambiguous (Panizza and Vilosh 2018). There is an opinion (Quint and Rabanal 2017) that unconventional measures of monetary regulation can be effective mainly as a reaction to ﬁnancial shocks. But they are ineffective in situations of shocks in a traditional business cycle. The essential role in assessing the impact of modern macroeconomic regulation methods on global ﬁnancial stability is given to a so-called ‘trilemma’ of monetary policy (Tong 2017). Researchers are concerned with the growing trade imbalance trend and the strengthening of protectionism. Attention is drawn to the correspondence between the US President D. Trump trade policy and the global growth prospects (Stiglitz 2018; Dong and Li 2017). However in modern scientiﬁc literature not enough attention is paid to a systems analysis of qualitatively new phenomena and processes. Their inner controversial character is the basis for the formation of the dilemmas of macroeconomic regulation. They include the effects of the ZIRP (zero interest rate policy) or the impact of low interest rates on world ﬁnance, costs of multi-directional character of price vector in the global economy, protectionism development trends and politicization of international economic relations. The use of the term “dilemma” in the context of macroeconomic regulation allows to deﬁne correlations between these phenomena in terms of their impact on the ﬁnancial situation in the world. Introduction of the ‘dilemma’ concept in the context of macroeconomic regulation represents an innovation in the ﬁeld of science. This article is motivated by the desire to use the heuristic potential of the ‘dilemma’ concept as a methodological instrument for

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addressing the relevant problems of modern economic theory and practice. The article authors have made some steps to achieve this goal.

2 Methods Financial globalization has put an end to perceiving the national ﬁnancial systems as separate units. Thus, the global ﬁnancial system was established. This is a megastructure, which operates and evolves as a whole. Systems theory methodological principles allow us to identify the internal contradictions of the mega-integrity. In accordance with the principle of integrity, a separate national ﬁnancial system becomes a reproductive fragment of the global system as a whole, the development of which is subjected to speciﬁc rules and regulations. The principle of complementarity draws attention to the unlimited national diversity. Global system cannot operate without its individual parts. But the contradictions between the whole and the parts, known as the antinomies of integrity, emerge. The principle of reflexivity allows refocusing on the mutual dependence of all participants of ﬁnancial relations. All actors are interdependent. Each participant is forced to focus on the behaviour and reactions of others in pursuit of self-interest. The principle of dominance outlines certain requirements, necessary and sufﬁcient to be sure that one of the components of the global system performed the functions of global governance. Among these requirements are the following: competence, responsibility, conﬁdence, external control, etc. When faced with the mutual dependence of the subjects, balance is required between the political and economic arguments, individual and shared goals (Libich et al. 2015). Formed on the basis of the data, the model of global economic management can take economic system to a higher level of self-organization and adaptability to global changes (Malova 2018). Methodological principles of the system analysis allow us to maximize the use of heuristic potential of the ‘dilemma’ concept. In this context, the dilemma is seen as a choice between two mutually exclusive instruments. In economic theory, macroeconomic regulation dilemma is considered when choosing between the achievement of full employment and price stability. In this article, ‘the dilemma’ concept is used to describe the need to choose between two undesirable possibilities in the context of macroeconomic regulation. This is an innovation in this ﬁeld of science. This article is motivated by the desire to use heuristic potential of the ‘the dilemma’ concept as a methodological instrument, which allows to identify internal contradictions of global phenomena and processes in order to contribute to the discussion of the relevant problems in modern economic theory and practice. The authors of the article have made some steps to achieve this goal.

3 Results The study revealed the following dilemmas of macroeconomic regulation. Dilemma #1. The global ﬁnancial crisis has had a signiﬁcant impact on the monetary policy, forcing regulators to make a choice between the policies of the ZIRP (zero

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interest rate policy) along with other unconventional monetary measures policies and negative consequences of raising the interest rates amid the crisis. Negative rates have emerged as a consequence of the economic problems faced by many countries in this period, and became another measure to stimulate the developed economies during the crisis. The calculation was that lowering the interest rates leads to increased consumer and investment spending by encouraging borrowing because it affects the intertemporal cost of consumption and accumulation. Also the expected national currency depreciation determines the growth of net exports. Low rates have become a reality for many countries, both developed and developing, which is shown in Table 1. Table 1. Interest rates and inflation in countries around the world (data from 23 April 2018) Country United States The Euro Zone Japan Germany United Kingdom France India Italy

Interest rate 1.75% 0.00%

Level of inflation 2.40% 1.30%

Country Sweden Poland

Interest rate −0.50% 1.50%

Level of inflation 1.90% 1.30%

−0.10% 0.00% 0.50%

1.10% 1.60% 2.50%

Belgium Thailand Austria

0.00% 1.50% 0.00%

1.39% 0.79% 1.90%

0.00% 6.00% 0.00%

1.60% 4.28% 0.80%

0.50% 2.00% 2.00%

2.20% 3.40% 2.60%

0.10% −0.65% 0.00% 3.00% 3.25% 0.78% 2.50% 0.00%

0.20% 0.50% 0.20% 4.30% 1.30% 0.20% 1.80% 0.80%

Norway U.A.E Hong Kong Canada 1.25% 2.30% Israel South Korea 1.50% 1.30% Denmark Spain 0.00% 1.20% Ireland Australia 1.50% 1.90% Philippines Netherlands 0.00% 1.00% Malaysia Switzerland −0.75% 0.80% Singapore Saudi Arabia 2.25% 2.90% Chile Taiwan 1.38% 1.57% Finland Source: Trading Economics, https://ru.tradingeconomics.com/.

Moreover, in the midst of monetary policy normalizing it becomes evident that negative rates are approaching the limit of their effectiveness while their side effects are increasing for banks and other ﬁnancial institutions in the medium-term. Conservation of low interest rates forces investors and ﬁnancial institutions to seek alternative sources of income. Increase of their risk operations is accompanied by increased economic costs. In ﬁnancial markets, low interest rates lead to inflation of assets (oil options, stocks of companies). This provokes the formation of a ﬁnancial bubble. Since corporate investments are made in equity, not in main capital, the imbalance between the real economy and the ﬁnancial sector is increased.

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The imbalance between the real and ﬁnancial sectors of the economy grows under the influence of the following factors: – decrease in demand among population due to the unemployment rate growth, spread of labour-saving technologies and robotics; – increasing inequality among the people. According to the World Economic Forum (WEF), estimations over the last thirty years income inequalities have increased in 53% of the countries. The trend is particularly acute in developed countries. Economic deformations caused long-term problems: high levels of private debt does not corresponds to savings and pensions (WEF 2018); – structural changes in the economy that entail the service sector companies profitability growth, including the ﬁnancial sector. Capital reorientation towards the service sector, despite the credit availability, reduces investment in the modernization of the real sector companies. Among the outcomes of low interest rates the following can be named: the increasing complexity of determining fair prices, the risk of violating the ﬁnancial institutions mediation functions, reducing banks proﬁtability, etc. (Panizza and Viplosh 2018). The Dilemma #2 arises from the difference in prices vector orientation in various countries. In developing economies, prices rise. In these countries high inflationary trend amid unacceptably soft monetary policy still remains. Two-thirds of 25 developing countries have negative real interest rates. Inflation expectations in these countries, which are by deﬁnition volatile, can push the prices up. At the same time, in many countries, inflation is steadily kept below the target level (Table 1). Moreover, deflation is becoming a key trend in the global monetary sphere. Admittedly, deflation is more dangerous than most other forms of inflation. The Japanese experience of countering deflation shows that deflation prevention is a difﬁcult and understudied task. The main changes, determining a deflationary price vector in global economy, are the following: structural changes, innovation, globalization of the ﬁnancial sector and inflation processes, transformation of commodity assets into ﬁnancial ones, deepening social inequality, the effect of demographic factors, increase of public debt (Khesin 2017). The observed slowdown in inflation in developed economies (Japanese, European, etc.) can create risks for all sectors of the economy, but above all for the ﬁnancial sector. It is low inflation which is one of the reasons for the deterioration in the ﬁnancial condition of the companies, whose business model in these conditions turns out to be ineffective. Strengthening of this trend leads to a complication of tools used by regulators in the process of countering deflation, limiting their freedom of action, generating a tendency to reduce the effectiveness of monetary methods of managing economic growth (Galati et al. 2018). Dilemma #3. Under modern conditions the regulator faces a choice between globalization, strengthening the foundations of the global ﬁnancial system and a shift towards protectionism and the politicization of international economic relations. This choice is difﬁcult, as the global ﬁnancial crisis challenged the beneﬁts of ﬁnancial integration. So far the gross cross-border capital flows remain volatile. This can lead to

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signiﬁcant fluctuations in exchange rates in the developing countries. An interlaced global ﬁnancial system will inevitably involve a risk of crises and chain reaction (Lund and Härle 2017). Moreover, ﬁnancial integration is facing new challenges in the form of funding in the digital format, which will speed up cross-border movement of capital flows and open new opportunities for interaction, but also will aggravate competition. A shift to protectionism contradicts the logic of the global economic cooperation system, which has developed after the Second World War. The core of the system are the International Monetary Fund, the World Bank, general agreement on tariffs and trade (GATT), replaced by the World Trade Organization in 1995. Leading role in this system originally belongs to United States. According to J. Stiglitz “… the US played a central role in creating our global rules-based system. We were remarkably successful in persuading others of the beneﬁts of such a system, and even as Trump walks away from it, and asserts an “America First” nationalism, other countries remain committed” (Stiglitz 2018). Under these circumstances, the US President D. Trump desire to blow up the existing global system and to conduct a full-scale trade war is a cause for concern and surprise. The consequences will be unfavourable both for the United States and the world economy. Experts estimate that implementing the protectionist policies under the said conditions of ﬁnancial stagnation could lead to a fall in world production by about 3% over the period up to the end of the year 2021 (IMF 2016).

4 Discussion Study of dilemmas of macroeconomic regulation shows that an extremely fragile global environment has emerged over the past decade. The exhaustion of the capacity of low interest rates provokes a turmoil in ﬁnancial markets. Credit quality has deteriorated. Low interest rates allowed smaller companies to borrow money on international credit markets. In 2017 highly risky companies have been granted loans amounting $788 billion (IMF 2018b). Transmission mechanism of monetary policy affects the economy through the ﬁnancial system. Debt overburden increases the vulnerability of the ﬁnancial system. Low rate and current yield curve are negative for the ﬁnancial services sector, including banks, insurance companies, pension funds (Frankel 2018). These factors weaken the ﬁnancial system, which in turn reduces the monetary policy effectiveness. In the short term period, these effects may not be this noticeable. In the long run economic costs of low interest rates will have an impact through the transmission mechanism of monetary policy and ﬁnancial system on a decline in business activity and increasing crisis trends. Favourable conditions of low interest rates led to an increase in global debt. According to the Institute of International Finance global debt reached $237 trillion in the year 2017. It is approximately 350% of the world GDP. 63% of the global debt is the non-ﬁnancial private sector debt, 37% is the public sector debt. The biggest part of the global debt is the developed countries debt. Over the past decade countries with emerging markets were actively borrowing funds. The contribution of China to the growth of the global debt is 43% for the period from 2007 up to this day. The ratio of public sector debt to GDP is constantly increasing. The cost of debt service increases.

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Countries with high public debt are more vulnerable to the changing ﬁnancial conditions (IMF 2018b). Experts outline that the risks to the ﬁnancial system can be created by modern technologies underlying crypto-assets. There appears a possibility to raise the efﬁciency of the payment systems. However, crypto-assets are vulnerable to fraud and security violations (IMF 2018b). The vulnerability of the global ﬁnancial system is also connected to the increasing trade conflicts. The long-term effects of the trade war caused by the D. Trump protectionism are still to be evaluated. But today adaptive expectations of investors emerge, resulting in the rise of volatility of the market indexes. Experts indicate that ﬁnancial markets are concerned not with the current steps taken by Washington or with the Beijing countermeasures, but with what awaits the world’s ﬁnancial system in the long-term period (IMF 2018a). The new trend towards the protectionism intensiﬁcation is reflected in attitudes towards China, the growing weight of which demonstrates the beneﬁts of world trade, the role of globalization and the dangers of protectionism. China has a dominant position in terms of the global GDP. This country has become the main trading partner for most major economies in the world. Hence about a quarter of the United States and Europe exports in 2017 ends up in China (Fig. 1).

Asia, except China 41.9 32

European Union

China

40.1

35.4 26.1

US EXPORTS

USA

24.5

EUROPEAN EXPORTS

Fig. 1. US and European exports by destinations, 2017 (%) Source: (Frankel 2018).

These data indicates a high level of interdependence in a globalized world. The rise of protectionism will be followed by the increase of the likelihood of destruction of the entire system of free trade, formed by the entire international community for decades.

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In close linkage with the trend towards intensiﬁcation of protectionism, the politicization of international economic relations intensiﬁes as well. This trend is a consequence of a stiffer competition, as well as of maintaining high interdependence in today’s world, when ups and downs, ﬁnancial crises are becoming global in scale. Manifestation of politicization of the international economy is reflected in the key role of political relations in technology transfer and the exchange of other actual information, in determining geographical location of production structures, in trade and ﬁnancial policies. The general trend to politicization of the world economy was reflected in the transmission of global competition from corporate level to an interstate one. The “slate revolution” was followed by the intensiﬁcation of the cooperation between the ‘gas OPEC’ and the ‘oil OPEC+’ participants. The politicization of the world economy is manifested in the application of sanctions as the main tool for geo-economic war. Currently, one third of humanity lives in countries against which unilateral coercive measures, id est unilateral sanctions, are applied. The UN Human Rights Council report conﬁrms that unilateral coercive economic measures have a negative impact on all economic agents. Over three years of the imposition of sanctions against Russia, European States have lost about $100 billion. It is twice as high as the damage for Russia (UN 2017). Presenting the results of his research I. Jazairy, the Special Rapporteur on the negative effects of unilateral coercive measures on the enjoyment of human rights, rejected accusations that during the preparation of the report on the impact of sanctions on the economy of Russia and the countries of the European Union he was subjected to Russian influence including ﬁnancial support measures (UN 2017). Tangible economic losses led to a split in ﬁnancial and political circles of Europe. Moreover, the net result of the imposition of economic pressure on Russia is Russia becoming a model state existing under economic sanctions for political reasons. That is why after the sanctions imposition Russia improves multipolar development strategy, focusing on the Asian area.

5 Conclusions The study conﬁrmed that a choice between two undesirable consequences in the context of macroeconomic regulation may contain latent challenges and threats to ﬁnancial stability on a global scale in the future. Focusing on national interests, regulators form the conditions for tensions in the global ﬁnancial system. Hence no national regulator is able to ensure the stability of its own ﬁnancial system in the face of strengthening the dependencies between all countries. Countries should take measures that would counter the negative impact of the conducted policy. An enhanced international cooperation in areas that have a direct and indirect impact on the ﬁnancial system is required. For example, joint action of countries could contribute to the stability and creation of equal conditions for competition in the ﬁnancial sector and the international ﬁnancial and currency markets. The global economic cooperation system, created after the Second World War, needs to be reinforced. A balanced model of global economic management is able to pull the global economy to a higher level of self-organization.

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References Burenin, A.: Negative interest rates: central banks initiated an experiment. Vestnik MGIMOUniv. 4, 262–273 (2016) Blinder, A., Ehrmann, M., den Haan, J., Jansen, D.-J.: Alone as the mother of invention: monetary policy after the crisis. ECB Working Paper Series. 2047/April (2017) Dong, Y., Li, Ch.: Economic sanction games among the US, the EU and Russia: Payoffs and potential effects (2017). https://doi.org/10.1016/j.econmod.2018.03.006 Galati, G., Gorgi, Z., Moessner, R., Zhou, Ch.: Deflation risk in the euro area and central bank credibility. Econ. Lett. 167, 124–126 (2018) Gaspar, V., Sahay, M., Obstfeld, R.: Macroeconomic Management When Policy Space is Constrained: A Comprehensive, Consistent and Coordinated Approach to Economic Policy. IMF staff discussion note SDN 16/09 (2016) IMF: Global Financial Stability Report-Fostering Stability in a Low-Growth, Low-Rate Era, Washington, DC, October 2016 IMF: World Economic Outlook: The Cyclical Upswing, Structural Change, Washington, DC, April 2018a IMF: Global Financial Stability Report: A Bumpy Road Ahead, Washington, DC, April 2018b Libich, J., Nguyen, D.Th., Stehlík, P.: Monetary exit and ﬁscal spillovers. Eur. J. Polit. Econ. 40, 184–206 (2015) Lund, S., Härle, Ph.: Global ﬁnance resets. Finance & Development, pp. 42–44, December 2017 Malova, T.: The formation of a new world economy order: methodological aspects of the problem. In: Conﬁguration Problems in the Global Economy of the Twenty-First Century: the Idea of Socio-economic Progress and Possible Interpretations, Volume one, Krasnodar (2018) UN: sanctions against Russia cost EU $3.2 billion per month. http://www.vestiﬁnance.ru/articles/ 90897 Panizza, W., Viplosh, Сh: Folk theorem of decreasing effectiveness of monetary policy: What statistics say? Dengi i kredit 1, 71–107 (2018) Quint, D., Rabanal, P.: Should Unconventional Monetary Policies Become Conventional? IMF Working Paper 17/85 (2017) Stiglitz, J.: Trump and Globalization. J. Policy Model. (2018). https://doi.org/10.1016/j.jpolmod. 2018.03.006 Tong, E.: US monetary policy and global ﬁnancial stability. Res. Int. Bus. Finan. 39, 466–485 (2017) Trading Economics. https://ru.tradingeconomics.com/ Frankel, J.: Reflections on central banks, protectionism and globalization. Dengi i kredit 1, 108–123 (2018) Khesin, E.: Managing inflation: driving forces of change. Dengi i kredit 12, 9–14 (2017) UN: Special Rapporteur rejects accusations of Russian influence on sanctions ﬁndings (2017). http://www.ohchr.org/EN/NewsEvents/Pages/DisplayNews.aspx?NewsID=22080& LangID=E WEF: The Global Risks Report 13, 2018-th edn. (2018)

Forming a Strategy for Development of Russian Gas Industry in Modern Economy Alexey M. Tsikin(&) Financial University under the Government of the Russian Federation, Moscow, Russia [email protected]

Abstract. The modern model of the world economy determines the need for the transformation of many industries, including such traditional one as the gas industry. The wide introduction of digital technologies causes a change in all technological processes for the production, processing, transportation and use of natural gas and related products. In this connection, the issue of elaborating a new strategy for the development of the Russian gas industry in modern economic realities becomes particularly important. The purpose of this work is to form a new vision for the development of the Russian gas industry, based on the analysis of the current status of the industry and the progress of the digital economy. To achieve this goal, the tasks of decomposition of the general production process into separate technological stages, assessing their current state, factors and development features are solved. On the basis of the studies carried out, the need to increase the competitiveness of the gas industry as a priority in the segment of geological exploration, production in difﬁcult mining, geological and climatic conditions, and the comprehensive development of gas chemistry with the manufacturing of liquid high-value-added products has been identiﬁed. The result of the work is scientiﬁcally grounded recommendations on the formation of a strategy for the development of the Russian gas industry. The results of the work can be used in the formation of state programs for the development of the gas industry, as well as improving the competitiveness of the Russian economy as a whole. Keywords: Development strategy Gas industry Competitiveness Economic policy JEL Classiﬁcation Codes: O13

Digital economy

L71 Q35

1 Introduction The Russian Federation has one of the largest reserves (categories A, B, C1 and C2) and resources (categories C3, D1 and D2) of natural gas in the world. At the end of 2016, proven reserves of natural gas in Russia were estimated at 32.3 trillion m3, which is 17.3% of the world’s total (BP Review 2017). It should be noted that the conﬁdent world leadership in reserves in 2006 was replaced by the second place, losing to Iran. This is due, above all, to intensive geological exploration in Iran, which provided a signiﬁcant increase in reserves, and less active gas production (the reserve/production © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 692–704, 2019. https://doi.org/10.1007/978-3-030-00102-5_72

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ratio is three times higher than in Russia). In general, the need to intensify geological exploration in Russia for the expanded reproduction of the mineral resource base is obvious. The bulk of the natural gas ﬁelds in Russia is concentrated in Western Siberia (almost half of the gas reserves are in the Nadym-Pur-Taz region), much smaller amounts are (in descending order) in the shelf, European territory, Eastern Siberia and the Far East. The deposits of Western and Eastern Siberia, the Far East are characterized by a multicomponent composition, including deposits with a high content of components from ethane and higher, which are a valuable raw material for gas chemistry (Eder et al. 2014). Consumption of natural gas of this composition for energy production is undesirable, since this raw material makes it possible to produce highly liquid products with high added value. The organization of individual hydrocarbon fractions production and further redistribution on the basis of “fatty” gas is a strategically important task for the formation of import independence and competitiveness of the Russian economy. Moreover, the supply of high-caloriﬁc gas for export can entail the imposition of penalties on contracts that provide the range of acceptable values for caloric content and gas composition. A positive feature of deposits in Western and Eastern Siberia, the Far East is the absence of aggressive acidic components, including hydrogen sulﬁde, in their composition. Unlike the regions considered earlier, the deposits of the Russia’s south (Astrakhan oil and gas condensate ﬁeld, Orenburg oil and gas condensate ﬁeld) are characterized by a high content of aggressive components (Lyugay et al. 2015), which leads to the need for thorough gas puriﬁcation and production constraints for environmental reasons. A by-product of the commercial gas production of such deposits (sulfur) is generally low-liquid and requires additional research on possible options for the beneﬁcial use (Seredin et al. 2016; Sabirov and Makhotkin 2016) to expand production opportunities at such deposits. In the current economic situation, the need for expanded reproduction of the mineral and raw materials base of the Russian gas industry is evident due to the intensiﬁcation of geological exploration work. The most promising sites for study are the Yamal Peninsula, Eastern Siberia and the Gydan Peninsula. In addition, further development of the resource base will be carried out at the expense of the Arctic shelf, marine areas of the Far East and, probably, gas hydrate deposits (Dmitrievsky and Balanyuk 2009). The emergence of new natural gas ﬁelds is complicated by a complex of factors (heavy geological conditions of occurrence of gas-bearing formations with poor ﬁltration-capacitive properties, remote areas with a low level of industrial, transport and other infrastructure development, a multicomponent gas composition that causes additional requirements for the organization of production and processing), which requires the formation of a new strategy for the development of the Russian gas industry.

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2 Methodology Technological processes of the Russian gas industry in the article were decomposed to separate components that form independent business segments (Fig. 1).

Production

Processing

Transportation

Storage

Transportation

Marketing

Fig. 1. Interconnection of the main technological processes in gas industry

As initial retrospective data, BP reviews, ofﬁcial sites of the largest companies of the Russian gas industry, and international information and analytical agencies were used. The author analyzed and summarized the initial data.

3 Results and Discussion 3.1

Natural Gas Production

Gas production at operating ﬁelds in 2016 in Russia amounted to 556.9 billion m3 (Ministry of Energy 2017), including 419 billion m3 of the main gas producer, the PJSC “Gazprom” company (Gazprom production 2017). At the same time, the bulk of Russian gas is produced in the deposits of Nadym-Pur-Taz region, many of which are in the period of falling production. The main reasons for the decline in production are the drop in reservoir pressure, the physical and moral deterioration of the technologies and equipment used, as well as the increase in the level of gas-water contact and the breakthrough of water into production wells (Skorobogach 2011). To maintain current production levels in the Nadym-Pur-Taz region in the future, it is necessary to develop domestic technologies for increasing the gas recovery factor and developing lowpressure gas reserves, reconstruction and technical re-equipment of production facilities and inter-ﬁeld transportation of natural gas, drilling additional production wells, implementing additional measures for work intensiﬁcation of gas producing wells. The development of the Russian gas industry requires, apart from increasing the efﬁciency of using existing ﬁelds, access to new gas producing regions. At the same time, it is ensured not only the introduction of base deposits, but also the regulator ﬁelds used to cover the winter peaks of gas consumption and to ensure fulﬁllment of contractual obligations for the supply of gas to the domestic and foreign markets. As

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shown earlier, further expansion of the mining capabilities of the Russian gas industry is associated with the development of offshore ﬁelds, the Yamal Peninsula, Eastern Siberia and the Far East, the Taz and Ob Bay. Among the stocks of the offshore shelf, the most promising at the moment is the Shtokman gas condensate ﬁeld. Despite the fact that the deposit was discovered back in 1981, and the company was established for its mastering in 2002, its development has now been suspended. The main reason is the lack of the necessary domestic techniques and technologies for the development of deposits characterized by extreme conditions: a large depth of productive reservoirs and remoteness from the coast, severe climatic conditions of the region, etc. The development of the Shtokman and other offshore ﬁelds, including the Arctic, involves the implementation of remotely controlled oil and gas condensate production technologies, the organization of manufacturing in Russia the offshore platforms for the hydrocarbons production, the provision of transportation of natural gas of complex composition to the places of its processing on land or the separation of heavy fractions at sea with the export of liquid hydrocarbons on tankers, increasing the ﬁre, industrial and environmental safety of facilities on the shelf. The deposits of the Yamal Peninsula have been put into operation since 2012. The largest and most promising are the Bovanenkovo gas condensate ﬁeld and the South Tambey gas condensate ﬁeld, which are characterized by unique reserves of hydrocarbon raw materials. The natural conditions of the Yamal Peninsula dictate the need to use advanced low-polluting and environmentally safe technologies in the production, liquefaction and transportation of natural gas, aimed at minimizing the negative impact on flora and fauna (Golubchikov and Cherbunin 2009). One possible solution is the use of an integrated system for the collection, processing, accumulation and environmental monitoring of data on the development of relevant deposits with the implementation of corrective and negative impact prevention measures. In addition to the environmental component, for the successful development of the Yamal Peninsula, it is necessary to solve a number of technological issues: the elaboration of techniques and technologies for the development of deposits in the conditions of the melting of permafrost soils, the design and introduction of domestic technologies for the development of multi-layer deposits, the use of advanced technologies for the construction of horizontal and directional wells to intensify gas production in conditions of layers with low ﬁltration-capacitive properties. The natural gas deposits of Eastern Siberia and the Far East are characterized by a high content of components valuable for gas-chemical processing: ethane, propane, butane and heavier ones. In addition, the natural gas of these deposits contains an overwhelming share of Russian reserves of helium (Archegov 2015). The increase in production in these regions is primarily due to the need to secure contractual obligations for the supply of gas to China via the “Siberia Power”. The need to allocate valuable fractions and related components, together with the lack of a developed industrial and transport infrastructure in the region, necessitates the elaboration of facilities for the preparation, transportation and underground storage of natural gas and helium. In this regard, for the successful development of hydrocarbon deposits in Eastern Siberia and the Far East, it is necessary to organize the development and exploitation of deposits in conditions of potential hydrate formation, not only

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during transportation, but also in the bottom hole formation zone; development of deposits characterized by low thickness of reservoirs; ﬁeld preparation, transportation and storage of helium concentrate. In addition to technological issues, development of some deposits of these regions is complicated by natural and climatic conditions, as well as by the need to strictly comply with environmental requirements when organizing production in nature conservation areas. The Taz and Ob Bay deposits are expected to be developed in the longer term due to heavy natural and mining-geological conditions, as well as the lack of experience and technologies in Russia for the development of similar deposits. 3.2

Backbone Transportation of Natural Gas

Remoteness of the main natural gas production sites from its largest consumers in Russia necessitated the creation of the world’s largest gas transportation system. Taking into account the requirements for technological continuity of the processes of production, preparation, processing and use of natural gas, gas transportation both domestically and for export is mainly carried out through trunk pipelines. The pipeline system of natural gas in Russia is represented by a separate gas transportation system in Eastern Siberia and the Far East and a uniﬁed gas supply system (UGSS) in the rest of the country. The creation of the UGSS has become one of the largest technological achievements not only in the gas industry, but also in the fuel and energy complex as a whole. At present, the UGSS of Russia is a complex of interrelated technological processes of production, backbone transportation, processing, underground storage and distribution of marketable gas (Eder and Provornaya 2012). The total length of only the main part of the UGSS gas transmission system (GTS) is more than 170 thousand km (Gazprom transportation 2017). The UGSS of Russia is subject to the negative impact of external factors, both anthropogenic and natural. Due to the fact that the UGSS GTS is located practically in all regions of Russia, the range of dangerous natural influences is extremely wide: snowfalls, floods, seismic and erosion impacts, etc. In addition, the system’s functional reliability reserve built in the USSR is gradually decreasing: physical depreciation of ﬁxed assets in the transportation of gas currently exceeds 60% (Golubev 2016). In this regard, the issue of overhaul, reconstruction and technical re-equipment of the UGSS GTS acquires a particularly topical signiﬁcance. In connection with the high level of the main gas pipelines depreciation, an important part of ensuring the stable functioning of the Russian gas industry is the organization of timely diagnostic work and forecasting of future reliability indicators. In addition to assessing the necessary ﬁnancial resources, the implementation of these works allows optimizing the dispatching of gas flows and improving the economic efﬁciency of the gas complex. The gas transmission system of Eastern Siberia and the Far East is not yet part of the UGSS of Russia. The most signiﬁcant part of the pipeline system in the region is the Sakhalin-Khabarovsk-Vladivostok pipeline and the Sakhalin-2 GTS. The development of gas export projects to China and other countries of the Asia-Paciﬁc region

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will require the expansion of the gas transportation system and the construction of new gas pipelines, some of which are already being implemented (the “Siberia Power” project). 3.3

Underground Storage of Natural Gas

The peculiarity of natural gas consumption in Russia and foreign countries consists in its primary use as a fuel for thermal power plants. In this connection, during the cold period of the year, the demand for gas increases substantially. Underground storages (UGS) are designed to balance the seasonal unevenness of natural gas consumption and provide an emergency reserve in case of unforeseen situations. Currently, Russia has one of the largest UGS networks in the world. The total number of them is 24, including the property of PJSC “Gazprom” – 22 UGS (Gazprom UGS 2017), two UGS refer to SUE RK “Chernomorneftegaz” and OJSC “Gazsbytservis”. Currently, operating UGS facilities ensure the performance of its main production function, but there exist plans to expand them. 3.4

The Infrastructure of Liqueﬁed Natural Gas

The global structure of the delivering natural gas to consumers has recently undergone signiﬁcant changes. In connection with the intensiﬁcation of competition in the world market, the growing demand in the APR countries and the transition to spot pricing is increasingly gaining liqueﬁed natural gas (LNG) trade (Gorbunova 2015). The development and introduction of new energy efﬁcient technologies for liquefying natural gas, including obtained from unconventional sources (e.g. US shale gas), has become a signiﬁcant event in changing the world gas market (Wilson 2015). Export of natural gas in the liqueﬁed state is carried out on the basis of largecapacity LNG production. From the point of view of the most promising market niche, it is advisable to single out the Asia-Paciﬁc countries, which demonstrate a steady growth in the demand for energy (Dyatlov and Kasyanenko 2015). However, taking into account the development of LNG technologies in the US and Australia, the competition in this direction is expected to intensify in the near future. To date, there are two LNG plants in Russia – Sakhalin-2 and the Yamal LNG, which supplies Russian LNG to the world market. In addition, it is planned to implement a number of LNG projects in Russia, designed to strengthen the country’s competitive position in the global energy market (Table 1). 3.5

Processing of Natural Gas and Gas Condensate

The processing of gas and gas condensate is one of the most important technological stages in the use of natural gas. Traditionally, the processing of natural gas is referred to the removal of mechanical impurities, separation of heavy fractions, drying, and puriﬁcation from acidic components, i.e. preparation of natural gas for backbone transportation and use as fuel. Despite the undoubted attractiveness of natural gas as an energy carrier (availability, reliability of supply, environmental cleanliness), the urgent task of the Russian gas industry is the development of the gas chemical direction of its

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A. M. Tsikin Table 1. Current and prospective LNG projects in Russia (Platts 2017).

Project Sakhalin-2 Yamal LNG Vladivostok-LNG Pechora LNG Far East LNG Baltic LNG Sakhalin-2 (3rd line) * – is not included in

Owners Power, million tons/year Year of input Gazprom, Shell 9.6 2009 Novatek, Total, CNPC 16.5 2017 Gazprom 10 2018* Rosneft, Alltech 8 2018 Rosneft, Exxon 5 2020 Gazprom 10 2021 Gazprom, Shell 5 2021 the list of priority projects.

use. The actual level of use of natural gas in chemical synthesis is extremely low and does not correspond to the world practice (Arutyunov 2017). Another valuable feedstock for deep processing, associated with natural gas in the deposits, is gas condensate. Depending on the fractional composition, the gas condensate is to be processed by the fuel or petrochemical proﬁle (Osipova 2010). It should be noted that in comparison with oil, gas condensate has a number of positive features (lower content of harmful impurities, better fractional composition), which necessitates its expanded use as feedstock for petrochemical synthesis. In Russia there are 29 plants for processing natural gas and gas condensate owned by PJSC “Gazprom”, PJSC “NK” “Rosneft”, PJSC “SIBUR Holding” and other owners. The largest are the processing plants of PJSC “Gazprom”, united in the subsidiary structure of LLC “Gazprom pererabotka” (Table 2). Table 2. Processing plants of PJSC “Gazprom” (InfoTEK-CONSULT 2016). No.

Name

Feedstock power

1 2 3 4 5

Astrakhan Gas Processing Plant Orenburg Gas Processing Plant Orenburg Helium Plant Urengoy Condensate Preparation for Transportation Plant Surgut Condensate Stabilization Plant

6

Sosnogorsky Gas Processing Plant

12 billion m3/year 35 billion m3/year 15 billion m3/year 13.6 million tons/year 12.3 million tons/year 3 billion m3/year

Year of input 1986 1974 1974 1984 1984 1941

Increasing the competitiveness of domestic plants for the processing of hydrocarbon raw materials is associated with the expansion of the assortment and improving the quality of products sold, increasing the depth of raw materials processing, improving energy efﬁciency and environmental safety of production. Modern conditions of the gas industry make it necessary to solve a set of tasks: expansion, reconstruction, modernization and technical re-equipment of production

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facilities with improvement of their technical and economic characteristics; implementation of a program to replace moral and physically deteriorated equipment; wide introduction of import substituting domestic technologies, equipment and materials into production processes; development and introduction of effective techniques and technologies for the beneﬁcial use of ethane, propane and butane fractions of natural gas, contained in signiﬁcant quantities both in traditional gas production sites and in new regions; increasing the efﬁciency of technologies for removing acidic components from natural gas; large-scale introduction of technologies for the production of gas-chemical products, including polyethylene and other polyoleﬁns, methanol, dimethyl ether and other compounds; ensuring the development of new gas production centers in Russia, including the Arctic offshore ﬁelds, the Yamal Peninsula, and Eastern Siberia and the Far East; the development of Russian helium industries on the basis of Eastern Siberia and the Far East deposits, containing industrially signiﬁcant amounts of helium. The prospective increase in the extraction of valuable ethane, propane and butane fractions of natural gas for gas chemistry and their processing is aimed at organizing the manufacturing in the Russian Federation of products that are in demand on the domestic and foreign markets; ensuring the caloric value of natural gas laid down in export contracts for the supply of gas; development of the domestic plastic industry; reduction of Russia’s dependence on the supply of polymer products from abroad. The primary tasks of Russian gas processing and gas chemical enterprises are to expand and modernize existing facilities for processing natural gas and gas condensate; reduction of losses of natural gas during processing, and also improvement of energy characteristics of applied technological processes; increasing the efﬁciency of the production capacities use, in particular, increasing the degree of their utilization; ensuring compliance of processing industries with regulatory requirements in terms of ﬁre, industrial and environmental safety, labor protection; expansion of the range and improvement of the quality characteristics of the products, as well as the transition to the concept of the maximum possible beneﬁcial use of raw materials. 3.6

Influence of the Modern Economy on the Gas Industry Trends Formation

The modern digital economy determines the transition to a qualitatively new strategy for the development of the Russian gas industry. The considered features of development and the current state of individual business segments should be coordinated with current economic trends. For the purpose of developing a new strategy for the growth of the gas industry, current trends have been analyzed according to the STEEP approach (Fleisher and Bensoussan 2003). Table 3 provides a consolidated list of key trends that characterize the development of the main business segments of the gas industry, grouped in accordance with the requirements of STEEP-analysis. Most trends in the development of the gas industry are technological and economic in accordance with the STEEP-classiﬁcation. One social trend determining the development of the gas industry, two political and four environmental are identiﬁed. Most of the trends in the development of the gas industry are associated with the proliferation of automated and mechanized techniques and technologies, the transition

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A. M. Tsikin Table 3. List of main trends in the development of the gas industry.

No. Trend 1 1 2 3 4 5 6 7 8 9 10

11

12 13 14

15 16 17 18 19 20 *–

Type by STEEP* S T Ec En P 2 3 4 5 6 7 Growth in global demand for energy, in particular natural gas X Decrease of the employees number in production, reduction in capital X expenditures and intensity Automation and mechanization of production X Increase in the efﬁciency of the production facilities use based on X X unfrequented technologies Increase in the share of hard-to-recover reserves of natural gas and gas X X condensate located in remote, protected natural areas Introduction of electronic devices in most production and household X processes Slowdown in the growth rate of oil reserves, which is the feedstock X for the motor fuels production Transition to the development of small and medium-sized reserves of X natural gas Development of the Northern Sea Route and Arctic shelf deposits X X X X Reduction of equipment units of main production capacities while increasing their capacity, technical and economic performance indicators Development and introduction of new technologies, equipment and X materials in areas where the use of existing techniques and technologies does not meet current and future requirements Increase of technical and economic characteristics of new techniques X X and technologies, in particular speciﬁc productivity, capacity and cost Dissemination of disruptive production processes based on X membrane, molecular, photon, laser and biotechnologies Development of small and medium-sized businesses as organizations X X that ensure the flexibility and efﬁciency of industries, and solve social issues Development of energy-saving technologies in all production X X X processes Increase in the production of all types of cars X Reduction of emissions, discharges and distribution of pollutants X Increase in the share of spot transactions in the global trade in natural X gas Harmonization of national regulations on the use of natural gas and its X components as motor fuel Increase in the depth of hydrocarbon raw materials processing X S – social, T – technological, Ec – economic, En – environmental, P – political.

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to new natural gas ﬁelds characterized by small reserves and the difﬁculty of development, as well as global changes in the global energy market.

4 Recommendations On the basis of the research it is advisable to propose the following recommendations for the development of the Russian gas industry’s business segments in conditions of modern digital economy. 4.1

Natural Gas Production

The development of the Russian gas industry in the hydrocarbon production segment is associated with the improvement of the industrial and transport infrastructure in new areas of natural gas production; development and implementation of domestic mining techniques and technologies in difﬁcult mining and geological conditions, on the Arctic shelf and in permafrost conditions; development of natural gas ﬁelds characterized by a complex multi-component composition, and construction of gas processing and gas chemical enterprises for its complex processing; increase in gas recovery factors and development of technologies for the effective production of low-pressure gas. 4.2

Backbone Transportation of Natural Gas

Expansion of the UGSS GTS in the long term is necessary for the development of the deposits of the Yamal Peninsula and the Arctic shelf. The solution of this problem requires the development of domestic technologies and equipment for gas transportation in permafrost conditions, deep-water transitions, seismically active regions, etc. The noted necessity of overhaul, reconstruction and technical re-equipment of capacities in the backbone transportation of natural gas creates demand for largediameter pipes and gas-pumping equipment. Thus, the development of the UGSS GTS provides the intensiﬁcation of industrial production in Russia not only of sheet metal and products of power engineering, but also of a number of related industries, in particular metallurgical production, the chemical industry and many others. 4.3

Underground Storage of Natural Gas

The development of the UGS system in Russia is connected with the fulﬁllment of a set of tasks: performing exploration work to ﬁnd new facilities suitable for the organization of UGS facilities in scarce regions; construction of underground gas storage facilities in regions not covered by the network of operating UGS facilities; reconstruction, modernization and technical re-equipment of the network of operating UGS facilities; optimization of technological modes of UGS operation, providing a new level of maximum daily consumption.

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A. M. Tsikin

The Infrastructure of Liqueﬁed Natural Gas

The main objective of the development of LNG production in Russia is to increase the competitiveness of the gas industry through diversiﬁcation of the resource base (including hard-to-reach deposits of the Far East and the offshore shelf) and consumers (countries in the Asia-Paciﬁc region, South America, etc.). In addition, with the developed LNG industry, it is possible to fulﬁll existing contracts for the supply of natural gas to Europe through various delivery schemes. In addition to the main issue (increasing competitiveness), the solution of the following complex of tasks is provided: development and introduction of innovative domestic technologies; reduction of political and technological dependence on transit countries when Russian natural gas is supplied to Europe; complex development of new regions of gas production: the Arctic coast, Eastern Siberia and the Far East; increasing the self-sufﬁciency of the Russian economy and its import independence by developing domestic cryogenic equipment and developing the shipbuilding industry. 4.5

Processing of Natural Gas and Gas Condensate

The complex development of gas processing and gas chemical plants in Russia is associated with the following tasks: – increasing the competitiveness of domestic processing enterprises’ products in the domestic and foreign markets; – increasing the efﬁciency of the use of production capacities involved in the technological stages of natural gas processing; – reconstruction and technical re-equipment of existing capacities for gas and gas condensate processing; – introduction of programs for training highly qualiﬁed personnel in the gas industry to ensure efﬁcient operation of modern techniques and technologies; – development of industrial, transport and other infrastructure of domestic gas processing enterprises; – improving state support for the industry, in particular its ﬁnancing, regulatory support and technical regulation. It should be noted that it is the processing of gas and gas condensate that is the engine for the development of not only the gas industry as a whole (including its transportation and production sub-sectors) but also related industries (chemical engineering, metallurgy, rail and road transport and many others). In this regard, special attention in the development of directions for increasing the competitiveness of the gas industry should be given to the development of domestic gas processing and gas chemistry, which is substantially inferior to the best world practices. Acknowledgments. The article is published with the support of the Russian Foundation for Basic Research (RFBR) grant “The issues of the XXI century global economy conﬁguration: the idea of socio-economic progress and possible interpretations, No. 18–010–00877 A”.

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References Archegov, V.B.: Fundamentals of the strategy for rational development of high-quality helium resources of the Siberian platform. Notes of the Mining Institute, vol. 211, pp. 5–15 (2015) Arutyunov, V.: Gas chemistry as a catalyst for Russia’s innovative development, Expert nonproﬁt partnership. Editorial ofﬁce of the newspaper “Industrial Gazette” (2017). http://www. promved.ru/articles/article.phtml?id=68. Accessed 22 Jan 2018 BP Review: BP Statistical Review of World Energy June 2017. Natural gas (2017). http://www. bp.com/content/dam/bp/en/corporate/pdf/energy-economics/statistical-review-2017/bp-statistical-review-of-world-energy-2017-natural-gas.pdf. Accessed 17 Jan 2018 Dmitrievsky, A.N., Balanyuk, I.E.: Gas hydrates of the seas and oceans – a hydrocarbons source of the future. LLC “IRTS Gazprom”, Moscow (2017) Dyatlov, S.A., Kasyanenko, T.G.: Issues and prospects for the export of Russian natural gas to the APR countries. Issues Modern Econ. 56(4), 255–258 (2015) Eder, L.V., Provornaya, I.V.: The role of transport infrastructure in the energy cooperation of Russia and the ATRAM. Russia’s Cust. Policy Far East 61(4), 22–31 (2012) Eder, L.V., et al.: The Russian gas industry: the current state and long-term development trends”, Mineral resources of Russia. Economics and Management, no. 4, pp. 36–46 (2014) Fleisher, C.S., Bensoussan, B.E.: Strategic and Competitive Analysis: Methods and Techniques for Analyzing Business Competition. Prentice Hall, NJ (2003) Gazprom production: Gazprom’s strategy for gas production (2017). http://www.gazprom.ru/f/ posts/66/233748/gazprom_strategy-2017-07.pdf. Accessed 22 Jan 2018 Gazprom transportation: Transportation. Uniﬁed Gas Supply System of Russia (2017). http:// www.gazprom.ru/about/production/transportation. Accessed 22 Jan 2018 Gazprom UGS: Underground gas storage (2017). http://www.gazprom.ru/about/production/ underground-storage. Accessed 22 Jan 2018 Golubchikov, M.Yu., Cherbunina, M.Yu.: Geoecological issues of Yamal development. Energy: economics, technology, ecology, no. 10, pp. 36–41 (2009) Golubev, V.A.: The main directions of the Russian Federation gas industry development. Energy Policy, no. 4, pp. 14–22 (2016) Gorbunova, A.S.: Peculiarities of Pricing Mechanisms in International Natural Gas Markets. Modern Problems of Science and Education, no. 1-1, pp. 629–636 (2015) InfoTEK-CONSULT: Oil reﬁning, gas processing and petrochemistry in the Russian Federation 2016-2035. InfoTEK-CONSULT, Moscow (2016) Lyugay, D.V., et al.: Features of composition, properties and phase characteristics of reservoir mixtures of deep-lying deposits of oil and gas condensate ﬁelds of PJSC “Gazprom. News Gas Sci. 24(4), 74–83 (2015) Ministry of Energy: Production of natural and associated petroleum gas (2017). https:// minenergo.gov.ru/node/1215. Accessed 22 Jan 2018 Osipova, O.O.: Technology of oil and gas processing: a method instructions. USTU, Ukhta (2010) Platts: LNG World News. Platts (2017). http://www.lngworldnews.com/tag/platts. Accessed 22 Jan 2018 Sabirov, R.F., Makhotkin, A.F.: Analysis of known sulfur processing methods in sulfur concrete, sulfur asphalt and other products. Bull. Kazan Technol. Univ. 19(20), 69–72 (2016) Seredin, B.N., et al.: Production and use of modiﬁed sulfur in composite materials. Bulletin of Volgograd State Architectural and Construction University, Building and architecture, no. 45, pp. 67–75 (2016)

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Skorobogach, M.A.: The issues of operating the gas gathering system at the Medvezhye deposit. Oil and Gas Technologies, no. 6, pp. 42–47 (2011) Wilson, A.B.: Liqueﬁed Natural Gas in Europe (2015). http://www.europarl.europa.eu/RegData/ etudes/BRIE/2015/571314/EPRS_BRI%282015%29571314_EN.pdf. Accessed 22 Jan 2018

Russia on the African Natural Gas Market Larisa S. Shakhovskaya(&) and V. I. Timonina Volgograd State Technical University, Volgograd, Russia {mamol4k,timonina.vika96}@yandex.ru

Abstract. The yield on the African gas market has prospects for Russian companies. Such companies as “Gazprom”, “LUKOIL”, etc. are interested in expanding their assets in Africa as it is not only an opportunity to increase production and impact on the global gas market, but also the ability to influence pricing and market conditions of other countries. Keywords: Natural gas The African continent Production The price of energy

Export and import

The African continent is still a region of the world in which failed the so-called “peak production”. Currently, African countries consist of 12.45 trillion cubic meters. However, continental-wide indicators energy consumption per capita remains low, as Africa lives to 15% of the world’s population and in the country only 3% of global commercial energy consumption (Tables 1 and 2). African gas deposits attract many companies for several reasons: 1. The country has developed hydrocarbon resources of the sea shelf are more lenient environmental standards and requirements, which allows TNCs to saving huge amounts of money; 2. Africa - source of raw materials, easy to transport like in the old centers of consumption (e.g. North America, Western Europe, Japan) and new (China, India, Southeast Asia, Brazil); 3. The development of Africa as an area of prospective expansion, will allow oil and gas TNCs to avoid direct confrontation in the Arctic. The main reason is the unwillingness of many companies to implement long-term investment due to three main investment indicators price. For Russian companies it is important both - the Northern and southern African areas of expansion. From the South, you can get quick and effective return on investment, from the North - the strategic depth of the reserve [1]. The main market for gas from Africa is the European market. Algeria is the largest source and gas exporter in Africa (Fig. 1), which has a rich gas ﬁeld Hassi R’mel reserves currently are estimated at 4.5 trillion cubic meters. The flow of gas to Europe there are two pipelines: Transmed (from Hassi R’mel in Sicily), the Maghreb (from Hassi R’mel through Morocco to Spain) [2]. The “big four” of gas production of Africa, apart from Algeria and Nigeria includes Egypt and Libya. However, in 2013 the return of Egypt and Libya in the global gas market became possible after the fall of the government in Egypt and the escalation © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 705–707, 2019. https://doi.org/10.1007/978-3-030-00102-5_73

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L. S. Shakhovskaya and V. I. Timonina Table 1. Natural gas market in African countries (data for 2015)

Countries

Nigeria Algeria Libya Egypt

Natural gas reserves (tcm) 5.1 4.5 1.5 1.8

Share or world reserves of natural gas, % 2.7 2.4 0.8 1.0

Natural gas production (bcm) 50.1 83.0 12.8 45.6

Natural gas consumption (bcm) – 39.0 – 47.8

Table 2. Gas suppliers to the European market (data for 2015 year) Countries Russia Algeria Qatar

Gas production (bcm) Total exports (bcm) 573,3 122,7 83,0 77,6 181,4 72,8

883 Нигерия

2015

Алжир

1561

0

500

1000

1500

2000

Fig. 1. The African gas export to Europe (mcm)

policy in Libya. The EU think, that Algeria, Egypt and Libya in the future can form an informal Alliance. The driving factor may be “Trans North African” pipeline, this idea discussed for many years. This association, according to experts, will allow North Africa to act as a supplier of natural gas volumes exceed the export capacity of Norway and the Netherlands [1]. According to experts, the development of the relationship between the largest gas miners - Algeria and Russia - will help to achieve the following results: – strengthening the position of these countries in Europe, as Russia has been supplying gas for the most part in the Eastern, Western and Central Europe, and Algeria - mostly in the southern part; – the opportunity for Russia to continue to implement its strategy on the African continent (in 2005 year between “Gazprom” and Egypt’s “EGAS” signed a Memorandum under which the parties agreed to establish working groups for exploration and gas production, transportation and sales; in 2007 “Gazprom” has won the tender and obtained the right for exploration and gas production in Libya;

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development of the shelf No. 19, “Gazprom” has signed the agreement on the exchange of assets with the German company BASF, according to which Russia will hold 49%) [8]. Russian companies investing in Africa has intensiﬁed its activities with other company. Promotion of Russia in Africa consists of four stages: 1. First. In 1995 year “LUKOIL” started to carry out exploration on the African continent; 2. Second. Risks and costs has led to a “stagnation” of production, which lasted until the arrival of “Rosneft” in Algeria (2001 year); 3. Third. In 2005 year, after another break, started the third phase of the intervention (the appearance of “Tatneft” and “Synthesis”); 4. The fourth. On the African gas market “Gazprom” and “Novatek” entered, other Russian companies looked for ways for expansion of a zone of the activities. In total during 2007–2011 only in Africa have earned about ten new projects with the Russian participation, including on the deep-water shelf of the Gulf of Guinea [3]. In 2016 Russia continued work in the ﬁeld of search, investigations and developments of ﬁelds abroad, in full fulﬁlling contract commitments. These works are conducted not only in the territory of the CIS countries, the states of Europe, Southeast Asia, but also in Africa and Latin America. So, on the site El-Assel (Algeria) comes to an end construction of the borehole No. RSH-3 with a depth of 4 150 meters, which has conﬁrmed gas content of deposits of the Ordovician [4]. At construction of the borehole have been used modern technologies. According to many experts, the found ﬁeld is a new stage in the relations between Russia and Africa.

References 1. Energy resources of Africa: global reserve or desired production?. http://russianview.com/ article?id=143&lang=ru. Accessed 19 Nov 2016 2. Supplying the EU Natural Gas Market: https://ec.europa.eu/energy/sites/ener/ﬁles/documents/ 2010_11_supplying_eu_gas_market.pdf. Accessed 20 Nov 2016 3. Russian Upstream: Africa. http://www.ngv.ru/upload/iblock/c3d/c3d7356f88de6abe13c43 71169063ccc.pdf. Accessed 19 Nov 2016 4. Multipolar energy: Annual statement of the “Gazprom”. http://www.gazprom.ru/f/posts/26/ 228235/gazprom-annual-report-2015-ru.pdf. Accessed 20 Nov 2016 5. BP Statistical Review of World Energy: http://www.bp.com/content/dam/bp/pdf/energy-economics/statistical-review-2016/bp-statistical-review-of-world-energy-2016-natural-gas.pdf. Accessed 20 Nov 2016 6. Natural gas: world market. http://www.eurogas.org/uploads/2016/ﬂipbook/statistical-report2015/index.html#p=4. Accessed 20 Nov 2016 7. Export and Import on world market: http://www.eia.gov/beta/international/data/browser.html. Accessed 20 Nov 2016 8. Tomberg, R.I.: The gas market of the African countries and prospect of Gazprom in Africa: http://old.imemo.ru/ru/publ/2009/09031.pdf. Accessed 20 Nov 2016

Creation and Functioning of Special Economic Zones in Russia: Tendencies Problems and Perspectives Inna V. Mitrofanova1,2(&), Natalia S. Melnikova3, Rustam A. Yalmaev4, and Makka A. Yalmaeva5 1

5

Southern Scientiﬁc Center of the Russian Academy of Sciences, Rostov-on-Don, Russia [email protected] 2 Volgograd State University, Volgograd, Russia 3 Astrakhan State University, Astrakhan, Russia [email protected] 4 Chechen State University, Grozny, Russia [email protected] Grozny State Oil Technical University Named After Academician MD Millionshtchikov, Grozny, Russia [email protected]

Abstract. The authors study peculiarities of functioning of free economic zones that are an inseparable part of substantial changes in the institutional structure of the regional level of economy in the Russian Federation. Each regime is characterized as an important tool of regional economy. The directions of functioning of special economic zones (SEZ) and types of SEZ, which are established by the federal law, are presented. The main economic indicators of Russia’s SEZ for 2006 - 2016 are given; the main motives that make the state, regions, companies, and local population participate in activities of SEZ as their subjects are distinguished. Ratio of planned and factual investments of private investors into development of SEZ is given. Keywords: Special Economic Zone Region Tool Investments Tax preferences Infrastructure Socio-economic development Entrepreneurial activities

1 Introduction The necessity for improving state regulation of territorial development of Russia actualizes the task of search for new effective tools and modernization of the existing tools of regional policy – one of which are special economic zones (SEZ). Creation of SEZ is aimed at attraction of foreign capital, diversiﬁcation of economy, transition of the country’s industry to innovational path of development, support for top-priority spheres, and modernization of the national economy on the whole (Belukhin 2016; Mitrofanova 2012).

© Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 708–717, 2019. https://doi.org/10.1007/978-3-030-00102-5_74

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There are more than a thousand various – according to the form, purpose, level of foreign economic openness, and size – territories of SEZ, which are treated as multipliers of economic development. However, efﬁciency of activities of the existing SEZ is not completely satisfactory. The volume of factual investments, number of residents, and number of created jobs do not conform to the planned values. General low level of business activity of companies-residents is observed. This actualizes the need for reconsidering experience of implementing the concept of development of SEZ and effective functioning of territories with a special economic regime within the region’s economic system and the state on the whole. Thus, experience of functioning of SEZ in Russia, determination of institutional factors that hinder their development, and preparation of recommendations that allow expending public-private partnership in regions of the RF, which stimulates higher level of competitiveness and labor efﬁciency, are very interesting.

2 Literature Review The results of comparative analysis of the global and Russian experience of organization and functioning of SEZ, evaluation of the role of institutes of development and, in particular, SEZ in activation of the processes of modernization of regional economy are studied in the following works of Russian researchers: (Alba 2016); (Ananyeva 2011); (Bukhwald 2017, 2014); (Belousov 2016); (Belukhin 2016); (Vilensky 2017); (Egorsheva 2017); (Zimenkov 2014); (Komrakov 2016); (Matushkina 2016); (Mitrofanova 2012, 2015); (Mikheeva 2011), et al. Application of the technique of analysis to a speciﬁc special economic zone is performed with ideas given in the works of Dhingra et al. (2009); Tracey et al. (2014); Hsiao and Shen (2003); Park (2005); Wang (2013); Gulbis and Geipele (2016), et al. The information and statistical basis of the research is formed on the basis of analytical data of federal and territorial statistical bodies of the RF, Department of special economic zones, Ministry of Economic Development of the RF, and Ministry of Regional Development of the RF. The authors use statistical data that are provided in scientiﬁc publications and ofﬁcial reports and the facts that are published in scientiﬁc literature. The authors use systemic and comparative analysis, statistical methods, method of generalization, and method of ranking.

3 Results 3.1

Institutional Peculiarities of Special Economic Zones in the Russian Federation

Special economic zone is a part of the territory, determined by the Government of the RF, with a special regime of conduct of entrepreneurial activities. Speciﬁcs of this regime consists in:

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– ready infrastructure: engineering, transport, and customs – which are created by means of the budgets of all levels; – tax subsidies: reduces income tax rate, quick amortization, reduced tariffs of insurance fees, etc.; – in the regime of free customs zone: imported goods (equipment, raw materials, spare parts, and construction materials) are placed and used without payment of customs rates and return of added value tax (18%); – “single window” system: simpliﬁed procedures of interaction between public authorities and reduction of time spent by investors (Federal law No. 116-FZ (2005); Alba (2016). This tool is used for attraction of investments into processing or high-tech spheres, development of transport infrastructure, tourism, and recreation sphere. Functioning of SEZ should be treated as a complex of natural economic and geographical advantages of the territory and tools of state regulation, which are the basis of creation and provision of their activities. The mechanism of functioning of SEZ is determined by special conditions for seven directions: (1) (2) (3) (4) (5) (6)

institutional regulation of investment and entrepreneurial activities; organization of special tax regime; cancelling limitations for operations with foreign currency; provision of access to resources; implementation of a special customs regime; control over the scale of distribution of subsidies.

The purposes of creation of SEZ in Russia’s regions are as follows: development of processing spheres of economy and high-tech spheres of economy; development of tourism and recreation sphere; development of new technologies and commercialization of their results; manufacture of new types of products (Mikheeva 2011); (Belousov 2016). Creation of SEZ was aimed at acceleration of socio-economic development of primarily industrially developed regions. It was determined that the Government of the RF makes a decision on creation of SEZ in the region based on suggestions of local authorities. The Ministry of Economic Development selects the zones on a competitive basis. For this, the Federal Agency for SEZ Management was created. The laws of the RF allowed for creation – with participation of federal bodies – of three types of SEZ: industrial & production; technical & implementation; tourist & recreational. Since January 1, 2008, there has been the fourth type of SEZ – port. Their activities could be terminated prematurely, if not a single agreement on activities was concluded during three years (Matushkina 2016). 3.2

Analysis of the Modern State, Problems, and Perspectives of Development of Special Economic Zones in the Russian Federation

By mid-2016, there were 33 SEZ in 30 regions of the RF. During that time, RUB 122 billion were allocated from the federal budget and RUB 64 billion were spent by the regions. RUB 334 billion were spent for the infrastructure, but only 526 objects of the planned 758 were put into operation.

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Revenues of SEZ residents constituted 0.2% of the volume of the regions’ GRP, where only 18,000 jobs were created. The Audit chamber evaluated the results of tenyear policy of functioning of SEZ in Russia and came to a conclusion that the process of their creation and management was peculiar for formalism, irresponsibility, impunity, and absence of executive discipline and demand for made decisions and their consequences, so real economic effect from SEZ has not been achieved, and their functioning – unlike, for example, China – did not influence the development of economy, and budget expenditures for creation of special tax regimes were ineffective (Special economic zones…(2017)). The Decree of the Government of the RF dated August 28, 2016, No. 978 terminated the activities of eight ineffective SEZ in Stavropol, Khabarovsk, Primorsky, and Krasnodar Krai, Murmansk Oblast, Republics of Altai, Adygeya, and North OssetiaAlania. The analysis by the Ministry of Economic Development of the RF showed that not a single resident was registered in these SEZ by mid-2016, and residents of SEZ in the Republic of Altai did not conduct tourist and recreation activities (Komrakov 2016). In 2017, the Government of the RF set new criteria of evaluation of activities of SEZ. During their organization, it will be necessary to provide assessment of profitability and return terms, and regions and municipalities will have to provide the project of planning of territories and perspectives of development of territories. For example, SEZ of industrial and production types should return investments in eight years, tourist & recreational, technical, and port SEZ – in ﬁfteen years maximum. During preparation of documents, it will be necessary to analyze the whole complex of issues, including ecological component and possibilities of elimination of potential damage to the environment, and managing company for SEZ should have experience in creation of the necessary infrastructure. At the moment of the decision on creation of SEZ, there should be projects of agreements with potential investors who are going to work in the created zone and will have to invest into SEZ the assets that are equal or larger than budget investments into creation of infrastructure (during three years). According to new approaches to zooming, regions be responsible ﬁnancially for non-achievement of economic indicators that are envisaged in preliminary documentation (Egorsheva 2017). In 2017, there were 26 SEZ in Russia’s regions. In October 2017, the Ministry of Economic Development of the RF prepared – for the purpose of increasing their investment attractiveness – a range of changes into the laws, in particular, business plan – which currently investors ﬁle to management bodies of the SEZ for receiving the resident status – will be changed to a short passport of an investment project, which will allow reducing time and expenditures during preparation of documentation; duration of consideration of applications of potential residents will be reduced (Special economic zones…(2017)). The federal law “Regarding special economic zone”, No. 116-FZ set industrial & production, technical & implementation, tourist & recreational, and port special economic zones (Federal law No. 116-FZ 2005). Table 1 presents short characteristics of the types of various objects of zoning in Russia.

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Table 1. The main economic indicators of Russia’s SEZ in 2006 – 2016 (accrued total). Zones

Number of Created jobs residents (including potential)

Factual volume Revenue, of investments RUB million of residents, RUB million

Revenue Per 1 ruble of investments, RUB 168 136.36 1.70

Per employee, million RUB 30.90

SEZ 58 5,434 97,827.19 Alabuga SEZ 23 2,460 24,148.00 23 941.00 0.99 9.70 Lipetsk SEZ 19 574 8,704.00 574.00 0.06 1.00 Tolyatti 11 21 3.00 – – – SEZ Titan Valley Other SEZ 97 101 271.00 – – – Total for 198 8,590 130,953.19 192,651.36 1.47 22.4 SEZ 402 4.509 22.890 19,342 0.85 4.30 On the whole for technical SEZ 67 110 1,048 125 0.12 0.10 On the whole for tourist and recreation SEZ On the 13 24 108 – – – whole for port SEZ 681 13,233 154,999.19 212,118.36 1.37 16.03 On the whole for all SEZ Source: made on the basis of the data: Special economic zones//Web-site of the Ministry of Economic Development of Russia. URL: http://economy.gov.ru/minec/activity/sections/sez/ main/index.

The volumes of investing determine the zone’s development. Recently, there have been attempts to increase the role of regional budgets in ﬁnancing of SEZ. For example, the Federal law “Regarding the federal budget for 2016”, No. 359-FZ dated December 14, 2015 envisaged reduction of allocations from the budget for SEZ. While in 2011 RUB 15.7 billion were allocated, in 2012–2013 ﬁnancing decreased to RUB 6 billion. As of 2016, RUB 4.35 billion were allocated for all types of SEZ (Bukhwald and Vilensky 2017). Together with sources of budget ﬁnancing, an important role in increase of effectiveness of functioning of the objects belongs to investing. According to the analysis, investors are not fully performing their obligations (Table 2). Analysis of the presented

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Table 2. Ratio of planned and factual investments of private investors (accrued total as to 2016). Type of zones

Planned investments, RUB million 120,000.00

Factual investments, RUB million 112,658.00

Plan-fact ratio, % 94.00%

Industrial & production zones Technical zones 22,500.00 28,291.00 121.00% Tourist and 7,500.00 1,271.00 17.00% recreation zones Port zones 120.00 125.00 103.00% Total 150,120.00 142,345.00 94.82% Source: made on the basis of the data: Special economic zones//Web-site of the Ministry of Economic Development of Russia. URL: http://economy.gov.ru/minec/activity/sections/sez/ main/index.

data shows that SEZ of industrial and tourist types are peculiar for a gap between the announced investments and factual investments. Technical zones are peculiar for a better situation, which could be understood – industrial and production zones have higher product turnover and higher revenue, which is a stimulating factor for investors. Let us distinguish the main motives that make the state, regions, companies, and local population participate in activities of SEZ as its subjects (Table 3). The problem of functioning of SEZ is to form conﬁguration of unique economic conditions that would ensure targeted level of effectiveness of the area after the phase of its active development. Such conditions should not be based only on tax preferences. Experience of foreign countries shows that provided subsidies have higher signiﬁcance as a condition of establishment and development of the zone – after that their influence decreases. Volumes of investments directly determine the development of the zone (Zimenkov 2014); (Bukhwald 2014). Recently, there have been attempts to increase the role of regional budgets in ﬁnancing of SEZ. Together with source of budget ﬁnancing, an important role in increase of effectiveness of functioning of objects belongs to investing. However, private investors do not fully perform their obligations (Table 4). Analysis of the presented data shows that SEZ of industrial and tourist types are peculiar for a gap between the announced investments and factual investments. Technical zones are peculiar for a better situation, which could be understood – industrial and production zones have higher product turnover and higher revenue, which is a stimulating factor for investors. Thus, planning and construction of such objects as special economic zones requires thorough approach and work of project managers. These objects should be an accelerator for creation of possibilities for small and medium business, should stimulate employment, creation of additional jobs, new medical establishments with subsidized conditions, and specialized educational establishments that train ﬁrst-class specialists in the areas required by the economic zone.

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I. V. Mitrofanova et al. Table 3. Motives for participation of subjects in activities of SEZ.

Subjects of SEZ State

Region

Companies

Local population

Motives Transformation of intellectual potential into the main resource of development with growth points, which will ensure full-scale usage of knowledge in top-priority spheres of activities; development of new technologies and new products of national and, perhaps, world importance; synergetic effect from public-private partnership; compensation of expenditures in the form of taxes in the long-term Socio-economic development of territory; formation of general economic infrastructure of region; formation of technological structure of region’s economy; development of adjacent spheres with the main type of zone’s economic activities Proﬁt, reduction of expenditures; export of products; guarantees of stability of economic conditions; preferences; access to infrastructure; access to capital; access to resources; implementation of leading technologies; participation in development of innovational products and products of intellectual property; increase of demand and orders for R&D Growth of employment; growth of wages; growth of demand for highlyqualiﬁed employees; creation of technological jobs; obtaining education and receipt of social services

Table 4. Ratio of planned and factual investments of private investors (accrued total as to 2016). Types of zones

Planned investments, RUB million 120,000.00

Factual investments, RUB million 112,658.00

Plan-fact ratio, % 94.00%

Industrial and production zones Technical zones 22,500.00 28,291.00 121.00% Tourist and recreation 7,500.00 1,271.00 17.00% zones Port zones 120.00 125.00 103.00% Total 150,120.00 142,345.00 94.82% Source: made on the basis of the data: Special economic zones//Web-site of the Ministry of Economic Development of Russia. URL: http://economy.gov.ru/minec/activity/sections/sez/ main/index.

Despite creation of regional institutes of development for interaction with investors, subjects face difﬁculties regarding provision of land plots for creation of industrial SEZ, support for administrative procedures in “single window” regime”, and taxation during implementation of infrastructural projects. The above problems could be solved by transition to a more flexible system of planning and management, which predetermines the importance of creation of new managerial schemes and mechanisms that are oriented at development of special economic zones (Mitrofanova and Rodionova 2015); (Bukhwald and Vilensky 2017).

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The main principles of creation of such new schemes and mechanisms of management should be the following: (1) During formation of trans-regional organizational structures, it is expedient to consider experience of formation of Euro-regions (which are often compared to Russia’s macro-regions according to size and scales of economy) and the historic example – the “Tennessee Valley Authority”, which was created for a range of anti-crisis measures during the Great Depression in the USA. (2) Possibility of formation of project administrations by the initiative “from above” and “from below”. (3) Improving the mechanisms of interaction of state, regional, and municipal authorities, non-proﬁt organizations, and other institutes of civil society and business structures that act on the territory of several subjects of the RF and/or municipal entities. On the whole, it is necessary to ensure coordination of activities of administrative structures that act in the sphere of state, regional, and municipal authorities, business, and civil society at all spatial levels: on the one hand, improve coordination of the existing structures, and, on the other hand, create a mechanism of formation of new structures, which are to ensure adequate management and coordination of socioeconomic development at the missing spatial levels (primarily, coordination of economic development at trans-regional and trans-municipal levels). It is necessary to form the normative and organizational basis of provision of flexible interaction between different structures of the institutional territorial structure of the country – areas of responsibility of federal and regional authorities, areas of activities of commercial companies, non-commercial organizations, and other institutes of civil society. This will require radical complication of the whole territorial institutional structure of the country – but such transition is very topical and it will become an adequate answer to challenges of acceleration of socio-economic development.

4 Conclusions Possessing high innovational potential, Russia is peculiar for insufﬁcient level of development of infrastructure, which does not allow entrepreneurs and investors to convert this potential into high technologies quickly and easily. Setting special preferential conditions at separate territories, it is possible to ensure more intensive inflow of external investments and create necessary conditions for technological modernization of production. In Russia, creation and functioning of special economic zones are regulated by the law “Regarding special economic zones” (2005). The main economic indicators of Russia’s SEZ in 2006 - 2016 show dependence of the zones’ development on the volumes of investments. However, according to the analysis, private investors do not fully perform their obligations. The subjects face certain difﬁculties, which include: provision of land plots for creation of industrial SEZ, support for administrative procedures in “single window” regime”, and taxation during implementation of infrastructural projects.

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The above problems could be solved by transition to a more flexible system of planning and management, based on creation of new managerial schemes and mechanisms that are oriented at development of special economic zones. In the future, development of SEZ will create new possibilities for small and medium business, stimulate population’s employment, create additional jobs, and expand social infrastructure. The presented approaches are aimed at implementing the potential of free economic zones: increase of investments into objects, application of modern technical developments, and possibility of organization of clusters, which will ensure growth of Russian regions’ competitiveness. Acknowledgements. The article is prepared within the implementation of the governmental task of the Southern scientiﬁc Center of the Russian Academy of Sciences for year 2018, No. of the state registration of the project is AAAA-A16-116012610047-9.

References Alba, S.: Comparative analysis of approaches to the notions of special economic zones and offshores. Finances, No. 3, pp. 119–123 (2016) Belousov, V.I.: Development of special economic zones of regional level. Regional economics, No. 3, pp. 54–58 (2016) Belukhin, V.V.: Institute of development as an element of institutional infrastructure of economic growth. Society: policy, economic, law, No. 7, pp. 50−54 (2016) Bukhwald, E.M.: Institutes of development and new priorities of regional policy in Russia. Theory and practice of public development, No. 6, pp. 108−114 (2014) Bukhwald, E.M., Vilensky, A.V.: Institutes of development in strategic planning of spatial structure of the Russian economy. Reg. Econ. South Russ. 1(15), 77–86 (2017) Egorsheva, N.: Ministry of economic development can change the law on special economic zones (2017). https://rg.ru/2017/09/12/mer-mozhet-izmenit-zakonodatelstvo-ob-osobyhekonomicheskih-zonah.html. Accessed 30 Sept 2017 Zimenkov, R.I.: Free economic zones, 224 p. UNITI DANA (2014) Komrakov, A.: Special failed zones. Independent newspaper, 05 April 2016. http://www.ng.ru/ economics/2016-04-05/1_zones.html Matushkina, N.: Experience of implementing the mechanisms of territorial development in Russia’s regions. Regional economy, No. 12, pp. 4–17 (2016) Mitrofanova, I.V.: Analysis and ways of modernization of strategic territorial management in Southern regions of Russia. Management and business administration, No. 2, pp. 16–22 (2012) Mitrofanova, I.V., Rodionova, E.V.: Analysis of organizational change in the system of regional administration in Russia. Bull. Econ. Reforms 1(17), 140–145 (2015) Mikheeva, L.N., Ananyeva, R.I.: Tools of regional policy: evaluation of effectiveness of usage. Region: economics and social sciences, No. 3, pp. 39–57 (2011) Regarding special economic zones in the RF: Federal law dated July 22 2005. No. 116-ФЗ. http:// afga.ru/?p=581 Special economic zones: Web-site of the Ministry of Economic Development of Russia. http:// economy.gov.ru/minec/activity/sections/sez/main/index Dhingra, T., Singh, T., Sinha, A.: Location strategy for competitiveness of special economic zones: a generic framework for India. Compet. Rev. Int. Bus. J. 19(4), 272–289 (2009)

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Gulbis, I., Geipele, S.: Social partner involvement in Latvia special economic zones. Baltic Journal of Real Estate Economics and Construction Management, No. 4, pp. 145–152 (2016) Hsiao, Ch., Shen, Y.: Foreign direct investment and economic growth–the importance of institutions and urbanization. Econ. Dev. Cult. Change 51(4), 883–896 (2003) Park, B.-G.: Spatially selective liberalization and graduated sovereignty: politics of neoliberalism and ‘special economic zones’ in South Korea. Polit. Geogr. Descr. 24(7), 850–873 (2005) Tracey, P., Heide, J.B., Bell, S.J., Governance, P.: Bringing ‘place’ back in regional clusters, project governance, and new product outcomes. J. Mark. 78, 1–16 (2014). https://doi.org/10. 1509/jm.13.0524 Wang, J.: The economic impact of special economic zones: evidence from Chinese municipalities. J. Dev. Econ. 101, 133–147 (2013)

Tendencies of Development of the Tools of Strategic Planning of Industrial Companies’ Activities in Post-industrial Economy Elena V. Popov(&) and Mikhail V. Khachaturyan Plekhanov Russian University of Economics, Moscow, Russia [email protected]

Abstract. The article discusses the main trends in the development of strategic planning tools for industrial enterprises in the post-industrial economy. The authors investigate the main features of the theory and practice of the use of strategic planning tools of industrial enterprises in the post-industrial economy. Special attention is paid to the study of the importance of the development of enterprise risk management systems in the post-industrial economy. Based on the analysis, an author’s vision of the main components of the complex of strategic planning tools of industrial enterprises in the post-industrial economy is presented. Keywords: Trends Development Tools Strategic planning Industrial enterprises Post-industrial economy

Instability of economic situation in the conditions of stable acceleration of technological progress and increase of consumers’ requirements to manufactured products complicate the process of determining the strategic perspectives of development of industrial companies. This is due to the following peculiarities of functioning of industrial companies: – relative duration of the process of industrial production and the following sales cycle; – long period of planned usage of the main production funds; – large expenditures for supply of material and energy resources; – long period of planned usage of logistical networks; – long-term planning of the processes of training of production personnel; At that, it should be noted that multiple attempts of direct transfer of the tools of strategic planning that were developed by foreign scholars to Russian industrial companies have not provided the desired effect. It is predetermined by insufﬁcient consideration of peculiarities of the Russian economy, expressed in lower level of industrial production, complex structure of interrelations between economic subjects, the system of socio-economic relations within companies, peculiarities of direct and indirect state regulation of economy, scale of the territory, large spatial inequality, and other factors of industrial production.

© Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 718–725, 2019. https://doi.org/10.1007/978-3-030-00102-5_75

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Effective adaptation of Russian industrial companies to the modern conditions, characterized by high level of variability of the state of production and economic relations, which dynamics is expressed in changes of demand and prices for products in external and internal markets, requires cardinal improvement of the tools of implementation of all functions in the chain of managerial processes. In this chain, the task of improving the tools of strategic planning of activities of industrial companies has a central place in functions “marketing – planning – organization – control – correction”. The tools of strategic planning as the tools of formation of the algorithm of actions, connected in space and time, are traditionally aimed at systemic coordination of balances of income and expenditures of the manufacturing company that satisﬁes ﬁnal consumers. Results of systematization of the principles of strategic planning are presented in Table 1. Table 1. Totality of principles of strategic planning of organization’s activities. No. 1

Principle Principle of the necessity for planning

2

Principle of integrity of plans

3

Principle of continuity of planning

Characteristics of the principle Means the necessity for wide and mandatory applications of plans during execution of any type of labor activities. Industrial company should conduct activities aimed at transformation of natural resources into ﬁnal products for satisfying market needs Envisages development of common or compiled plan of socio-economic development of the company, in which, apart from industrial and technological ﬁnancial plan, there are also separate plans of production and sales of products, plans of receipt of income and expenditures, plans of technical, organization, and ﬁnancial development of the company on the whole, and partial plans of activities of separate production departments and services. All these plans should be closely connected to each other and to the complex plan of the company’s socio-economic development. Changes in any of private plans of the company should be translated to related components of other private plans and the company’s general plan, based on connection between company’s plans on the horizontal and vertical levels of planning Means that at each company the processes of planning, organization, and management of production should be conducted on the constant basis – which ensures the necessary update of the issues products, improvement of production technologies, etc. At that, continuity of planning allows for constant control, analysis, and modiﬁcation of plans during the change of internal and external environment – which has to ensure compatibility of factual and planned indicators of company’s production and economic activities (continued)

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No. 4

Principle Principle of flexibility of plans

5

Principle of precision of plans

6

Principle of complex character of plans

7

Principle of effectiveness of planning

8

Principle of strategic planning optimality

Characteristics of the principle Means the possibility of correction of the set indicators and coordination of planned economic activities of the company, caused by changes in technique, technology, organization of production, etc., fluctuations of demand, accompanied by changes of existing prices, tariffs, etc. Flexible planning determines company’s reserves as a “safety bag” of its economic security Means that each plan has to be prepared with precision required for the plans of the corresponding scales in view of ﬁnancial state of the company, its position in the market and other factors Means that results of production and economic activities of company’s departments depend on: level of development of equipment; technology and organization of production; applied systems of HR management; motivation and payment for labor; usage of existing material, labor, and ﬁnancial resources; indicators of efﬁciency, proﬁtability, paying capacity, etc. These factors form a comprehensive complex system of planned indicators. At that, each quantitative or qualitative change of at least one private plan leads to change of many other economic indicators. The changed planned decision influences production, economic, organizational, social, technical, organizational, and other indicators of the company. That’s why the plans should be complex and should ensure consideration of changes in separate objects and in ﬁnal results of the whole company Means development of such strategic plan of production of goods and services that would ensure the best achievement of strategic goals (e.g., economic effect as difference of revenues or income and product cost) with set limitations Means selection at each stage of planning of the best variant of the provided multitude, which conforms to the set criterion of optimality (minimum of labor intensity, material intensity, or product cost, maximum revenues, income, proﬁt, etc.) (continued)

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Table 1. (continued) No. 9

Principle Principle of participation

10

Principle of holism

Characteristics of the principle Means personnel’s participation in the process of planning on the basis of active influence on employees. At that, the initial precondition of implementing the principle is the statement that no person can plan better than the person who plans for himself. Besides, someone else’s plans cannot increase desires and capability of human to implement them, and own planning increases human’s striving for implementation of plans, raises efﬁciency and satisfaction with labor. Professional specialists on planning attract other employees to the process and make the process of planning easy for themselves, thus increasing effectiveness of planning by means of usage of information, motives, knowledge, experience, and distracted opinion of other employees Uniﬁes functions of coordination and integration during implementation of the planning processes. Coordination and integration have to unify the plans of hierarchical levels and separate objects of company’s activities that differ for the implemented directions, issued products, serviced markets, etc. At that, coordination uniﬁes plans for the objects of one level, and integration uniﬁes the plans created for the objects of various hierarchical levels of the company Thus, the principle of coordination states that effectiveness of simultaneous planning for all objects of the company of one level is always higher that independent planning for separate objects of the viewed level of the company. The requirement of coordination during planning comes from interconnection (direct or indirect) between objects of the same level The principle of integration envisages that the strategic plan, which is formulated at one level of activities of the company, causes problems for implementing the plans at other levels. That’s why formation of plans of the same level requires consideration of plans of other levels of the company Thus, according to the principle of holism, the more elements and levels in the system, the more proﬁtable it is to plan “for everyone” at the same time, considering interdependencies of elements and levels in the system of company as compared to variants of autonomous planning for the elements, “top-down” or “bottom-up” planning

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E. V. Popov and M. V. Khachaturyan Table 2. Methods of strategic planning of organization’s activities.

No. 1

Classiﬁcation sign According to initial positions of plan’s formation

2

According to the schemes of selection of plan’s variants

3

According to principles of determining planned indicators

4

According to calculation of planned indicators

5

According to the number of developed plans

6

According to the scheme of coordination of resources

7

According to the scheme of provision of results

Planning methods Targeted Resource Technological HR Systemic and analytical Scenario Portfolio Situational Expert Model Extrapolation Interpolation Normative Factor Experimental (test and experience) Project and variative Single-variant Multi-variant Poly-variant economic and mathematical optimization Balance Matrix Engineering and economic Table Graphic

The distinguished principles of planning are used during implementation of various methods of strategic planning of organization’s activities (Table 2) based on: – – – –

purposes and tasks of planning; character of used initial information; applied normative basis; viewed means of receipt and coordination of ﬁnal planned indicators;

On the whole, determining the basic principles of strategic planning allowed transferring to study of the tendencies of development of tools of strategic planning of industrial companies’ activities in post-industrial economy. Results of studying the tendencies of development of tools of strategic planning of industrial companies’ activities in post-industrial economy showed that the key tendencies are as follows: Firstly, almost all tools of strategic planning of industrial companies’ activities in post-industrial economy are aimed at implementing resource-saving type of economic growth.

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Secondly, imperative of ecologizaton of socio-ecological development of society formed the tendency of qualitative growth of requirements to the tools of strategic planning of industrial companies’ activities in post-industrial economy. Thirdly, the tools of strategic planning of industrial companies’ activities are oriented at growth of the share of industry in the volume of ﬁnal products. Fourthly, among the factors that determine selection of tools of strategic planning of industrial companies’ activities, the evolutional factor is distinguished – which envisages provision of possibilities for determining the tendencies of development of the company’s potential over a long period of observation. Fifthly, development of the tools of strategic planning of industrial companies’ activities in post-industrial economy is related to further approximation of the theory of organization of company’s activities and strategic management from parallel development to convergence at the level of theoretical preconditions and description of the subject sphere and object of the research. Sixthly, an important criterion of development of effectiveness of strategic planning of industrial companies’ activities in post-industrial economy is development of the systems of risk management, which, in the conditions of change of technological modes, become a key element of provision of stability of organization’s functioning. It should be noted that theoretical discussion of the necessity for improving the system of risk management and practical implementation of the measures for solving this problem are a reflection of absence of effective interconnection between managerial science and managerial practice at the level of private companies and at the level of the state. On the one hand, in the conditions of reduction of prices for traditional groups of export goods and economic sanctions, there is functional and political necessity for support and development of the mechanisms of economic control and management. It is obvious that economic situation implies that the main types of risks that are peculiar for a private company and the national economy should be determined and controlled in due time. On the other hand, the above factors influence stability of Russian companies of all types of ownership, which present various spheres of economy, creating the conditions at which unstable position of a company of one sector may lead to emergence of negative consequences for other sectors of economy, creating progressive flow of refusals, scandals, and catastrophes, which may lead to downfall of the organizational and economic mechanism of managing the national economy, with complete absence of understanding the essence of risks and threats and the mechanisms of managing them – by managers, company owners, and public authorities. Thus, it is possible to conclude that the system of risk management in the modern conditions has to organize that which cannot be organized within the existing regular system of management. Development of systems of risk management is a guarantee of successful implementation of private and public projects in the innovational sphere.

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At that, such development sets new requirements to responsibility of owners and top managers for the decisions that have to be implemented in previously unsolved situations and forms new means of evaluating the effectiveness of these solutions. It is possible to see a trend when the companies that traditionally accepted public risks – e.g., insurance companies, hedge funds, and ﬁnancial corporations, prefer to include public risks into their internal systems of managing the ownership risks. According to the authors, this process shows gradual transition from the system of risk management, based on rather effective but vulnerable division of mechanisms of management into own risks and customer risks to merging of these two mechanisms into the single system of managing the risks of owner and customer of organization. In the modern conditions, the system of risk management at the national level should transform as well. Development of the systems of risks management of Russia’s economic security in the modern conditions acquires a key importance for supporting stability of the economic system and transition to economic growth. Federal and regional authorities will have to solve the triple task of prevention, management, and re-distribution of risks. It should be noted that without solving this task it is impossible to speak about formation of effective systems of corporate management and improvement of the system of state management of economy. It should be emphasizes that risk management is more important for development of business than the mechanism of technical and analytical evaluation of challenges and threats that accompany the company’s life cycle. The system of managing ownership risks includes the key values and ideals of management on the whole – namely, the value and ideals of accountability and responsibility. Historically, the main purpose of development and implementation of the policy of organization in the sphere of managing ownership risks was provision of transparency and accountability of the scientiﬁc expertise of decisions on acceptability of the level of certain risks. However, in late 20th – early 21st century, the necessity for formation and development of the systems of management of ownership risks has become very important and is becoming a decisive element in the range of mechanisms of ownership management of the leading transnational companies. Thus, the mechanisms of analysis, evaluation, and management of risks, which were traditionally technical for achieving the company’s goals, have acquired – in the conditions of economic instability – the character of the key element of the system of ownership management of organizations and state regulation of economy. The results of studying the tendencies of development of tools of strategic planning of industrial companies’ activities in post-industrial economy are an objective basis for analysis of objective conditions of implementing the processes of strategic planning of industrial companies’ activities of energy machine-building.

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References 1. Plekhova, Y.O.: Economic and organizational capabilities of using the reserves of development of industrial company in post-industrial economy: Monograph. Institute of Economics of the RAS (2006). 279 p. 2. Seliverstov, V.E.: Strategic developments and strategic planning in Siberia: experience and problems. Edited by V.V. Kuleshov. RAS Publ., Novosibirsk (2010). 495 p. 3. Smirnova, O.O.: Strategic state planning in Russia. Study guide. MNEPU Publ., Moscow (2010). 142 p. 4. Tebekin, A.V.: Strategic management. Urait (2012) 5. Tkachenko, D.D.: Strategic planning as a tool for increasing effectiveness of industrial company. Strategy and tactics of company management in transitional economy: Collection of scientiﬁc works, pp. 174–187. VolSTU, Volgograd (2004) 6. Utkin, E.A.: Strategic planning. Tandem (1998) 7. Kharchenko, K.V.: Municipal strategic planning: from theory to technology. Study guide. Regional printing house, Belgorod (2009). 304 p. 8. Chmyshenko, E.V.: Strategic planning as a factor of regional development. Bulletin of Orenburg State University, No. 1(107), pp. 77–82 (2010) 9. Shkardun, V.D.: Marketing foundations of strategic planning, 3rd edn. Delo (2008). 375 p.

The Study of Modern Approaches to Development of Economic Systems Through Managing Their Complexity Anna A. Parshina1 ✉ , Valery V. Levchuk1, Elena V. Shpilevskaya1, Ekaterina P. Garina2, and Alexander P. Garin3 (

)

1 Rostov Institute of Entrepreneur Protection, Rostov-on-Don, Russia [email protected], [email protected], [email protected] 2 Nizhny Novgorod State Pedagogical University Named After K. Minin, Nizhny Novgorod, Russia [email protected] 3 Nizhny Novgorod State Pedagogical University, Nizhny Novgorod, Russia [email protected]

Abstract. The subject of the study is the organizational and economic relations that arise in the process of functioning and development of complex economic structures. Main goal of the research is to develop conceptual bases for managing complex economic structures of the economy that ensure their balanced func‐ tioning. The methodology consists in the application of scientiﬁc and methodo‐ logical developments of domestic and foreign scientists devoted to solving the problems of managing economic systems and processes, and strategic and opera‐ tional management of integrated structures. Results: Formation of conceptual bases for managing the development of complex economic structures in the industrial sector of the economy that implement a targeted approach to manage‐ ment, in conditions of a steady increase in the complexity of systems. The following controls are selected: managing the complexity of the product and managing the complexity of systems in the context of clustering solutions for their formation and development; the approaches used in managing complexity, the degree of complexity using the “grade index” criterion are evaluated. The admin‐ istrative impacts are systematized according to: formation of a set of elements responsible for the functional support of processes and the functional saturation of products; selection of management tools; achievement of system stability and results. It is proved that most competitive economic units have the characteristics of a complex economic structure that encloses a certain set of links in the value chain, either as an instrument or as a target. The results of the research presented by the authors can be used as a methodological basis for the development of economic systems through managing their complexity. Keywords: Economic systems · Increasing complexity Managing the complexity of products and managing systems

To increase the competitiveness of domestic producer’s products, it is necessary to widely use advanced technologies for managing systems that ensure a signiﬁcant © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 726–733, 2019. https://doi.org/10.1007/978-3-030-00102-5_76

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increase in the eﬃciency and eﬀectiveness of economic activities, which in turn diﬀer both in component saturation and in complexity of implementation. “Diﬃcult” is considered, above all, technical, economic and social systems because of their nonli‐ nearity, nonstationarity, discontinuity (discreteness) of their implementation. The change in the time characteristics of processes requires the creation of intelligent control algorithms in the “direct time” mode. Therefore, the size of modern business systems is increasingly determined by the complexity of the management system, which predeter‐ mines the size of economic activity, based on the values of the calculation units “labor intensity management” and “management eﬀectiveness” [14]. Thus, complexity is a typical property of modern management systems, conditioned by: the need to ensure the competitiveness of the business/product; the need to provide a wide range of product lines for consumers’ requests, and, accordingly, the development of the ﬂexibility of processes (production, technological, business processes), the complexity of products (works, services) and the technology of their creation, the growth of the science intensity of processes and the transition to a “knowledge economy”. The relevance of the study is due to the complexity of the control object, the substantial nonstationarity of processes and systems, the diﬃculties in constructing the model, because of the uncertainty of the elements and their interrelationships, the large variation in the initial parameters and the insuﬃcient systematization of information, and the lack of eﬀective tools and control algorithms. As studies show, a steady increase in the complexity of processes (management, business processes, production processes) and management systems was actively intro‐ duced two decades ago (since the 1990s). And in the modern economy there is already a gradation: (a) in the case of production activities - the desire to reduce the growth of complexity with the subsequent transition to the stage of systemic combination of the advantages of mass production and “eﬀective adjustment” of the product, in the condi‐ tions of growth of assortment list [3]; (b) in the case of management technologies, the complexity of management systems and the interaction of business units increases. Let us dwell on the selected elements in more detail. I. Managing the complexity of the product - it is suggested to understand under the product of production: the result of any process (industrial, technological, business process); a set of information embodied in the project; the result of the implemented project. Actively complicating the product of production in the modern economy occurs in the machine building, chemical, oil industry, and IT industry. The issue of product protection from a competitor is solved through the formation of technological barriers, a system for managing structural interdependencies, and management culture [7]. The complexity of the product is not the end goal of the manufacturer. The product acquires this characteristic either at the initial stage of the life cycle, when the product is launched onto the market, or in the conditions of its execution in a closed architecture. In the ﬁrst case, the increase in the complexity of the product/systems is explained by the manu‐ facturer’s desire [8]: 1. Diﬀerentiate the product range/product variety in order to main‐ tain competitiveness; 2. improve the technical characteristics of the product, since in this period there is still no rigid standardization of components and interrelations, their

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structural and functional saturation is being ﬁnalized; 3. increase the variability and ﬂexibility of technological/production systems/business processes; 4. Achieve techno‐ logical breakthroughs as a response to changes in market demands. And, since the advantages of a variety of products can not be realized without increasing costs for complexity, the goal is to generate an assortment of products of the “optimal level of complexity” taking into account the beneﬁt-cost relationship. In addition, as systems become more complex, multivariate design is virtually eliminated, the decision support stage for selecting algorithmic and other types of provision for the management system is not available; and development time continues to grow with the complexity of systems [2]. In the second case, the closed architecture of the product essentially determines the nature of the complexity of the product - the product is complex, the “original”, closed and complex architecture, where the development of an industrial product or a change in the main components of an already formed architecture is the main reason for the increase in production cost. There is no possibility of transferring existing components to new models or changing the production technology. The complexity of the product is aﬀected by the level of decomposition of the “component map”: the more detailed the structure of the product, the greater the assigned tasks and need for cooperation between members of the multidisciplinary team and vice versa: reducing the degree of abstraction allows you to keep communication eﬀorts in an acceptable range, and also to minimize the amount of the proﬁle group of expenditures [8]. In accordance with this approach, the essence of managing the complexity of a product is reduced to identifying an “acceptable” range of decomposition of components to the product architecture, as well as the necessary set of product components, in the context of minimizing costs, that is, managing the cost of the product (it is taken into account that the average cost of the product is relatively is minimal when the complexity of a function, option, element is not “neither too high nor too low”). To measure the complexity, Prasad suggests using the “grade index” (Cv) criterion, on the basis that the more varieties, components involved in production, more expensive it will be to produce the product for a large i=3 ( ) ∏ αi where αi is the mapped parameter for the i-th number of options/variety: Cv = i=1

factor responsible for the cost. The current value of the i-th factor is determined by the following parametric equation: The current value of the coeﬃcient (i factor) = (min value of the i factor) (1 – αi)+ (maximum value of the i factor) (αi). If the ﬁnal calculated value is 1, then the product reaches maximum value. The normative value is 0 ≤ α ≤ 1. Evaluation of the approaches used in managing the complexity of the product shows that: – The level of complexity of the product directly aﬀects the ﬁnal cost of the product: the total aggregate of costs is minimal when the number of functions is limited or a small amount of detail is required to produce the product, and vice versa [16]. There‐ fore, another indicator of the complexity of the product is usually the coeﬃcient “income-expenditure ratio” (Conceptually, the optimal choice is determined at the point where the marginal utility is equal to the marginal cost) [15];

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– complexity management is most often reduced to reducing the cost of production by forming a minimum assortment/model range and/or reducing the element/functional complexity of the product by “simplifying” both the composition of the product and production technologies. In this connection, the competitiveness of an individual producer is signiﬁcantly reduced; – The target conﬂict between standardization and individualization of a product is often called the potential of modular product design. In this connection, the main tools used in managing the complexity of the product are mass customization, design of struc‐ tures, product modularity, modular function deployment technology, product plat‐ forms, etc. The tools used to manage the complexity of systems in the context of clustering solutions for their formation and development is conventionally divided into: 1. Corecompetency (Forming a portfolio of core competencies of the enterprise) - a combination of resources and their combination, as well as the capabilities of ﬁrms that together form the “distinctive competences” of the company [9]: 1.1. QFD (QualityFunctionDeployment is the deployment of quality functions, ROS) is a structured tool for the collection and quantiﬁcation of customer requirements within the methodology of systemic structuring of customer requests in technical speciﬁcations, operational speciﬁcations of the product manufacturing process and requirements for quality. Developed in the late 1960s in Japan. Product information and decisions are systematized as a matrix (“Quality House”), which in the horizontal part contains information about customer requests, the vertical part shows technical information. However, such aspects as architecture and product development prospects, the focus of the QFD concept are not, and the quantitative deﬁnition of the complexity of the product is not considered at all [4]; 1.2. MFD (Modular Function Deployment) is a method developed by Ericson in 1998 to support the concept of product modularity. It is based on the imple‐ mentation of the idea of module drivers (the driver consists of several functions that are responsible for certain actions of the system and provide basic modu‐ larity criteria. The essence of the method is the formation of a module for indicating the module (MIM), which allows to allocate functional carriers (components, etc.) technical solutions for product assembly design (DFA), production design (DFM), etc., phases in the value chain of the product (manu‐ facturing, installation, prototyping, testing, etc.), functional characteristics and the product (cost, quality, time, ﬂexibility, diversity, etc.). However, the func‐ tional aspects of the product are not the focus of the concept; 2. The PPD model (Forming a “component map” that deﬁnes the functionality of prod‐ ucts) is considered by companies as a way of creating a “family of products”, expanding the product line, as an approach to managing a complex product through small changes in production (technological) processes, due to a certain hierarchical grouping of product components: 2.1. Product modularity, as a tool for managing product complexity, assumes that the modular/integrated product architecture consists of a number of relatively

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independent units/modules with standardized interfaces. Modularity allows to accelerate the product development process, increase production ﬂexibility, reduce the cost of invariance by minimizing interdependencies between product modules, increase producer proﬁt from economies of common compo‐ nents and economies of modules in diﬀerent products [11]; 2.2. Product Variant Conﬁguration (DFC concept) - The methodology assumes that a variety of product variants with the required variety can be obtained from a ﬁxed set of modules and components. The goal is to form a wide range of products while saving expenses by: (1) a clear deﬁnition of a set of pre-designed components and modules; (2) a pre-designed product architecture that meets the speciﬁed range of customer requirements; (3) refusal to develop new components against the backdrop of a systematic conﬁguration of product options from existing components; (4) a common architecture for the entire product family. From the point of view of management, the complexity of the product, the DFC methodology provides eﬀective conﬁguration options for products based on a typical architecture, modiﬁed to meet customer require‐ ments even at the design stage [10]. II. Management of the complexity of control systems and their interaction. Complication of management systems is explained by the reaction of business units to market changes, innovative development of systems, introduction of new technologies in production, changes in targets, etc. In the historical context, major changes are being made in the 20th century and go from adaptive solutions to current challenges, with the subsequent use of extrapolation methods (mathematical appa‐ ratus) to the integration of management actions that combine centralization and decentralization of management, the widespread use of expert assessments in condi‐ tions of strategic uncertainty. The degree of complexity (managerial, structural, production) is the deﬁning system principle of economic systems, where the management system can be described as a set of elements connected generally. The number of elements and the corresponding number of relationships linking the elements represent a corporate governance system. Classics of the science of managing complex systems consider F. Taylor, A. Fayol, M. Messon, R. Daft, G. Mintzberg, and others. The study and systematization of inter‐ actions between elements was carried out in [9]: – Pimmler and Eppinger (1994, p. 346), where four universal types of interactions are distinguished: (1) abutment or orientation between two elements; (2) “energy transfer” (author) between the two elements; (3) information exchange between two elements; (4) material exchange between two elements. The characteristic (including qualities) or property inherent in an element is called the attribute of this element (color, size, strength, shape). The way in which the elements are related to each other is called the structure of the system. Deﬁning the boundaries of the system allows you to have spatial relationships, as well as the exchange of materials, information or energy with their environment through a dedicated border; – Patzak (1982, pp. 22–24), who considered complexity as an obligatory attribute of the management system and distinguished two aspects of complexity: 1. the number

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of interactions and the diversity of relationships and 2. the diversity of the elements. He considered that the complexity of the control system is determined by: (1) the number of links between the elements of the system, (2) the number of diﬀerent types of relationships between the elements of the system, (3) the number of elements making up the system, and (4) the number of diﬀerent types of elements making up the system. The amount of information needed to describe the system increases with increasing complexity. – Simon (1962), dealing with modular and integral system architectures. The author provides a demonstrative basis that the hierarchical system consists of interconnected subsystems, each of which is hierarchical in structure until the minimum level of the “elementary subsystem” is reached. The module is accordingly deﬁned as a separate subsystem, the internal relations of which are much stronger than the relations with other subsystems; – Peters and Waterman (2000s), who suggested that the complexity of the system deﬁnes a set of variables: structure, strategy, system and management procedures, value settings, core competencies, management style and personnel system. As an object of inﬂuence, an enterprise in the system approach is treated as a complex socio-economic system characterized by a signiﬁcant degree of dynamism and changes between elements, discreteness of processes and the non-formalizability of the result. That is, the degree of complexity is the determining principle of its existence and devel‐ opment. Modern economic structures are considered as complex economic systems because of [12]: (1) the time lag in their formation, (2) the inherent diﬀerentiation of structures, models and management tools, (3) the conditions of functioning and devel‐ opment; (4) sets of interacting elements formed in a speciﬁc hierarchy; (5) the intensity of information ﬂows; (6) “integrative” processes (business processes, production processes, etc.). Selected features predetermine the choice of management impacts by: the formation of a set of elements responsible for the functional support of processes and the functional saturation of products; selection of management tools; achievement of system stability and results, etc. [5]. A model that describes parametrically the relationship at the time of the management impact, takes into account [13]: Mca:J, E, P, Z, F, K, C,

J - the structure of the internal environment of the object; E - structure of the external environment of the object; P - a parametric description of the internal and external environment; Z - formation of the objectives of the control object; F - interdependence of internal and external environment; K - criteria for the state of media; C - a mechanism for assessing the level of the state of media and the object of control in general. In this context, the most important management task is the goal setting through the coherence of all elements of the system and ensuring the maximization of value added at all stages of the chain (not maximizing proﬁts!). Orientation to goal-setting in the course of management inﬂuences predetermines the need to select the appropriate tools recommended for use [13]:

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1. “Management of business units” - the management approach, formulated by X. Vissema: (1) delegation of responsibility of the parent company to the level of indi‐ vidual units (business units), that is, the formation of economic independence; (2) decentralization of work until signiﬁcant losses of economies of scale are observed; (3) the synergy of strategic management and the concept of a “self-developing” business unit. 2. G. Mintzberg’s “Strategic Progress” implies the construction of consistent actions and goals by forming a hierarchy and decomposition of a certain set of operational and strategic plans (SWOT analysis, PEST analysis). Also, the SPACE analysis, the GE/McKinsey matrices, BCG, Shell, Ansofa, ADL and other tools can be recommended, taking into account the adaptation to the conditions of functioning of economic units. Thus, with the socio-economic system (by which the enterprise is meant) has a “systemic” structure, which is represented by a set of subsystems. Modern management of systems must be built through a combination of principles of the theory of economic systems (enterprise/ﬁrm theory, industrial organization theory, etc.) and the added value theory (by Porter). Most competitive economic units have signs of a complex economic structure that closes a certain set of links in the value chain, either as an instrument or as a target. The ultimate goal of managing the complexity of the product is to master the structural and functional product variety of the producer in the conditions of product standardization and modulation, that is, the formation of a compromise between a unique product/diﬀerentiated product alongside relatively high production costs and a standar‐ dized product with a minimum production costs.

References 1. Ahmad, S.R., Mallick, D.N., Schroeder, R.G.: New Product Development: Impact of Project Characteristics and Development Practices on Performance. Operations and Supply Chain Management Faculty Publications.20 (2013). http://ir.stthomas.edu/ocbopmtpub/20 2. Eckert, C., Albers, A., Bursac, N., Chen, H.X., Clarkson, J., Gericke, K., Gladysz, B., Maier, J., Rachenkova, G., Shapiro, D., Wynn, D.: Integrated product and process models: towards an integrated framework and review. In: 20th International Conference on Engineering Design (ICED 2015), Milan, 27–30 July 2015 3. Garina, E.P., Kuznetsov, V.P., Egorova, A.O., Garin, A.P., Yashin, S.N.: Formation of the system of business processes at machine building enterprises. Eur. Res. Stud. J. 19(2), 55–63 (2016) 4. Hackman, J.R., Wageman, R.: Total quality management: empirical, conceptual, and practical issues. Adm. Sci. Q. 40, 309 (2015) 5. Kuznetsova, S.N., Garina, E.P., Kuznetsov, V.P., Romanovskaya, E.V., Andryashina, N.S.: Industrial parks formation as a tool for development of long-range manufacturing sectors. J. Appl. Econ. Sci. 12(2), 391–401 (2017) 6. Kuznetsov, V.P., Garina, E.P., Andriashina, N.S., Kozlova, E.P., Yashin, S.N.: Methodological solutions for the production of a new product/managing service, education and knowledge management in the knowledge economic era. In: SERVE 2016 4th Proceedings of the Annual International Conference on Management and Technology in Knowledge, Service, Tourism and Hospitality, pp. 59–64 (2017)

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7. Mizikovsky, I.E., Bazhenov, A.A., Garin, A.P., Kuznetsova, S.N., Artemeva, M.V.: Basic accounting and planning aspects of the calculation of intra-factory turnover of returnable waste. Int. J. Econ. Perspect. 10(4), 340–345 (2016) 8. Prasad, B.: Concurrent Engineering Fundamentals, Vol. II: Integrated Product Development, Prentice-Hall PTR, New Jersey (1997). http://brianprasad.weebly.com/uploads/ 2/4/3/9/24393270/designing_products_for_variety_and_how_to_manage_complexity.pdf 9. Schätz, C.: A Methodology for Production Development: doctoral thesis, 126 p. Norwegian University of Science and Technology (2016) 10. Aleksandrovsky, S.V., Shushkin, M.A.: Model implementation strategies of companies’ imitation. Innovation 1(195), 108–114 (2015) 11. Andryashina, N.S., Kuznetsov, V.P.: Features of creating a new product at engineering enterprises, 134 p. Krasnodar (2016) 12. Garin, A.P., Kudashov, V.I., Sholomitskaya, M.M.: Methodology of formation and development of the landscape of business processes in machine building. Bull. Univ. Minin 4(8), 4 (2014) 13. Deberdieva, E.M.: Management of complex economic structures of the oil and gas sector of the economy under conditions of transformation of the hydrocarbon market: Doctor of Science in Economics, 419 p. Tyumen State University Oil and Gas University, Tyumen (2016) 14. Levchuk, V.V., Ivanchenko, M.A.: Corruption as one of the global problems of our time. In: The Tenth International Conference on Economic Sciences Proceedings of the Conference, pp. 135–140 (2016) 15. Mizikovsky, I.E.: Technology and organization of management accounting at the enterprise: monograph, 150 p. Publishing house N.I. Lobachevsky, N. Novgorod (2005) 16. Medvedeva, O.V., Shpilevskaya, E.V., Nemova, A.V.: Complex Economic Analysis of the Enterprise: Textbook. Higher Education, 240 p. Rostov-on-Don (2010)

The Modern Approach to Forming the Conception of Functions of Finance Yuliya Budovich ✉ , Konstantin Lebedev, and Anna Lebedeva (

)

Financial University Under the Government of the Russian Federation, Moscow, Russian Federation {JBudovich,KNLebedev}@fa.ru, [email protected]

Abstract. The aim of the work is to demonstrate a new approach to the formation of the concept of functions of the ﬁnancial system. This approach consists in a clear deﬁnition of the purpose of the conception of ﬁnancial functions and the corresponding interpretation of the concept of “ﬁnancial function”, the develop‐ ment of multi-attribute classiﬁcation of these functions, as well as examples of its use to implement the purpose of the conception of ﬁnancial functions. An important methodological technique of this study is the harmonization of the conception of ﬁnancial functions with the conception of functions of credit, which is considered part of ﬁnance. As a result of the study it was found that the purpose of the conception of ﬁnancial functions is to demonstrate to society the diverse beneﬁts of ﬁnance, the function of ﬁnance has been interpreted as an element of public beneﬁt from ﬁnance, a classiﬁcation of ﬁnancial functions on the most signiﬁcant grounds and examples of construction on its basis of species and vari‐ eties of ﬁnancial functions were developed. The approach to the formation of the conception of ﬁnancial functions, demonstrated by the authors, is intended to replace the traditional approach, in which the functions of ﬁnance are allocated in one row without specifying the signs of their allocation, to turn the discussion about the functions of ﬁnance into a constructive channel, consisting in the allo‐ cation of additional essential signs of the functions of ﬁnance, the complete and detailed allocation of the types of functions by individual grounds and the forma‐ tion of examples of construction on the basis of the appropriate classiﬁcation of various species and varieties of ﬁnancial functions. Keywords: Credit · Classiﬁcation · Beneﬁt · Finance · Functions JEL Classiﬁcation Code: A12 · E5 · E60 · E61

1

Introduction

Characteristic feature of concrete economic sciences is debatable interpretations of their basic concepts and provisions, in particular interpretations of functions of the species of economic activity or economic objects studied by them. One of the sciences, in which there is no unity of opinion on the latest issue, is the science of “ﬁnance”. And in fact, in both Russian and foreign science of ﬁnance, there are many author’s versions of the conception of the functions of ﬁnance or the ﬁnancial system. Even the extreme case is © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 734–740, 2019. https://doi.org/10.1007/978-3-030-00102-5_77

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presented, consisting in the denial of any functions of the ﬁnance. This point of view is defended, for example, by N.M. Sabitova (Sabitova 2014). V.I. Shchedrov identiﬁes three functions of ﬁnance, which include target, distribution and control functions (Shchedrov 2012). L.L. Igonina believes that the ﬁnancial system provides ﬁve func‐ tions: distribution, regulatory, accumulating, control, information (Igonina 2017). L.M. Shevchenko believes that the ﬁnancial system has nine functions: the movement of resources in time and space, risk management, accumulation of funds, savings, credit, planning, information, control (Shevchenko 2012). The foreign science of ﬁnance also presents a variety of views on the functions of ﬁnance or the ﬁnancial system. R. Levin highlights the following functions of the ﬁnan‐ cial system: production of ex ante information about possible investments; monitoring of investments and implementation of corporate governance; trading, diversiﬁcation and management of risk; mobilization and pooling of savings; exchange of goods and serv‐ ices (Levin 2005). J. Stiglitz identiﬁes the following functions of the ﬁnancial system: transfer of capital from savings entities to borrowers and investors; concentration of capital for project implementation; selection of projects; monitoring the use of project funds; contract enforcement; transfer, separation, aggregation and diversiﬁcation of risks (Stiglitz 1993). R. Merton identiﬁes as the main function of the ﬁnancial system the distribution and deployment of economic resources in space and time, and considers that it covers functions such as the payment system, the transfer of resources from depositors to borrowers, accumulation of savings and risk reduction through insurance and diversiﬁcation (Merton 1992). The problem of the conception of the functions of ﬁnance and the ﬁnancial system in the science of “ﬁnance” is not only its debatable nature, but also the unconstructive‐ ness of the latter, because this conception fulﬁlls its purpose poorly, namely poorly characterizes the functions of ﬁnance.

2

Materials and Method

As the economic-theoretical analysis has shown, the problem of element conceptions, which include the conception of ﬁnancial functions, is the lack of clear understanding among their authors about what elements should be allocated, as well as the fact that the elements of the whole are distinguished by a variety of attributes, several of which may be signiﬁcant. The latter speaks of the futility of the allocation of elements of the whole in one row, or without indication of signs of their allocation, as attempts to characterize more fully the relevant area of phenomena in the form of one raw of elements will always be unsatisfactory due to entry of some elements of this area in others. The above mentioned creates the ground for “endless” discussion around the element conceptions of economic sciences. The above problem exists, for example, in the conception of management functions in the science of “management”. The historical conception of management functions, according to which the management distinguishes functions such as planning, organization, motivation and control, will endlessly be subjected to” attacks “ in the form of the addition to this series of “new” functions or the division of “old” until the participants of the discussion come to the conclusion that, ﬁrstly, the

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function in this case is understood as an element of management activities, and, secondly, elements in management activities are allocated by a variety of signs, including essential for its characteristics (Budovich 2016). What should be understood by the functions of ﬁnance? The purpose of the concep‐ tion of ﬁnancial functions is to describe the beneﬁt of ﬁnance or the ﬁnancial system for the rest of the economy. Accordingly, the function of ﬁnance is understood to be an element of ﬁnancial beneﬁt for the rest of the economy. This interpretation of the concept of “function” in relation to ﬁnance follows both from the analysis of the functions of ﬁnance allocated by scientists, and from the fact that in the theory of science there must necessarily be a theoretical construct characterizing the beneﬁt to society from the specie of activity studied by science. This construct is present, for example, in the theory of accounting. It is the conception of the subject of accounting as a practice. Note that the theory of science also presents theoretical construct that characterizes the beneﬁts for society from the science itself, traditionally referred to as the subject of science. It should be noted that a signiﬁcant obstacle to the formation of the conception of functions of activities studied by economic sciences in the Russian science is interpre‐ tation of functions as manifestations of essence of social phenomena, “hiding” from the observer, coming from Marxist economic theory and inspired by Hegel philosophy, a fan of which was K. Marks. So the function is interpreted, for example, in relation to the credit in the science of “money circulation and credit” (Lavrushin 2016). It is diﬃcult to interpret the “external” manifestations of a phenomenon as elements of beneﬁt from it. This, however, does not prevent the Russian science “monetary circulation and credit” to form the conception of credit functions, by the way, also characterized by “debatable” nature as the conception of elements of beneﬁt from credit for the rest of the economy. Such it has been since its inception – the formation at the turn of the 20–30-ies of the twentieth century, of Marxist-Leninist, and more precisely Stalin’s, science of money and credit. Traditionally, the following credit functions are singled out in one row: redistribution of capital (cross-sectoral overﬂow), expansion of production beyond the boundaries of individual accumulation, concentration of capital and saving on circula‐ tion costs. It is obvious that they describe the public beneﬁts of the credit. The Russian ﬁnancial science also presents the interpretation of the concept of func‐ tion in relation to ﬁnance as a manifestation of the essence of ﬁnance, but, to its delight, it is combined with interpretation of the function as a manifestation of public purpose or destiny of ﬁnance, close to the concept of “beneﬁt” (Shevchenko 2012, Igonina 2017). However, it is clear that the treatment of function as a manifestation of public purpose of ﬁnance does not have suﬃcient heuristic power. This is clear, in particular, from the fact that Russian scientists in the ﬁeld of ﬁnance began to include in the func‐ tions of ﬁnance functions, allocated in foreign ﬁnancial science, serving as a beneﬁt for ﬁnancial decision-making processes, such as information function, consisting in supplying ﬁnancial departments of non-ﬁnancial organizations and households with information from ﬁnancial markets. It is obvious that clariﬁcation is also required to who is the recipient of the beneﬁts of the country’s ﬁnances or ﬁnancial system. Since ﬁnances consist of the ﬁnancial activities of non-ﬁnancial enterprises and households, as well as the activities of noncommercial and commercial (specialized) ﬁnancial organizations, the recipient of the

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beneﬁts of ﬁnance is the activities of commercial and non-commercial non-ﬁnancial organizations and households, excluding their ﬁnancial activities, which will be here‐ inafter referred to as the non-ﬁnancial, or real sector of the economy. Thus, the beneﬁt of ﬁnance is the beneﬁt that a commercial or non-proﬁt non-ﬁnancial institution or household receives by performing a ﬁnancial transaction (paying tax, receiving credit or budgetary allocations, opening a bank account, etc.). As is clear from the above, the conception of functions (public beneﬁt) of ﬁnance should be shaped by highlighting the types of beneﬁts on various grounds, starting with the most signiﬁcant. It is important to note that it is in this way that another element conception is formed in the science of ﬁnance, namely the conception of ﬁnancial markets, which is a multi-attribute classiﬁcation of the relevant markets. This once again conﬁrms the abnormality of the situation, when the conception of functions of ﬁnance is formed in the form of one range of functions and without indication of signs of their allocation. It is also useful to answer the question of how multi-attribute classiﬁcation of the functions of ﬁnance introduces the society with the beneﬁts of ﬁnance? The fact is that the multi-attribute classiﬁcation of ﬁnancial functions itself is, although extremely important, but only the ﬁrst step in resolving the relevant issue. This classiﬁcation should be seen as a tool for highlighting the diﬀerent species of beneﬁt that have varying degrees of detail. These species or varieties of beneﬁt are formed by combining their separate types, allocated on diﬀerent number of signs. The most detailed varieties of beneﬁt will be varieties, allocated for all grounds shown in the classiﬁcation. Having the sets of types of beneﬁt of ﬁnance allocated on a diversity of signs, the potential recipient of the beneﬁt of ﬁnance can construct any beneﬁt from it, not even presented in a traditional example of beneﬁt from ﬁnance. In connection with the above, the conception of func‐ tions should include examples of the formation of species of ﬁnance beneﬁts on the basis of an appropriate classiﬁcation of beneﬁts. Since the credit is currently treated as part of ﬁnance, an important methodological approach to the formation of the conception of functions of ﬁnance is taking into consid‐ eration the allocated functions of the credit or the harmonization of conception of the functions of ﬁnance and the conception of the functions of the credit. The conceptions of credit functions of Russian scientists say that there is no such harmonization. It is important to note that the work on the formation of the conception of functions of the activity, based on the interpretation of the function as a public beneﬁt from the activity and its multi-attribute classiﬁcation, was previously done by the authors of this article in relation to such ﬁnancial activity as credit (Budovich and Lebedeva 2016). In this regard, carrying out similar work in relation to the broader phenomenon of ﬁnance, the authors of this article will simply be forced to show how their conception of ﬁnancial functions is consistent with the previously developed conception of credit functions. In the relevant work, the beneﬁt of the credit was divided into elements by the following attributes (signs of elements of beneﬁt are indicated in parentheses, if necessary): (1) party of the credit transaction (lender, borrower), (2) stage of reproduction (production, distribution, exchange, consumption), (3) level of interpretation of the beneﬁt of the credit (micro and macro), (4) participant of credit relations (population, insurance companies, enterprises, etc.), (5) attitude to management activities (management

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activities, production activities), (6) attitude to the domestic economy, (7) randomness of the credit transaction.

3

Results

Consider the classiﬁcation of the beneﬁts (functions) of the ﬁnancial system by the most signiﬁcant features (examples of beneﬁt are given in parentheses, if necessary). 1. Financial instrument: (1) beneﬁts of the credit, (2) beneﬁts of the shares, (3) beneﬁts of taxes, (4) beneﬁts of the currency, etc. It should be noted that tax and credit can also be considered as ﬁnancial instruments. 2. Party of transaction: (1) beneﬁts of the sale (development of production through the issuance and sale of bonds), (2) beneﬁts of purchase (receipt of dividends on shares purchased). It should be noted that the payment/receipt of tax and receipt/issuance of credit could be considered as the purchase/sale of the relevant ﬁnancial instru‐ ments (tax and credit, respectively). 3. Stage of reproduction: (1) beneﬁts for production (insurance of industrial property), (2) beneﬁts for distribution (payment of wages to employees at the expense of the loan), (3) beneﬁts for the exchange (non-cash payments by opening a bank account), (4) beneﬁts for consumption (purchase of household appliances at the expense of consumer credit). 4. Recipient of beneﬁts: (1) beneﬁts for budget non-ﬁnancial institutions (defense and social spending through budgetary allocations), (2) beneﬁts for commercial nonﬁnancial enterprises (innovation through tax incentives), (3) beneﬁts for households (to live “quiet” under the protection of the state due to the payment of tax). 5. Level of interpretation of the beneﬁts: (1) macroeconomic beneﬁts (concentration of capital), (2) microeconomic beneﬁt (expansion of the company to the account of additional issue of shares). 6. Time of material embodiment: (1) current beneﬁt (life through scholarship), (2) future beneﬁt (provision of life in old age through pension contributions before retirement age). It is important to note that the provision in old age through pension contributions before retirement age is a real beneﬁt, since people already feel conﬁ‐ dent in the future, despite the fact that its material embodiment will come only after reaching retirement age. 7. Character: (1) ensuring normal functioning (payment of tax at the expense of the loan, security in old age through the payment of pension contributions), (2) improve‐ ment of activities (modernization of production at the expense of the loan, the purchase of an apartment at the expense of the mortgage), (3) implementation of calculations, (4) accumulation or savings (accumulation of funds in the bank account for the purchase of the apartment), (5) insurance, (6) meeting social needs (imple‐ mentation of the charitable contribution). 8. Constancy: (1) accidental beneﬁt (payment of wages at the expense of the loan in case of lack of own funds due to emergency circumstances), (2) permanent beneﬁt (provision in old age at the expense of pension contributions).

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This classiﬁcation of functions is a toolkit for the allocation of a variety of Finance functions of varying degrees of speciﬁcity. For example, on the basis of signs 1 and 2, such a function of Finance as provision with credit resources can be allocated. Any, including quite speciﬁcally formulated, beneﬁt from (function) of the ﬁnancial system can be represented in terms of the types of functions allocated on several grounds. For example, the function of repayment of salary debt at the expense of the loan corre‐ sponds to the following types of functions (before the bracket indicates the number of sign): (1) beneﬁts of the credit, (2) beneﬁts of the sale, (3) beneﬁts for distribution, (4) beneﬁts for commercial non-ﬁnancial enterprises, (5) microeconomic beneﬁt, (6) current beneﬁt, (7) maintaining normal functioning, (8) accidental beneﬁt. The following types of functions correspond to such function of Finance as the redistribution of capital (the ground number is indicated before the bracket): (1) beneﬁts of the credit, beneﬁts of the bonds, etc., (2) beneﬁt of the sale, (3) beneﬁt for production, (4) beneﬁt for commercial non-ﬁnancial enterprises, (5) macroeconomic beneﬁt, (6) current beneﬁt, (7) maintaining normal functioning, (8) permanent beneﬁt. Of course, the author of the article is far from considering the above classiﬁcation of ﬁnancial functions as complete and even covering the most basic grounds of their classiﬁcation. It was important to demonstrate the approach to the formation of the conception of ﬁnancial functions. The above multi-attribute conception of functions of Finance is consistent with conception of the functions of the credit, previously developed by the authors of the present article, and even is its development (Butovich and Lebedeva 2016). First of all, the conception of ﬁnancial functions uses 5 out of 7 signs of beneﬁt, identiﬁed in the conception of credit functions (party of the transaction, stage of reproduction, level of interpretation of the beneﬁt, participant of relations, i.e. recipient of the beneﬁts, randomness of the transaction, i.e. constancy). The conception of the functions of Finance does not use such a sign of the beneﬁts of credit as the attitude to management activities, as the beneﬁts of Finance is interpreted in the spirit of the realization of the purpose of Finance, i.e., as a beneﬁt for the production activity of the real sector of the economy. The conception of the functions of Finance does not also use this sign of beneﬁts from the credit, as the attitude to domestic economy, since the beneﬁt from the national ﬁnancial system to the national non-ﬁnancial system is considered. On the other hand, additional signs of beneﬁt have been added. First of all, it is a sign of a ﬁnancial instrument. It could not be in the conception of functions of the credit, as on this basis the very beneﬁt of the credit is allocated. The addition of such signs of beneﬁt disag‐ gregation, as the time of material embodiment and the nature of use, allows considering the conception of ﬁnancial functions as the development of the conception of credit functions. It is obvious that the beneﬁt, for example, of a newly issued loan for a lender is materialized (in the form of interest) in the future, i.e., it is a future beneﬁt, and for the loan recipient, if the loan is used to pay oﬀ the salary arrears-in the present, i.e., it is the current beneﬁt. Also, the beneﬁt of the credit can be divided into types by its nature. For example, the loan for repayment of salary debt ensures the normal functioning of the enterprise, and the loan for the modernization of production – improvement of the enterprise. Thus, these two signs are relevant for the allocation of credit beneﬁts and the classiﬁcation of credit functions should be supplemented by them.

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Classiﬁcation of the functions of the credit in the conception of the credit functions was also seen as a tool to highlight diﬀerent varieties of functions of the credit.

4

Conclusions/Recommendations

The conception of ﬁnance functions discussed above can serve as a basis for turning the discussion on the functions of Finance in the science of Finance into a constructive channel, consisting in the allocation of additional signs of functions of Finance, full and detailed allocation of types of functions on separate grounds, demonstrating how, on the basis of appropriate types of functions of Finance, their various species and varieties can be allocated.

References Sabitova, N.M.: On the conceptual apparatus in Finance. Vestnik Finansovogo Universiteta (Bulletin of the Financial university), No. 1, pp. 74–80 (2014) Shchedrov, V.I.: To the question about the essence and functions of Finance. Finance, No. 3, pp. 60–62 (2012) Igonina, L.L.: On the functions of the national ﬁnancial system. Financ. Anal. Sci. Exp. 10(10), 1188–1202 (2017) Shevchenko, L.M.: Functions of the ﬁnancial system. Vestnik Gumanitarnogo instituta TGU, vol. 2, pp. 194–198 (2012) Levin, R.: Finance and growth: theory and evidence. In: Aghion, Ph., Durlauf, S.N. (eds.) Handbook of Economic Growth, vol. 1A, pp. 866–934. Elsevier B.V. (2005) Stiglitz, J.: Financial Systems of Eastern Europe’s Emerging Democracies. International Center for Economic Growth Publication (1993) Merton, R.C.: Financial innovation and economic performance. J. Appl. Corp. Financ. 4(4), 12– 22 (1992) Budovich, Y.I.: Economic theory and accounting science on management functions, correlation and relationship of accounting with management functions. Int. Account. 41(383), 2–16 (2015) Lavrushin, O.I.: Evolution of the theory of credit and its use in modern economics, p. 394. KNORUS, Moscow (2016) Budovich, Y.I., Lebedeva, A.K.: The concept of functions of the credit: economic-theoretical analysis. Economic and Law Issues, No. 12, pp. 40–46 (2016)

Exploring Alternative Strategies for Managing the Complexity of a Product ( ) Ekaterina P. Garina ✉ , Viktor P. Kuznetsov, Nataliya S. Andryashina, Elena V. Romanovskaya, and Svetlana N. Kuznetsova

Nizhny Novgorod State Pedagogical University Named After K. Minin, Nizhny Novgorod, Russia [email protected], [email protected], [email protected], [email protected], [email protected]

Abstract. The focus of models for creating complex products is always a sepa‐ rate speciﬁc aspect of the issue of creating a product, but never - the whole aggre‐ gate. Therefore, when forming the mechanism for creating a complex product, it is necessary to implement successively certain steps. When implementing the model of managing the complexity of a product, it is possible to apply individual classical strategies by selecting them from an aggregate of an inﬁnitely wide spectrum, depending on the current conditions. The variants in this context are customization strategy and product standardization strategy. There are ﬁve methods of mass customization, each of which focuses on diﬀerent stages of the value chain. The strategy of product standardization is realized when there is no close relationship between the customer and the manufacturer, so individual pref‐ erences of customers are not taken into account. The application of the complexity management model of the product takes into account the width of the strategic framework in the context of decisions when optimizing the product architecture. Therefore, in the future, the strategic positioning of the company is assumed based on a quantitative assessment of the complexity of the product. The manufacturer is in constant contradiction. On the one hand, any modiﬁcation of products, their diﬀerentiation, expansion of the assortment list, customization of the product and much more, on the other hand, when the technology is brought to the classical level of complexity, as well as the complexity of the systems, is reduced. This leads to a reduction in the cost/ﬁnal cost of the product and the increase in the eﬀects and results produced by the producers. The contradiction is proposed to be solved through the formation of modern production management mechanisms, synergistic integration of knowledge areas; due to the intensive division of labor among participants in the system and to enhance coordination of activities related to development; intensiﬁcation of cooperation between enterprises and suppliers, participants in the system; formation of organizational and communication. Keywords: Product · Product complexity management · Customization Standardization · Mass customization and lean manufacturing strategies

Currently, a single management mechanism that would take into account all the condi‐ tions for creating a complex product (the prospects for the development of the product in a strategic plan, the market characteristics of the product, its architecture, the possi‐ bility of production based on existing capacities/management systems, a quantitative © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 741–747, 2019. https://doi.org/10.1007/978-3-030-00102-5_78

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assessment of complexity) does not exist yet. The focus of individual models of creating complex products is always a speciﬁc aspect of the issue of creating a product, but never - the whole aggregate. Therefore, when managing the complexity of the product, it is necessary to implement successively the following steps: (1) Form a strategy for the development of the company, including - in the context of the life cycle of the product. The goals of the manufacturer, as well as the positioning of the product in a certain phase (for example, growth or decline) determine the direction and content of the strategy; (2) Assess the complexity of the product. Quantitative data on product functionality and physical complexity are generalized, systematized and presented as a “complexity matrix” - a model that serves as a starting point for optimizing the product architecture; (3) Determine the sequence of actions (guidelines) for subsequent decisions (usually to reduce the complexity of the product). The last step combines the results of the two previous steps, and allows the enterprise management to take measures to reduce the complexity of products due to forming a set of uniﬁed components and modules, optimizing the product architecture. Let us stop on the ﬁrst element of the methodology for managing the complexity of the product in more detail. The goal of managing the complexity of the product is to optimize the product archi‐ tecture through: change and improvement (allocation, merging, splitting of components and/or entire modules), redesign and standardization of interfaces (relationships), and in some cases - a rethinking of the fundamental concept of the product. The conditions for implementing the model are as follows [14]: – The process should cover all functional areas of the company, from product devel‐ opment and production to sales; – The strategic component should be taken into account: the role of the product and positioning in terms of strategic development of the company. Thus, the ﬁrst and second conditions determine the basis of the product being created; – making decisions to manage the complexity of the product, taking into account which phase of the product life cycle is implemented at the time of the decision. When implementing the model of managing the complexity of a product, it is possible to apply individual classical strategies by selecting them from the set of an inﬁnitely wide spectrum, depending on the current conditions. The variants in this context are customization and product standardization strategy [17]. Strategy customization - tincture/adaptation of the product to the consumer, the preferences of which are taken into account already at the level of the concept of the product. In this case, the product is “original”, requires constant investment, the avail‐ ability of highly qualiﬁed personnel, the use of R @ D-technologies. Increasing the complexity of the product created throughout the value chain entails an increase in total costs, the ﬁnal price of the product. However, since the product being created is “conﬁg‐ ured for the customer’s request,” the consumer is willing to pay a higher price, because the product accurately reﬂects requirements. Therefore, the manufacturer compensates

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for the high costs of creating the product with its high beneﬁt. With the increase in the utility of the good/product, the elasticity of demand at a price decreases, which allows the producer to form a consumer surplus [8, pp. 58–62]. The reserve of reduction of the aggregate of costs is the synergy eﬀect in the production of several products at the same time (using standard technology, tools, R & D resources and other assets). Examples are the German automaker Volkswagen (VW), developed in 2006 a new line called VW Individual. Special solutions (colors, additional options, interface, etc.), adapted to the wishes of individual customers, are provided by the created independent “competence center”, and provide a diﬀerent positioning of the product in the continuum between tuning and standardization, an individual approach to the client. The strategy of product standardization is realized when there is no close relationship between the customer and the manufacturer, so individual preferences of customers are not taken into account. Product attributes are selected based on marketing estimates of average consumer preferences. The price of a standardized product is signiﬁcantly lower (than in the case of a custom product) due to the implementation of: – Economies of scale - where a signiﬁcant proportion of ﬁxed costs are allocated to a large number of items [2, C.94–96]; – “Experience curve”/”state eﬀect” - when doubling the total volume each time entails a 20–30% cost reduction [15, p. 273]. The main reasons for this phenomenon in the mass production are the increase in labor eﬃciency, specialization, improvement of products and processes by bringing them to the “optimal state”, rationalization and use of modern technologies [4, p. 58]. The eﬀect of the experience curve was “discovered” in 1925 in the United States, where the technologists and designers of the military-industrial complex determined that labor costs in the assembly of an aircraft per unit of time decrease [18, p. 90]. Subsequently, (in the 1960s), the Boston Consulting Group systematized the data and introduced the term “experience curve” [15, p. 273]. Extreme options (customization and standardization of the product) in practice in pure form are very rarely implemented. In the strategic plan for the development of an individual company, one of the options is most often highlighted as a priority. Alterna‐ tively, it focuses on a particular market segment through a combination of several of Porter’s general strategies [13, pp. 64–67]: – Diﬀerentiation strategies that take various forms (product design, brand, technology, features, customer service, dealer network, and much more). The viability of the strategy is determined by brand loyalty and lower consumer sensitivity to price, the absence of comparable alternatives, and the formation of entry barriers for compet‐ itors; – The overall strategy of leadership dictates that the ﬁrm can create eﬀective and scal‐ able management tools, achieving cost reductions, through economies of scale and experience curve, control of direct and overhead costs. The main strategic object is a lower cost in comparison with competitors, quality, and service and customer satis‐ faction;

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– Focus strategy, when a certain segment of the market is served (for example, one speciﬁc buyer of the group, a geographic market, etc.). The strategy is implemented by better meeting the needs and desires of a particular group of consumers. Porter claimed [13, pp. 71–74] that ﬁrms that failed to build their strategies in one of the three above-mentioned areas are in a very diﬃcult strategic situation. Such ﬁrms do not have a market share or high proﬁtability. The position “stuck in the middle” means that the three general strategies are alternative and their combination is not a viable option. Later writers questioned Porter’s postulate that the strategy of leadership and diﬀerentiation mutually exclude each other. For example, Murray [10, pp. 395–397] argued that the prerequisites for a leadership strategy are due mainly to the structural characteristics of the industry, while customer preferences mainly form a product diﬀer‐ entiation strategy. Moreover, since the industry structure and customer preferences are two independent factors, the possibility of combining the two strategies exists. Piller also speculated [11] that the value of a product is determined by the structural content elements, the producer’s assets (for example, eﬀective control and production systems of the product). While product diﬀerentiation is determined by market aspects. Expanding the logic of the listed authors, Hill concluded that the combination (hybrid‐ ization) of two or more strategies is not only possible, but also recommended for the formation of sustainable competitive advantages. The classical approach in this case is the adjustment of the hybrid strategy by forming a matrix. Typically, between two dimensions: diﬀerentiation and standardization of the product. A common element of the hybrid strategy is the “mass adjustment” of the product (the strategy of mass customization), i.e. an attempt to form individual solutions of the product in the framework of mass production. Davis put the term « mass customiza‐ tion » into circulation in 1987 [1], which asserts that mass production and manufacturing of a product under the customer’s order are not mutually exclusive categories. Perhaps their combination - the adaptation of a mass product of production to the needs of the consumer by partially changing the products in accordance with the speciﬁc request of the consumer. In addition, the satisfaction of a large number of individual customer orders can be achieved in the conditions of “work under the order”. Tseng and Jiao [17] deﬁne mass customization as the production of goods and services to meet the individual needs of the customer with a number of eﬀects of mass production. The essence of the approach is that mass customization is a hybrid of a competitive strategy that overcomes Porter’s hypothesis regarding the need to choose between a cost leadership strategy and a diﬀerentiation strategy; contradicting the view that cost leadership and product diﬀer‐ entiation are incompatible [13]. Mass customization as a strategy allows you to ﬂexibly regulate, change the nomenclature list of products to customer request, approaching the level of mass production. From a management point of view, mass customization provides a conceptual basis for balancing the moderate increase in product complexity by optimizing the total cost. The focus is on product customization, while the product architecture and the quantiﬁcation of complexity are not considered at all. If the strategy of mass customization is implemented, the product is “original”, requires constant investment, the availability of highly qualiﬁed personnel, and the use of R @ D tech‐ nologies. Increasing the complexity of the product created throughout the value chain entails an increase in total costs, the ﬁnal price of the product. However, since the product

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being created is “conﬁgured for the customer’s request,” the consumer is willing to pay a higher price, because the product accurately reﬂects requirements. Therefore, the high cost of creating a product the manufacturer compensates for high added value. With the increase in the utility of the product, the elasticity of demand at a price decreases, which allows the producer to form a consumer surplus [6]. The reserve of reduction of the aggregate of costs is the synergy eﬀect in the production of several products at the same time (using standard technology, tools, R & D resources and other assets). An example is the German automaker Volkswagen (VW), which developed in 2006 a new line called VW Individual. Special solutions (colors, options, interface with iPod, etc.), adapted to the wishes of individual customers, are provided by the created independent “compe‐ tence center”, and provide a diﬀerent positioning of the product in the continuum between tuning and standardization, an individual approach to the client. In this context, Miller and Dess [10, p. 581] came to the conclusion that the use of hybrid strategies is not only possible, but also extremely beneﬁcial; that the combination of diﬀerentiation and standardization strategies is a viable option [10, p. 579]. However, at the same time, companies are limited to “performance boundaries” [5]. In the continuation of the study, Lampel and Mintsberg [7] in 1996, in addition to evaluating the eﬀectiveness of imple‐ menting a set of hybrid strategies, took into account the industry aspect of the issue and introduced the concept of “order point”, proving: the closer the state to the customization of the product, the earlier the “order point” appears in the value chain. Another element of the hybrid strategy is the strategy of lean manufacturing, which was developed and tested in the activity of Japanese automakers, which in the 20th century showed a signiﬁcant increase in labor productivity in comparison with their western counterparts [3]. Research conducted by scientists in the 1980s–1990s revealed the main reserves, among which were reduction of engineering hours for the develop‐ ment of a new product; reduction of production areas, due to improved quality; rethinking the value stream aimed at reducing the complexity of the product. Based on the success of Toyota, the scientists [8, 12] singled out fourteen management principles organized into the groups of the following actions: philosophy (long-term thinking), the process (elimination of waste), people and partners (respect, challenge, and grow), as well as problem solving (continuous improvement and training). Womack and Jones (2003) deﬁned ﬁve principles of lean manufacturing: Specify value, Identify the value stream, Flow, Pull, Perfection. Lean production is considered by supporters as one of the modern paradigms in the production world, which replaced mass production. Scien‐ tists [9, 16, 17] believe that the main areas of inﬂuence are: (1) employees, (2) functional areas and (3) other companies participating in the value creation. Firms that implement the philosophy of lean manufacturing, in fact, operate the complexity of systems/prod‐ ucts. The process of optimization of expenses provides, at the same time, the required level of consumer value, establishes a balance between the internal and external complexity of the product/system. Thus, managing the complexity of the product takes into account the breadth of the strategic framework in the context of decisions when optimizing the product architec‐ ture. Therefore, in the future, the strategic positioning of the company is assumed based on a quantitative assessment of the complexity of the product. The manufacturer is in constant contradiction. On the one hand, any modiﬁcation of products, their

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diﬀerentiation, expansion of the assortment list, customization of the product and much more: (1) change the composition of the product/systems, (2) form other interdepen‐ dencies and relationships between the structural groups of the elements of the system, (3) determine the other structural content of the product, and (4) the conditions for implementation and (5) technological support of the production process. In addition, in the case of technically complex products, the multiple relationships existing between the integrated components signiﬁcantly change the individual design of the particular component/product as a whole [24, p. 39]. All this leads to a signiﬁcant complication of the product of production, to an increase in the complexity of the systems. Accord‐ ingly, the cost of production and the cost of production increases, the possibility of commercializing the result is reduced. On the other hand, when the technology is brought to the classical (in the form of standardization of product composition, the formation of product platforms, and a modular approach to production), its complexity, as well as the complexity of systems (production, technological, business systems) is reduced. This leads to a reduction in the cost and ﬁnal cost of the product and the increase in the eﬀects and results produced by the producers. Moreover, at the same time - leads to the uniﬁ‐ cation of the product, to the loss of uniqueness, and, consequently, the competitive advantages in the future. The proposed contradiction is proposed to be solved through the formation of modern production management mechanisms; by increasing the coor‐ dination of actions related to development; intensiﬁcation of cooperation of participants in the system.

References 1. Davies, A.: Government policy and innovation in complex system industries: the cellular mobile telephone system industry. In: 1st International Conference on Technology and Innovation, Macau, p. 205 (1997) 2. Feitzinger, E., Lee, H.: Mass customization at Hewlett-Packard: the power of postponement. Harv. Bus. Rev. 75(1), 116–121 (1997) 3. Garina, E., Kuznetsova, S., Semakhin, E., Semenov, S., Sevryukova, A.: Development of national production through integration of machine building enterprises into industrial park structures. Eur. Res. Stud. XVIII, 267–282 (2015) 4. Hax, A.C., Majluf, N.: Competitive cost dynamics: the experience curve. Interfaces 12(5), 50–61 (1982) 5. Hobday, M.: Product Complexity, Innovation and Industrial Organisation, vol. 52, pp. 689– 710. University Business School, Cops Publication (1998) 6. Kuznetsova, S.N., Romanovskaya, E.V., Potashnik, Y.S., Grechkina, N.E., Garin, A.P.: Factors determining whether industrial parks are successful or not. In: Managing Service, Education and Knowledge Management in the Knowledge Economic Era - 4th Proceedings of the Annual International Conference on Management and Technology in Knowledge, Service, Tourism and Hospitality, SERVE 2016, pp. 53–58 (2017) 7. Lampel, J., Mintzberg, H.: Customizing customization. Sloan Management, p. 254 (1996) 8. Meyer, M., Utterback, J.: The product family and the dynamics of core capabilities. Sloan Manag. Rev. 34(3), 58–152 (1993) 9. Murray, A.: A contingency view of Porter’s “generic strategies”. Acad. Manag. Rev. 13(3), 390–400 (1988)

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10. Miller, A., Dess, G.: Assessing Porter’s model in terms of its generalizability, accuracy and simplicity. J. Manag. Stud. 30(4), 553–585 (1993) 11. Piller, F.: Mass Customization: Ein wettbewerbsstrategisches Konzept im Informationszeitalter, 3rd edn, p. 351. Deutscher Universitäts-Verlag, Wiesbaden (2003) 12. Pine, B.: Mass customizing products and services. Plan. Rev. 22(4), 6–13 (1993) 13. Porter, M.: What is strategy? Harv. Bus. Rev. 74(6), 61–78 (1996) 14. Romanovskaya, E.V., Garin, A.P., Dalidovich, K.N., Lapygin, Y.N.: Optimization of inventory management in the supply chain based on the process approach, No 1-1(13), p. 1. Bulletin of the University of Minin (2016) 15. Seiler, A.: Planning: BWL in der Praxis 3, p. 384. Orell Füssli, Zürich (2000) 16. Schuh, G., Schwenk, U.: Produktkomplexität managen: Strategien, Methoden, Tools, p. 284. Hanser, München (2001) 17. Tseng, M., Jiao, J.: Mass customization: In: Salvendy, G. (ed.) Handbook of Industrial Engineering: Technology and Operations Management, 3rd edn., pp. 684–709. New York (2001) 18. Wright, T.: Factors aﬀecting the cost of airplanes. J. Manag. Stud. 30(4), 122–128 (1936)

Increasing the Complexity of the Product Manufacture: Assessment of Trends and Prospects of the Process ( ) Ekaterina P. Garina ✉ , Viktor P. Kuznetsov, Alexander P. Garin, Elena V. Romanovskaya, and Nataliya S. Andryashina

Nizhny Novgorod State Pedagogical University named after K. Minin, Nizhny Novgorod, Russia [email protected], [email protected], [email protected], [email protected], [email protected]

Abstract. The article is devoted to the study and generalization of design prac‐ tices for the development of a complex product based on the example of the automotive industry. On the basis of the systematization of scientiﬁc experience, the conceptual apparatus is speciﬁed. Also theoretical questions of ensuring the productivity of production, development through the use of modern methods of managing the complexity of the product of production; interpreted the practices of industry leaders on the development of product creation systems and summa‐ rizes the experience of managing the complexity of the product production. It is proved that there are a number of trends that predetermine the complexity of the product of the industry: a signiﬁcant increase in the variety of products to the consumer’s request, against the background of a reduction in the life cycle of the product; technological sophistication of the ﬁnal product; the harshness of stand‐ ards/requirements imposed on the characteristics of the ﬁnal product; changing the architecture of the product, etc. It is proposed to develop the product of production in the modern economy through: the development of intelligent networks in the context of the integration interaction of producers, the change in the structure of the product (modularization, common platforms); supply chain/ supply chain integration; providing ﬂexibility of production; formation of deriv‐ ative projects within the framework of process management; acquisition of advanced technologies; active cooperation with foreign R & D centers. In the forecast period, it is necessary to change the system of relations between OEMOESs- producers and suppliers; changing/expanding the competitive priorities of producers, that is the development of production of industry leaders in the context of the formation of a complex industrial product. Keywords: Production · Production eﬃciency · Management system Complex product · Development · Complexity management

Studies show that economic growth in the modern world is associated with the produc‐ tion of complex high-tech products based on key business competencies. The allotted process is increasingly being considered in conjunction with the development of inte‐ grated adaptive production systems and enterprise management/production processes. At the same time, the available results of practical application of scientiﬁc research in © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 748–756, 2019. https://doi.org/10.1007/978-3-030-00102-5_79

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the ﬁeld of methodology for the creation/development of a new industrial product are contradictory. The task of ensuring eﬃcient production through new products in the industry is solved through a number of decisions, taking into account the set of trends in the creation/development of complex products by large industrial enterprises of the machine-building/automotive industry at the world level, among them: The ﬁrst trend: increase of more than twice in the last 15 years in the diversity of products, against a background of a reduction in the life cycle of the product - on average by about 25% [1]. Moreover, the variety of new products, their functionality, techno‐ logical content, as well as the complexity of introduction to the market have grown multiple from the state of “very simple” to “very complex”, and this is against the back‐ ground of a shortening of the product’s time to market [5] (Figs. 1, 2 and Table 1).

Fig. 1. Increase in the complexity of the product and shorten the time to market for the product in the historical perspective [5].

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300

automotive industry

300

mechanical engineering

375

375

250

250

225

225

216 190

217

81

76

200

170

189 200

150

127

129 150

125

125

100

93

91 100

75

75

50

50

25

25

0

257

1997 2002 2007 2012 2015 0

1997 2002 2007 2012 2015

Where: The length of the product's life cycle Quantity of raw materials and components Number of product sales Fig. 2. Increase in product variety/complexity as a percentage of the automotive industry and machine building in general (in comparison) [1].

Table 1. Comparison of the characteristics of the Russian automotive industry with the world level of development of the industry [12]. Parameter

Share of R & D expenditures

Experience of foreign companies - leaders of the industry Around 5%

Experience of domestic companies About 1%

The tendency to increase the variety of products produced against the backdrop of a decline in the life cycle is particularly noticeable on a global scale in the machine-building sector, particularly in the automotive industry. For example, a modern car, being a product with a significantly increased level of complexity (at times, compared to the last five years), is already produced in less time (often less than three years). The same car, about ten years ago, was brought to the market for five years. And its complexity ten years ago, by modern standards, can be described as “very simple”. The trend is intensifying. Currently, the average development time of the components of the product is 14 months, and the development of technically complex systems based on knowledge - ranging from two to four years. At the same time, the customer’s requirements are constantly growing and become more diverse.

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And when the producer satisfies the needs of customers in the product, the level of their expectations is not only increased, but also reoriented to original products that take into account their personal, social and cultural tastes [6]. The low growth rate of used components, components and raw materials is explained by the efforts of manufacturers to standardize and modularize production. The second trend: technological complication of the ﬁnal product. As statistical data shows, for the 1990s, the 2000s. The complexity of the produced product sharply increased - for the period 1997–2015. increased more than twofold due to a number of factors: – The produced product acts as a key point of introducing new technologies into the OEM manufacturing process [7]; – The creation of a complex product entails a complication of production systems and processes of enterprise vendors; – The development of a complex product through the integration of production systems and processes of producers is an intensive technology of production development (technological basis, production asset), where R @ D processes, engineering, produc‐ tion, technical and technological systems and processes, their maintenance are the fundamental stages creating value for the product. In addition to the functional and technical characteristics of the product, the tech‐ nological complexity of the end product in modern production is ensured by: 1. Actions to coordinate systems and production processes within the project. The technological sophistication of the ﬁnal product was the central factor ensuring the competitive advantage of industry leaders at the global level in the 1990–2000s. but at the same time predetermined a signiﬁcant increase in production costs. Therefore, in recent years, manufacturers have set themselves the task of restraining the growth of technological complexity of the ﬁnal product due to projects of modularity and stand‐ ardization of the product; due to the formation of complexity management mechanisms/ strategies. In the long term, this will reduce production costs to 49 billion euros per year. The launch of the campaign for the modularity and standardization of the product in the engineering industry as a whole began relatively later than in the automotive industry as a sub-sector. Therefore, according to statistics, the positive trend for increasing the complexity of the product in engineering is generally obvious (the increase in the complexity of the product to 200% per annual). 2. Constant growth of technical innovations at all stages/directions of production, in particular, in the ﬁeld of fuel eﬃciency (up to 30% of all developments), in safety issues, seamless connection of structural elements, information dynamics and comfort. Moreover, the study of R & D expenditure automakers and suppliers shows that about 40% of all investments are in innovation, have no practical use because of the lack of recognition on the market [10]. Of the remaining 60%, 20% are in demand only as part of a batch production. Another 20% of innovations meet all legal requirements, but do not add “originality to the product”, they do not realize the main competence of the manufacturer. Accordingly, such innovations in the long term do not pay oﬀ. Thus, 20% of innovations representing a proﬁtable investment

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remain, and only 10% of them are technologies with development potential. Compared: 3. Active automation of organizational and technical systems. Beginning in the 1940s and 1960s, the use of new equipment and technological processes was the main direction of production development, and already in the late 1960s many companies began actively implementing automated systems for planning and allocating resources; production management. At present, corporate management implements ﬁve types of corporate e-business systems, in demand and approved in practice by leading Russian and Western corporations, such as: electronic system of material and technical supply (e-Procurement); electronic supply chain management system (e-SCM, supply chain management); electronic sales system of products (e-Distri‐ bution); electronic system of interaction with customers and partners (e-CRM); sectoral and inter-branch electronic trading platforms (e-Marketplace). The complexity for domestic business is ensured by the fact of their transition to the automation of production, temporary and monetary costs. The third trend: global standardization of the product, which is provided by a number of reasons, in particular - the development of inter-corporate interaction; when the product design (modularity, open architecture) makes it possible to manufacture indi‐ vidual elements in any production, no matter where it is located in the world. For the domestic manufacturer, issues related to the generalization of project practices in the ﬁeld of quality were also signiﬁcant. The interest in creating quality systems from the manufacturer is explained by the opening opportunities to improve production, increase the eﬃciency of activities, and enter new markets. It is becoming the norm to have passed the examination (certiﬁed) quality system at the enterprise. The fourth trend: change the architecture of the product. Since the late 1990’s – 2000’s, a technological shift has been made towards the creation of an open architecture product. As a consequence, the product in the modern version is an integrated system of modules, which are often supplied to the OEM manufacturer in assembled form. As a result, a reduction in the technological diﬀerentiation of products between producers and an increase in their dependence on suppliers. Eﬀects of modular production of products have not yet been fully evaluated, but according to experts [3, 4], the imple‐ mented measures for standardization and modularity of production allow: (1) to manage cost groups, short product life cycle against the background of ever more sophisticated customer demand; (2) to monitor production on the background of constant complication of machines; (3) to positively inﬂuence the performance characteristics of the product. On the other hand, the disintegration and “modularization” of technologies, the rejection of the vertical integration of production activities, the development of “open networks” of interactions of various market participants allow the manufacturer to reduce the life cycle of the product, as a result of which it is forced to form new competencies/inno‐ vations and introduce new products to the market in a shorter time and with a greater frequency. Therefore, under the pressure of consumer preferences and experiencing the need to reduce costs, OEMs increase the number of product models, while at the same time reducing the number of product architectures, dramatically increasing generality. In particular, Volkswagen bring the number of modular platforms to four. GM is going to

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from 30 major platforms in 2010 to increase their number to 26 by 2017, and strategically - to move to four ﬂexible platforms by 2025. Toyota and Ford have similar tasks. Another option to reduce costs against the background of increasing complexity of the product is the decision to share OEM components with common components and modules on a single platform, as well as increase the volume of products. Fifth trend: increase in costs of production follows with increase in the cost of the ﬁnal product. The created models of products quickly become obsolete, and the produc‐ tion of new models/versions of products requires signiﬁcant investment in redesign, readjustment of equipment, etc. Volatility of demand and diﬀerentiation of customer requirements are the determining factor in the growth of the assortment/range of manu‐ factured products. As a result, the costs of producing the product are substantially increased, and consequently the ﬁnal cost of the product. According to Hobday [3] all engineering-intensive products (and this is the main characteristic of a complex product) have a high cost. And some elements of a complex product/system belong to several participants in the federation of systems that are in the implementation phase of the project in a temporary coalition for production preparation, conceptual and operational design of the product/systems, product manufacturing; installation, maintenance and maintenance of technically complex systems and commissioning. It turns out that the manufacturer, increasing the nomenclature list of products, thereby increases the total cost of production/sale of the product, and hence ﬁnal cost. Costs, as a rule, increase in proportion to the total time needed to produce the product and bring it to the market. The sixth trend: shifting the greater share of value added from the manufacturer of the product to the “production designer”. Traditionally, domestic OEM manufacturers had more than 90% of the added value of the product. As the technological sophistication of the ﬁnal product, as well as with the introduction in Russia in the 2000s, the mode of industrial assembly of the function of the OEM-manufacturer is reduced to the process of assembling ready-made technological modules, quality control and bringing the product to the consumer. As a result, short-term results include: a relative increase in the localization of foreign brands and an increase in the quality and technological level of local brands, the domestic automotive sector; creation of close relations of OEMmanufacturers with other participants of the system; section of investment risks between all participants. But at the same time, the modiﬁcation of the very basis for the devel‐ opment of the entire value chain of the product - currently OEMs have about 30% of the value added. The remaining 70% fall on suppliers of R & D technologies and “production designers”. According to forecasts of analysts at the Massachusetts Institute of Tech‐ nology, the trend will be strengthened. The results of these changes are separation of product innovation from production; the departure of the OEM manufacturer from managing the value chain through its own production units; shifting the center of proﬁt from production to product development. Seventh trend: development of systems of intercorporate interaction: networks of business processes - BPN. The concentration of manufacturers and suppliers entailed the development of a system of inter-corporate interaction - business-to-business (B2B) and the creation of standards of basic business processes at the level of technologies. For comparison, the Korean car industry at the international level is developing a system

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of inter-corporate interaction with GM and Ford; with companies-manufacturers of automotive components - such as Delphi and Visteon. In Japan, Toyota has partnered with Denso, the automotive component manufacturer, in Europe Mercedes-Benz, BMW and Renault have partnered with automotive components manufacturers Bosch and Valeo. Integration of internal and external business processes is realized using SCM (chain management), CRM (customer relationship management) and VAN (information exchange system). This applies not only to the internal work processes of companies, but also to inter-organizational systems (IOS). In the future, the development of inter‐ action systems is planned in the following directions: business-business, businesssupplier, business-client. The need for the systematization of business processes of interaction between enterprises arose in the 1960s. Eighth trend: Change of systems of mutual relations of OEM- OESs- manufacturers with suppliers. The study shows that in the industry there is now a focus of mass produc‐ tion to meet the individual needs of the buyer, so all used to proceed value in the basic processes of the manufacturer become suppliers of the company. According to Martinrea International [11], on average 60-75% of the cost of a new vehicle is determined by the ratio of R & D-cooperation between car manufacturers and suppliers. The relationship between OESs and producers in general, between OESs-producers and FTSs-suppliers in particular, has undergone profound changes over time and revealed a number of diﬀerences between Western and Japanese approaches to produc‐ tion and in relations with suppliers. Europeans prefer to independently produce a larger share of components, have considerable freedom in choosing suppliers, preferring the most favorable terms of delivery (prices, quality and services). The behavioral model is based on the interchangeability of suppliers. The approach typical of Japanese industry is based on a strong interaction between the customer and the supplier. The solution of any problem (nutritional deﬁciencies, eﬃciency, losses, etc.) is accomplished through forms of mutual cooperation. Each Japanese OEM manufacturer selects a limited number of FTSs, with which a systemic partnership is established, which determines greater manageability. Ninth trend: Change/expansion of competitive priorities of producers. To classical priorities for a long time belonged to: (a) compliance of product quality with technical requirements, i.e. The company’s ability to produce products in full compliance with the technical design assignment; (b) the reliability of the products, c) the timing of the fulﬁllment of orders. However, in the early 1990s, the ability of the company to produce products at low prices and in accelerated terms becomes essential for competitiveness [11, p. 47]. The explanation for this is the following - each product in the eyes of the consumer has a certain value. This concept from the point of view of the consumer means the possibility of acquiring a product with the most important characteristics, i.e. produced in strict accordance with the technical conditions, within the prescribed period and with a certain reliability, at the lowest possible price. Therefore, to increase its competitiveness, the manufacturer must strengthen the consumer value of the product. The manufacturer needs [8]: (a) either improve the most important characteristics for the consumer, or reduce the price, or do both at the same time; (b) to create the impor‐ tance of the fastest possible withdrawal of a new product to the sales market.

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In this way: 1. There are a number of trends that predetermine the complexity of the product industry: a signiﬁcant increase in the variety of products (at the request of the consumer), against the background of a reduction in the life cycle of the product; technological sophistication of the ﬁnal product; the harshness of standards/require‐ ments imposed on the characteristics of the ﬁnal product; changing the architecture of the product; increase in production costs, increase in the cost of the ﬁnal product; shifting the greater share of value added from the manufacturer of the product to the “production designer”; development of systems of inter-corporate interaction of participants in the federation of systems (intersectoral/intersectoral nature); changing relations systems OEM OESs- manufacturers with suppliers; change/ expansion of competitive priorities of producers. That is, the development of produc‐ tion of industry leaders is carried out in the context of the formation of a complex industrial product; 2. Creation/development of a product of production in a modern economy by industry leaders is carried out through: the development of intelligent networks in the condi‐ tions of integration interaction of producers [2], the formation of a short product life cycle; optimization of product structure (modularization, common platforms); supply chain/supply chain integration [9]; providing ﬂexibility of production; forma‐ tion of derivative projects within the framework of process management; acquisition of advanced technologies; active cooperation with foreign R & D centers.

References 1. Berger, R.: Mastering product complexity. Düsseldorf, November 2014. http://www. rolandberger.us/media/pdf/Roland_Berger_Mastering-Product-Complexity_20121107.pdf. Accessed 28 Feb 2017 2. Garina, E., Kuznetsova, S., Romanovskaya, E., Garin, A., Kozlova, E., Suchodoev, D.: Forming of conditions for development of innovative activity of enterprises in high-tech industries of economy: a case of industrial parks. Int. J. Entrep. 21(3), 1–6 (2017) 3. Hobday, M.: Product Complexity, Innovation and Industrial Organisation. University Business School, Cops Publication, No. 52, pp. 689–710 (1998) 4. Mizikovsky, I.E., Bazhenov, A.A., Garin, A.P., Kuznetsova, S.N., Artemeva, M.V.: Basic accounting and planning aspects of the calculation of intra-factory turnover of returnable waste. Int. J. Econ. Perspect. 10(4), 340–345 (2016) 5. Prasad, B.: Competitiveness analysis of early product introduction and technology insertion. In: PED-Vol. 68-1, Manufacturing Science and Engineering, Proceedings of the 1994 International Mechanical Engineering Congress and Exposition, Chicago, IL, vol. I, pp. 121-134. ASME (1994) 6. Prasad, B.: Concurrent Engineering Fundamentals, Vol. I: Integrated Product and Process Organization. Prentice-Hall PTR, New Jersey (1996) 7. Schätz, C.: A Methodology for Production Development: doctoral thesis, 126 p. Norwegian University of Science and Technology (2016) 8. Garina, E.P.: Business decisions on the creation of a product in industry, No. 1. Bulletin of the University of Minin (2014). http://vestnik.mininuniver.ru/jour/article/view/446/422. Accessed 07 Aug 2017

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9. Romanovskaya, E.V., Garin, A.P., Dalidovich, K.N., Lapygin, Y.N.: Optimization of inventory management in the supply chain based on the process approach, No. 1-1(13), p. 1. Bulletin of the University of Minin (2016) 10. Andryashina, N.S., et al.: Formation of business solutions to increase the competitiveness of products (services) enterprises: monograph, 220 p. Nizhny Novgorod State University of Engineering and Economics, N. Novgorod (2014) 11. Chase, R.B., Equiline, N.D., Jacobs, R.F.: Production and operational management. 8th edn., 704 p. Publishing house “Villamé” (2004) 12. Shushkin, M.A.: The development of enterprises of the automotive industry on the basis of industrial partnership strategies: theory, methodology, practice: doctoral thesis, 299 p. Penza State University, Penza (2013)

International Financial Markets in the Conditions of Transformation of Financial System Nelli V. Tskhadadze1 ✉ and Nina V. Chernorizova2 (

1

)

Financial University with the Government of the RF, Moscow, Russia [email protected] 2 Moscow Technical University, Moscow, Russia

Abstract. The authors consider the role of ﬁnancial markets, which have become a dominating factor of globalization of the world economy. They allowed taking international economic relations to a new qualitative level, which determines the modern character of global economic relations. Since the second half of the 20th century, ﬁnancial markets have become a leading force of the crisis process, which role grows with economy’s globalization. Formation of the global ﬁnancial market in the conditions of transformation of ﬁnancial capital and development of banking sector is analyzed. With devel‐ opment of stock trading, ﬁnancial of stock deals became a more attractive form of investing free capital than crediting of real sector. The process of liberalization of ﬁnancial markets is studied – which was performed in the course of general integration processes, including within decisions of international economic organizations. At present, ﬁnancial liberalization, with appeared as economic phenomenon, acquires larger social and political role. National authorities’ refusal from regu‐ lating the inﬂow of ﬁnancial capital led to transformation of the status of a sover‐ eign state. The issue of “blurring” and “disappearance” of national sovereignty began to be discussed, as it is threated by global ﬁnancial ﬂows, the Internet, global media empires, transnational corporations, etc. Recommendations for corrections into conditions of ﬁnancing of the global ﬁnancial system are of non-speciﬁc and cosmetic character. At that, objective shifts in functioning of the global economy, determined by ﬁnancial globalization and large changes in inter-state and inter-regional balance, will stimulate inter‐ national society for cardinal reconsideration of conditions of functioning of this system. Keywords: International ﬁnancial risks · Financial system · Financial crises Financial liberalization · World prices · Financial regulation International ﬁnancial organizations

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The Role of Financial Markets in the Global Economy

International ﬁnancial markets, which exceed the growth of export and global produc‐ tion, became a dominating factor of globalization of the world economy. Incoming investment ﬂows, expansion and integration of markets of capital, and diversiﬁcation © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 757–764, 2019. https://doi.org/10.1007/978-3-030-00102-5_80

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of the spheres of ﬁnances’ application took international economic relations to a new qualitative level, which determines the modern character of global economic relations. However, in recent decades the ﬁnancial sector has the role that diﬀered from the one assigned to it by the economic theory. Its classic version supposes that ﬁnancial sphere reproduces deep processes in economy and, under the inﬂuence of exogenous pushes, performs chaotic ﬂuctuations, which are similar to movements of a pendulum. However, in practice, ﬁnancial capital started – from the second half of the 20th century – to show itself as a global destructive tsunami, which moves between countries and regions and eliminates the weakest markets. In view of this fact, it is possible to conclude that ﬁnancial markets became a leading power of the crisis process, which role grows with economy’s globalization economy.

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Formation of the Global Financial Market

Starting from the last quarter of the 20th century, the global economic situation has been formed under the inﬂuence of increasing power of speculative capital, which does not participate in provision of reproduction process and thus possessing necessary freedom and – in the conditions of globalization of economy – suﬃcient mobility. In late 19th century, M.I. Tugan-Baranovsky studied the process of re-accumulation of ﬁnancial capital and introduced into the economic theory the notion “free capital”, treated as “capitalized share of national income that is not applied in the place where it appeared” (Tugan-Baranovsky 1914). Absence of connection to the sphere of origin forms the logic of search by excessive ﬁnance of new spheres of application, where the decisive qualities are freedom and mobility of capital. The studies of crises of the modern period (Rumyantsev 2007; Sazhina 2012) note amazing correlation between the level of mobi‐ lity of ﬁnancial capital and frequency of ﬁnancial crises. In the pre-industrial period, ﬁnancial capital ensured execution of tasks of economic development, having a credit form. In 17th – 18th centuries, in the conditions of factual absence of the banking sphere, free capitals participated in usurious crediting and were applied in ﬁnancing of trade or individual credits. Formation of the banking sector provided an institutional basis for growth of credit operations and development of the system of debt obligations. With development of capitalistic economy, a tendency for transformation of ﬁnancial capital into industrial capital appeared. Expansion of credit allowed conducting expan‐ sion of production machine and further increase of commodity production beyond the ﬁnancial capabilities of market participants. Also, expansion of credit stimulated increase of the volumes of trade operations, provoking growth of commodity prices, which did not reﬂect the real balance of demand and oﬀer. Excessive investments of ﬁnancial capital into real economy ensured ﬁctitious demand and created an illusion of underproduction with factual overproduction. C. Kindleberger calls such application of credit “adding fuel to the ﬂames”. (Kindleberger and Aliber 2010). With development of stock trade, ﬁnancing of stock deals became a more attractive form of investing free capital than crediting the real sector. Traditional entrepreneurial proﬁt, created in the conditions of real economy, could not be compared to the proﬁt

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from speculative placement of capital, stock games, and ﬁnancial pyramids. Investments into creation and development of production tools were less proﬁtable and most trou‐ blesome as compared to other variants of the investment strategy. Due to this, the investments became marginal – they ceased to be top-priority in the investments policy of most market participants. Active actions of speculators led to the periods of increased stock activity, with development of which the market situation became more and more distant from economic realia. At that, transformation of consciousness of market participants took place, which consisted in shift of their interest from proﬁt formed in “dull”, classic segment of entrepreneurship – material production, to the proﬁt obtained from risky speculative schemes, creation of ﬁnancial pyramids, and other types of activities that are not useful for society. Expansion of credit in the system of stock trade became a reason of stock crises, which became a usual phenomenon of economic life, and speculations with commodities and related bankruptcies became inseparable qualities of the global economic develop‐ ment. Each downfall of the market was preceded by quick growth of speculative oper‐ ations, characterized by the American researcher J. Gibbons as “expectation of fraud” (Gibbons 1858). Karl Marx noted, “Race in trade and industry, which has demoralizing inﬂuence on their development over eight or ten years of prosperity, led to the largest catastrophe. Appearance of the gangs of speculators and ﬁctitious creditors, which were positions as an example of successful… business, for violating trust to the methods of slow enrichment with fair business – became the source of poison. The sphere of inﬂu‐ ence of each source of corruption is expanding” (Marx and Engels 1964). These words, which were written under the impression of the 1857 crisis events, are still topical nowadays. In order to limit the sources of origin of speculative capital and increase of sustain‐ ability of the ﬁnancial system, various legislative acts were adopted, the earliest of which is Peel Banking Act of 1844. 1. Another example is the Glass–Steagall legislation, adopted in the USA during the Great Depression; it is still the foundation of the American ﬁnancial sphere. 2. Qualitative push in creation of new ﬂows of ﬁnancial capital and formation of new relations in the sphere of international ﬁnance was performed in 1970’s, when deep transformations in the energy sphere led to transformations of the post-colonial system of distribution of total income from the global trade in favor of extracting countries (by means of leveling the value of added value between the products of the initial and following stages of the production cycle). Such redistribution of resources formed excessive reserves of free capital: Kuwait and Saudi Arabia, peculiar for small population, received $40 billion of annual income after 1973, and annual growth of incomes of the OPEC members reached $ 80 billion (Stiglitz 2010). Being unable to ﬁnd application in underdeveloped economies of oil exporters, which had limited possibilities for mastering the received resources, the new capitals entered the banking system of Western countries, which this formed excessive and accessible credit ﬂows. International banks received $50 billion, which return into turnover of the world economy took three years (1974–1976). (Stiglitz 2010). Formation of new ﬂows of free capital took place against the background of “ﬁnan‐ cial revolution”, which consisted in cancelling of direct state control over credit and

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interest policy of banks; liberalization of banking law; liberalization of requirements for mandatory reservation; cancelling of limitations for opening certain types of accounts; conduct of certain types of activities by banks (investment and insurance business, deals with real estate), etc. (Stiglitz 2010). It should be noted that unlike liberalization of foreign trade relations, which eﬀect is evaluated positively, possible proﬁts from ﬁnancial liberalization are ambiguous. It was supported by S. Fischer and L. Summers. Thus, Fischer oﬀered to include stageby-stage liberalization of movement of ﬁnance into the number of tasks of the IMF. At that, J. Keynes, when preparing Bretton-Woods agreements, showed doubt in the neces‐ sity for increase of capital’s mobility. Some other economists are skeptical towards proﬁts from liberalization of ﬁnancial markets (Klyukin 2010). It is stated and such liberalization raises crisis risks in developing countries, and it is recommended for the countries that are already in crisis to implement active control over movement of capital. J. Williamson, the authors of basic provisions of the “Washington consensus” (the IMF and the United States Department of the Treasury), states that did not supplement the standard package of market reforms with the requirement of liberalization of ﬁnancial markets due to absence of consensus on that issue (Klyukin 2010). Starting from late 1980’s, the process of erosion of the main provisions of the Banking Act of 1933 was started. Thus, in 1987 the Federal Reserve System allowed three banking departments to pass through “subsidiary companies on securities” a range of insigniﬁcant operations (e.g., emission and distribution of commercial securities), with a limitation that income from such actions would not exceed 5% in aggregate incomes of the given subsidiary company. In 1989 this limit was raised to 10%, and in 1996 – to 25%. Also, it was allowed to issue shares and corporate obligations (Stiglitz 2010). In March 2000, the Law on ﬁnancial modernization was adopted, which allowed banking establishments to created subsidiary companies in the form of insurance soci‐ eties and companies on securities. It was allowed to create so called ﬁnancial holding companies, which has a right to conduct all ﬁnancial operations in the volumes not exceeding own capital, the suﬃciency of which was determined by the FRS (Stiglitz 2010). At the same time, in the UK – the world center of banking services and ﬁnancial capital – large reduction (to 12.5%) of liquidity coeﬃcient started – ratio of assets to issued credits; before 1971, it had been at the level of 28% (Stiglitz 2010). The above solutions freed a large massive of ﬁnancial assets that has been reserved as a banks’ guarantee to execute their short-term ﬁnancial obligations and made banks’ position in case of ﬁnancial changes more vulnerable. Then the process of liberalization covered the developing world and the countries with transitional economy. Annual inﬂow of capitals to their ﬁnancial markets increased from 1991 to their maximum indicator in 1997 by 3.6 times ($75.4 billion/$74.8 billion). Total inﬂow of capital into these states for 1991-2000 constituted $ 1,585 billion, including $171 of shares, $686 billion of bonds, and $704 billion of loans (Stiglitz 2010). Liberalization and instability of ﬁnancial markets Liberalization of ﬁnancial markets was conducted in the course of general integration processes, including within decisions of international economic organizations. Thus, in

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1995 the summit of G-7 in Halifax adopted an economic communiqué, containing a call for stimulating the participants of the IMF and the World Bank that eliminated protective barriers in internal ﬁnancial markets. In December 1997, within liberalization of the sphere of ﬁnancial services, the states of the WTO signed a multilateral arrangement which established an obligation to guarantee freedom of non-residents’ access to national ﬁnancial markets in the fund, insurance, and banking sectors from 1999 (Stiglitz 2010). Forced development of the ﬁnancial revolution was stimulated by improvement and appearance of new means of communication, which stimulated acceleration of transregional transfer of negative economic information, which inﬂuenced the mood of market participants. Thus, while it took two weeks in 1857 for the London City to learn of the banking panic in New York after the fall of Ohio Life Insurance and Trust Company (the time required for the sea ship to cross the Atlantic), monitoring of changes in the world trade platforms is conducted online. At present, strong ﬁnancial liberalization, which appeared as an economic phenom‐ enon, acquires larger social and political role. Refusal of national authorities from regu‐ lation of the inﬂow of ﬁnancial capital led to transformation of the status of a sovereign state. Political science discusses the issues of disappearance of national sovereignty, which is threatened – apart from global ﬁnancial ﬂows – by the Internet, global mediaempires, transnational corporations, etc. (Stiglitz 2010). Increase of the processes of ﬁnancial liberalization underwent further transformation and quality of ﬁnancial capital, which acquires a speculative form that aimed not at strategic ﬁnancing of the real sector of economy but at short-term operations at the most proﬁtable markets. Most of short-term crediting was used for consumption, not invest‐ ments, which us transferring the current budget problems to later periods. Instability of ﬁnancial markets was seen in further distortions of the global economy – especially during the crises in South-East Asia (1997), Russia (1998), Brazil (1998– 1999), and the USA (2000), and destructive inﬂuence of unregulated ﬂows of “hot” capital, which moved along the regions spontaneously, seeking for a reliable refuge or conditions for obtaining speculative proﬁt, became in the second half of the 20th century the most important sing of the global economic development. Free ﬁnancial capital transformed also a part of trade – primarily, resource – markets. Product price is no longer a totality of cost and justiﬁed proﬁt. From the period of formation of excessive quantitative mismatch between monetary mass and volumes of goods and services in the world markets, dependence of price on cost became rather conventional. Thus, oil prices, which were unpredictable phenomenon, depended on demand-oﬀer ratio, and thus were controlled by exporters of oil. An undisputable fact is quick increase of prices that was performed in 1972 by Arabic oil producers. Also, clear actions (according to certain versions, they were politically motivated) led to reduction of oil prices in 1986. However, at present, oil prices are almost separated from actions of oil producers. They are formed at stock markets and in the minds of brokers who trade ﬁnancial tools that are based on shipments of oil but are detached from actual movement of this product. In this regard, behavior of world oil prices in 2004-2008, which – without any clear reason – rose to $147 per barrel (August 15, 2008) - was called by the Chevron CEO anomalous. Over the next four months, there was quick decline to

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$37 per barrel (August-September - $100, October - $70, November – below $50, and towards the end of the year - $35 per barrel). At that, consumption and production grew in equal rates: during 1997-2007 the word demand for oil grew by 15% (3.433 billion/ 3.953 billion tons), and production – by 13% (3.46 billion/3.906 billion tons) (Reinhart and Rogoﬀ 2011). Balance of demand and oﬀer did not stabilize diﬀerent movement of oil prices. Such changes of the price trend could be determined only by the inﬂuence of speculative factors. Due to negative inﬂuence of speculative capital, stock and ﬁnancial markets lost their main function – providing the reproduction sector of economy with liquidity – and turned into a simple market with speculators (Akaev and Sarygulov 2013). This fact is conﬁrmed by the example of the Russian stock market, which, despite the growth in 2004–2007, decreased during the 2007–2009 crisis to the minimum volumes. That reduction has its certain internal logics, as stock indices returned to the level at which they would have been in case of absence of a “bubble” in stock market in 2005 (with certain downward correction that is related to negative expectations of market partici‐ pants in the period of recession). Modern conditions of functioning of the global ﬁnancial market As a result of the “ﬁnancial revolution”, a special global system has formed, which has no territory but which has a center and periphery. Within it, ﬂows of capitals are created, which ensure ﬁnancial ﬁlling of the most important directions of the global economic activities (Tskhadadze 2017). In the conditions of growing openness of national economies during the usage of the modern communication technologies, these resources are freely distributed in various regions through the global ﬁnancial markets. Simultaneously, ﬂows of “hot” capital create the reproducing state of unsustainability, as “ﬁnancial markets are unstable due to their nature” (Tskhadadze 2017). In case of justiﬁcation of this conclusion, the role of ﬁnancial markets in the modern economy requires cardinal reconsideration. Analyzing the circumstances of emergence of the 2007–2009 global ﬁnancial crises, a lot of researchers point out the necessity for developing the parameters of a new global ﬁnancial architecture, which is more ﬂexible and reliable and which excludes the prob‐ ability of formation of ﬁnancial bubbles that generate crises process that lead to quick downfall and further depression in economy. Of course, freedom of movement and variety of forms of international capital remain an important determinant of functioning of ﬁnancial markets, but they have to be accompanied by the measures of control over inﬂow of short-term capital and stimulation of inﬂow of long-term ﬁnances. Primarily, this should be achieved by means of implementation of measures for radical update of the banking sphere. “It has to be shy and fair”, outlined the contours of a new banking system the federal president of the BRD during the ﬁnancial crisis (Reinhart and Rogoﬀ 2011). In April 2009, similar position was articulated by P. Krugman. In the article “Make banking business dull”, the Nobel prize winner on economy (2008) supported the return to strict ﬁnancial and banking regulation, pointing out that the bank should return to the role of intermediary in distribution of money ﬂows and should act in strictly determined limits, without speculative business in the ﬁnancial markets, the costs of which are borne by the society. P. Krugman warned that if cardinal reformation of the ﬁnancial sphere

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were not performed, the 2007-2009 crisis would become just a prelude to more serious problems (Krugman 2010). Ambiguous evaluations – as a result of economic problems of 2007–2009 – were given to other subjects of the ﬁnancial market – the ranking companies, which, according to J. Stiglitz, “stimulate cyclicity in the same manner as market prices, and their evalu‐ ations, used by regulating bodies, aggravated cyclicity of the process of banking cred‐ iting” (Stiglitz 2010). The market mission of ranking agencies, which consisted in objective informing of society on the real state of participants of the economic process, was very ineﬀective in practice – which became a reason for decrease of trust to their activities. Transparency of ranking establishments as to the process of preparation of analytical materials, on the basis of which decisions are made, and opening the initial data might stimulate better understanding the conclusions that are presented in the form of credit rankings. Ranking companies have to provide larger openness of data in the results of their previous activities, which will allow interested parties to see the level of professionalism of analytical groups that took the responsibility for evaluation of sepa‐ rate companies and whole countries and regions (Stiglitz 2010). An important role in development and establishment of rules of movement of transborder capital belongs to international ﬁnancial organizations. The IMF acknowledges that trans-border movement of capital will bring large economic proﬁts, stimulating redistribution of ﬁnancial resources. However, instability of these ﬂows raises vulnera‐ bility at the national level and might lead to danger of inter-country shift of negative tendencies and shocks. Due to this, possibilities of the IMF in the issues of inﬂuencing inter-regional ﬂows of capital require expansion and development of measures of management as to inﬂow and outﬂow of foreign capital. However, it should be acknowledged that recommendations for corrections in the conditions of functioning of the global ﬁnancial have unspeciﬁc and surface character. At that, objective shifts in the global economy, caused by ﬁnancial globalization and large changes in inter-country and inter-regional balance, will stimulate international society for cardinal reconsideration of the conditions of functioning of this system (Tskhadadze 2017).

References Tugan-Baranovsky, M.I.: Periodical industrial crises: History of English crises. General theory of crises. 3rd edn., 466 p. SPb: O.N. Popova’s society (1914) Rumyantsev, A.M., et al.: Modern cycles and crises, 471 p. Mysl (2007) Sazhina, M.A.: Crisis management, 265 p. Forum: Infra M (2012) Kindleberger, C., Aliber, R.: Global ﬁnancial crises. Manias, panics, and downfalls, No. 4, 544 p. SPb: Piter (2010) Economist. No. 4 (1949) Gibbons, J.S.: The Banks of New York, their Dealers, the Clearing House, and the Panic of 1857, 399 p. Appleton & Co., NewYork (1858) Marx, K., Engels, F.: Collection of works, 2nd edn., V. 35, 526 p. Gospolitizdat (1964) Report by Stiglitz: On the reform of the international monetary and ﬁnancial system: lessons of global crisis. Report of the Committee of ﬁnancial experts of the UN, 328 p. International relations (2010)

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Klyukin, P.N.: Market research institute in new historical coordinates (“economic thought – economic system”). In: Klyukin, P.N. (ed.) Selected works of Kondratyev market research institute. Russian Academy of Sciences, Institute of Economics, Ekonomika Publ., pp. 11–32 (2010) Reinhart, K.M., Rogoﬀ, K.S.: This time it will be diﬀerent: eight centuries of ﬁnancial folly, 528 p. Karyera Press (2011) Akaev, A.A., Sarygulov, A.I., et al.: Structural changes in developed and developing economies, 171 p. SPb: Polytechnical university (2013) Tskhadadze, N.V.: Risk of emergence of crisis processes and economic stagnation in modern Russia. Phenomenon of the market economy: vectors and features evolution, Academic Monograph-LSP, 620 p. (2017) Tskhadadze, N.V.: Dynamics of development of global economic crises. Actual issues of economics and modern management, Samara, pp. 12–18 (2017)

The Main Tendencies and Directions of State Policy in the Sphere of Technological Development of Russia Tatiana A. Alekhina ✉ , Oksana E. Konobeeva, Elena E. Konobeeva, Evgenia V. Simonova, and Maria A. Stepanova (

)

Orel State University of Economics and Trade, Orel, Russia [email protected], [email protected], [email protected], [email protected], [email protected]

Abstract. The authors study the role and meaning of the national technological initiative. Peculiarities of the state policy in the sphere of technological develop‐ ment of the country are presented. Analysis of the problems of development of national economy and activation of innovational activities in Russia is performed. The authors determine the main problems of implementing the strategy of tech‐ nological development of Russia and oﬀer the ways of solving them. As a result of the performed research, the main directions and measures of implementing the program of technological development are prepared. The authors present a strategy of formation of results of implementing the program of the country’s development. Conclusions and oﬀers that are formulated in the article could be used during formation and implementation of eﬀective state policy in the sphere of technological development of the RF. Keywords: State policy · Innovational activities · Strategies · Program National Technological Initiative · Technological development

1

Introduction

The state of national economy determines well-being of population. The Russian crisis, which was caused by reduction of oil prices, showed the necessity for radical changes. National technological initiative has to distinguish the most perspective spheres of economy and stimulate them. Their development will lead to development of economy on the whole. For people, this means increase of life span and improvement of living standards. Activation of innovational activities in Russia is the main factor of development of national economy and its economic growth. At that, the guarantee of success of imple‐ mentation of innovations, according to a lot of experts, lies in quality of innovational processes. Innovational path of development of national economy, selected by the Government of the RF, stimulates active involvement in the process of search for inno‐ vational ideas and means of their commercialization for the purpose of creation of prod‐ ucts that conform to technological process and adaptation to current changes. Strong stimuli for innovations are complex economic situation, Western sanctions, policy of © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 765–773, 2019. https://doi.org/10.1007/978-3-030-00102-5_81

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import substitution, such large-scale projects as “National technological initiative” (hereinafter – NTI), etc. The core of innovational economy is the spheres that issue high-tech products. For stimulating their development, state corporations were created, which partici‐ pate in development, production, and export of products with innovational and stra‐ tegic potential. In 2014, the Government of the RF outlined the necessity for determining and solving perspective problems of development of national economy with the help of long-term planning. Also, in the Message to the Federal Assembly dated December 4, 2014, the President of the RF Vladimir Putin outlined the National Technological Initiative as one of the priorities of state policy. As a result, the National Technological Initiative includes the following: – ensuring global technological parity of Russia and technological leaders, – preparing national companies for work in completely new sectorial markets, which do not yet exist, but which will constitute the basis of the global economy. The role of national technological initiative is to determine the most important and signiﬁcant spheres of economy and create Russian companies in these spheres. With rational tactics and strategy of selection, such concept may ensure multi-billion ﬁnancial turnover. Russia may become a competitive state – at the level of developed countries – as win a large part of the world market. The highest attention is paid to the spheres that are related to leading technologies. Successfulness of implementing the national technological initiative depends not only on the government. It should be a system of priorities and a matrix of management (Decree of the Government of the RF 2016). One of the main directions of implementation of the NTI should be state support for development of high-tech spheres and science-driven productions by creation of organ‐ izational and legal conditions for development of public-private partnerships that unite in various combinations the state, public, and business structures for joint solution of speciﬁc technological tasks, which, in its turn, stimulates provision of high rates of technological, economic, and social development. It is important to develop a system of support for entrepreneurial initiatives that are aimed at creation of new technologies. It is important to unify eﬀorts of business, science, and government and ﬁnd points of their application. That’s why the national technological initiative should be conducted based on long-term forecasting, which allows determining the problems that will be faced by Russia in 10–15 years (Alekhina et al. 2016). Technological development of the RF is turning science and technologies into the key factor of development of Russia and provision of the country’s readiness for eﬀec‐ tive reaction and solution of important problems and tasks. Peculiarities of formation of state policy in the sphere of technological development of Russia determine the new role of science and technology as the basic elements in solving national and global problems and allow forecasting the changes that take place in the world, taking into account internal tendencies, expectations, and needs of the Russian society, and determining new tasks and solving them. Priorities of technological development of the country are the most important direc‐ tions of technological development of the state, within which technologies are created

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and used, solutions are implemented, which are ensured by HR, infrastructural, infor‐ mation, ﬁnancial, and other resources (Rygalin 2006). Russia is one of the four global scientiﬁc states: the Russian scientiﬁc and engi‐ neering schools solved the problems of socio-economic development and security of the country, contributed into humanity’s accumulation of scientiﬁc knowledge and creation of leading technologies. This was stimulates by adequate system of organization of R&D (Sagdatullin 2014). The Problems that Hinder Technological Development of the Country At present, Russian science continues to play an important role in provision of the country’s security and development of the global science. The modern stage is peculiar for competitive advantages of the RF and for unsolved problems that hinder technolog‐ ical development of the country. Let us view these problems in detail. 1. Several hundreds of scientiﬁc and educational centers conduct R&D at the global level, but research potential is concentrated only in several regions of the country. 2. There is large potential in certain spheres of fundamental research, which is reﬂected within joint international projects. However, the directions of research correspond to the directions that are peculiar for recent decades of the past century. 3. Since 2004, the number of scientiﬁc workers younger than 39 increased by 30%, with leveling of general age structure of scientiﬁc personnel. Pupils and students of Russia are traditionally among winners of international competitions in the sphere of natural and technical disciplines – however, not all of them continue working in these directions. In the ranking of talent attraction, Russia is ranked 50th – 60th. The purpose of technological development of Russia is to ensure independence and competitiveness of the country by means of creation of an eﬀective system of increase and fuller usage of intellectual potential of the nation (Zakharkina 2016). Stages of Implementation of the Strategy of Technological Development of Russia This Strategy is implemented in several stages, which are related to stages of develop‐ ment of economy and the budget system of the RF. Each stage is assigned with a set of indicators that characterize the course and main results of the Strategy’s implementation. At the ﬁrst stage of implementation of this Strategy (2017–2019), organizational, ﬁnancial, and legal mechanisms are created that ensure coordination of scientiﬁc, tech‐ nological, innovational, industrial, economic, and social policy, and readiness of the RF for larger problems and complex tasks; research projects are started – which are aimed at obtaining new fundamental knowledge that is required for long-term development and are based on convergence of various directions of research, including humanitarian and social; implementation of technological projects is begun within top-priority direc‐ tions of technological development of the RF, determined in this strategy. This stage is peculiar for formation of a comprehensive system of sustainable reproduction and attraction of personnel for scientiﬁc research and technological development of the country, creation of conditions that are necessary for growth of investment attractiveness of scientiﬁc, technological, and innovational activities.

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At the second stage of implementation of the analyzed strategy (2020–2025), completely new technological solutions are formed in the interests of the national economy – they are based on nature-based technologies; the measures aimed at ensuring transition to active phase of commercialization of results of intellectual activities and large-scale creation of new products and services, based on technologies, which react to serious problems, are taken; growth of the volume of export of technologies and hightech products is envisaged, including by implementing the National technological initia‐ tive and support for national companies that enter the world market. Principles and Directions of Implementation of State Activities in the Sphere of Technological Development of the RF The principles of state policy in the sphere of technological development of the RF are as follows (Fig. 1): Principles of state policy in the sphere of technological development

Freedom of scientific and technical creativity

Concentration of resources

Openness

Systemic support

Targeted support and competition

Fig. 1. Principles of state policy in the sphere of technological development of the country.

The authors study the issues relating to development and determination of directions and measures of implementing the state activities in the sphere of technological devel‐ opment of the RF. Figure 2 shows the mechanism of development of these directions. The main directions of implementing the state policy in the sphere of technological development of the RF are as follows: HR and human capital, infrastructure and envi‐ ronment, management and investments, interaction and cooperation, integration. Let us view some of them in detail. Education is a very conservative social institute. Its essence is the role of the main tool of reproduction of knowledge economy – i.e., the dominating picture of the world. This institute changes only under the inﬂuence of external circumstances – but these are necessary changes, which allow for large-scale transformation of society for new tasks. At present, developed countries are in transformation that is related to mastering of new package of technologies – information & communication ones, which change the nature of relations within the society including within the educational sphere. These technologies provoke changes in economic, political, social, and cultural sphere – and, as a result, form new requirements to the system of education (Khoreva 2008). The scientiﬁc problem consists in the necessity for development of tools for personnel provision within implementation of the National Technological Initiative through transformation of the system of higher education (Kuznetsov 2013).

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- provision of country’s independence; - provision of competitiveness of the RF by creating an effective system of increase and complete usage of intellectual potential of the

Principles of state policy in the sphere of technological development

nation.

- freedom of scientific and technological creativity;

Tasks of technological development of the RF

System of goals of the program of technological development

Development of the main directions and measures of implementing the state policy in the sphere of technological development of the RF

- creating a possibility for determination of talented youth and building a successful career in the sphere of science, technologies, and innovations; - provision of conditions for R&D; - formation of an effective system of communication in the sphere of science, technologies, and innovations; - formation of an effective modern system of management in the sphere of science, technologies, and innovations; - creating a model of international technological cooperation and international integration in the sphere of research and technological development.

- systemic support; - concentration of resources; - rational balance; - openness; - targeted support and fair competition.

Evaluation of effectiveness of directions and measures of implementing the state policy in the sphere of technological development of the RF

Fig. 2. Development of directions and measures of implementing the state policy in the sphere of technological development of PФ

Creation of possibilities for determining talented youth, building a successful career in the sphere of science, technologies, and innovations, and development of intellectual potential of the country are achieved by means of: (a) increase of authority of reputation mechanisms in acknowledgment of scientiﬁc qualiﬁcation and merits of researchers and increase of the role of scholars in society;

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(b) long-term planning and regular update of top-priority scientiﬁc and technological projects that stimulate formation of competitive teams that unify researchers, developers, and entrepreneurs; (c) creation of a competitive environment, which is open for attraction for work in Russia of world-class scholars and talented young scholars with scientiﬁc results of the high level, as well as formation of new research groups that are aimed at convergence of the spheres of knowledge and spheres of activities; (d) implementation, also with attraction of private investment and federal assets, of the means of regional and local budgets of innovational projects for creation on the basis of leading R&D and educational organizations of social, primarily housing, infrastructure that is necessary for provision of targeted mobility of participants of technological development (Burtseva 2016). Innovations are one of the most important indicators of socio-economic develop‐ ment; they are directly related to satisfaction of requirements of the public; due to inno‐ vational manufacture of the products of the corresponding quality, population’s living standards increase (Ilyenkova 2014). Strategy of Formation of the Results of Implementing the Program of the Country’s Development Implementation of the strategy of technological development of Russia should change the role of technologies in development of economy and state and lead to eﬀective results (Fig. 3). Thus, the authors present the strategy of formation of the results of implementing the technological program of Russia’s development. They include: (a) provision of country’s readiness for solving the problems on the basis of uniﬁcation and application of new knowledge and eﬀective usage of human capital; (b) increase of population’s living standards, provision of security, and strengthening of Russia’s position in the global ranking of quality of living by means of creation of popular goods and services; (c) provision of technological update of traditional spheres of economy and increase of the share of products of new high-tech and science-driven spheres in gross domestic product on the basis of structural transformations of Russia’s economy; (d) provision of promotion of Russian technologies and innovational products in new markets, growth of revenues from export of high-tech products, services and rights for technologies, and, as a result, increase of the role, inﬂuence, and competitiveness of Russia in the world; (e) creation of an eﬀective system of organization of R&D that ensures high eﬀective‐ ness and signiﬁcance in the scientiﬁc sphere (Kuznetsov 2012).

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Provision of country’s readiness for solving problems based on unification and application of new knowledge Personnel and HR potential

Increase of population’s living standards, provision of security and strengthening of Russia’s position

Infrastructure and environment Directions of implement ation of state policy

Management and investments

Interaction and cooperation

Increase of the share of products of new high-tech spheres in gross domestic products on the basis of structural changes in Russian economy Results of develop ment

Provision of promotion of Russian innovational products in new commodity markets

Creation of an effective system of organization of developments that ensures high effectiveness and significance in the scientific sphere

Cooperation and integration Provision of growth of the influence of science on technological culture in Russia

Strategy of formation of results of implementing the technological program of development of the RF

Fig. 3. Strategy of formation of the results of implementing the technological program of development of the RF

2

Conclusions

Thus, it is possible to conclude that as a result of implementing the oﬀered strategy, the spheres of technologies and innovations should function as one system, integrated with socio-economic system of the country and ensuring independence and competitiveness of Russia. A timely reaction to the emerging problems should be creation of technologies and products that are necessary for signiﬁcant increase of the population’s living stand‐ ards and are popular and competitive in the world. In the conditions of formation of the national innovational economy in the RF, preconditions are created for integration of eﬀorts of representatives of business, science, and education for development, production, and implementation of high-tech products that possess large economic or social potential. It is not only the task that was proclaimed by the Russian government but also natural process in the country’s economy that stim‐ ulates increase of eﬀectiveness of activities of all participants of integration. As a result

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of integrated interaction between education, science, and business, synergetic eﬀect appears due to formation of an interactive model of interaction, which supposes active usage of uniﬁed knowledge, ideas, technologies, and other resources during implemen‐ tation of innovational projects. The main results of implementation of the NTI by 2035 are as follows: appearance of ten Russian technological companies – leaders in their segments of the world market; 50 quickly growing technological companies – leaders of the domestic market; 500 quickly growing small and medium technological companies with potential of leader‐ ship in the national and international markets and high share of export in revenues; tens of thousands of technological companies that are at early stages of development, with potential of quick growth and global ambitions (Motovilov 2015). Quick growth of technologies leads to qualitative transformation of society, economy, and human. The RF has to incorporate into the processes that take place in the world of technological revolution and ﬁnd the sectors that appear as a result of the global transformation of economy, in which it may ensure equal participation of Russian companies in formation of new markets. Very soon, new regional, sectorial, and market alliances, which inﬂuence technological, production, and economic global chains of added value creation, will be created (and the existing ones will be changed). The logic of acquisition of such inﬂuence should be taken into account during selection of inter‐ national partners and forms of international cooperation in the sphere of technologies. It is necessary to consider the growing signiﬁcance and independence of companies and corporations. The inﬂuence of corporations that possess digital platforms could be compared to inﬂuence of certain states. Within the NTI markets, the global leading companies are created, which form the global policy of the new type. States become the infrastructure for supporting activities of corporations and companies and learn to use global companies in their national interests. Inter-country mobility of talents grows, and within the NTI a possibility to attract other talents and develop own talents by means of using the whole global infrastructure appears, with growth of competition for attraction of talents. With successful implementation of these actions, the mechanisms of initiation of projects and infrastructure of support for initiatives of enthusiasts of high-tech devel‐ opment will be created. Also, a package of eﬀective communicative possibilities will be formed – it will allow “NTI growth points” to translate the ideology of the NTI and promote application of the NTI methods in social environment. Implementation of the oﬀered initiatives will ensure popularity of unions around NTI projects and availability of wide network societies that involve all interested parties into interaction with NTI structures. By 2035, each person who is involved in economy will be using the tools for additional training and conﬁrming competences. The RF will be in top-5 countries as to the level of development of human capital. Russian inventions will be commercialized in the Russian market. The share of innovational goods, works, and services, manufac‐ tured by resident companies, in the total volume of shipped goods, performed works, and provided services, will constitute at least 20%. Russian population will show high level of civil cooperation, inter-personal and institutional trust (more than 50% of the population think that most people could be trusted and more than 90% trust universities).

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Russia’s achieving leadership on the given directions of the national technological initiative requires extraordinary eﬀorts. New production technologies are of the large potential for economic development, but there are large problems for implementing the planned program. In order to solve them, it is necessary to orient at the long-term perspective. However, international experience shows that achievement of technological leadership is possible during a short period as well. Such result is based on formation of personnel, increase of existing proﬁts, and cooperation between universities and business.

References Alekhina, T.A., Lyapina, I.R., Stroeva, O.A.: Project ﬁnancing of innovations: issues of selecting the tools and adaptation. Economics and entrepreneurship, No. 10(V. 2), pp. 411–417 (2016) Burtseva, M.N.: Rational organization of labor and management as a factor of increase of eﬀectiveness of company’s activities. Fundamental research, No. 8-2, pp. 310–314 (2016) Zakharkena, N.V.: HR potential of industrial organization: approaches and methods of evaluation. Fundamental research, No. 8-2, pp. 327–331 (2016) Ilyenkova, S.D., Yagudin, S.Y., Guzhov, V.V.: Managing innovational project: study guide. Eurasian Open University Publ., 181 p. (2014). ISBN 978-5-544-01079-8. Accessed biblioclub.ru/index112326 Kuznetsov, B.T.: Investments: study guide, 636 p. UNITI DANA Publ.(2012). ISBN 978-5-238-11512-8. Accessed knigafund.ru Kuznetsov, P.M.: Integration of science, education, and business as elements of national innovational system of the RF, No. 12 (140), pp. 91–94. Bulletin of Tomsk State Pedagogical University (2013) Motovilov, O.V.: Financial and credit provision of innovational activities: study guide, 272 p. Direkt Media (2015). ISBN 978-5-9854-5249-2, knigafund.ru Decree of the Government of the RF dated April 18, 2016, No. 317 “Regarding implementation of the National Technological Initiative”. Accessed http://government.ru Rygalin, D.B.: Experience of formation of high-tech sectorial clusters. Innovational bulletin ‘Region’, No. 6, pp. 50–59 (2006) Sagdatullin, A.M.: Integration of science, education, production, and business as a basis of increase of eﬀectiveness of regional system of professional education, Issue 1(132), pp. 46– 51. Bulletin of Adygea State University (2014) Khoreva, T.A.: The role of industrial production in socio-economic development of region. Alpine information and analytical bulletin (technological journal), No. 10, pp. 154–160 (2008)

Deformations of the Global Financial System in the Conditions of Globalization Tatyana V. Zhukova(&), Olga V. Panﬁlova, Ilona V. Avlasenko, Lyudmila M. Avlasenko, and Anastasiya V. Belousova Don State Technical University, Rostov-on-Don, Russia [email protected], [email protected], [email protected]

Abstract. The authors study the issues of actualization of formation of the global ﬁnancial system in the conditions of global changes. Formation of the global economic space determines new possibilities of integration of economy and creates problems that are related to dynamics of ﬁnancial interactions. Effectiveness of the existing ﬁnancial system depends on a lot of factors. Formation of modern ﬁnancial and economic complexes formed the means of movement of the global capital and creates certain disproportions of the global economy. In these conditions, development of conditions that are able to add order to ﬁnancial and economic relations is especially topical. Ineffectiveness of the existing ﬁnancial system envisages various scenarios of its further development. Selection of the optimal driver of ﬁnancial interactions is the most important task of the global economic society. Keywords: Globalization of economy Global ﬁnancial system Financial policy of the state Financial sector of economy Financial and economic space JEL Classiﬁcation Codes: G 15

G 18

1 Introduction Formation of ﬁnancial capital of new quality is expressed in emergence of new forms of ﬁnancial and economic interrelations within single ﬁnancial space, formed as a result of global changes of policy and economy. The result of these tendencies is growth of the ﬁnancial sector of economy and growth of proﬁtability of states by means of ﬁnancial operations. A new model of economy with the dominating tendency of growth of the role of ﬁnancial services is based on improvement of ﬁnancial tools that support movement of ﬁnancial tools. Such changes directly influence economy of any country. Russia is not an exception – the elements of its economy adapt to new ﬁnancial forms. Development of TNC, growth of influence of state ﬁnance, formation of natural monopoly, and development of ﬁnancial globalization lead to unexpected consequences of development of the global ﬁnancial system. Formation of ﬁnancial and economic complexes © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 774–782, 2019. https://doi.org/10.1007/978-3-030-00102-5_82

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and clusters of economy is related to changes of the structure of production and infrastructural changes – which is reflected on movement of capitals and organization of dynamics of capital markets. Restructuring of the global economic space leads to transformation of ﬁnancial interrelations between the dominating ﬁnancial and economic complexes within the legal ﬁeld. Totality of such changes and the corresponding ﬁnancial forms is called geo-ﬁnance.

2 Materials and Methods 2.1

Research Object

The research object is the global ﬁnancial system, which is currently in the state of crisis. The modern state of global ﬁnances makes it necessary to look for the ways of optimization of the global and ﬁnancial interactions against the background of constantly changing market situation. Actualization of unsustainability of ﬁnancial relations makes analysis of ﬁnancial connections a top-priority problem of modern economic development. The notion of ﬁnancial system envisages totality of legal norms that regulate interrelations in the sphere of emergence and usage of various funds by the subjects that have access to these resources. The research object includes principles of the ﬁnancial system and the system of ﬁnancial tools. 2.2

Qualitative and Quantitative Research

Qualitative study of internal components of the global ﬁnancial system envisages analysis of ﬁnancial institutes, as well as levers of ﬁnancing, which dynamics stimulates solving the emerging problems and reduction of ﬁnancial activity. Actualization of ﬁnancial tools is based on requirements of the modern state of the global economic relations. The mechanism of the global ﬁnancing should be analyzed in strict accordance with the existing possibilities and economic interests of countries – subjects of the global ﬁnancial environment. Quantitative research is based on analysis of statistical material, which characterizes the role and place of ﬁnancial interactions in the global integration ties. The studied data show instability of the processes of ﬁnancial development of the global economy, which is related to economic fluctuations. The given data characterize the vector of development of ﬁnancial relations and reflect instability of the situation – which requires close attention. 2.3

Methodological Approach

The article uses theoretical and methodological approaches to studying the speciﬁcs of functioning of the global ﬁnancial system in the conditions of market instability and consequences of the economic crisis. Analytical studies are used for determining the

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reasons that lie in the basis of the studied phenomenon. Statistical analysis is the basis of evidential base.

3 Results 3.1

Scenarios of Development of the Global Financial System

Year 2017 showed dynamics of the global ﬁnance in the conditions of instability of general economic situation and forecasted scenarios of development of the global situation. Such scenarios remain the possible ways of development of the global ﬁnancial market for the near future. With a certain share of probability, economists predict the following ways of development of the global ﬁnancial relations in the near future: – certain leveling of dynamics of the global ﬁnances after the 2010–2015 instability with presence of local risks of functioning (30–35%); – continuation of growth of economy’s volatility against the background of aggravation of general economic situation – especially, in developing countries, which may lead to crisis ﬁnancial indicators (50–60%); – aggravation of geo-political situation – primarily, the problems of the Middle-East and other crisis areas, will lead to chain reaction of aggravation of ﬁnancial risks in all global economy, which will increase instability and continuing volatility of global ﬁnance (10–15%). Imbalance and negative dynamics of ﬁnancial risks remains the dominating tendency of development of the global ﬁnancial system. Improvement of the ﬁnancial situation against the background of money investments, performed by certain countries – primarily, the USA – is not effective, which leads to new efforts of the leading countries to stabilize the ﬁnancial situation. In the near future, imbalance of the leading and developing economies will remain, which is not the basis for solving ﬁnancial problems. The problems of development of Chinese economy and India’s rush will increase disproportions in the ﬁnancial market. Speculative changes of currency rates, reduction of incomes of resource countries, growth of dollar, imbalance of ﬁnancial systems of the states, and anti-Russian sanctions – all this destabilizes the ﬁnancial system and does not allow it to use the existing resources of the internal mechanism of development. The current processes of development of the global ﬁnance reflect the tendencies of modern ﬁnancial development: – restructuring of the global ﬁnance against the background of dynamics of currency rates; – deep transformation of the whole ﬁnancial system, ﬁnancial rush, which lies in the basis of the state’s ﬁnancial policy; – constant growth of the national debt of a range of countries; – continuing process of inevitable globalization of global ﬁnance; – accumulation of risks in separate niches of ﬁnance, which increase volatility of the ﬁnancial market and bring pre-crisis situations.

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Restructuring of global ﬁnance remains one of the decisive directions of their development. The process of cyclic strengthening of US dollar remains stable. There are no reasons to consider that strengthening of the American currency will cease. Economists think that the peak of US dollar strengthening will be in 2018–2019; it will result in large-scale change of ratio of rates of currencies of a lot of countries. It is supposed that the share of USD in the global ﬁnance will continue to grow – unlike Euro and national currencies of other states. Scholars think that the share of USD in international reserves will constitute around 60–65%. Cyclic fluctuations of USD lead to changes of global prices for main resources. Since 2012, price for Brent oil dropped by 2.5 times, price for NYMEX natural gas dropped by 2 times since February 2014, and price for COMEX gold dropped by 1.5 times since 2011. Such situation put resource countries in a very difﬁcult position, which, in its turn, influenced increase of national debt and aggravation of economies’ ﬁnancial state. For the countries that import resources that situation was directly opposite. Against the background of such processes, economists predict until 2020 the continuation of the tendency of strong USD and low prices for resources, which will influence the structure of global ﬁnance and will reflect on the economy of the leading countries of the world. In these conditions, developed states may count on growth of incomes, which will decrease the need for money emission. Developing states – against the background of the global integration processes – will continue to follow the leading economies. The result will be growth of their national debt and aggravation of the ﬁnancial state. Such resource states, which depend primarily on resources’ prices, put themselves into dependence on the leading economies of the world (Russia, Nigeria, Brazil, and other countries of Latin America and Southern Europe). As of 2017, more than 40 states have national debt that is higher than 70% of GDP. At that, the risks of the American national debt are minimal. During the last twenty years, ﬁnancial globalization was conducted in high rates. Growth of turnover of ﬁnancial assets continues – it exceeds positive dynamics of economies. Financial systems become diversiﬁed and complicated. The crisis processes provoke monetization of economy, which becomes the main indicator of the country’s ﬁnancial development. As of 2016, more than 85% of developed countries had monetization above 80% of GDP. Around 65% of the countries with developing and transitional economy have “ﬁnancial depth” below 60% of GDP (including Russia). Growth of ﬁnancial depth remains the dominating tendency for close future (Global ﬁnancial system in 2017). In 2017, debt of economies of leading countries of the world exceeded the indicators of 2007. Total debt in the USA, the EU, and China exceeded 300% of GDP. Levels of debts in these countries are almost equal. Experts forecast that the epicenter of the second wave of the global crisis could be America, the EU, and China at the same time. It is supposed, that 2018 will see the second wave of the global ﬁnancial crisis, which might be postponed to 2019 with better conditions. Probability of the start of the crisis in 2018 is at the 80% level, in 2019 –20%.

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The director of the Department of monetary systems and capital markets of the IMF warned about the risks to ﬁnancial stability. He noted the increase of the level of debt in G20 countries, growth of external debts of countries with forming market and countries with low level of incomes; volume, complexity, and growth rates in the Chinese ﬁnancial system (The IMF warns about the risks for the global ﬁnancial stability). The IMF is the institute that can determine the direction of development of most countries and provide ﬁnancial help. It stimulates effective economic policy of the states, increasing stability of economy. That’s why the IMF implements the policy of increase of ﬁnancial stability against the background of growing globalization. It has the leading role in development in the international ﬁnancial system. 3.2

Consequences of Economic Crisis and Directions of Development of the Global Financial System

Transformation of the global ﬁnancial system is a necessary element of formation of the global economy. Absence of legislative barriers in the conditions of further increase of ﬁnancial mechanisms of regulation of public production led to excessively large system of ﬁnancial tools. Diversity of ﬁnancial institutes, which cannot cope with the process of ﬁnancial regulation of economy, inevitably leads to their bankruptcy, which negatively influences the whole system of global ﬁnance (Pakova 2016a, b). The modern paradigm of development of global ﬁnancial interconnections, based on the priority of growth of crediting, provokes the crisis of economy in the future. Economic and political decisions are made based on the current market situation, without heed to negative consequences in the future. Consequences of such policy will inevitably lead to stagnation, which will influence developing countries, including Russia (Pridachuk 2010). New forms of ﬁnancial and economic interrelations in the conditions of globalization change ﬁnancial environment and create contradictions between interests of ﬁnancial integration and the policy of strengthening of economy of a separate state. The share of incomes of developed countries, which have the dominating positions in the system of global ﬁnancing, grows (Ivanenko and Vanieva 2016). The Russian economy adapts to the system of ﬁnancing and new ﬁnancial norms. The system of state ﬁnances and corporate capital of natural monopolies become integrated. Economic transformations of Russia require constant inflow of ﬁnancial resources, which involves the country into the system of the global ﬁnancing. The process of ﬁnancial globalization is formed on the basis of multiple achievements of modern public development, which requires development of scientiﬁc approach to formation of the mechanism of ﬁnancing and formation of developed ﬁnancial infrastructure and institutionalization of the market. Economists distinguish various factors that stimulate the development of the process of ﬁnancial globalization and increase of economic growth. These factors include: – liberalization of ﬁnancial markets; – expansion of the sphere of activities of transnational corporations that possess large technological and investment resources, which ensures high effectiveness of

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production against the background of optimal placement and usage of various resources; – development and implementation of the information base, which ensures optimization of the production process and economic interconnections with the global economic agents. Slow down of the rates of economic growth remains one of the main problems. In these conditions, scholars actualize the main principles of managing the long-term ﬁnancing: 1. Financial system should use savings of households and large corporations for longterm ﬁnancing, in view of constantly growing needs of economy for investments. 2. Necessity and possibility of long-term ﬁnancing should take into account real possibilities of economic subjects, which are able to work in the long-term. 3. The system of ﬁnancial tools should stimulate the policy of long-term investing, and the whole totality of ﬁnancial tools should be accessible to companies at all stages of functioning. 4. The global ﬁnancial system will become effective only when long-term ﬁnancial is done in stable flows and is supported by the whole system of global regulation. Such measures will stimulate solution of the problem of deﬁcit of long-term ﬁnancial, which will push the economy to further global growth. Despite a certain stability of the current ﬁnancial development, one cannot underestimate possible risks in market relations. Increase of the level of debt in developed countries and large increase of external debts of the countries with a forming market and countries with low level of incomes are the risks that can destroy the current mechanism of ﬁnancial integration (Platonova 2016).

4 Discussion The most debatable and topical are the basic principles of functioning of global ﬁnance. There are various positions on the issue of analysis of interconnection between ﬁnancial reforms, which should be aimed at effective development of the countries of the whole economic society. However, there is no clear position on this issue. Representatives of the Chicago University state that ﬁnancial interconnections will lead to mobility of the Russian economy, which can adapt to the changing conditions against the background of constantly changing globalization. However, certain economists offer to limit activities of TNC due to their striving for limiting the competitive character of economy. Preventive measures include increase of political and legal regulation of this process. Financial system may become a factor of sustainable economic growth only if it considers the interests of large corporate and small and medium entrepreneurship, which depends primarily on foreign investors. Dependence of the ﬁnancial sector on the real economy is obvious, and the position of leadership in improvement of the ﬁnancial sphere, which provides an impulse of positive influence on the production

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sphere cannot be the basic one. Effective functioning of economy is not a result of successful development of the process of economy’s ﬁnancization. One of the main problems of modern times is search for the ways of creating effective ﬁnancing in the conditions of geo-economic influence on the country’s economy. Are there any advantages of ﬁnancial intermediaries that can strengthen the economy and allow it to build into the system of ﬁnancial interaction? That is one of the topical questions at the current stage of development of the global economy (Pakova 2016a, b). Advantages of functioning of powerful TNC are obvious, but one should bear in mind the policy of domination of such economic complexes that influence the level of accessibility of ﬁnancing of small and medium business, which are separated from the system of crediting. The problem of accessibility of resources of ﬁnancing remain the most important problem for a lot of countries, including Russia, which strive for the decent place in the system of global ﬁnance, while preserving the priority of economic interests of Russian companies. Quick growth of international investment activities and expansion of geo-political space, formation of multiple ﬁnancial institutes lead to constant improvement of the ﬁnancial market. New communicative possibilities and information base for optimization of ﬁnancial flows develop new capabilities of modern ﬁnances as a tool of globalization and change their functions. Traditional ﬁnances are supplemented by their new virtual form, which is separated from the reproduction process and forms its own layer of interrelations. Crypto currency is an equal element of ﬁnancial relations. On the one hand, it provides new possibilities for ﬁnancial interaction, on the other hand, it may lead to separation from the real process of provision with material resources and development of speculative processes in economy (Growth of cryptocurrency: four reasons why it is good for the global ﬁnancial system). It is necessary to create a productive system of information and ﬁnancial interaction. Virtual ﬁnancial capital should become a tool of implementing economic interests of real manufacturers. Financial and speculative tendencies might become a threat to modern development of the global ﬁnancial system if they acquire independence and cease to reflect the real picture of public economy. Certain scholars offer to use the resources of information economy for future development of the global ﬁnancial system. Various measures are offered for saving the ﬁnancial system: 1. Reducing payment for usage of money is difﬁcult. In view of new tendencies of development and appearance of cryptocurrencies, it is possible to reach E-services for ﬁnancial systems, thus deleting loan interest. At that, adequate tax for deposits on bank accounts should remain. Over the time, the need for crediting would disappear altogether. Obviously, such scenario of development seems fantastic today, but it is still possible. 2. Transformation of the existing system of taxation should strive to equal distribution of incomes in the conditions of property differences. Tax articles should conform to

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the ﬁnancial state of economic subjects (Global ﬁnancial system. Downfall or development?).

5 Conclusions The modern economic crisis reflects inconsistency of the global ﬁnancial system, which requires further improvement of legal regulation and implementation of a complex of anti-crisis measures; these actions should be conducted not after the crises phenomena – they should prevent downfalls of the global ﬁnancial interaction. Globalization of economic processes complicates the process of economic and ﬁnancial stabilization in the global scale and increases state’s responsibility before the global economic society (Mukhin and Mustaﬁn 2013). The modern ﬁnancial system has the following main drawbacks: – high payment for the services of ﬁnancial system due to credit interest and taxes; – inevitable growth of national debt, which leads to ﬁnancial crises; – negative attitude toward material and other values against the background of ﬁnancial priorities. The level of ﬁnancial danger depends on multiple splashes of currency exchange rates – especially if they last long. The formed pyramid of relations of dependent and dominating subjects will lead to problems in their interaction. Financial downfall with different consequences for the global society will become inevitable if the lessons of economic development and ﬁnancial crises are not learnt. Analysis of previous experience will allow avoiding tragic consequences and adapting the ﬁnancial world to new realia, as well as gaining proﬁt for further development of humanity.

References Pakova, O.N.: Financial institutes in the conditions of globalization. Study guide. Specialty 38.06.01. “Economics”, “Finnces, ﬁnancial turnover and credit”, 120 p. SKFU, O.N. Pakova. - Stavropol (2016a) Ivanenko, I.A., Vanieva, A.R.: Speciﬁcs of development of the global ﬁnancial system in the conditions of global instability. Problems of the modern economy, No. 4(60), pp. 87–91. Scientiﬁc and Production Company ROST Publ., St. Petersburg (2016). ISSN 1818-3395e, ISSN 1818-3409 Mukhin, I., Mustaﬁn, T.: Financial integration and economic security of Russia. International economics, No. 12, pp. 50–54 (2013) Platonova, I.N.: The global debt problem and sustainable development of the global economy. Economics Taxes Law, No. 2, pp. 51–59 (2016) Pridachuk, M.P.: Problems and perspectives of development of the global ﬁnancial system. J. Financ. Credit 16(16), 31–32 (2010)

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Pakova, O.N.: Financial inspection and regulation as an institute provision of sustainability of the ﬁnancial system in the conditions of globalization. Scientiﬁc R&D in the age of globalization. Collection of conference articles, pp. 154–156. Aeterna, O.N. Pakova. – Ufa (2016b) The IMF warns about the risks for the global ﬁnancial stability. http://www.rosbalt.ru/business/ 2017/10/11/1652380.html The global ﬁnancial system in 2017. http://www.webeconomy.ru/index.php?page=cat&cat= mcat&mcat=137&type=news&newsid=3580 The global ﬁnancial system. Downfall or development?. https://binaroption.com/stati/462mirovaya-ﬁnansovaya-sistema-krakh-ili-razvitie Growth of cryptocurrency: four reasons why it is good for the global ﬁnancial system. https://happycoin.club/rost-kriptovalyutyi-4-prichinyi-pochemu-eto-horosho-dlya-mirovoy-ﬁ nansovoy-sistemyi/

The Internet as a Synergetic Model Information Interaction Between Chaos and Order Elena B. Ivushkina ✉ , Nelli I. Morozova, Irina B. Kushnir, and Olga S. Buryakova (

)

Institute of Service and Entrepreneurship (Branch) of Don State Technical University, Shakhty, Russia [email protected], [email protected], [email protected], [email protected]

Abstract. Informational interaction in the scientiﬁc knowledge, characterized by a variety of possible results is the reason of all the changes appearing in science. Information chaos and order are the fundamental elements in the process of infor‐ mation interaction in scientiﬁc knowledge. The realization of information interactions is one of the main functions of the Internet global information network. Open communications between scientists, self-regulated by their own choice are a form of information interaction. The Internet is a universal ﬁeld incorpo‐ rating information of scientiﬁc research. The net allows any researchers publish information concerning their discoveries and experiments, ﬁnd people of the same set of mind, partners and colleagues, working with whom they will achieve success. Practice and culture of Internet communication, creation of virtual communities, clubs and workgroups of various kinds are the new basis for the revival of the social institutions, in particular the scientiﬁc ones. Keywords: Information · Information ﬁeld · Information interaction · Science

1

Introduction

A development process of anything including science is the interaction and relationship of chaotic and orderly processes. That’s why the information chaos and order are the fundamental elements of information interaction in the scientiﬁc knowledge. In the modern scientiﬁc world view order and chaos are the fundamental elements, which not only not exclude each other, but, moreover, interact with one another, because science is an endlessly developing area, which corresponds with principle of chaos and order balance. The Internet global information network is a symbol of the modern age – a complex system saturated with numerous information interactions. Scientists’ open communications self-regulated by their own choice are a form of information inter‐ action. The Internet is a universal field incorporating information of scientific research. The net allows any researchers publish information concerning their discoveries and experiments, find people of the same set of mind, partners and colleagues, working with whom they will achieve success. “The Internet culture is © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 783–788, 2019. https://doi.org/10.1007/978-3-030-00102-5_83

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deeply rooted within the tradition of cooperative scientific activities, earning repu‐ tation by reaching sufficient scientific results, reviewing the work of other researchers and the openness of the results of the research, duly trusting the authors of every discovery” [1, pp. 56–57]. In the age of information the Internet is one of the chief instruments of professional activity of scientists. Theoretical basis of the study Theoretical basis of the performed study is a number of attempts to deﬁne the meaning of the terms “information”, “information ﬁeld”, and “information interaction”. In the context of this study it is suggested to view information as an immanent char‐ acteristic of the scientiﬁc information ﬁeld, transforming information interaction between chaos and order in the scientiﬁc knowledge. The term “information ﬁeld” is deﬁned as a ﬁeld (area) of the scientiﬁc knowledge where information interaction between chaos and order take place. The deﬁnitions of information and information ﬁeld given above suggest that there exist a sender and a recipient i.e. there appear to be interactions between a number of objects. Information interaction should be understood as any interaction between objects inside the scientiﬁc information ﬁeld during which one object achieves information without another one losing it. The Internet global informational network is an integrated informational space, a projection of a real space, which unites all existing telecommunication and information networks. This deﬁnes the technological component of the Internet. In the context of scientiﬁc information interaction problem the Internet should be viewed as an integrated information ﬁeld (area, environment), a collection of all existing information and knowledge operated by the humankind. With the development of information technologies ways to exchange and redistribute information are changing, which promotes further reevaluation of the earlier global ideas. Naturally, informational revolution caused the appearance of the new historical paradigm. For a long time it was thought that computers are meant exclusively to produce artiﬁcial intelligence suﬃciently exceeding human mind. But today it is clear that the development of the computer technologies allowed the communication with the use of computer networks. Today the Internet is viewed not only as a technical means used for diﬀerent purposes, but also like a special ontological reality [2, p. 460]. Development of the Internet initiated fundamental changes in mass consciousness. According to many modern scholars semantic space of the Internet is similar to the chaos in its absolutely new interpretation – as a structure of inner order. In the Internet the information is not chaotic; rather, it is structured and united. But it is not grouped on linear, centralization or hierarchy basis; the grouping is multi-dimensional, dihierarchical and uncentralized semantically. The starting point or the core is presented by the user, who can move in any direction, creating personal semantic world on the basis of his or her choice. Using the Internet provides access to numerous informational services and products allowing a person to organize their information ﬁeld according to their particular needs. This proves to conﬁrm the democratization of the informational life of the society. At the same time, a large number of people in the society have no access to the Internet, which automatically bars its representatives from further social functioning and development.

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The Internet caused general transformations in people’s social culture. Everincreasing popularity of the Internet, the forming of an open space, personality trans‐ formation in the Internet medium, construction of new social practices and elements of communication, virtualization of the social institutes – all these factors and some other ones have major inﬂuence on the structure of the information ﬁeld, which is created in the virtual plane and transforms traditional means of communications into Internet means. Evolution of the types of communication due to majorly visual ways of information representation suggests that the mankind is now moving towards the line of the outer simplicity in the culture, thereby shedding the excessive and unnecessary complex baggage of cultural values and ideas accumulated by the civilization for hundreds of years. Researchers are also interested in such problems as scarcity and transience of interpersonal interactions, the shifting of communication to the consciousness’s level by immersing a person into the virtual reality and forcing out their life values. Informational and communicational environment of the modern social and cultural systems is a characteristic of the net culture, which development is spontaneous and random. Net culture is based on the multi-leveled contacts between people and their non-linear interactions. Net culture is the culture that is formed not only on the basis of knowledge, but also on virtual mythological awareness. In O. N. Astaﬁeva’s work called Synergetic Discourse of the Modern Information and Communication Processes [3, pp. 421–422] net culture is deﬁned as a special system of structured interactions in the information-oriented society’s culture, formation of which is strongly connected with a special role of information, wide-spread communi‐ cation interactions fulﬁlled with the use of up-to-date information technologies. Including a person into the process of creating, storing, processing and transferring information alters their imagination, behavior in the real world, ways of expressing emotions and aﬀects memory development. One of the major negative results of the changing principles of communication in the real world proves to be the degradation of subjectivity. Humankind is now seeking to spread its Internet information communication system over the entire planet, but in the reality everyone tends to create their own world, with‐ drawing into themselves and limiting their social interactions. On the one hand, communication via Internet attracts people due to its neutrality, lack of judgment and social repercussions. On the other hand, the Internet’s expansion limits the development of person’s practical abilities; a person gets used to simulation and loses the necessity for communication. French philosopher J. Baudrillard characterizes the eﬀect of virtual communication on a person as “a weakening grasp of the reality due to the excessive appearance of reality” [4, p. 121]. The author explains the attractiveness of the virtual communication by the search for a missing dimension which could shorten the distance between the reality and its look-alike [4, p. 127]. In the author’s point of view, these and many other contradictions illustrate the consistency of a person with the time we live in – the age of bifurcation. Nowadays the Internet network is a global self-organized system, a self-developing and self-expanding hypertext. Creation of this dynamic information communication environment became

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a peculiar mark of the beginning development of the information culture. Altering objective and subjective communication conditions are linked with revised values, both social and personal. Self-reproduction of the Internet information communication network suggests synergic interaction between chaos and order, which reﬂects in simultaneously realizing and rejecting information. As information becomes the key commodity of the new economy and the world is drowned by the ocean of chaotic information signals, more substantial and exclusive knowledge becomes ever more important [5]. Nowadays people are interested not really in information itself but, rather, in its meaning and context. That’s why they are trying to sort, structure and interpret crushing ﬂows of information to make them a source of knowledge. A. Toﬄer writes: “Today hoarding information doesn’t have top priority; more important is the ability to search the massive data for the information you need, correctly analyze the sorted data and deliver it to the customer in time” [6, p. 358]. As important as the content of the information is the ability of processing and interpreting it. “Complexity of our society and opportunities of our “digital age” impose respective demands on certain people. They should be better educated to survive economically and achieve social success. They should also have appropriate moral upbringing to make diﬃcult decisions” says E. Dyson [7, p. 121]. Contemporary model of information interaction between chaos and order in science is synergetic. According to the synergetic model of interaction in the “chaos and order” semantic ﬁeld instead putting these categories in stark opposition to each other, an emphasis is made on the presentation of chaos as the source and creator of order. Chief demands to the systems to which potential synergetic regimes of functioning can be applied are the following: a system should be non-linear, open, be in non-equilibrium state towards external environment and be sensitive to ﬂuctuations, which transfer the condition of the system from one phase to another. In science synergetic model of information interaction between chaos and order is represented by the Internet global informational network as the constantly changing, extremely complex and continually upgrading system. The Internet global informational network is an informational medium where subjects and objects are coexisting and interacting despite the lack of any strict cause-and-eﬀect relationships. Scientiﬁc communication is understood as a collection of processes used to repre‐ sent, transfer and obtain scientiﬁc information; this the mechanism of science’s existence and development. All processes of scientiﬁc communication involve scientists and specialists. Open communication between scientists, self-regulated by their own choice is a form of information interaction. The Internet is a universal ﬁeld incorporating information of scientiﬁc research. The net allows any researchers publish information concerning their discoveries and experiments, ﬁnd people of the same set of mind, partners and collea‐ gues, working with whom they will achieve success. In the age of information the Internet proves to be a tool of professional occupation. Still valid is the common informational law according to which implementation of new tools into the system of scientiﬁc communication doesn’t cancel or substitute the

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old traditional ones. Evolution of scientiﬁc communication is achieved by redistribution of functions between the types and means of information management. Today virtual communication is becoming more popular; growing number of the net users is observed; the quality of the Internet connection is being improved; more and more means of Internet communications are being created. Recently developed software makes it easier to share not only text information, but also audio and video ﬁles. New processes, methods and means of scientiﬁc and mass communication, which appear regularly and are dedicated to make peoples’ intellectual activity more eﬀective will supplement and enrich the communication system without causing atrophy of its existing forms. Materials and methods of the study During this study a complex of methods was used due to the cross-disciplinary approach used to research the problem. Philosophical research of chaos and order as means of information interaction’s realization in science is based on the complex of methods associated with philosophy and general science: analytical and phenomeno‐ logical methods, principles of objectivity, universal connection and contradictions, comparative analysis, synthesis and scientiﬁc generalization methods. The research used conceptual and logical analysis of the theoretical terminology to redeﬁne the physical and mathematical term of “information” in the context of social culture. To achieve this approach of historical and genetic methods of scientiﬁc methodology were involved to analyze its reorientation from formally theoretical objective to socially signiﬁcant one. The basic methodological idea used in this study is represented by dialectical and system approach. The results of the study Means and forms of communication are changing. Modern people lose ability to perform real-life face-to-face communication because together with the formation of a new type of culture a new type of communication subjects is also developing. The writing and audiovisual system developed in 19th and 20th centuries was supplemented with the new system of computer culture based on interactive communication. The age of natural contacts between people is now giving way to a new age of interactive communication. Despite the constant growth in the number of contacts, a person is not always satisﬁed with the semantic meaning and objectives of such commu‐ nications. According to M. S. Kagan’s precise remark about increasing complexity of communications in modern world, it is necessary to keep in mind their simpliﬁcations in inner personal space [8]. New processes, methods and means of scientiﬁc and mass communication, which appear regularly and are dedicated to make peoples’ intellectual activity more eﬀective will supplement and enrich the communication system without causing atrophy of its existing forms. Research in the area of digital libraries as one of the currently important and rather attractive line of development in scientiﬁc information interaction; the creation of digital libraries provides a new level of studying and summarizing the knowledge, together with its spreading and using. Digital libraries provide intellectual access to distributed

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data storages on the basis of creating informational environments. A digital library provides access to large bulk of multimedia information and knowledge. Currently important is the study of the information interactions’ mechanism in the science in the context of altering scientiﬁc paradigms. Information interaction’s mech‐ anism is not merely a process of exchanging information that leads to the changes in the knowledge of at least one of the recipients of the information; the mechanism causes the recipient to suﬀer deeper changes characterized by the reception of the new knowl‐ edge and supplement to the existing hoard of knowledge. The main components serving as the basis for information interactions are information, information ﬁeld, chaos and order.

References 1. Castells, M.: The Internet Galaxy. Reﬂections on the Internet, Business and Society (translated from English by A. Matveeva, edited by V. Kharitonov), pp. 56–57. U-Factoria, Yekaterinburg (with the participation of the Humanitarian University) (2004) 2. Modern philosophical Problems of Natural, Technical, Social and Humanitarian Science: a textbook for postgraduates and PhD candidates (under the general editorship by the Doctor of Philosophy, Professor V. V. Mironov), Gardariki, Moscow, p. 460 (2006) 3. Astaﬁeva, O.N.: Synergetic Discourse of The Modern Information and Communication Processes. Synergetic paradigm. Cognitive and communicative strategies of modern scientiﬁc knowledge, pp. 421–422. Progress-Traditsia, Moscow (2004) 4. Baudrillard, J.: Temptation (translated from French by A. Garadgy), p. 121. Ad Marginem, Moscow (2000) 5. Bard, A., Soederqvist, J.: Netocracy – The New Power Elite And Life After Capitalism, p. 252. Stockholm School of Economics, St. Petersburg (2004) 6. Toﬄer, A.: Powershifts (translated from English), p. 358. OOO “AST”, Moscow (2003) 7. Dyson, E.: Living in the Epoch of Internet, p. 121. “Biznes I Kompiutor”, Moscow (1998) 8. Kagan, M.S.: Aesthetics as Philosophical Science, p. 544. TOO TK “Petropolis”, St. Petersburg (1997)

Economic Analysis of Eﬀectiveness of the Existing Tools of State Support for Entrepreneurship in the AIC in the Digital Economy Aleksei V. Bogoviz1 ✉ (

1

)

, Yury A. Bugai2 , and Aleksey V. Minenko2

Federal State Budgetary Scientiﬁc Institution “Federal Research Center of Agrarian Economy and Social Development of Rural Areas – All Russian Research Institute of Agricultural Economics”, Moscow, Russia [email protected] 2 Altai State Agricultural University, Barnaul, Russia [email protected], [email protected]

Abstract. The purpose of the article is to develop methodological provision for conducting qualitative economic analysis of eﬀectiveness of the existing tools of state support for entrepreneurship in the AIC in the digital economy, to conduct this analysis (based on created methodological provision) by the example of modern Russia, and to develop recommendations for raising economic eﬀective‐ ness of state support for entrepreneurship in the AIC in the digital economy in modern Russia. The authors use the proprietary method of analyzing the eﬀec‐ tiveness of the existing tools of state support for entrepreneurship in the AIC in the digital economy, which envisages consideration of not only short-term results (related to increase of gross added value that is created in the AIC) but the longterm results of this support (related to digital modernization of entrepreneurship in the AIC and growth of its global competitiveness). Due to this, it is determined that even during usage of the classical method (without connection to the condi‐ tions of the digital economy), the eﬀectiveness of the existing tools of state support for entrepreneurship in the AIC in modern Russia is low. In the conditions of the digital economy, eﬀectiveness of this support is critically low. It is neces‐ sary to reconsider this support, for which authors’ recommendations are oﬀered. Keywords: Economic analysis of eﬀectiveness · State support Entrepreneurship in the AIC · Digital economy · Modern Russia

1

Introduction

Digitization of modern economic systems stimulates their technological modernization and thus ensures not only acceleration of economic growth but also increase of its quality, which is related to optimization of production & distribution processes, growth of eﬃciency of production factors, improvement of labor conditions, and increase of population’s living standards. That’s why in the conditions of the digital economy, the classical scientiﬁc method of analysis of economic eﬀectiveness of economic phenomena and processes, based on comparison of results and expenditures in © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 789–794, 2019. https://doi.org/10.1007/978-3-030-00102-5_84

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qualitative expression, does not allow for full reﬂection of achieved qualitative positive eﬀects and for receipt of authentic estimate results. At that, while at the corporate level, foundation on the classical method of analysis of eﬀectiveness leads to separate distortions of results, the problems of founding on which would be possible to overcome due to high ﬂexibility of entrepreneurial struc‐ tures, at the macro-economic level the foundation on imprecise method lead to largescale distortions, foundation on which during development and implementation of state economic policy could lead to serious negative consequences for society and business. Due to this, the problem of improvement of methodological provision of analysis of eﬀectiveness of state economic policy is very urgent – especially in such top-priority spheres as state support for entrepreneurship in the agro-industrial complex (AIC). The initial point of this research is the oﬀered hypothesis that economic eﬀectiveness of the existing tools of state support for entrepreneurship in the AIC in the conditions of the digital economy in modern Russia is low. The purpose of this article is to develop the methodological provision for conducting high-quality economic analysis of eﬀectiveness of the existing tools of state support for entrepreneurship in the AIC in the conditions of the digital economy, conduct this anal‐ ysis (based on the created methodological provision) by the example of modern Russia, and to develop recommendations for raising economic eﬀectiveness of state support for entrepreneurship in the AIC in the conditions of the digital economy in modern Russia.

2

Materials and Method

The theoretical basis of the research are the works of modern authors on the issues of state support for entrepreneurship in the AIC: (Bogoviz et al. 2018a); (Bogoviz et al. 2018b); (Bogoviz et al. 2018c); (Bogoviz et al. 2018d); (Bogoviz et al. 2018e)’ (Bogoviz et al. 2018f); (Mikhaylova et al. 2017); (Popova et al. 2018); (Troyanskaya et al. 2017); the issues of economic analysis of eﬀectiveness of the applied tools: (Dudin et al. 2018); (Gorshkova et al. 2017); and the issues of modernization of the AIC in the condi‐ tions of the digital economy: (Boojihawon and Ngoasong 2018); (Curran 2018); (ElderVass 2018); (Martin-Shields and Bodanac 2018); (Popkova et al. 2017a); (Popkova et al. 2017b), and (Sandeep and Ravishankar 2018). As a result of generalization of the existing scientiﬁc and methodological provision of economic analysis of eﬀectiveness of state support for entrepreneurship in the AIC, we determined that the applied classical method of analysis envisages ﬁnding the ratio of results, expressed in growth of contribution of the AIC into GDP, to expenditures for this support. A signiﬁcant drawback of the classical method in the conditions of the digital economy is its limitation by determination of short-term eﬀectiveness (only at the moment of evaluation), which does not allow determining long-term consequences of state support for entrepreneurship in the AIC, which pose the highest interest. Due to this, high eﬀectiveness (determines with the use of the classical method) of state support for entrepreneurship in the AIC does not guarantee its competitiveness in the long-term but shows its current level of development, which does not allow compiling long-term strategies of development of the AIC on the basis of the results of

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analysis. This requires additional qualitative coeﬃcient in the classical formula, which reﬂects contribution of state support for entrepreneurship in the AIC in its digital entre‐ preneurship, which allows compiling long-term forecasting scenarios of its development in the conditions of the digital economy.

3

Results

The improved formula of eﬀectiveness of the existing tools of state support for entre‐ preneurship in the AIC in the conditions of the digital economy may could have the following form:

Ess(AIC)de(t) =

) ] [( GAVAIC(t) − GAVAIC(t−1) ∗ Cde ∕ Ess(AIC)(t) ,

(1)

where Ess(AIC)de – это eﬀectiveness state support for entrepreneurship in the AIC in the conditions of the digital economy; GAVAIC – gross added value that is created in the AIC, RUB. Cde – qualitative coeﬃcient that reﬂects contribution of state support for entrepre‐ neurship in the AIC in its digital entrepreneurship, shares of 1; Ess(AIC) – expenditures for state support for entrepreneurship in the AIC, RUB; t – time period (calendar year) during which analysis is performed. When assigning values to coeﬃcient Cde, it is oﬀered to use the following logic: – 1.2 points, if state support for entrepreneurship in the AIC is aimed at its digital entrepreneurship and ensures not only modernization of equipment of these compa‐ nies on the basis of digital technologies but also R&D in the sphere of digital tech‐ nologies, preparation of specialists in the sphere of digital technologies for the AIC, and provision of digital security of the AIC; – 1.1 points, if state support for entrepreneurship in the AIC indirectly stimulates its digital modernization and ensures not only modernization of equipment of these companies on the basis of digital technologies but also R&D in the sphere of digital technologies, training of specialists in the sphere of digital technologies for the AIC, and provision of digital security of the AIC; – 1 point, if this support envisages implementation of some of the above measures, in addition to modernization of equipment on the basis of digital technologies; – 0.9 points, if this support envisages only modernization of equipment on the basis of digital technologies; – 0.8 points, if this support does not envisage any measures in the sphere of digital modernization of the AIC; – 0.7 points, if this support envisages additional measures without modernization of equipment on the basis of digital technologies. In view of susceptibility of added value, which is created in the AIC, to a lot of factors, which include expenditures for state support for the AIC, the results of analysis of eﬀectiveness state support for entrepreneurship in the AIC in the conditions of the digital economy should be treated in the following way:

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Ess(AIC)de(t) ≤ 30: critically low eﬀectiveness; 30 < Ess(AIC)de(t) ≤ 50: low eﬀectiveness; 50 < Ess(AIC)de(t) ≤ 100: acceptable (normal) eﬀectiveness; 100 < Ess(AIC)de(t) ≤ 300: high eﬀectiveness; Ess(AIC)de(t) > 300: very high eﬀectiveness.

According to the Federal technological program of development of agriculture for 2017–2025, adopted by the Decree dated August 25, 2017, No. 996, expenditures for state support for entrepreneurship in the AIC in 2017 (Ess(AIC)2017) constituted RUB 1.73 billion. The measures in the sphere of digital modernization of the AIC are not envisaged in this program directly, though there are measures that are aimed at increase of inno‐ vational activity of the AIC companies, increase of their provision with infrastructural objects, and provision of the AIC with programs of personnel training for perspective and new specialties (Government of the RF 2018). This means that state support for the AIC companies in Russia envisages additional measures without modernization of equipment on the basis of digital technologies – i.e., coeﬃcient Cde 2017 is assigned with the value 0.7. According to the World Bank data, gross added value that is created in the AIC constituted 4.74% of GDP in 2016 (GDP in constant prices constituted RUB 61,097.5 billion in 2016, therefore GAVAIC (2017-1) equaled RUB 2,896.02 billion), and in 2017 – 4.79% of GDP (GDP in constant prices constituted RUB 61,952.89 billion in 2017, therefore GAVAIC (2017) equaled RUB 2,967.54 billion). In view of the above data, economic analysis of eﬀectiveness of the existing tools of state support for entrepreneurship in the AIC in the conditions of the digital economy в Russia in 2017 (based on the created methodological provision) is conducted in the following way: Ess(AIC)de(2017) = [(2, 967.54 − 2, 896.02) ∗ 0.7]∕1.73 = 71.52 ∗ 0.7∕1.73 = 28.94 . The obtained value of the indicator Ess(AIC)de(2017) is less than 30, therefore, eﬀectiveness of the existing tools of state support for entrepreneurship in the AIC in the conditions of the digital economy in modern Russia in 2017 is critically low. It should be noted that when using the classical method, eﬀectiveness of state support for entrepreneurship in the AIC in Russia in 2017 was low, but not critically low. Thus, taking away the coeﬃcient of digital economy from the oﬀered formula, we receive 71.52/1.73 = 41.34 (less than 30, but not above 50). For increasing the eﬀectiveness of state support for entrepreneurship in the AIC in the conditions of the digital economy in modern Russia, the following recommendations are oﬀered: – establishment of digital modernization of the AIC as the key goal of state support for entrepreneurship of this complex; – modernization of equipment on the basis of digital technologies as the top-priority tools of state support for entrepreneurship of the AIC; – normative establishment and complex implementation of additional measures in the sphere of digital modernization of the AIC companies: creation of digital (telecom‐ munication) infrastructure, subsidizing, state order and placement of grants for R&D in the sphere of digital technologies for the AIC, standardization of the system of specialists training in the sphere of digital technologies for the AIC and placement of state order for their training, as well as provision of digital security of the AIC.

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Practical implementation of the oﬀered recommendations will allow increasing the total positive eﬀect (result) from state support for the AIC companies of Russia. This is due to the fact that not only growth of the value of qualitative coeﬃcient, which reﬂects contribution of state support for entrepreneurship in the AIC in its digital entrepreneur‐ ship (Cde) but also large growth of added value that is created in the Russian AIC and increase of global competitiveness of the AIC companies are achieved, which will allow for import substitution and increase of export of the AIC products.

4

Conclusions

Thus, the proprietary method of analyzing the eﬀectiveness of existing tools of state support for entrepreneurship in the AIC in the conditions of the digital economy is developed – it envisages accounting of not only short-term results (related to increase of gross added value that is created in the AIC) but also long-term results of this support (related to digital modernization of the AIC entrepreneurship and growth of its global competitiveness). Due to this, it was determined that even with usage of the classical method (without connection to the conditions of the digital economy), eﬀectiveness of the existing tools of state support for entrepreneurship in the AIC in modern Russia is low. In the condi‐ tions of the digital economy, eﬀectiveness of this support is critically low. This conﬁrms the oﬀered hypothesis and is the basis for reconsidering this support – for which the authors’ recommendations are given. It should be concluded that in the conditions of the digital economy new possibilities appear for highly-eﬀective state support for entrepreneurship of the AIC, as not only classical tools, which are brought down to protectionism and aimed at achievement of short-term eﬀect, but also innovational tools, which allow avoiding protectionism and starting the process of market development of entrepreneurship of the AIC due to its technological (digital) modernization and growth of its global competitiveness, are available. Acknowledgments. The research was performed with ﬁnancial support from the RFBR within the project No. 16-12-22018.

References Bogoviz, A.V., Alekseev, A.N., Chepik, D.A.: Improvement of the economic mechanism of state support for innovational development of the Russian agro-industrial complex in the conditions of import substitution. Adv. Intell. Syst. Comput. 622, 555–561 (2018a) Bogoviz, A.V., Bugai, Y.A., Osipov, V.S.: Import substitution in the agro-industrial complex in the interests of provision of food security: option or necessity? Adv. Intell. Syst. Comput. 622, 37–43 (2018b) Bogoviz, A.V., Lobova, S.V., Bugai, Y.A.: Eﬀective import substitution in the agro-industrial complex: competition or monopoly? Adv. Intell. Syst. Comput. 622, 30–36 (2018c) Bogoviz, A.V., Lobova, S.V., Ragulina, Y.V., Alekseev, A.N.: A critical review of Russia’s energy eﬃciency policies in agriculture. Int. J. Energy Econ. Policy 8(3), 67–75 (2018d)

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Bogoviz, A.V., Taranov, P.M., Shuvaev, A.V.: Innovational tools for provision of food security through state support for the agro-industrial complex in the conditions of the digital economy. Adv. Intell. Syst. Comput. 622, 659–665 (2018e) Bogoviz, A.V., Tufetulov, A.M., Chepik, D.A.: The mechanism of activation of the process of import substitution in the agro-industrial complex for provision of food security. Adv. Intell. Syst. Comput. 622, 71–76 (2018f) Boojihawon, D.K., Ngoasong, Z.M.: Emerging digital business models in developing economies: the case of Cameroon. Strat. Chang. 27(2), 129–137 (2018) Curran, D.: Risk, innovation, and democracy in the digital economy. Eur. J. Soc. Theory 21(2), 207–226 (2018) Dudin, M.N., Zasko, V.N., Dontsova, O.I., Osokina, I.V., Berman, A.M.: Renewable energy sources as an instrument to support the competitiveness of agro-industrial enterprises and reduce their costs. Int. J. Energy Econ. Policy 8(2), 162–167 (2018) Elder-Vass, D.: Lifeworld and systems in the digital economy. Eur. J. Soc. Theory 21(2), 227– 244 (2018) Gorshkova, N., Grigoryeva, L., Perekhodov, P., Shkarupa, E., Arkannikov, A.: Informational and analytical support for integration of agro-industrial enterprises in Russia. In: Contributions to Economics, pp. 399–405 (2017). 9783319552569 Martin-Shields, C.P., Bodanac, N.: Peacekeeping’s digital economy: the role of communication technologies in post-conﬂict economic growth. Int. Peacekeeping 25(3), 420–445 (2018) Mikhaylova, N.A., Babich, T.V., Smirnova, O.S.: Improvement of the state support mechanism for regional agro-industrial complex under the conditions of international sanctions and Russia’s membership in the WTO. In: Contributions to Economics, pp. 151–157 (2017). 9783319606958 Popkova, E.G., Bogoviz, A.V., Lobova, S.V.: Vacuum in the structure of human capital: A view from the position of the theory of vacuum. Human Capital: Perspectives, Challenges and Future Directions, pp. 163–181. Nova Science Publishers, Inc., Hauppauge (2017a) Popkova, E.G., Morozova, I.A., Litvinova, T.N.: New challenges for human capital from the positions of its infrastructural role in the system of entrepreneurship. Human Capital: Perspectives, Challenges and Future Directions, pp. 257–275. Nova Science Publishers, Inc., Hauppauge (2017b) Popova, L.V., Dugina, T.A., Skiter, N.N., Panova, N.S., Dosova, A.G.: New forms of state support for the agro-industrial complex in the conditions of the digital economy as a basis of food security provision. Adv. Intell. Syst. Comput. 622, 681–687 (2018) Sandeep, M.S., Ravishankar, M.N.: Sociocultural transitions and developmental impacts in the digital economy of impact sourcing. Inf. Syst. J. 28(3), 563–586 (2018) Troyanskaya, M.A., Ostrovskiy, V.I., Litvinova, T.N., Matkovskaya, Y.S., Bogoviz, A.V.: Possibilities and perspectives for activation of sales in the agricultural machinery market within sectorial development of Russian and European economies. In: Contributions to Economics, pp. 473–480 (2017). 9783319606958 Government of the Russian Federation: The federal technological program of development of agriculture for 2017-2025, adopted by the Decree dated August 25, 2017, No. 996 (2018). http:// static.government.ru/media/files/EIQtiyxIORGXoTK7A9i497tyyLAmnIrs.pdf. Accessed 13 May 18

Socio-Economic Mechanisms of Supporting the Institute of Family in the Conditions of Financial Crisis Elena V. Smirnova1(&), Svetlana V. Mitrofanova1, Nina I. Medvedeva2, Valentina V. Gorbunova3, and Lilianna Y. Grazhdankina3 1

2

North Caucasus Federal University, Stavropol, Russia [email protected] Stavropol State Pedagogical University, Stavropol, Russia 3 Stavropol State Medical University, Stavropol, Russia

Abstract. In the conditions of ﬁnancial crisis, one of the most vulnerable social institutes is family. Being a fundamental condition of functioning of the Russian society and the most important element of its self-organization, family should be the object of special attention from the state and society, as well as other social institutes and even business. Based on complex analysis of experience of supporting family at the federal and regional level, the following socio-economic mechanisms of support are determined: social transfers, social vouchers, social insurance, social outsource, and corporate social responsibility. The article presents socially signiﬁcant tasks for family and society and analysis of experience of solving them by means of implementing one of the most distributed mechanisms of state support for Russian families – social transfers. By the example of maternity capital, experience of usage of this mechanism at the federal and regional levels in view of local peculiarities is presented. One of the private mechanisms of support for the institute of family, which is implemented by the Russian business society, - corporate social responsibility – is characterized. By the example of companies of various spheres, corporate programs for supporting the families of companies’ employees are analyzed – in the sphere of recreation, culture, sports, formation of healthy living, private pension provision, development of creativity, construction of accommodation, development of public space and parks, etc. Keywords: Corporate social responsibility Support for family Socio-economic mechanisms Maternity capital JEL Classiﬁcation Codes: H 53

M 14

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1 Introduction Financial crisis influences not only economy but also the social situation in society – at that, these processes are not isolated but interconnected. Strong and sustainable economy ensures social stability and high living standards, while crisis economy negatively influences economic and social position of people (Volgin 2009). According to experience of ﬁnancial crises, which influenced Russia in the 21st century, the most vulnerable part of population has always been average statistical family with a man as a head with low level of education, families with a lot of children, and lone mothers (Nikoloski et al. 2013). At that, family is a unique social institute of society that performs important functions of reproduction, development, and socialization of personality and satisfaction of spiritual, material and other needs – so stability and well-being of family determines stability and well-being of the country. Obviously, in the crisis periods, families with children are in the most difﬁcult situation as they face the problems that they cannot solve independently. For supporting living standards of family, various socio-economic mechanisms within social and economic policies are used.

2 Methodology The theoretical and methodological basis of the research includes fundamental and applied works of domestic and foreign scholars and modern ideas on the problems of family in the conditions of ﬁnancial crisis, mechanisms of help and support, the role and possibilities of the state and business in solving social and economic problems of society and separate categories of population. Study of socio-economic mechanisms of support, which stimulate leveling the negative influence of economic crisis on the state and functioning of the Russian family, has been performed on the basis of the systemic approach with analysis and synthesis of socio-economic processes and phenomena. The main method of research is analysis, applied during studying literature and generalization of theoretical and empirical material. Usage of systemic and structural & functional methods allowed considering the modern state and tendencies of development of socio-economic mechanisms of supporting the institute of family.

3 Results The main and most effective socio-economic mechanisms of supporting the institute of family include social transfers, social insurance, social voucher, social outsource, corporate social responsibility, etc. (Fig. 1). Let us view the experience of using certain different mechanisms of provision of socio-economic mechanisms. Social transfer is a system of measures of natural or ﬁnancial help to vulnerable groups of population that is not related to their participation in economic activities. Financial payments are performed from local and state budgets, non-budget social

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Social transfers are a system of measures of natural or financial help to socially vulnerable groups of population, which is not related to their Socio-economic mechanisms of supporting the institute of family

participation in economic activities. Payments are performed from local budgets, state, non-budget, and social funds and assets of public organizations. Social voucher (targeted consumer subsidy, social certificate) is a documents that gives a right to receive a service in a certain volume (money value of the voucher) and under certain conditions, and supplier can receive payment for the service based on the fact of its provision in full volume and under certain services. Social insurance is a system of support of disabled, old, and economically active citizens from the state insurance funds, and the means of distribution of national income for supporting citizens who do not participate in public work. The main economic function of social insurance is creation of optimal conditions for reproduction of labor resources. Social outsource is transfer of social organizations of functions for provision of social services or production functions to other establishments, organizations, and companies Corporate social responsibility is companies and organizations’ performing social responsibilities defined by the law and readiness to bear voluntary expenditures for social needs above the limits set by the laws. Fig. 1. Socio-economic mechanisms of supporting the institute of family.

funds, and assets of public organizations. Social transfers solve the following socially signiﬁcant tasks for family or society on the whole: – reduction of asymmetry in the level of material provision of active and unemployed population; – increase of living standard of citizens that are not involved in the labor process; – reduction of the negative influence of crisis factors of socio-economic, political development of society that reflect important spheres of living activities of human; – reduction of social risks for different categories of population, including family, through the system of social protection, support, and social provision and insurances;

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– provision of social justice in society, minimization of social, economic, and political justice, etc. An example of the most effective social transfer in Russia is programs of maternity capital, which is a form of state support for Russian families with children. During the period of implementation of (since 2007), the volume of payments for families with a second child (or second adopted) increased by two times. In 2007, maternity capital constituted RUB 250 000, and in 2017 – RUB 453,026. In 2018, it remains at the previous level. Together with maternity capital, paid from the federal budget for each norm child, each subject of the RF has its own programs for support for multi-child families. In certain regions it is money payments, in other – land for construction of accommodation, in other – support with mortgage. In Novosibirsk Oblast, the Republic of Sakha and other regions (20%), maternity capital can be spent for purchasing an automobile; in Murmansk Oblast – for purchase of durable goods; in Samara Oblast – for education, medical treatment, installment of natural gas heating system, and goods for children; 10% of the subjects of the RF allow spending maternity capital for family’s needs (Volgograd, Ivanovo, Kaluga Oblasts, etc.) or at the receivers’ discretion (Tyumen Oblast) (Tipikina and Boltenkova 2016). In 2017, social transfers in the form of regional maternity capital were issued in 72 regions of Russia. The volume of regional maternity capital is set by the subjects of the RF depending on the possibilities of the region’s budget. In Moscow, programs of regional maternity capital are absent, and in Moscow Oblast they are currently terminated due to limited budgets of regions (Regional maternity capital 2018). The provided examples of social transfers are implemented by the state, with the source being the federal and regional budgets. Another actively developing socio-economic mechanism of support for poorly protected groups of population, including families, is corporate social responsibility. Corporate social responsibility is a concept according to which a company takes responsibility for influence of its activities and decisions on society, going beyond the limits of the legally set requirements, and is ready to take voluntary measures for increasing the living standards of its employees, members of their families, and local society on the whole. A quantitative indicator of development of corporate social responsibility as a mechanism of social development of the territory of support for local society, including families, is dynamics of development and provision of corporate non-ﬁnancial reports. According to the Russian union of industrialists and entrepreneurs, as of March 15, 2018, the National register of non-ﬁnancial reports includes 167 companies and 826 reports, which have been issued since 2000 (Table 1). Table 1. Dynamics of compilation of non-ﬁnancial reports. Years 2000 2001–005 2006–2010 2011–2016 Number of reports 1 72 273 480

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Non-ﬁnancial reports (Fig. 2) include: ecological reports – 73, social reports – 311, reports in the sphere of sustainable development – 277, integrated reports – 141, and sectorial reports – 26 (National register and the Library of corporate non-ﬁnancial reports 2018).

Fig. 2. Dynamics of compilation of non-ﬁnancial reports.

However, despite the conﬁdent dynamics of growth, only large companies publish reports on social responsibility. According to certain data, 80% of entrepreneurs implement social responsibility before the society in different forms – develop personnel, implement socially signiﬁcant projects, develop charity, etc. (Devyatova 2016). Let us view experience of social responsibility of several large corporations on implementation of corporate social programs in the sphere of supporting families. EuroKhim is an international agro-chemical company that implements a wide specter of social programs – from development of workshops for development of cities, creation of new sports and educational infrastructure to an international hockey competition and supporting initiatives of local residents and non-proﬁt organizations. Cooperating with local administrations, communities, volunteers, etc., EuroKhim implements the program “High-quality living environment”, which uniﬁes projects for construction of accommodation, development of public spaces and parks, being aimed at increase of living standards and environment. This program won the competition of social programs “Leaders of corporate charity”. Within the program, two unique – in Volgograd Oblast and Perm Krai – corporate districts will constructed with social infrastructure, which conform to the modern standards of social provision: with kindergartens, schools, hospitals, sports centers, parks, and public spaces for 15,000 people - employees and their families. In 2016, EuroKhim spent $17.8 million for social programs and development of public infrastructure. In the conditions of difﬁcult socio-economic situation in Russia,

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these social investments positively influence the socio-economic context and social stability in the regions of the company’s presence (Report on sustainable development of EuroKhim 2016). A lot of companies care for formation of healthy living image for their employees and families. For example, the metallurgical company Nornikel has a Council on development of physical culture and sport. The company stimulates regular sport events for employees and organizes sports competitions with tens of thousands of participants. The company’s expenditures for the programs of reduction of social tension, charity, and development of social infrastructure constituted RUB 23.6 billion in 2016 (Report on corporate social responsibility of Nornikel 2016). ALROSA is a Russian group of diamond companies; it conducts voluntary activities for creation of favorable business climate, supporting decent labor conditions, and well-being of employees and population in the regions of its presence. In 2016, as a result of analysis of activities of companies in the sphere of sustainable development, ALROSA was among the leaders of the indices of sustainable development of the Russian union of industrialists and entrepreneurs “Responsibility and openness” and “Vector of sustainable development”. Social expenditures of the company constituted RUB 10.4 billion in 2016. According to the principles of corporate social responsibility, ALROSA has taken responsibilities for socially responsible participation in lives of its employees. A wide complex of target programs, aimed at creation of competitive advantages of the company as a socially oriented organization and attractive employers, includes the programs of support for employees and their families: – “Recreation and leisure of employees and their families”. The company has its yearround sanatorium with modern equipment and highly-qualiﬁed personnel at the Black Sea coast of Russia. Recreation of employees’ children in the summer period is conducted in stationary youth health camps. More than RUB 200 million are spent for children’s recreation annually. – “Health”. Preservation of health of employees and their families is viewed as one of the strategically important directions of social policy of the company, which determines conditions for increase of labor efﬁciency at the companies. – “Culture and sport”. Implementation of the program is set on the sports complex ALROSA. The complex has 14 sports objects, 8 culture establishments, and 6 objects of summer recreation for children and teenagers. On the basis of culture and sports establishments of the complex, 15 sports sections for children and 17 sports sections for adults function; more than 90 creative groups with 6,000 people. Uniqueness of the program consists in the fact that cultural and sports events that are organized and ﬁnanced by the company influence creation of favorable social environment not only for employees but also for local communities. – “Accommodation”. The company spent RUB 466.8 million for improvement of housing conditions of its employees in 2016. – “Private pension program”. Formation of additional pension for employees takes place within the corporate pension plan, which envisages regular payments of the company into the non-federal pension fund (Socio-ecological report of ALROSA 2016).

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The local corporate social programs for support for families include more than 40 projects of the Russian telecommunication company Mobile TeleSystems, which provides services under the brand MTS. MTS has been involved with volunteer corporate movement “Give away Kindness” for six years. As of now, more than 6,000 MTS employees are involved in it. In 2016, they conducted more than 500 events in different regions of Russia. MTS pays special attention to socially unprotected children. Employees and partners organize federal volunteer events for handicapped children, children from orphanages, etc. Another project of MTS is Generation M. It is a creative charity project for children of whole Russia. General expenditures of the MTS group for charity and social projects constituted RUB 515.5 million in 2016 (Report in the sphere of sustainable development of MTS Group 2016).

4 Conclusions In the conditions of ﬁnancial crisis, Russia is peculiar for various socio-economic mechanisms of supporting the institute of family. The most popular mechanisms of state social policy include social transfers, which are implemented in the form of onetime payment to pregnant women; maternity grants; maternity-leave provision; monthly ﬁnancial compensation for each child under 18 for families with many children; monthly payment for children; new program of mortgage for housing with 6% interest, etc. Apart from the state, business also supports the institute of family, using the mechanisms of corporate social responsibility. While internal social investments concern to employees of socially responsible companies and their families, external social investments and charity programs concern families that reside on the territory of business’s location. In some regions, the role of this socio-economic mechanism is more vivid, but there is overall positive dynamics of the process of development of corporate social responsibility of Russian business – though it is just at the beginning of the path. Diversity of socio-economic mechanisms of supporting the institute of family and involvement of business into this process reduce negative influence of ﬁnancial crisis on living activities and economic and social state of Russian families.

References Nikoloski, Z., Ajwad, M.I.: Do economic crises lead to health and nutrition behavior responses? Analysis using longitudinal data from Russia (English). Policy Research working paper; no. WPS 6538. World Bank, Washington, DC (2013). http://documents.worldbank.org/curated/ en/743931468325257806/Do-economic-crises-lead-to-health-and-nutrition-behaviorresponses-analysis-using-longitudinal-data-from-Russia. Accessed 25 Mar 2018

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Volgin, N.A.: Social consequences of ﬁnancial crisis in the Russian society. Sociology of power, No. 2 (2009). https://cyberleninka.ru/article/n/sotsialnye-posledstviya-ﬁnansovogo-krizisa-vrossiyskom-obschestve. Accessed 22 Mar 2018 Devyatova, P.: More important than money. Social responsibility of business evaluated by experts. Argumenty i fakty. Accessed 30 Nov 2016 The National register and the Library of corporate non-ﬁnancial reports. http://xn–o1aabe.xn– p1ai/simplepage/157. Accessed 25 Mar 2018 Reports in the sphere of sustainable development of MTS Group, pp. 80–84 (2016). http:// our2016.mts.ru/ru/index.html. Accessed 25 Mar 2018 Report on corporate social responsibility of Nornikel, pp. 100–110 (2016). https://www. nornickel.ru/upload/iblock/b9d/nn_cso2016.pdf. Accessed 07 Mar 2018 Regional maternity capital. http://pro-materinskiy-kapital.ru/regionalniy/. Accessed 09 Mar 2018 Socio-ecological report of ALROSA, pp. 84–118 (2016). http://www.alrosa.ru/sr2016/. Accessed 19 Mar 2018 Tipikina, A.E., Boltenkova, O.M.: Analysis of effectiveness of implementing the programs of maternity capital. Young scholar, No. 14, pp. 615–617 (2016). https://moluch.ru/archive/118/ 32675/. Accessed 23 Mar 2018 Sustainable development in the spotlight. Report on sustainable development of EuroKhim, p. 47 (2016). http://www.eurochemgroup.com/wp-content/uploads/2016/02/EuroChem-SR-2016RUS.pdf. Accessed 24 Mar 2018

Conceptual Approaches to Formation of Financial Strategy of a Higher Education Institution Oksana N. Momotova1 ✉ , Lyudmila V. Belokon1, Soﬁya G. Kilinkarova2, Tatyana A. Mayboroda1, and Galina V. Stroi1 (

1

)

North Caucasus Federal University, Stavropol, Russian Federation [email protected] 2 Pyatigorsk State University, Pyatigorsk, Russian Federation

Abstract. The article is studying the actualization issues of higher education institutions’ ﬁnancial strategies. Basing on the summary of the analyzed infor‐ mation a conclusion is made concerning replacing the conceptual model used to ﬁnance education in Russia. World trends of educational institutions’ ﬁnancing were analyzed and interpreted, especially those, which are characteristic of the countries – members of the Organization for Economic Co-operation and Devel‐ opment (OECD). General conclusion is drawn concerning the condition of higher education institutions’ funding; prevailing function of such institutions is the providing of high-quality education services. The conclusion is that functioning of the higher education institutions is performed under the conditions of limited public funding, budget fund’s economy, partial regulation of extra budgetary funds spending which certainly should activate the modernization of ﬁnancial strategies and particular elements of higher education institutions’ ﬁnancial management. Basing on theoretical research and empiric material, using the methodology of the study and world-wide experience, the authors made a conclu‐ sion of the increase in tendencies of orientation toward market mechanisms during the forming of conceptual methodological approaches used for higher education institutions’ ﬁnancial management, of applying the result-oriented budgeting principles and integrating ﬁnancial management projects allowing to simultane‐ ously improve the quality of education services and cause growing results from ﬁnancial, productive and business activities of education institutions. Keywords: Higher education · Conceptual approaches · Education sector Education funding · Financial strategy JEL Classiﬁcation Codes: G32 · G38 · H52 · I22

1

Introduction

Issues of ﬁnancial management are among the most important questions of economics, especially in case of ﬁnancial management in public and local sectors of economy. Problems of ﬁnancial management became increasingly signiﬁcant for higher education institutions because market mechanisms’ transformation and budget process’s reforming dramatically alter organizational and legal forms of the institutions together © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 803–812, 2019. https://doi.org/10.1007/978-3-030-00102-5_86

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with their performance and ﬁnancial indexes; classical tools of ﬁnancial management don’t provide expected management outcome as they are not fully result- and eﬀectoriented. Research of the existing ﬁnancing mechanism of higher education institutions demonstrates the presence of numerous problems which still prevent academic institu‐ tions from acting as equal marketplace participants: no scientiﬁcally-proven standards for the expenses ﬁnancing the government’s assignment are developed; restraining of actual ﬁnancial independence in ﬁnancial management issues; no opportunity to handle extra budgetary funds and ﬁnancial ﬂows within budget implementation. Modern system of higher education in Russia still has excessive amount of higher education institutions and works in highly competitive environment. One of the factors explaining the growing competitiveness, acceleration of market adaptation and forma‐ tion of tools accumulating extra budgetary funds proves to be the perfection of strategic ﬁnancial management by the use of result-oriented budgeting, ﬁnancial planning aimed at eﬀective and rewarding use of both budgetary and extra budgetary ﬁnancial resources and constant growth of extra budget funding; using high-quality ﬁnancial management to create ﬂexible ﬁnancial tools (Joraev 2006).

2

Methodology

Methodological base of the study consists of concepts and ideas of modern economic science, discussed in the works of Russian and foreign scientists specializing in the area of public sector economy, studying the nature of public goods and economic content of public services, conceptual framework of public management, ﬁnancial theory, the problems of the modernization of the state and local facilities’ ﬁnancial mechanism during the budgeting system’s reform. Systematic and functional approaches have also become the base of the methodology as the general principle for studying various economic and ﬁnancial interactions; these approaches allowed deﬁning cause-and-eﬀect relationships and integrating assorted directions of the research. It is necessary to point out that the research of economic problematics of educational system from the perspective of the public goods theory by such classical economists as G.S. Becker, F. List, A. Marshall, A. Smith and T.W. Schultz. The study reached its height with the deﬁnition of education, skills and proﬁciency developed during the education as a component of national wealth. In Russian ﬁnance theory it is necessary to mark the works of A.G. Griaznova, O.B. Ivanova, E.V, Markina, V.M. Rodionova, M.V. Romanovsky and N.G. Sychev. Substantial contribution to the research of the modernization of the diﬀerent levels of education system’s ﬁnancial mechanism was made by such Russian scientists as O.V. Andreeva, V.V. Bocharov, A.A. Voronin, I.G. Djivotovskaya, O.V. Inshakov, O.M. Kochanovkaya, T.F. Romanova, V.K. Senchagov and V.V. Tarakanov. Nevertheless, until now no general idea concerning higher educa‐ tion institutions’ ﬁnancial management has been formed; not enough attention was paid to the problems of the ﬁnancial planning methodology, there were too few studies devoted to the budgeting of education institutions’ activity.

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While theoretically generalizing academic ideas and arguing in favor of the study the authors relied on the following general scientiﬁc instruments: special scientiﬁc cognition methods among which are scientiﬁc abstraction, retrospective, systematic and functionally-structured analysis, economic and statistical methods, together with logical, semantic and comparative analysis. These methods were used according to their functionality and strengthened the reasoning of the achieved results, proving their accu‐ racy. Informational and empiric basis of the study is formed with the use of the legislative acts of the Russian Federation, oﬃcial information of the Russian Federal State Statistics Service, materials from monographic and thesis papers of Russian and foreign scholars, information gathered from relevant Internet sources and the authors’ personal observa‐ tions and projects.

3

Results

The relevance of the study devoted to the stated topic is proved by the fact that education expenses similarly to healthcare ones are the productive expenses. They directly inﬂu‐ ence human capital and are able to transform into economic growth results getting ahead of the midterm prognoses. The education ﬁnancing model used in Russia dramatically diﬀers from the world trends. Russia spends 25% less public funds on the middle education’s ﬁnancing and 1.5 times more on the senior school education. At the same time funds spent on pre-school education are on the level with the countries of the same revenues. These diﬀerences can be explained by the record coverage of senior education among Russia’s population (more than 50% of the population aged between 25 and 64) and shorter period of secon‐ dary education if compared with the countries of high and average development levels (Eroshin 2007). However, if education spending per student is analyzed, remarkable diﬀerence between wealthy and poor countries can be observed depending on provided education levels. This diﬀerence is more than ﬁve times higher in case of the senior education. It is also necessary to point out dropping levels of education ﬁnancing by the consolidated budget (from 12% in 2006 to 9.9 in 20017); the conclusions are not really comforting. For a long time annual education spending reached about 4% of GDP. The lowest ﬁgure was observed in 2005 and 2006 (3.7% and 3.8% respectively). Nevertheless from 2013 education funding restarted its fall. This occurred both due to the decrease in oil prices and the priority of military and pension expenses. The spending peaked in 2009 – it reached 4.6% of GDP, then, in 2013 education system received about 3.9 trillion roubles (according to the prices of the year 2016), which corresponded with 4.3% of GDP. In 2016 education funding decreased to 3.7 of GDP and it is planned to lower the funding even more: to 3.5% of GDP before 2019. According to the experts, during all these years the structure of Russian budgetary system’s spending tended to develop in the direction opposite to the trajectory observed in the countries – members of the OECD. The share of education spending in OECD countries stayed on the level of 13% during last ten years, while in Russia it dropped from 11.8% to 9,9%. Saving existing spending priorities with the lowering amount of

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spending corresponding with GDP, planned in several years will furthermore distance Russia from developed countries, drawing it nearer to Third World. It makes sense to point out that this country ranked 41st in the world rating according to the amount of funds spent on education. The leaders of the rating are Cuba (12.9%), Sweden (7.3%), Finland (6.8%), Belgium (6.4%), France (5.9%), Israel (5.8%), Great Britain (5.6%), Austria (5.5%) and the USA (5.4%). General decrease in education funding in Russia is caused by the federal budget. For instance, between 2013 and 2019 Higher Education funding dropped from 661 billion roubles to 458 billion. From 2012 to 2019 federal funding of the General Education decreased from 128 billion roubles to 14 billion roubles. Between 2013 and 2019 preschool education spending reduced 25 times: from 77 to 2.9 billion. Federal funding of secondary professional education is going to be diminished more than seven times between 2011 and 2019. Due to the fact that the federal budget traditionally ﬁnances higher education, delegating expenditure powers of funding secondary professional, general and preschool education to the regional and local authorities, higher education institutions are usually the ones who suﬀer the most. The scientists of economics school point out that from 2013 a process of “gradual withdrawal” of the federal centre from public sector ﬁnancing has been going on; this process allowed quicker formation of a new model of education funding. Conceptually, modern global tendencies of education funding are linked to forming models suggesting a consensus of the government, business owners, families, students, sponsors and philanthropy and charity organizations with the assistance of non-commer‐ cial organizations. An education ﬁnancing model aimed at the open education system is preferred: this model is ﬂexible, reacts quickly to any change, and proves to be resultoriented, as it’s based on a high level of individuals’ and education institutions’ results measurability, which is the principle idea of the knowledge society. The greater share of funds used for education modernization in Western European countries is still formed by the state and local budget. Only small share of the funds come from private organi‐ zations, but the tendency seems to become stronger and has been growing steadily for the last 10 years. A range of new strategies in educational sphere has been developed worldwide; some of these became widely used during the last few years. These strategies suggest granting autonomy to education institutions, decentralizing ﬁnancial and political planning and forming new mechanisms of ﬁnance distribution. The authors share Hans-Georg Hoﬀman’s opinion that nowadays there are three main educational conceptions concerning education funding. First one is the conceptual model suggesting orientation on the free market. Diﬀerent forms of this model are used in the states of continental Europe and become more popular in Russia. The model stimulates public and private education institutions to match the ways of ﬁnancing used at the market. It is based on neoliberal views considering searching for new ways to attract capital from certain individuals to fund public and private education. Followers of neoliberalism integrate new ideas of an education insti‐ tution’s management. An education institution is presented as a decentralized autonomic establishment providing educational services and functioning according (and following) the laws of the market as any other company. As a producer of educational services in

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market economy, an education institution is independent in the market and bears full responsibility for its actions during competitive activity, together with the realization of educational and other products to the consumers with achieving maximum gain. Neolib‐ eral philosophers side with the policy of legal independence of education institutions and their independence from the government. Moreover, there is a discussion of making education institutions responsible for the ﬁnancial resources received from all levels of budgetary system: federal, regional and municipal ones. Expenditure control by author‐ ized structures is going to increase. Neoliberal funding policy suggests unprecedented decrease in educational spending and transferring this sphere to the power of the unregu‐ lated market. The government’s role in education is minimal; public authorities don’t interfere with the decisions taken by the education institutions, education institutions become more independent. According to the model teachers’ salary depends on their results; they can also be rewarded for excellent results in students’ training. At the moment, global tendencies of neoliberalism’s development (Europe, USA, Australia and New Zealand) are connected with the promotion of the joint responsibility strategy and shared co-ﬁnancing of educational sphere by the state, regions, communi‐ ties, organizations and companies, charity associations and individuals (Anisovets 2012). Today neoliberal ﬁnancing models are moving towards choosing equal opportunities for all successful students, who enter labor market bearing ﬁnancial and time expendi‐ tures for their education, though neoliberalism ideology states inequality of education as the main factor of educational activity’s development and further shortening of education period. Only general education is supposed to be free and obligatory; educa‐ tion is partly free for the most gifted and talented. The ﬁnancial models themselves correlate with results rather than with spending. Theoretical framework of the model was created by such scientists as M. Friedman, F. A. von Hayek, F. Chubb and T. M. Moe. The second ﬁnancing model leans towards the common market. This model is suggested by the modern social democratic parties of the Western Europe; according to it the responsibility for an individual’s education and career should be equally shared by the individual, government and education institutions, most of which will be private. Theoretical basis of such ideas is presented by the economic model of the active state. Followers of this type of educational sphere funding mostly rely on the strategy aiming at supporting and stimulating successful education of an individual for a ﬁxed period of time, in other words, giving guaranteed funding providing equal opportunities for everyone entering the education system, but not the results. Nevertheless, this funding approach supports the decrease of the state’s educational sphere ﬁnancing by stimulating the increase of individuals’ investing into their future education according to the existing social system. The model assumes partial privatization of educational sphere and suﬃcient increase in targeting (education products being oriented to the customers); activating of education process-oriented ﬁnancial support provided by indi‐ vidual consumers. The model under examination supposes cooperative management of education institution functioning by all interested parties, relying on the basic principles of social democratic education approach for middle-class population.

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Similar to neoliberals, the followers of education approach for middle-class popu‐ lation propose to give education institutions responsibility for their budget, but they also declare the openness of the system to stimulate the educational system and student’s functioning, together with promoting life-long education, which allows lowering academic education spending. In the context of the quickening technological develop‐ ment social democrats view education as a mechanism of social conﬂicts’ appeasement. Educational activity’s ﬁnancing should meet social, technological and economic requirements. Theories by D. Schumpeter, N. Kondratiev, G. Giddins, W. Rombach and H. Meier deeply inﬂuenced this education funding approach. Finally, conceptual model of anti-market education social ﬁnancing is oriented on alternative integrated society. Professionals and alternatively-thinking scientiﬁc circles feel especially warmly towards this model. They claim that further development of a state’s welfare is impossible without signiﬁcant government support of educational sphere. The growth in government education spending should be determined by so called “long waves” of education and consider constantly changing social, technological and cultural conditions. To achieve this it’s necessary to increase taxation on real property. Education should promote full development of individual’s personality, be free of large corporations’ dominant inﬂuence and be a priority in every society member’s line of care. The funding should develop decentralization of education institutions’ manage‐ ment by the growing inﬂuence of educational communities and democratize decision making in educational sphere on regional and local levels. A policy of recurrent additional education during a person’s life should be supported by the government increasing the funding of the market’s needs and developing the social employment sector. Educational sphere ﬁnancing should be deﬁned by an indi‐ vidual’s needs and democratic civil society’s interests. This conceptual approach of education funding is based on not only the equality of initial opportunities, but also one of the results. Additional sources of ﬁnancing are supposed to be taxes from companies and organizations having no education centers of their own. This model of education funding planned a growth in the numbers of faculty members, dropping working hours standards for the education institutions’ workers and increasing salaries of educational sphere personnel. However these principles found no support; so nowadays alternative models incorporating the ideas of the second model are promoted. Today theoretical pioneering in this area belongs to the European Trade Union Institute in Brussels and the Research Center of German Education Union in Frankfurt. Conceptual models of education spending observed during several last decades prove to be the governments’ answer to the question of how it is possible, while suﬃciently limiting budget funding, meet the increasing demands to the quality of education proposed by education institutions of various types of ownership together with compa‐ nies’ educational centers. The experience of Russia’s education’s modernization program’s realization, in accordance with The Conception of Russia’s Education’s Modernization for the period until 2010, approved by the Government Executive Order of the Russian Federation No. 1756-r on December 29th of the year 2001, uncovered some suﬃcient problems in the conception itself together with the issues connected with a range of main reforms’ real‐ ization. A lack of budgetary funds led to the necessity of ﬁnding new mechanisms of

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the Russian Federation’s education ﬁnancing basing on the global practices. Firstly, it caused disclaiming of a number of education funding priority guarantees. For example, law article No. 40 of the Federal Law No. 3266-1 “About Education’ from July 10th 1992 was recognized to lose its legal force, which negatively aﬀected the education system. By doing so the government abandoned education’s ﬁnancing norms accounting to at least 10% of national income. Such guarantees were never included into the new Federal Law “About Education in the Russian Federation” from 29.12.2012 No. 273FL. At the moment there are still no institutional mechanisms providing the connection between human capital’s development and peoples’ wellbeing. According to this the grounds for educations’ public budgetary funding follow from the essence of the educational service as a public service and are deﬁned by its signiﬁ‐ cance in the social and economical development of the country. Nevertheless modern realities are such that the most eﬀective balance between market mechanisms and state educational policy should be developed. On the basis of this during the forming of the conceptual approaches used to improve education institutions’ funding mechanism the following goals were stated as top-priority: transition to standard ﬁnancing; increase and legalization of extra budgetary income, more eﬀective ﬁnancial spending; resultoriented budgeting (Tkachev 2009). Generalizing global experiences shows that in many economically developed coun‐ tries education institutions’ funding is made of ﬁnance transferred from diﬀerent levels of budget system, money paid by students receiving educational services, charity from individuals and organizations, college funds and ﬁnances from other sources. In the countries with well-developed market economy main participants of ﬁnancial and credit programs are the students (users of an educational service) and the state. National ﬁnan‐ cial support for students and their families is presented in the form of subsidies, diﬀerent kinds of scholarships and credits together with tax reliefs. This approach was put to good use in Russia during the development of education institutions ﬁnancial strategy, including the higher education one (Meliksetian 2013). The core of the modern Russian education system’s ﬁnancial strategies comes down to “result-oriented budgeting” (program-based funding) instead previously used “management of budgetary resources (ﬁnances)” or budget utilization. This allows creating conditions and meeting necessary requirements for eﬀective use of budgetary funds in accordance with the priority goals of the state’s social and economic policy by increasing independence and responsibility of the administrators of budgetary resources in the presence of strict midterm reference points. Such ﬁnancial strategy suggests that the budget is composed on the basis of the goals and predicted results of the state’s policy. Spending is strictly linked to education institutions’ functions, programs, serv‐ ices and operations. During its planning chief emphasis is placed on forming ﬁnal results of the budgetary programs according to their economical eﬃciency and social signiﬁ‐ cance. Priority is set on preliminary administrative control; the responsibility for taking decisions is delegated to the lower levels (Maltseva 2006). At the moment two main modiﬁcation issues of higher education institutions’ ﬁnancing and ﬁnancial management are being realized: ways of distributing funds inside the education system and education institution-based ﬁnancial management.

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Education funding usually uses per capita principle (this country included) with various options depending on the profession and the type and level of education. In Czech Republic this model is used since 1992, but at least 10% of funds are provided to the universities on competitive basis for the realization of the projects corresponding with announced national priorities in higher education sector. Organizing competitive tender it is necessary to pay special attention to how eﬀectively higher education insti‐ tutions fulﬁll strategic plans of particular parts of the national education policy. In most countries per capita funding formula is based on the information of previous year’s student’s admission. However, in some European countries ﬁnancing is deter‐ mined by achieved results. For instance in Netherlands 50% of funds are provided according to the number of issued diplomas, and in Norway 25% of spending is deter‐ mined by the number of successful examinations and graduations. Other conceptual approaches of forming certain elements of higher education insti‐ tutions’ ﬁnancing strategies recently developed in OECD states are the following: – English experience using the approach based on a formula determining major construction works’ funding. – Norwegian integral approach based on formulas and quality indicators for deter‐ mining the amount of research spending. – Australian experience of reserving ﬁnances for three years to provide higher educa‐ tion institutions’ stability while they are reaching their midterm goals. – Switzerland’s experience of allocating funds in the quantity proportional to the amount accumulated by education institutions with the help of third parties, used to stimulate budgetary income growth (Kolesnikov, et al. 2016). Some of these ideas were used in Russia, mostly while forming approaches for federal universities funding. So, the universal tendency suggests leaving behind alloca‐ tion of lump-sum payments bearing no connection to the number of students. At the same time there is no general opinion concerning the deﬁnition of “the number of students”: it is not clear, if we are speaking about students who has entered the education institution or of the ones who graduated from them. Until now there were no examples of funds’ allocation based on either education results or the number of graduations. Schemes of ﬁnancial management in the conditions of centralized administration and ones existing in the situation where suﬃciently higher education institutions’ autonomy is present have serious diﬀerences. It is worthwhile to mention that in the majority of OECD countries a tendency of strengthening education institutions’ ﬁnancial autonomy is observed. In such situation universities should provide their funders with timely and valid reports of the granted funds’ spending together with statistical data providing information of their work’s eﬀectiveness and results. Besides demands for providing data and ﬁnancial reports, authorities have other means of insuring higher education institutions’ accountability: – performing compulsory external audit of higher education institutions’ accounts and making yearly reports on carrying out internal audit. – authorizing government’s audit service to investigate any aspect of higher education institution’s ﬁnancial activity.

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– compulsory reporting to the ﬁnancial authorities concerning any ﬁnancial planning or any strategic documentation (for instance, one related to academic activity, IT development, staﬀ and asset management) (Vorontsova and Kibalnikova 2015). As a last measure of persuasion the Ministry can strip an institution of its power to award diplomas and withdraw its government funding. One more area, control under which the government hesitates to lose is the disposi‐ tion of property. Switching to the system where the Ministry of Finance loses its control on individual higher education institutions’ spending can cause tension in some countries due to the payroll liabilities control. It’s necessary to point out that in a fully decentralized system this problem is solved by the fact that education institutions are fully responsible for keeping their budget balanced and perform personal cuts if needed (Parakhina, et al. 2017). Increasing the quality of the higher education is also an unsettling issue. The govern‐ ment is aware that by decreasing the amount of funding and increasing the ratio between students and teachers’ numbers the quality of services is bound to suﬀer. There are numerous approaches of solving this problem: attempts to strictly control the education process by the use of independent inspectors; providing consultation and support to improve the quality of the education; creating reporting system to selected consumers and ﬁnancial stimulation for those higher education institutions using innovative methods and spreading new ideas. And, ﬁnally, under the conditions of the eﬀective legal system, when left no choice, consumers can sue an education institution for the low performance of the paid services.

4

Conclusions and Recommendations

Latest trend of OECD countries is represented by providing higher education institutions with more ﬁnancial autonomy on condition of strengthened ﬁnal control of the fulﬁlled work. This tendency becomes more prominent in this country, too, correcting ﬁnancial strategies of the institutions, including the sphere of higher education (Alikaeva and Nalchadgy 2015). The education institutions’ funding systems used earlier were based on strictly centralized ﬁnancial management, approved amount of spending and banned solutions of independent ﬁnancial management. This approaches lacked ﬂexibility and provided no motivation for eﬀective funds disposal. Furthermore it didn’t consider the tendency for extra budgetary ﬁnancing growth in high education. Modern tendencies of ﬁnancial strategies’ modernization on the level of higher education institutions’ funding come down to increasing rights and responsibilities in the area of budgetary questions, using up-to-date accounting forms and modern methods of ﬁnancial management, and improving evaluation systems. Analyzing global experience demonstrates that further reforming of higher education institutions’ budgetary funding should lead to growing autonomy and increasing rights and responsibilities of the higher education institutions, including budgeting issues.

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That’s why in the point of view of the authors the most perspective ﬁnancial management trends of the Russian higher education institutions are the following: – the development of the top university management’s functional areas, the growth of economical and ﬁnancial independence with intact responsibility for the results of the activity; – expanding ﬁnancial and economical administrations’ responsibilities by assigning them with the issues of ﬁnancial planning, universities’ budget establishment and control of its utilization; – Decentralization of the ﬁnancial planning, switching to the departments and other higher education institutions’ elements’ budgetary funding, revenue centers forming with transferring rights and responsibilities for budgets’ establishment and usage to their heads; – creation of internal bureaus inside education institutions assigned with business operations in various spheres, which will exist on the base of self-suﬃciency, marketing and budgeting.

References Alikaeva, M.V., Nalchadgy, T.A.: Transformation and trends of education institutions’ ﬁnancial management system. Modern Management Technologies, No. 2(50). Article’s number 5001 (2015). http://sovman.ru/article/5001/. Accessed 08 Feb 2015 Anisovets, T.A.: Economics of Education and Education Institution: study guide (epitome). Instant Printing Department of the NRU HSE, St. Petersburg (2012). 180 p. Vorontsova, G.V., Kibalnikova, A.M.: Modern Educational Technologies of The Foreign Universities. Economics and Socium, No. 2-1(15), pp. 1074–1077 (2015) Joraev, V.O.: Conceptual Approaches for The Formation of Educational System’s Financial Strategy’s Development. Multidisciplinary electronic scientiﬁc magazine of the Kuban State Agrarian University, No. 24, pp. 285–294 (2006) Eroshin, V.I.: Economical Problems Of Education’s Modernization. Management in Education, No. 3, pp. 50–55 (2007) Kolesnikov, Y.A., Epifanova, T.V., Usenko, A.M., Parshina, E., Ostrovskaya, V.N.: The peculiarities of state regulation of innovation activities of enterprises in the global economy. Contemp. Econ. 10(4), 343–352 (2016) Maltseva, G.I.: Higher education institution’s mechanism’s transformation under education system’s modernization. In: Proceedings of the Strategic University Management international conference, 28–29 June 2006. TSTU, Tambov (2006) Meliksetian, S.N.: Higher Education Institutions’ Financial Management Under Budgetary Reform: Synopsis of a Thesis by The Cand. of Econom. Sci. RSEU, Rostov-on-Don (2013). 25 p. Parakhina, V., Godina, O., Boris, O., Ushvitsky, L.: Strategic management in universities as a factor of their global competitiveness. Int. J. Educ. Manag. 31(1), 62–75 (2017) Tkachev, V.N.: Some Aspects of Public Institutions’ Budgetary Funding Modern Reforming. The Legislation, No. 11, pp. 5–8 (2009)

Applying an Algorithm for Vertex Minimization of Non-deterministic Finite Automata (NFA) on the Basis of a Multi-heuristic Approach for Studying Social and Economic Performances of Region Svetlana V. Pivneva1 ✉ , Tatyana N. Ivanova2, Galina V. Akhmetzhanova2, Anastasia A. Kurilova2, and Julia A. Anisimova2 (

)

1

Russian State Social University, Moscow, Russia [email protected] 2 Tolyatti State University, Tolyatti, Russia [email protected], [email protected]

Abstract. The article investigates an algorithm for vertex minimization of nondeterministic ﬁnite automata (NFA) on the basis of a multi-heuristic approach; and also its application to study a variety of social and economic performances. Keywords: Multi-heuristic approach · Non-deterministic ﬁnite automation Social and economic performances · Algorithms · Region

1

Introduction

The study is carried out within the framework of the RFBR grant project (Russian Foundation for Basic Research) No. 17-46-630560 “Conceptual innovation pattern of social, ecological and economic system of the Samara region”. With application of the regular languages theory to various branches of science and practice, it became obvious that not only the very language is important for the most of tasks, but also the way of setting it up [1]. Therefore, the issues of research of nondeterministic ﬁnite automata (NFA), including issues of their eﬃcient representation in computer memory, are topical now [2]. For diﬀerent ways of the NFA representation, the most important may be either a minimum number of vertices or a minimum number of arcs. Respectively, we have to consider diﬀerent possibilities of heuristic algorithms to minimize NFA (these are vertex, arc or astro-altitude minimization. The latter is considered by us as the task to build a ﬁnite automaton with a minimal nesting of the “Kleene closure” operation among all equivalents [2]. An employed multi-heuristic approach to minimize non-deterministic ﬁnite automata due to various criteria is based on a mixture of combinatorial and heuristic optimization methods and is applicable with relevant changes in three cases. The purpose is to choose an admissible solution that contains a minimum number of blocks. © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 813–818, 2019. https://doi.org/10.1007/978-3-030-00102-5_87

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However, in real tasks of the formal languages theory these sets of pseudoblocks contain too many elements: thus, a block with 4 “lines” and 3 “columns” produces (24 − 1) · (23 − 1) = 105 pseudoblocks. Therefore, one of the main issues for advanced applications consists in the description of algorithms using sets of blocks instead of sets of pseudoblocks. One issue of this kind is a minimization of a non-deterministic automaton by various criteria (vertex, arc, “astro-altitude”), i.e. a construction of an automaton deﬁning a provided language and having the lowest possible number of vertices (the least possible number of arcs, the lowest possible cyclic complexity) [3]. Possible algorithms for solving some of these problems, and for all minimization tasks, can be described as follows. We study the whole set of pseudoblocks on Qπ × Qρ that covers the relation #, and we obtain all possible arcs, as well as start and ﬁnal states of the corresponding automaton. Considering all possible subsets of this set of arcs, we decide whether the provided language determines an obtained automaton. Among all these automations we choose the “best” one.

2

Heuristic Study Algorithms

We primarily remark that we deem heuristic algorithms as the so-called anytime-algo‐ rithms, i.e. real-time ones that have the best current solution at every particular moment of operation. To develop algorithms, we apply an unterminated branch-and-bound method (MVG) [4]. The heuristics that directly relates to the task of NFA vertex minimization is the choice of the discriminant for MVG. This is an example of greedy heuristics (slightly simplifying the situation, we can say that we are trying to choose a block with a relatively big number of characters 1 that are not included in the already selected blocks). The discriminants are generated dynamically within operation of the “main” MVG, and an “auxiliary” one is applied to generate them. Now let’s describe in brief the application for the unterminated MVG. Clustering, ﬁrst of all, is carried out on a set of subtasks in order to make the choice of the same discriminant (solving the subtasks “by analogy”) after execution of a single MVG step to solve some subtask [5]. To apply common clustering algorithms, we need to choose a metric on the set of subtasks as follows. Let X and Y be some sets, n = |X ∩ Y| is the number of elements of their intersection, N = |X ∪ Y| is the number of elements of their merging. Then we write Ω (X, Y) = 1 − n/N. Consider a heuristics for deﬁning a metric on the set of subtasks blocks. Let P1 be a set of matrix cells of the ﬁrst subtask with value 1; P2 is the same for the second subtask. Then, we use a value of Ω (P1, P2) as a metric.

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An Algorithm to Minimize Non-deterministic Finite Automata

Let’s state ﬁnally the algorithm to the task of the NFA vertex minimization. According to the terms established in the modern literature on algorithmization, it can be called a diagram for the algorithm development. (initializing the list of subtasks with a single element - an initial task) (“High” step) loop { The ﬁrst “low” step is the choice of an immediate task from the list of sub-tasks; for her it’s the choice of discriminant; and for him - the execution of one step of the branchand-bound method. It should be noted that the algorithm for implementing the choice of the discriminant for MVG single step is an individual complex task and has already been described above. Also we note that the so-called sequence of right subtasks has been generating during this task (PPZ; see [1]). The second “low” step is related to the subject of clustering situations; A detailed description of the implemented clustering algorithm is given in our previous publications, and a simpliﬁed one may be presented as follows. Earlier, when generating the left task, we point out its familiarity to right task (i.e., deﬁne the left-right pair); if in the future some solution (of discriminant) is chosen for one of them, then, if possible, we do the same in another one. This auxiliary algorithm operates very quickly (since the discriminant is already chosen): if this element exists in the “pair” task, we select it; if it isn’t, then we also do not lose anything. All similar actions are also related to their own algorithm for PPZ generating. The 3rd “low” step – generation of immediate potential discriminant (block). In this situation (unlike in the ﬁrst “low” step), this discriminant is not yet a speciﬁc one for any subtask; the algorithm of the relevant generation, of course, also depends strongly on a particular task. This step (in contrast to the next 4th “low” step) is implemented with the help of “greedy” algorithms and random sampling – and exactly yields the result; it is similar to the above-mentioned tournament self-training. The 4th “low” step – one step of the branch-and-bound method for auxiliary ZDO which uses it not to solve the entire task, but to build a block (i.e. a potential discriminant) close to the maximum (by some natural metric). At the same time, unlike the “big” ZDO, here we maintain all the solutions, even deliberately far from appropriate, since generally we need all potential discriminants for further work (for a “big” ZDO). (Precisely: at further stages of algorithm operation. As a matter of fact, our algorithms operate well for very big dimensionalities, just because the generation of all potential discriminants is not produced beforehand. Therefore, in this situation, the structure of the task as an object is a bit diﬀerent; however, here we also develop PPZ similar to the 1st “low” step.) } We should note that present algorithm (more precisely – an algorithm diagram) is very convenient for parallel execution too. Also, the latter is applicable when choosing an immediate subtask from the list by diﬀerent criteria.

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Simulation Experiments Related to an Astro-Altitude Minimization of Non-deterministic Finite Automata (NFA)

So, we fulﬁlled the following opportunities in the program intended to carry out simu‐ lation experiments related to the astro-altitude minimization of non-deterministic ﬁnite automata: 1. Search for a regular expression equivalent to a given ﬁnite automaton by the exhaus‐ tion method of vertices with a predetermined order of states deleting. 2. Generation of a random ﬁnite automaton with supplied parameters. The number of automation states and alphabet size are should be preassigned. 3. Construction of all possible regular expressions (for various interchanging of states) for a predetermined ﬁnite automaton. 4. Building a regular expression appropriate in terms of the stellar height for a prede‐ termined ﬁnite automaton by an optimized exhaustive enumeration method. 5. Getting an approximate solution to the task of astro-altitude minimization of a ﬁnite automaton with one of four heuristics or several ones based on dynamic evaluations. It’s possible to specify diﬀerent sets of heuristics and averaging methods for aver‐ aging heuristics method with the help of dynamic evaluations. 6. Receiving an accurate solution of anytime-algorithm. For anytime-algorithm you can set 3 variations to choose the next task from the decision tree: by the minimum dimensionality, by the minimum value of special heuristic, by both criteria [6]. 7. Obtaining the best current solution of the task for a user-determined time period with the help of anytime-algorithm. 8. Construction of a generalized regular expression for a predetermined generalized ﬁnite automaton, which deﬁnes the same language as an automaton.

5

Algorithm for Simulation Experiment of Astro-Altitude Minimization of Non-deterministic Finite Automata

We reduce an initial ﬁnite automaton to one with a single start and a single ﬁnal vertex. If for any two states p and q there are two or more transitions between them – q ∈ 𝛿(p, a1 ), q ∈ 𝛿(p, a2 ), … , q ∈ 𝛿(p, an ) – then we unite them in one transition q ∈ 𝛿(p, a1 + a2 + … + an ). We delete in any order all states having just one front-end arc and just one back-end arc. We obtain a certain evaluation vector of automaton states with use of dynamic eval‐ uations through a dynamic risk function. We add to the decision tree the ﬁrst task consisting of a ﬁnite automaton and a state vector ordered according to evaluations received. While the decision tree contains at least one task, we make the following steps. We choose from the decision tree a task corresponding to taken criteria (by the minimum dimensionality, by the minimum value of special heuristic for task choosing or by some combination of these criteria). We delete this task from the decision tree [6].

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We implement branching of taken task. We choose an automaton state q with the best overall evaluation. We build left and right subtasks. In the left task we add the state q to the set of states that cannot be deleted in the next step. We calculate a boundary. If any regular expression is already found and its stellar height does not exceed a calculated boundary, then this task shouldn’t be included in the task list for the subsequent solution, since the latter will not be better than the one available. For the right task we delete the state q from the automaton. We calculate the boundary and, by analogy with the previous step, we add the task to the decision tree, if only the boundary is smaller than the stellar height of the current solution. If in the right task there is only one state, except for start and ﬁnal one, we delete it. We ﬁnd the solution: labeling the transition between start and ﬁnal states. If received regular expression has a smaller stellar height than the current one, it becomes the current pseudo-optimal solution. If in the left task the number of states that cannot be deleted in the next step is only one less than the number of all automation states, except for start and ﬁnal ones, then we build the right one by deleting the only one possible state. If a timer signal shows that preset time is up, then the current pseudo-optimal regular expression is returned as an approximate solution of the task. If all tasks of the decision tree are solved, then the current regular expression is an accurate solution of the task. We had implemented 3 variations to choose the next subtask from the decision tree: We choose the task with the lowest dimensionality (states’ number in automaton is minimal). We calculate a total of automation cycle’s number constructed at the time of solving this subtask and the boundary values. We choose the task with the lowest value of this property. Firstly, we choose the tasks with the lowest property value from point 2, and then among them we select the one with the lowest dimensional. Thus, the program we implemented to carry out simulation experiments related to the astro-altitude minimization of non-deterministic ﬁnite automata on the basis of a multi-heuristic approach allows obtaining a solution to optimization tasks in real-time dimension of the region. Besides, the user is able to view these pseudo-optimal solutions in real time, and the sequence of them within the limit gives an optimal solution. The program had been implemented in C++ programming language.

References 1. Mel’nikov, B.F.: Heuristics in the non-deterministic game programming. The Russian Academy of Sciences News, No. 5, pp. 63–80 (2001) 2. Baumgertner, S.V., Mel’nikov, B.F.: Generalized non-deterministic ﬁnite automata. Phys. Math. Sci. 2(26), 64–74 (2013). Higher Education Institutions News. The Volga Region

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3. Pivneva, S.V., Trifonov, M.A.: Mechanism to determine representation of properties of social and economic systems on random generation of SOP expressions. In: Collection: Topical Issues of Economic Interests’ Integration in Russia and Ukraine. International Virtual Scientiﬁc-Practical Conference: Collection of Research Papers. Publications Assistant: Anisimova, Yu.A., pp. 283–289 (2014) 4. Mel’nikov, B.F., Pivneva, S.V.: On the multiple-aspect approach to the possible technique for determination of the author’s literary style. In: CEUR Workshop Proceedings Selected Papers of the 11th International Scientiﬁc-Practical Conference Modern Information Technologies and IT-Education, SITITO 2016, pp. 311–315 (2016) 5. Pivneva, S., Melnikov, B., Kuptsov, N.: Inﬁnitely complex sum of classiﬁcation of noncommuting matrix S-sets (Beskonechno slozhnaya zadacha o klassiﬁkatsii S-naborov nekommutiruyushchikh matrits). In: CEUR Workshop Proceedings (CEUR-S.org): Selected Papers of the XI International Scientiﬁc-Practical Conference Modern Information Technologies and IT-Education (SITITO 2016), vol. 1761, Moscow, Russia, pp. 56–63, 25– 26 November 2016 6. Mel’nikov, B.F., Pivneva, S.V., Trifonov, M.A.: Various algorithms, calculating distances of DNA sequences, and some computational recommendations for use such algorithms. In: CEUR Workshop Proceedings, pp. 43–50 (2017)

Financial Tools as an Alternative to Bank Deposits and Deposits of Microﬁnance Organizations I. E. Shaker(&) and N. S. Shaker Financial University Under the Government of the Russian Federation, Moscow, Russia [email protected], [email protected]

Abstract. In 2016-2017, the conjuncture of the corporate securities market is relatively favorable. In the context of declining borrowing costs, issuance activity in the primary market of corporate bonds is increasing. Debt securities rise against the backdrop of slowing inflation, lowering the key rate of the Bank of Russia, restoring world oil prices, increasing investor risk appetite, and reducing the volatility of the ruble. All the conditions for the placement of bonds were formed in order to invest them in the real economy. Corporate bonds of various companies receive a signiﬁcant share in the total portfolio of investors, and this affects the development of investment potential and economic growth. Keywords: Investments Corporate bonds Deposits Financial Instruments Credit activity Banking sector Financial literacy Stock valuables Microﬁnance organizations

1 Peculiarities of the Russian Bond Market At present, there is a vivid tendency for reduction of interest rates for deposits - 7–8.5 – the maximum interest. Interest rate of ruble deposits in ten largest Russian banks [1] in September 2017 reached a new historical minimum, dropping down to 7.29%. Average interest rates of bank deposits for individuals (1 year) constitute 4–6%. Individuals and non-ﬁnancial organizations require an alternative for investing assets – these could be simple stock tools with ﬁxed proﬁtability. These are debt tools – in particular, state and corporate bonds with higher rates, as compared to deposits, and with higher reliability ranking. The level of ﬁnancial literacy of the large share of population is rather high; people are ready to invest their money into bonds [1]. If the data for the indicators of proﬁtability of deposits and bonds are compared, we see that proﬁtability of the former constitutes appr. 5–6% per year, while for bonds it is higher by 2%, constituting 7.5% [1]. In the bonds market, more legal entities are involved in the process of emission of own debt securities (Table 1). This is an attractive tool of borrowing money. Sberbank is the largest Russian bank (net assets – RUB 23 billion); it is ranked 3rd as to the size of equity offering (Table 1). Gazprombank and VTB (RUB 5 and 3 © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 819–825, 2019. https://doi.org/10.1007/978-3-030-00102-5_88

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I. E. Shaker and N. S. Shaker Table 1. Leaders in the market of organizers of placement of corporate bonds. Investment bank Volume (RUB million) Market share Number of emissions Gazprombank 214,354 16.64 36 VTB Kapital 178,588 13.86 42 Sberbank CIB 167,722 13.02 39 FK Otkrytie 145,150 11.27 22 Sovkombank 141,319 10.97 49 Source: Cbonds (URL: http://ru.cbonds.info/about/services); the data on cost of net assets are given based on ﬁnancial ranking of banks on the web-site (URL: http://www.banki.ru/banks/ratings/) [2]. Table 2. Volume of corporate bonds in turnover and their share in GDP. Year Nominal volume of corporate GDP, RUB Share in bonds in turnover, RUB trillion trillion GDP, % 2007 1.3 9.6 13.54167 2008 1.8 8.7 20.68966 2009 2.5 12.8 19.53125 2010 3 13.5 22.22222 2011 3.6 11.8 30.50847 2012 4.3 12.2 35.2459 2013 5.3 13.6 38.97059 2014 6.6 15.2 43.42105 2015 8.1 16.9 47.92899 2016 9.2 19.1 48.16754 Source: compiled by the authors based on the data of Moscow Exchange (URL: https://www.moex.com/).

billion, accordingly) are leaders – though, according to the cost of assets they are way behind Sberbank. Net assets of Sovkombank – RUB 615 million, which is less than with other banks. However, Sovkombank is a leader according to size of emissions in bond market, as it has a more effective business model for this product [3]. Also, the data of Table 1 show that Russia has large monopolization of the bond market. The largest investment banks are state-owned, which reduced the level of competition. Thus, ﬁve Russian banks account for 65.8% of the whole market. In the modern conditions, the market of corporate bonds is rather attractive for banks and their corporate customers, which is stimulated by terms of placement of bonds and high fee for placement of bonds. Average rates (as of July 2017) for credits for legal entities (non-ﬁnancial organizations) varied from 11% to 14% [4]. Average coupon in the corporate bonds market is within the range of 8%–9%, which allows corporate clients to use money assets of creditors with more proﬁtable terms and avoid obtaining credits in a bank. Also, it is necessary to consider the influence of monetary policy – in particular, gradual reduction of the key rate of the Bank of Russia. As of now, it equals 8.5%, with further

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expected reduction to 8%, which may lead to reduction of coupon rate for bonds. This will stimulate corporate clients to emit new bonds and will give investors the impulse for trading securities, as their market cost will be higher than nominal cost. Correlation between growth of GDP and volume of corporate bonds in turnover equals 0.94 – it is high. The share of corporate bonds in GDP grows. This raises attractiveness of emission securities as compared to non-equity securities. The bonds market also has changes in favor of usage of debt tools. An example is repos with the Bank of Russia (Table 3). Table 3. Repos with the Bank of Russia. Indicator 2014 2015 The volume of corporate bonds, passed by the 1,177.27 1,397.43 Bank of Russia according to repos (RUB billion) Source: Cbonds (URL: http://ru.cbonds.info/about/services) [2].

2016 757.65

2017 193.93

As is seen (Table 2), over the last four years, the volume of corporate bonds that are used as a security for repos with the Bank of Russia reduced by 84%. At that, activities in the repos market did not decrease, but there’s gradual change of the direction of usage of debt securities. Also, banks prefer repos with commercial banks in non-stock market space. This shows that in the modern conditions there are new models and strategies of usage of bonds. A vivid example of that is a new ﬁnancial tool – one-day ruble “bonds” of VTB. Based on the data of the Bank of Russia on the volumes of debt securities issued in the domestic market and their distribution for the sectors of economy (Table 4), we see that the main customers of emission are non-ﬁnancial organizations. Table 4. Placement of securities for the sectors of economy (RUB billion). Sectors of economy Debt securities (RUB billion) Non-ﬁnancial organizations 5,190,029 Other ﬁnancial organizations 2,253,964 Credit organizations 1,557,901 Non-residents 109,800 Insurance companies 17,000 Source: data of the Central Bank of the RF (URL: http://www. cbr.ru/statistics) [5].

2 Largest Bond Issuers in Russia Non-ﬁnancial organizations account for 57% of the market of corporate bonds of Russia. The leading spheres for placement of bonds are oil and gas industry, construction, energy sphere, machine building, metallurgy, etc. The size of issuer is very

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important here. Bonds are placed by large companies – mainly, state corporations – as issue of securities is a costly operation (investment banks receive large payments for organization and conduct of a deal). According to statistics of Moscow Exchange, Transneft PJSC is a leader among the issuers – non-ﬁnancial organizations in 2017 (Table 5). Table 5. Non-ﬁnancial organizations – largest issuers of bonds (as of August 1, 2017) Company Size of emission (RUB billion) Transneft PJSC 82 RZhD OJSC 75 PIK Group PJSC 33 GTLK PJSC 20.17 MTS PJSC 20 Uralkaliy PJSC 15 EuroKhim PJSC 15 Rostelekom PJSC 10 Lenta LLC 5 Detsky Mir LLC 3 Obuvrus LLC 1 Source: compiled by the authors based on Moscow Exchange data (URL: https://www.moex.com/) [6].

According to Moscow Exchange, Bank VTB PJSC was a leader as to placement of corporate bonds in 2017 (Table 6). The size of issues of its one-day bonds constitutes RUB 7.9 trillion. The model of usage of one-day bonds was implemented by VTB in 2016; as of now, it is actively used as a tool for expansion of liabilities. Placement of Table 6. The largest placements of corporate bonds (as of August 1, 2017). Bank Size of issue (RUB billion) Bank VTB PJSC 7,889.34 Vneshekonombank 80.55 BINBANK PJSC 20.00 Rosselkhozbank JSC 20.00 Sberbank PJSC 15.20 ALFA BANK JSC 12.15 Bank FK Otkrytie JSC 10.00 SMP Bank JSC 5.00 Tinkoff Bank JSC 5.00 ROSBANK JSC 2.80 Source: compiled by the authors based on the data of Moscow Exchange (URL: https://www.moex.com/) [6].

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such one—day bonds takes place after closure of the market of Moscow Exchange, which allows credit establishments to close the day position in a positive range. It is another conformation of a tendency for implementation of new approaches to using such debt tools as one-day and structured bonds. As for other mid-term and long-term placements of bonds by credit organizations (Table 5), the leading positions belong to the banks with partial or full state participation. However, such retail commercial banks as Alfa Bank, Tinkoff Bank, Rosbank, and others actively use bonds as a tool for attracting liquidity.

3 Provision of Subsidized Terms of Taxation of Corporate Bonds In March 2017, the State Duma passes the law that cancelled taxation of individual income that is received as a form of discount for payment of bonds of Russian organizations that were issues in rubles during January 1, 2017–December 31, 2020. The State Duma allowed private investors not to pay personal income tax from coupon proﬁt. But not all bonds are covered by these amendments. Firstly, they have to be issued in rubles; secondly, they have to be issued in the period of January 1, 2017– December 31, 2020. The 13% tax has to be paid if the coupon exceeds the reﬁnancing rate of the Central Bank of the RF by 5% and more. As of now, income for securities which coupon exceeds 14.75% will be still subject to tax (rate of the Central Bank 9.75% + 5%). These changes raised attractiveness of issues of corporate bonds. That’s why by 2020 the share of corporate bonds in the total volume of investments will exceed 70%.

4 Debt Tools in the Market of Micro-Financing Investments into micro-crediting have a very important feature – volume of investments cannot be less that RUB 1.5 million. This blocks middle and large business. For the last year, the average sum of investments into bonds from private investors constituted RUB 10 million. Bonds have a range of substantial advantages, as compared to deposits – high level of proﬁtability; receipt of regular income; low risk level – so investors use different business strategies that allow increasing their income and reducing risks of investments: 1. Buying and holding bonds until redemption. 2. Using offers for bond issue (offer of issuer when purchase of bonds takes place by the initiative of bond issuer or offer of investor when the initiator of purchase is investor). Signs of offer (date of offer, price of bond purchase, list and terms of ﬁling documents, etc.) are determined in the process of issue and are not further changed. In Russia, “issuer offer” is not used. Investor offer shall be used by the company – leader in the market of micro-ﬁnancing - “Domashnie dengi” (“Household money”),

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which placed in April 2017 – for the purpose of further development of business by means of increase of loan portfolio – bonds in the quantity of 1.25 million for RUB 1,000 per one bond. The total sum of money received by the company for placed securities constituted RUB 1.25 billion. As a rule, bonds are purchased by the initiative of holder of bonds. In case of investor offer, there is a possibility to require from issuer to purchase the bonds for the previously set price in the previously set period. At that, investor has a choice: he can use the offer or leave the bonds in the investment portfolio, or provide all his bonds for sale (or a part of them). During independent trade on stock market, the procedure of offer – unlike the payment for coupons and redemption of nominal cost of bonds – sets certain obligations on investor. Using offers for bonds allows investors to receive additional resource and using new investment possibilities that appear in the bond market. The bonds for which an offer is envisaged allow regulating demand due to change of the level of interest rates in the ﬁnancial market – as there is reverse dependence between the level of interest rates and bonds price; when interest rates grow, prices for bonds reduce, and vice versa. During formation of investment portfolio, private investor cannot predict the future level of interest rates, however he can reconsider the structure of his investment portfolio in view of market realia. Investment strategy with the usage of bond offers has certain advantages: low risk level and high level of predictability of results of investments; possibility to quickly react to changes of market situation – e.g., by including the bonds with various terms of offer into portfolio; possibility to set bonds for the offer with a certain periodicity. In April 2018, the offer for bonds of a micro-ﬁnance company “Domashnie dengi” was appointed. All investors – bond holders – may set them for payment. Proﬁtability of securities is very high for the Russian market - 20%. Investors can receive proﬁt that exceeds the average proﬁt for bank deposits by three times. [7]. Interest and trust of investors to the market of micro-ﬁnancing grows, but the risks of business of micro-ﬁnancial organizations increase as well. The main systemic risk is the risk of non-return of loans that are issued with high interest rates. At the beginning of 2018, proﬁle assets of micro-ﬁnancial organizations reached RUB 111.8 billion. Growth of micro-ﬁnancial market is predetermined by accumulation of problems assets with micro-ﬁnancial company. At that, accumulation of problem debt will lead to growth of the share of overdue debt in gross portfolios of micro-ﬁnance organizations from 30% as of January 1, 2017 to 38–40% as of early 2018. [8]. Based on the performed analysis, it is possible to conclude that market of placements has a good potential for growth of investments in real economy. Due to attractiveness of stable investments with low risk, corporate bonds of various companies – primarily, state ones – could obtain large share in the aggregate portfolio of investors, which will influence the development of investment banking. However, as the market is very narrow in the aspect of placement organizers, there is a probability of increase of monopolization and larger reduction of the level of competition. In order to improve the existing situation, it is necessary to develop investment business at the micro-level and develop and implement new models in the corporate market, increasing its attractiveness.

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It is possible to distinguish the following tendencies and directions of development in the market of corporate bonds: 1. Gradual reduction of nominal proﬁtability of bonds, caused by consecutive reduction of the key rate of the Bank of Russia. Real indicators of proﬁtability will largely depend on the inflation policy of the state. 2. Continuation of the existing trend in favor of increase of the volumes of placement of bonds; however, reduction of proﬁtability may lead to slower growth rate as compared to 2014–2018. 3. Appearance of new investment models – e.g., one-day or structural bonds (ties to an asset), bonds with offer. 4. Deepening of monopolization and reduction of the level of competition in the market of investment securities leads to the necessity for developing investment business at the micro-level and developing and implementing new models in the corporate market, thus increasing its attractiveness. 5. Increase of investment activity of citizens, which one of the results of the policy of the Bank of Russia, which ensures increase of ﬁnancial awareness of population. 6. Interest and trust of investors to the market of micro-ﬁnancing grows, long-term investment tools develop, proﬁt of micro-ﬁnance organizations increases, and risks of business of micro-ﬁnance organizations increase.

References 1. Galaktionov, I.: Bond will replace deposit [E-source]. BKSExpress: ofﬁcial web-site of company BKS LLC. https://bcs-express.ru/novosti-i-analitika/obligatsiia-zamenit-depozit 2. Cbonds Services: Cbonds Database [E-source]. Cbonds Financial Information: ofﬁcial website of Cbonds Group. http://ru.cbonds.info/about/services 3. Rankings of banks [E-source]. Banki.ru: ofﬁcial web-site of Information Agency Banki.ru LLC. http://www.banki.ru/banks/ratings/ 4. Banki.ru: ofﬁcial web-site of Information Agency Banki.ru [E-source]. http://www.banki.ru/) 5. Newsfeed [E-source]. Banki.ru: ofﬁcial web-site of Information Agency Banki.ru LLC. http:// www.banki.ru/news/lenta 6. Moscow Exchange [E-source]. Group “Moscow Exchange”: ofﬁcial web-site. https://www. moex.com/ 7. “Domashnie dengi” LLC. https://versia.ru/domashnie-dengi-evgeniya-bernshtama-mozhetspasti-tolko-chudo 8. Journal PLAS. https://www.plusworld.ru

Risks and Management of Sustainable Development of the Global Financial System

The Forecasting Approach to Strategic Development of Economic Subjects Olga S. Glinskaya ✉ , Anna V. Shokhnekh, Olga V. Prokopova, and Irina S. Skorikova (

)

Volgograd Institute of Cooperation (Branch) of Russian University of Cooperation, Volgograd, Russia [email protected]

Abstract. The balance of economic development is based on internal and external mechanisms that are inﬂuenced by strategic policy of economic subject’s development. The system of strategic development is required in the conditions of low demand, low oﬀer, low quality, insuﬃcient eﬃciency of state normative & legal inﬂuence, and barriers that hinder creation of economically substantiated decisions in eﬀective management. The article is devoted to the forecasting approach to strategic development of economic subjects. Keywords: Strategy · Management · Budgeting System of accounting in the sphere of sustainable development

Increase of the living standards is realized in a state through its highest social purpose – the strategy of development, related to a completely new view of the problems and unique farsightedness which allows determining the growth and external & internal factors and building the priorities and the queue of the tasks, as well as forming the “goal tree”. An important stage of the strategy is preparation of the development concept. Development of the strategic plan of development the Russian Federation for the long-term is determined by the period until 2020. The ﬁrst variant “Strategy 2020” was prepared by the Ministry of Economic Development before the 2008 crisis. At present, there are discussions and debates in economic and special literature of the analysis of the ﬁrst results of this work – its results in the sphere of monetary policy are especially unsatisfactory. “… The set two tasks – leveling of the currency rate and reduction of inﬂation – were not properly solved. Moreover, these tasks cannot be solved simulta‐ neously. So, the monetary policy should concentrate only on one task. Which one? It’s easy to guess – ﬁghting inﬂation. It is necessary to stop regulating the exchange rate and reduce inﬂation to 5% per year. Then it would be possible to expect the reduction of interest rates and appearance of long-term deposits, which will attract investments” [408]. The strategy of economic development supposes that with formation of new “complexes of technologically related productions” and emergence of “comprehensive contours of expanded reproduction”, distribution of nano-technologies will acquire more large-scale and complete character.

© Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 829–835, 2019. https://doi.org/10.1007/978-3-030-00102-5_89

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Such way conforms to the international tendencies of development, speciﬁed by the UN in 2000. The main positions of the “United Nations Millennium Declaration” (September 18, 2009, 55th session) are as follows: 1. Values and principles that ensure large-scale and strong eﬀorts for formation of the common future on the global level, including developing countries and countries with transitional economy; 2. Peace, security, and disarmament; 3. Development and ﬁghting poverty; 4. Protection of envi‐ ronment; 5. Human rights, democracy, and good management; etc. A common thread of this document is the idea of sustainable development of political and economic systems that provide satisfaction of the current population’s need without damage to the future generations’ possibility to satisfy their needs. One of the key diﬃculties, related to sustainable development, is the necessity for new and innovational solutions and mode of thoughts. Accumulation of knowledge and development of technologies that ensure economic development contains the possibil‐ ities for expansion of risks and threats to the environment and national economies. For that purpose, a system of accounting in the sphere of sustainable development – GRI (Global Reporting Initiative) – which is to be used by organizations of any size, sphere, and location. The manual for reporting in the sphere of sustainable development includes common and speciﬁc materials that are considered universal for accounting on the results of organization’s activity in the sphere of sustainable development. [1] Inclusion of the notion “strategic” into the structure of sustainable development is related to formation of the strategy of business management. The works of Richard Rumelt “Strategy, Structure, and Economic Performance” (1974), Michael Porter “Competitive Strategy” (1980), which became classic, and modern works of Robert S. Kaplan, David P. Norton “The Balanced Scorecard: Translating Strategy into Action” (1996), Hubert Rampersad “Universal Index System for Achieving Results, Having Kept the Integrity” (2003) and others are very popular and form the basis for develop‐ ment of the scientiﬁc direction in the sphere of strategic accounting and strategic control (and therefore – strategic accounting, strategic managerial accounting, strategic audit, etc.). A common thread of all scientiﬁc directions is the “strategy”, which is a formulation of the organization’s mission, goals, and purposes, policy, programs, and methods of achievement. In his book “Eﬀective Management”, Peter F. Drucker notes that the company’s strategy should: – determine which possibilities it wants to realize and what risk it can take; – solve the issue on the scale and structure of its business and, what’s most important, determine the right ratio between specialization, diversiﬁcation, and integration; – make a choice between money and time, creation of own business and purchase of someone else’s, or participation in a joint enterprise, for achieving one’s goal; – determine the organizational structure, adapting to the real state of aﬀairs, one’s own possibilities, and the program of activities. In the period of developed corporate management, the strategy is its basis, as it ensures timely and precise disclosure of information on all signiﬁcant issues that are related to activities of corporations, including their ﬁnancial provision, results of the activities, rights of property and management. In the Principles of corporate governance

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of the Organization of Economic Cooperation and Development, the main principle is V “Disclosure of information and transparency”, which states the following: 1. Disclosure should include, but not be limited to, material information on: – The ﬁnancial and operating results of the company. – Company objectives. – Major share ownership and voting rights. – Remuneration policy for members of the board and key executives, and infor‐ mation about board members, including their qualiﬁcations, the selection process, other company directorships and whether they are regarded as independent by the board. – Related party transactions. – Foreseeable risk factors. – Issues regarding employees and other stakeholders. – Governance structures and policies, in particular, the content of any corporate governance code or policy and the process by which it is implemented. 2. Information should be prepared and disclosed in accordance with high quality stand‐ ards of accounting and ﬁnancial and non-ﬁnancial disclosure. 3. An annual audit should be conducted by an independent, competent and qualiﬁed, auditor in order to provide an external and objective assurance to the board and shareholders that the ﬁnancial statements fairly represent the ﬁnancial position and performance of the company in all material respects. 4. Channels for disseminating information should provide for equal, timely and cost‐ eﬃcient access to relevant information by users. In the signiﬁcant information, the emphasis is made on the necessity to provide full information on past, current, and expected activity to the interested groups. In the encyclopedic literature, prognoseology, as a science for forecasting the future, is viewed by philosophers in two directions of futurology: the 1st – the future does not exist as an object, the 2nd – forecasting as a study of tendencies of development of being is not a science. At the same time, any theory and any form of public conscience supposes discussions on the future, as there’s no sense of the present without hope for the future. The forecasting approach is used not only in philosophy but also in management. The technology of strategic management is a core for many applied studies and is reﬂected in scientiﬁc research. The American economist Kith Ward used the technology of stra‐ tegic management for development of the theory of strategic managerial accounting. In order to apply business strategies in practice, it is necessary to develop them as to speciﬁc internal and external conditions of organization’s activity. For large business, development of a business strategy is conducted at the main organizational levels, as organization needs a common corporate strategy, and its structural departments that enter various segments of the market require separate but competitive strategies. That’s why the technology of strategic management should contain the speciﬁc mechanisms of realization of the selected strategies. If the goals and tasks are formed in the longterm, the strategy that corresponds to these goals should be realized in the conditions of dynamic and constantly changing external environment. If the system of strategic management does not have a possibility of evaluation and control and, therefore, the

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processes of strategies’ correction, it is unlikely that the organization will be able to achieve these long-term goals. That’s why strategic management is usually shown as iterative process. That is, the system of strategic managerial accounting should be ﬁt for functioning in the conditions of changing and evolving environment. This will ensure the possibility to “make a positive contribution into the process of strategic analysis, planning, and control” [6]. Each separate direction – strategic analysis, strategic planning, or strategic control, which provide information to business management – are scientiﬁc and practical direc‐ tions at the same time, viewed by the scholars as applied to diﬀerent levels of manage‐ ment of economy. At the macro-economic level, “activity for development of forecasts, programs, and strategic plants of all levels and time horizons predetermined emergence and development of a special science that was called “strategic planning”. Strategic planning is the sphere of research activity of people aimed at production of new knowl‐ edge in the sphere of compiling and providing the possibility for realization of mana‐ gerial solutions in the form of strategic forecasts, programs, and plans” [3]. The algorithm of organization’s strategic development as the factor of growth of the Russian economy becomes especially topical in the conditions of tough competition, which is increased by the global ﬁnancial crisis. Monitoring of the set strategy of the subject and evaluation of the possibilities of its achievement will allow building, in the preliminary, current, and forecasted time range, the deviations from the set goals, and to develop the necessary measures for timely elimination of distortions in the policy of harmonization. The necessity for application of organization’s strategic development as a factor of growth of the Russian economy is dictated by the following inﬂuences on the subject’s business environment: (1) (2) (3) (4) (5) (6) (7)

positional inﬂuence of a consumer as to the demand on the market; positional inﬂuence of competitive struggle for resources; positional inﬂuence of national preferences in business; positional inﬂuence of quick development of information systems; positional inﬂuence of high-speed distribution and access to information; positional inﬂuence of modern communication; positional inﬂuence of the integrated sense of human resources in the national and international economies [7].

Based on provisions of the strategy of an economic subject, which is aimed at and is to ensure a well-balanced, sustainable, and long-term proﬁtable realization of the facts of economic life in view of the state of external economic conditions and conditions of competitive struggle, the process of implementation of strategic development should be divided into the following consecutive stages: (1) determination of the goal of the sphere of application of mechanisms of organization’s strategic development; (2) selection of the mechanisms of organization’s strategic development; (3) realization of the algorithm of strategic development; (4) monitoring of building the results of mechanisms of organization’s strategic development. The ﬁrst stage – determining the goal of realization of the mechanisms of organiza‐ tion’s strategic development – it is necessary to formulate and understand the task of

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the performed work, including evaluation of human potential as a basis of organization’s strategy; production activity – whether it corresponds to the consumers’ demands; ﬂex‐ ibility of reaction and conduct of timely changes in the organizations, which conform to the dynamics of changes of the business environment; competitive advantages; the possibility of the organization to conduct the ﬁnancial and economic activity in the longterm; perspectives of achievement of the set goals. The second stage – selecting a type of mechanisms of organization’s strategic devel‐ opment – the following blocks are used: (1) Methodology of organization’s strategic development (mechanisms of organiza‐ tion’s strategic development of budgeting and ﬁnancial support for the cycles of production and sales); (2) Methodology of organization’s strategic development of in the long-term of economic organization (mechanisms of organization’s strategic development of the strategy’s management of ﬁnancial sustainability; mechanisms of organization’s strategic development of investment activity. The third stage – application of the mechanisms of strategic development organiza‐ tion’s – the methods of monitoring are applied that determines the presence, direction, and strength of connections of proportions and regularities in various time periods, including: simple comparison; complex analysis; statistical studies. The fourth stage – application of the mechanisms of organization’s strategic devel‐ opment is necessary for: evaluation of reliability of the algorithm of strategic develop‐ ment; determination of the level of trust to the results that depends on signiﬁcance of the viewed elements of the strategy and the ﬁnancial state; determination of the precision with which the results are supposed; evaluation of inseparable risk and the risk of means of control over strategic management of development of an economic subject; studying the deviations from the expected regularities and interconnections that contradict another information and diﬀer from the supposed values. In case of determination of deviations or contradictions to possible regularities and interconnections, as a result of application of the algorithm of strategic development, it is necessary to study the received deviations, namely: to obtain explanations from the administration of strategic management of development or organization, including for the centers of responsibility of strategy achievement; to perform collection and analysis of additional corresponding proofs and conﬁrmations. In strategic management and development of the algorithm of application of the mechanisms of organization’s strategic development, it is necessary to determine the ﬁnancial and targeted structures of the process-oriented management of revenues and expenditures of the centers of ﬁnancial responsibility and the places of their emergence on the basis of strategic budgeting [8]. Managing the development of budget possibilities of strategic management of organization’s development supposes evaluation of obser‐ vation of the main principles: the principle of improvement; the principle of competi‐ tiveness; the principle of structures’ rationalization. Any budget strategy is subdivided into three parts: the strategy on revenues, the strategy on expenditures, and the strategy on managing the debt. The purpose of the work on compilation of the budget strategy is development of the procedures on

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optimization of the budget policy and eﬀectiveness of using budget assets for the midterm and the long-term [2]. The mechanisms of organization’s strategic development of the budget policy should be classiﬁed as to the blocks of management. The ﬁrst block includes three stages that unite the mechanisms of the developed budget scheme that determines the strategic possibilities of the selected directions of the organization. The second block unites four stages in which the mechanisms of organization’s stra‐ tegic development are applied through the management of eﬀectiveness on the basis of strategic budgeting. During formation of the development strategies, the mechanism of the budget scheme is to be built which determines the strategic possibilities of the selected direc‐ tions of a business subject for three main stages: (1) management of decision making on strategic direction of the business subject and preparation of preliminary strategic budget; (2) management of creating the possibilities for increasing competitiveness, acquisi‐ tion of new markets or segments, expansion of own share in the old market, and reduction of production costs; (3) management of creating the strategic budget of ﬁnancial possibilities, technological possibilities, and HR and managerial possibilities. The ﬁrst stage of the block of formation of the strategic budget scheme, which deter‐ mines the possibilities of the business subject and consists in evaluation of the decisions on the necessity for strategic direction and substantiation of the goals that are sought at this stage. The second stage includes the management of creation of the potential of the business subject’s development, possibilities of these structures and departments in achievement of the set goals, and the inﬂuence of external factors that predetermine the choice of the management strategy. The third stage – comparison of the results of previous stages, with obtaining the ﬁnal evaluation of the level of probability of realization of the set strategic goals. During the strategic creation of the mechanism of organization’s strategic develop‐ ment, the goals and results of the strategy of budget management are determined as a system of interconnected strategic decisions on the main directions of activity: produc‐ tion proﬁles; internal policy according to the set mission of the business subject. It is expedient to take into account a lot of approaches to formation of budget management. The first approach to managing the budgeting sets the necessity for formation of the feedback mechanisms. Budget management is treated as a process of provision of connec‐ tions between strategic goals, on the one hand, and strategic planning, accounting, control, and management creation, on the other hand [4]. The second approach to budget management is based on the mechanism of coordi‐ nation and is viewed as budgeting on the basis of actions, i.e., the collective process of managing the system of company’s budgets, which allows coordinating the activity and subjecting it to the common strategic goal. [5]

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The third approach of budget management is formed on control methods. In the control approach, budget management is control over the planned and factually achieved eﬀective spending of resources, where the budget system determines the technological level and is a basis of operative management. However, the budget system supposes formation of strategic direction, where it is necessary to take into account the distin‐ guished mission, goal, and tasks. The decisive meaning of strategic budgeting consists in collection of information on evaluations of activity of the studied period, where it is necessary to compare and specify the movement of ﬁnancial ﬂows to achievement of the strategic goal. Therefore, strategic budget management becomes the main tool of execution of general functions of strategic management of organization’s development and planning. Sustainability and competitiveness of modern economic subjects in market condi‐ tions depend largely on strategic goals and tasks of their development. Increase of the number of ﬁnancially sustainable organization and growth of their business’s value are the most important factor of development of the country’s economy.

References 1. Glinskaya, O.S.: Methodology of audit of the forecasting ﬁnancial information. Doctoral thesis. Mari State Technical University, Yoshkar Ola (2012) 2. Klimanov, V.V., Mikhaylova, A.A.: Regarding the formation of budget strategy at the regional and municipal levels. Finances, No. 2, pp. 9–14 (2011) 3. Logvinov, S.A.: Macro-economic strategic planning: Study guide. INFRA-M (2001). 348 p. 4. Manyaeva, V.A.: Financial structure of managing the corporate expenses for achievement of strategic goals. International ﬁnancial accounting, No. 10, pp. 30–35 (2011) 5. Puzov, E.N., Yashin, S.N.: Approaches evaluation and analysis of business effectiveness within the process-oriented management. Economic analysis: theory and practice, No. 16(97), pp. 8–16 (2007) 6. Ward Keith: Strategic managerial accounting. Olimp Business PJSC (2002). 448 p. 7. Shokhnekh, A.V.: Strategic approaches to organization of provision of break-even and continuous activity of small business economic subjects. Audit and ﬁnancial analysis, No. 6, pp. 321–325 (2012) 8. Shokhnekh, A.V., Kalinicheva, R.V., Akhrameev, A.N.: The role of strategic controlling of harmonization of industrial and trade policy in development and eﬀectiveness of small business eﬀectiveness. Audit and ﬁnancial analysis, No. 5. pp. 264–268 (2014)

Global Crisis: Overcoming the Uncertainty of the Concept in the Philosophical Paradigm of Globalization Anna Guryanova1 ✉ , Nonna Astafeva2, Natalya Filatova2, Elmira Khaﬁyatullina2, and Nikolai Guryanov2 (

)

1

Samara State University of Economics, Samara, Russia [email protected] 2 Samara State Technical University, Samara, Russia {nonnaast,arbuzc,dek.fispos2009,nikguryanow}@yandex.ru

Abstract. The article concerns the problem of global crisis, its reasons, sense, interpretations and ways of potential overcoming. The uncertainty of the concept becomes clear through an opposition of catastrophism and alarmism. Alarmism makes philosophers thinking about human future, the fate of civilization and the right way of its modern development. Thus philosophical paradigm of globali‐ zation was formed. It includes at least three main models of global crisis over‐ coming: “new humanism’s” formation, following “commandments of humanity” and noosphere’s construction. These models can be considered as complementary because they both call to radical changes of human mind. Keywords: Crisis · Global crisis · Global problems · Paradigm of globalization Alarmism · Catastrophism · New humanism · Commandments of humanity Noosphere JEL Classiﬁcation Codes: Z 10 · Z 13 · Z 18

1

Introduction

In the second half of the XX century humanity found itself facing the complex of essen‐ tially important problems. Later they were called “global” problems. These problems have universal nature and aﬀect interests of humanity as a whole. The future of human civilization depends on ability of their overcoming. In the beginning of the XXI century global problems caused situation of a real global crisis in the ﬁeld of economy, ecology, politics, socio-cultural and moral life (Guryanova 2017). This crisis was a reason of fundamental changes in the worldview of the modern society. Alarmism, catastrophism and ﬁnalism have become its dominate forms. In this situation it is necessary to talk about potential ways of global crisis over‐ coming. In our view they are directly related with the changes of mental paradigm of the modern society. A special role in this process must be played by humanities and, ﬁrst of all, by philosophy. These sciences are responsible for correcting and changing of human being’s consciousness. In this context it’s necessary to identify philosophical © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 836–843, 2019. https://doi.org/10.1007/978-3-030-00102-5_90

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basis of global crisis and its connections with human mentality. Global crisis is a result of irrational activity of the human civilization. So its overcoming is directly associated with the changes in human mind. This article is an attempt to analyze these changes from the point of view of philosophy.

2

Materials and Methods

Methodology is an important part of the system of philosophical knowledge. It includes both general scientiﬁc, logical and philosophical methods. 2.1 Dialectical Method Dialectical method plays a special role in the ﬁeld of philosophy. It is the most general, universal method of human cognitive activity. It means consideration of an object in its variability, uncertainty, historical dynamics. Using of dialectical method gave us a chance to analyze the global crisis in its evolution, in dialectical unity and interaction of all the multiple global problems of the modern world. 2.2 Logical Methods Logical methods are the methods of analysis and synthesis, classiﬁcation and typology used to categorize diﬀerent interpretations of the crisis and the ways of its overcoming. We also used a method of analogy for assimilation of diﬀerent models of the crisis and a method of induction for analyzing particular characteristics of the crisis with an aim of its later universal philosophical generalization. 2.3 General Scientiﬁc Methods It is well-known that general scientiﬁc methods are divided into empirical and theoret‐ ical. We used them all in the process of consideration. 2.3.1 Empirical Methods From a number of empirical methods we chose the method of description to represent and characterize concrete empirical facts of the considering area and method of compar‐ ison to identify diﬀerences and similarities between the models of global crisis inter‐ pretation. 2.3.2 Theoretical Methods From the group of theoretical methods we used widely historical and logical methods. The ﬁrst one gave us a chance to study in detail formation and development of the global crisis. The second one helped us to ﬁnd out the most important, signiﬁcant aspects of the global crisis. We also used a system method that allowed us to analyze global crisis as a complex combination consisting of diﬀerent speciﬁc elements.

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Results

3.1 Concept of the Crisis: Interpretations in Modern Philosophy Concept of the crisis has many diﬀerent senses in modern philosophy. One of them interprets crisis as a total catastrophe which leads to the end of human civilization. In other conceptions crisis is shown as a diﬃcult test for human revival, but a hope for renewal is given. Crisis is also connected with a sense of alarm that makes us think about future and choose the right way of civilization development. 3.1.1 Crisis as a Total Catastrophe Famous German philosopher O. Spengler in his ”Decline of the West” described an impressive picture of the crisis and the following death of modern Western civilization (Spengler 1991). This crisis, according to Spengler, isn’t a special punishment or a tragic verdict of history. Such crises periodically took place in the evolution of the humanity. The culture can’t always develop a single universal line. Its internal problems accumu‐ late, conﬂicts appear. This means that the time of the culture is over, its existence approaches the end. Spengler believed regeneration of the culture is impossible. So crisis is a real catastrophe, a signal of the ﬁnal death. Crisis of the modern West means its sooner disappearance, a great “decline of Europe”. This process can’t be stopped. And we also can’t predict which culture will take place of the previous one. As we can see Spengler drew a very pessimistic picture of decadence of the West. But there are another point of view on the nature of the crisis. 3.1.2 Crisis as a Hope for Revival Crisis can be interpreted as a necessary period of culture’s development. Certainly, crisis can lead to destruction of the culture, but this scheme is not absolute. In this meaning crisis is a hard transition state. It can paralyze cultural dynamics and cause diﬀerent painful phenomenon. But it can also discover a hidden potential of the culture, internal forces of its future development. As the history shows, the birth of the new culture always starts from the crisis of the previous one. This point of view we ﬁnd in the writings of A. Toynbee, A. Schweitzer, P. Sorokin. For example Toynbee thought that crisis over‐ coming connects with culture’s spiritualization and orientation to the church. Many authors believe that modern Western culture found itself in a deep crisis exactly because of the decline of faith and spirituality. Schweitzer wrote that Western culture has lost its religious-spiritual basis. Now its nature is material. This leads to scientiﬁc, technical and consumer society. Sorokin also believed that the current crisis doesn’t mean an agony of Western society. It’s simply one of the periodical crises connected with destruction of the sensual form of the modern Western culture. After that it’ll be a new integration – return to spiritual and religious values, to faith and selfdenial of human beings.

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3.1.3 Crisis as a Sense of Alarm The second variant of crisis interpretation seems us more correct. It gives a hope for survival. But the crisis is the crisis. However most philosophers feel alarm for human future and for the fate of the world. Authors of the end of the XIX – beginning of the XX century discussed decadence of the European society. In the middle of the XX century they wrote about the crisis of economic development and excessive consumption of resources. Contemporary philosophers discuss the paradigm change of socio-cultural development of Western civilization. Philosophical paradigm of globalization describes the ways of future civilization development (pessimistic for the most part). It includes reﬂections about the place and the role of human being in the global world, the changes of his outlook and mentality. Philosophical paradigm of globalization is also connected with an alarmist world perception. Alarmism in its extreme forms turns into catastrophism and ﬁnalism as we have seen in the case of Spengler’s socio-cultural conception. 3.2 Situation of Global Crisis in the Modern World Some philosophers are sure the destruction of human civilization will take place in the XXI century. However looking back at the history we shan’t do so pessimistic conclu‐ sions. Humanity was always able to ﬁnd compromise solutions even in the most diﬃcult situations. 3.2.1 Main Reasons of the Global Crisis One of the main reasons of the global crisis is a unity of the modern world which is formed by crossing political and economic relations. This was the most clearly mani‐ fested during the world wars of the XX century that covered the whole planet. Philos‐ opher N. Berdyaev wrote about it: “What is happening with the world in all spheres is an apocalypse of a great cosmic epoch, the end of the old world and the eve of the new world… In the risen world whirlwind, in a faster temp of development all moves from its places… But in this whirlwind the greatest values can die, the human being may not survive, may be broken to pieces” (Berdyaev 1990). One more reason of the global crisis is the growth of industrial production on the planet. Already in the XIX century K. Tsiolkovsky predicted human being would become the most powerful force on the planet. But human’s inﬂuence on nature is much more strong than the most violent natural forces. And what’s the worst, human being can’t often control the changes caused by his irrational activity. It’s a main reason of the modern global crisis. 3.2.2 “Rolling Snowball” of Global Problems Global problems form together a complex system constantly changing in time. This system is principally open. So the list of global problems is periodically added by the new ones. On the contrary other problems can lose their global character and go to lower (not global) level of existence. Global problems are also dependent, inﬂuenced one from

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another. But we can speak only theoretically about their possible solution. A short history of global problems’ existence doesn’t know such examples. Today a complex of global problems is similar to a huge “snowball” rolling from the top of the mountain. It gains speed and adds new layers on its way. What will happen when the “snowball” will reach the foot of the mountain?.. By all appearances this question remains opened today… 3.2.3 Global Crisis as a “Turning Point” of Human Development One of the most famous organizations exploring philosophy of global problems is the Club of Rome. His participants pay priority attention to two main aspects of human existence: economic development and human relations. For example G. Forrester and D. Meadows in their report “The Limits to Growth” talked about the quick economic and environmental stabilization. It is necessary to reach the global balance. In these conditions humanity needs reconsideration of the very structure of its needs. M. Mesarovic and E. Pestel in their report “Mankind at the Turning Point” showed that modern world isn’t just a single unit. The world is like an organism. Each of its elements has its own speciﬁc characters. Industrial society based on economics as a determining factor of development is in the past now. So modern humanity doesn’t need further growth of industrial power (quantitative line of devel‐ opment). It needs much more a qualitative leap into the future. It’ll just be the best model of civilization development. 3.3 Ways of Global Crisis Overcoming in the Philosophical Paradigm of Globalization Overcoming the uncertainty of human future caused a number of philosophical attempts to explain the perspectives of civilization development. Here has been proposed several projects related with radical changes of human nature. They were the way of “new humanism’s” formation, the way of following “commandments of humanity” and the way of noosphere’s construction. These conceptions form together the basis of philo‐ sophical paradigm of globalization. 3.3.1 The Way of “New Humanism’s” Formation One of the founders of the Club of Rome A. Peccei noticed that the growth of industrial capacity is really nothing more than a myth which hides a lot of global problems (Peccei 1977). The main task in this situation isn’t only the changing of the surrounding world, but an “inner transformation” of the human being. The only chance to prevent a global catastrophe is straightly correlated with the use of the main resource – human potential. In this context A. Peccei formulated his idea of “new humanism” – harmonic balance between nature and human being. New humanism means creation of new cultural values which must form a worldview basis of the people all over the world. This will lead to cultural evolution of human civilization and to the birth of the “renewed human being”. New humanism is charac‐ terized by three main principles:

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1. sense of globalism, 2. love for justice, 3. intolerance to violence. Conception of new humanism is a basis of philosophical paradigm of globalization. It includes ideas of the world unity and human integration, cultural development and integral human personality with its inﬁnite possibilities. Survival of modern humanity needs radical transformation of human consciousness. This concerns every person on our planet. A “human revolution”, according to Peccei, is the only real way out of the global socio-cultural crisis of the modern world. 3.3.2 The Way of Following “Commandments of Humanity” Famous Russian academician D. Likhachev formulated 10 “commandments of humanity” (Likhachev 1991) which can add some more principles to the “new human‐ ism’s” conception. 1. 2. 3. 4. 5. 6. 7. 8.

Don’t kill and don’t start the war. Don’t consider your nation as an enemy of other nations. Don’t steal and don’t take the results of your brother’s labor. Seek in science only the truth and don’t use it for evil or for proﬁt. Respect thoughts and feelings of your brothers. Honor your parents and grandparents, save and respect all their creations. Honor nature as your mother and a helper. Your work and your thoughts must be the work and the thoughts of a free creator, but not a slave. 9. Everything living must live, everything thinking must be thought. 10. Everything must be free because all was born free. Probably these commandments help to complete construction of the philosophical paradigm of globalization. They show the way of basic changes of the human mind which are necessary for successful overcoming the global crisis. 3.3.3 The Way of Noosphere’s Construction Philosophical paradigm of globalization is also based on a well-known theory of noosphere. Even in the ﬁrst half of the XX century Russian scientist V. Vernadsky paid attention to the powerful inﬂuence of human activity on the environment and transfor‐ mation of the biosphere. He called humanity the strongest force on the Earth that could change the face of the planet and determine its present and future (Vernadsky 1991). So noosphere is a highest stage of biosphere’s development. It’ll be rationally ruled by human’s activity that becomes the main force of development on the Earth. Vernadsky formulated 12 conditions of noosphere’s formation: 1. Human’s settling all over the planet. 2. Rapid transformation of mass media and exchange between diﬀerent countries. 3. Growing connections, including political, between the countries of the Earth.

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4. Priority of the geological role of human being over the other geological processes in the biosphere. 5. Enlargement of biosphere’s boundaries and human ﬂight into space. 6. Discovery of new sources of energy. 7. Equality of people of all races and religions. 8. Increasing role of masses in questions solution and internal politics. 9. Freedom of scientiﬁc thought and scientiﬁc search from the pressure of religious, philosophical and political theories and creation favorable conditions for free scientiﬁc thought in public and state systems. 10. The rise of the living standards of the working people. Creating a real opportunity to prevent hunger, misery and to weaker an inﬂuence of illnesses. 11. Reasonable transformation of the primary nature of the Earth with an aim to make it capable to satisfy all material, aesthetic and spiritual needs of the numerically growing population. 12. Excluding wars from the life of humanity. As an experience of nowadays shows the principles associated with development of technique and technology are realized in general. But the principles connected with human nature and relations between people are still far from their practical realization. Thus the concept of noosphere becomes contently close to Peccei’s and Lisachev’s theories, which also accent the importance of changing of human qualities.

4

Discussion

Modern world exists in a situation of global crisis. It’s well known. But the concept of the crisis is very uncertain. It has many diﬀerent senses in modern philosophy. Consid‐ eration of these senses allowed us to conclude the following: we don’t agree with inter‐ pretation of the crisis as a total catastrophe which leads humanity to the end of its exis‐ tence. We don’t agree with those who believe destruction of human civilization will become already in the XXI century. These hypotheses are too pessimistic. Humanity was always able to ﬁnd compromise solutions even in the most diﬃcult situations. Modern global crisis isn’t an exception to the rule. We are sure global crisis is an extraordinary diﬃcult test for modern human civili‐ zation. But humanity is also given a chance for survival. That’s why it’s necessary to analyze crisis tendencies from the philosophical point of view. Philosophy is responsible for correcting of human mind and changing by this way the world around us. It also forms a special philosophical paradigm of globalization. This paradigm proposes several ways of human survival. They are the way of “new humanism’s” formation, the way of following “commandments of humanity” and the way of noosphere’s construction. These conceptions seem us complementary. Besides they can be practically applied. They both call to changing of human mind and human qualities. It’s really necessary in the modern conditions of global crisis!

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Conclusions

Situation of global crises brought to life many pessimistic worldview tendencies such as catastrophism, ﬁnalism, alarmism. If the crisis is interpreted as a catastrophe it makes human future impossible. If it is interpreted as a sense of alarm it makes us thinking about the fate of the world and the right way of civilization development. Overcoming the uncertainty of human future caused formation of the philosophical paradigm of globalization. It includes a number of philosophical attempts to explain the perspectives of civilization development. They are “new humanism”, “commandments of humanity” and noosphere. These projects are related with radical changes of human mind and human nature. They form together the basis of modern philosophical paradigm of glob‐ alization.

References Likhachev, D.S.: Reflections. Ed. A.G. Dubrovskaya, Detskaya literatura, Moscow (1991). 318 p. Berdyaev, N.A.: The Crisis of Art (Reprint edition), SP Interprint, Moscow (1990). 48 p. Guryanova, A., Guryanov, N., Frolov, V., Tokmakov, M., Belozerova, O.: Main categories of economics as an object of philosophical analysis In: Popkova, E. (ed.) Russia and the European Union: Development and Perspectives, pp. 221–228. Springer (2017) Peccei, A.: The Human Quality. Pergamon Press, Oxford (1977). 214 p. Spengler, O.: The Decline of the West. Ed. A. Helps, H. Werner, Oxford University Press, New York (1991). 415 p. Vernadsky, V.I.: Scientiﬁc Thought as a Planetary Phenomenon, Nauka, Moscow (1991). 271 p.

The Tools of Sustainable Development of Industrial Production Management Lyudmila V. Strelkova1(&), Dmitriy I. Tarasov2, Julia A. Makusheva1, Oleg V. Troﬁmov1, and Viktor P. Kuznetsov3 1

Lobachevsky Nizhny Novgorod State University, Nizhny Novgorod, Russia [email protected], [email protected], [email protected] 2 MKB Capital, Moscow, Russia [email protected] 3 Kozma Minin Nizhny Novgorod State Pedagogical University, Nizhny Novgorod, Russia [email protected]

Abstract. The key condition of achieving or maintaining the company competitive advantage is appropriate strategy formulating, providing sustainable development of an economic object. The BCG, General Electric, Ansoff, McKinsey and PIMS strategy formulating tools are the most well-known. Recently suggested in literature, the SPACE method enables to overcome some of these approaches limitations. The SPACE model is being applied to analyze the company position in external and internal environments and to develop strategic directions that enable to achieve and maintain the favorable company competitive position. The primary objective of this article is to offer the adaptation of the SPACE model as an sustainable development management tool of economy sectors and to apply it for the Volga Federal District. The results of method applying enable to make a conclusion about high differentiation of economic sectors competitive position. According to the place on the SPACE diagram economic sectors were classiﬁed on four types (aggressive, conservative, competitive, and defensive), it enables to identify tendencies of enterprises development with the help of the strategic decision map. It was shown that the region does not use potential in corpore. It is one of the factors that impedes region economic growth and demands actions complex for improving conditions that exists for investors and entrepreneurs. The methodic and the theoretical conclusions can be utilized for developing and implementing the strategic plans of sustainable development of administrativeterritorial units. Keywords: Sustainable development of production SPACE model SPACE diagram

Strategic management

1 Introduction The differentiation of social-economic levels takes place under the competition mechanism influence, that main factor is region ability to provide the sustainable economic development. © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 844–851, 2019. https://doi.org/10.1007/978-3-030-00102-5_91

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The achieving sustainable development of the regions is one of the most actual tasks of modern Russian economics and politics. The solving these tasks allows to provide advancement to strategic aims being determined competitive advantages and limitations of economic objects, abilities and threats of environment flexibly adapting to changing conditions and saving functional abilities and qualitative parameters of a system as a whole. The Theoretical Framework of The Study. The necessary condition of sustainable development is management application of appropriate to the market situation contemporary methods taking in consideration variety of challenges and oriented to the achievement of strategic development aims. One of contemporary strategic analysis tools is the SPACE method (Strategic Position and Action Evaluation). The method is the expansion of such classical tools as BCG analysis, ADL, matrixes GE, Ansoff and Shell. It enables to overcome some limitations of the approaches and causes the increasing popularity of the method as a strategic management tool [1, p. 343]. The SPACE model is being applied to analyze the current company position in external and internal environments and to develop strategic directions that enable to achieve and maintain the favorable competitive company position [2, pp. 255–271]. The method possesses the following advantages: 1. It allows studying business units and strategic development alternatives more thoroughly; 2. Be based on a lot of relevant factors and extends simulated and analytic method characteristics [3, p. 192]; 3. To change and adapt the considering factors set to the economic subject speciﬁc and external conditions; 4. It allows to compare data and to use differ dimension factors (cost, qualitative, quantitative); 5. The research the general business portfolio picture and to deﬁne the business units place in it; 6. Many variants of strategic development directions of business units are offered according to a strategic position; 7. The method enables to forecast the economic subject position in the case to make simulation modeling and to control the achieving factors value. This approach can be adapted for strategic analysis of economic sectors and be applied as a separate macroeconomic level tool or an addition to external environment analyze.

2 Methodology of Research In scientiﬁc publications devoted to competitiveness measurement and estimation, a generally accepted methodology that allows to determine such set of factors is absent on the moment [4, p. 173]. However, in most foreign and domestic methodological

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approaches to estimation of competitiveness sales growth rate, activeness proﬁtability, investment activity, costs of innovations, economic stability is the center of attention [5, p. 93]. The list of strength industry and environmental stability factors, the methods of calculating and the descriptions are contained in the next table. Each of the dimensions is deﬁned by ten isolated factors (Table 1). The deﬁning dimensions factors can have different signiﬁcant for the integral estimation. The adapted Saaty method of pairwise comparisons is supposed to apply to take into consideration factors signiﬁcant [7, p. 204]. Expertly ﬁlled pairwise comparisons matrixes allowed to sort out the several factors groups according to influence level: • The growth and proﬁt potentials, ﬁnancial stability and tax duty have high significance for the industry strength. The capital intensity level, productivity level, ﬁxed capital investment activity have medium. Estimation of life cycle stage and price dynamic rate have less signiﬁcance; • The technological and product changes levels, competitive pressure, the ﬁnancial responsibility level, the level of overdue credits and elasticity of production by import have high signiﬁcance for environmental stability. Market conjuncture dependence and raider suitability have medium. Intensity of foreign investments and demand by income elasticity rate has less signiﬁcance. The calculated factors signiﬁcant coefﬁcients enable to get the estimation of the factors set quality. If the coefﬁcients values are homogeneous it indicates of more even set factors signiﬁcant and receiving the complex many-sided dimensions estimation. Less homogeneous coefﬁcients values indicate of some factors domination, formal condition of rest factors and one-sided type of the research. We propose logarithmic coefﬁcient of factors versatility to estimate factors quality (1, 2). The coefﬁcients values vary from 0 to 1, more homogeneous factors weights are situated nearer to 1. n P

K ¼ i¼1

ðln xi xi Þ ln n

ð1Þ

The values of the logarithmic factors versatility coefﬁcients of industry strength and environmental stability are 0.86 and 0.91 respectively. It indicates of rather high quality of factors to enable to research dimensions complex. The advantage of the Volga Federal District is availability of signiﬁcant industrial potential. The part of region industrial production in Russian economy is equal to 23,9%. Insufﬁcient competitiveness of production, signiﬁcant production cost, deterioration of production capacity is typical of industrial complex economic situation. The condition becomes complicated because of ﬁnancial crisis, macro economic and geopolitical crisis. But industrial production dynamic in the region is more positive than many other Russian regions during the last ﬁve years. We apply introduced methodic to the region.

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Table 1. Description of SPACE diagram factors for economy sectors [8, 11] No. 1 1.1 1.2

Factor Economic sector Growth potential Proﬁt potential

Calculating Strength Average annual prognostic industry growth index Average annual sales proﬁtability of economy sector Financial conditions rating of sectors describing efﬁciency and ﬁnancial stability Value of productivity concentration index (CR)

1.3

Financial stability

1.4

Live cycle stage

1.5

Price changes

1.6

Tax duty

1.7

Productivity level Capital intensity level Fixed capital investment activity Percentage of innovation Innovation investment in net proﬁt investment activity Environmental Stability Technological Percentage of investment costs changes level in net proﬁt

1.8 1.9

10

2. 2.1

2.2

2.3 2.4

2.5

2.6

Elasticity of production by import Competitive pressure Elasticity of demand by income Dependence on market conjuncture Raider suitability

Average annual prognostic value of price growth index of economic sectors Average tax duty of economy sectors Average annual productivity of economy sectors Average annual capital intensity of economy sectors Percentage of ﬁxed capital investment in net proﬁt

Description Prognostic growth of economy sector production Prognostic proﬁtability of economy sector Attractiveness of general ﬁnancial conditions of sectors Attractiveness of sectors from the point of view live cycle stage of sector development Prognostic income increasing

Level of government support Efﬁciency of using labor resource Efﬁciency of using capital Attractiveness of sectors from the point of view investment activity Attractiveness of sectors from the point of view innovation investment activity

Coefﬁcient of elasticity production by import

Environmental stability from the point of view technological changes Influence strength of foreign producers

Productivity concentration index (CR) of economy sectors Coefﬁcient of elasticity demand by income

Level of sectors competitive pressure Influence strength of income changes

Betta coefﬁcient value

Influence strength of live cycle stage of economy

Rating estimation of sector suitability for raider attacks

Sectors susceptibility to raider attacks risks (continued)

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L. V. Strelkova et al. Table 1. (continued)

No.

Factor

2.7

Foreign investment intensity Financial responsibility level Level of product changes Level of overdue credits

2.8

2.9

10

Calculating (characterizing actives liquidity, economic attractiveness and capital division) [10, p. 2] Percentage of foreign investment in overall sector investment Account payables and credits to EBITDA ratio Percentage of product innovation costs in net proﬁt Percentage of overdue credits in overall credits

Description

Activity of foreign investors

Environmental stability from the point of view ﬁnancial responsibility of companies Environmental stability from the point of view product changes Environmental stability from the point of view ﬁnancial responsibility

3 Analysis of the Results of the Study The factors estimation of industry strength and environmental stability is calculated on the basis of open source data for main economic sectors of The Volga Federal District. The next tables contain the factors estimation on the scale from 0 to 6 (Tables 2, 3).

Table 2. The score estimation of the industry strength factors Factor/economic sector

Machinery and equipment (DK)

Transport facilities (DM)

Oil and gas extraction (CA)

Metallurgy (DJ)

Chemical production (DG)

Food industry (DA)

Woodworking (DD)

Mineral product (DI)

Growth potential

6.0

6.0

0.4

2.7

4.8

3.6

4.2

5.5

Proﬁt potential

0.7

0.5

6.0

1.7

4.0

1.5

0.3

0.5

Financial stability

1.4

0.9

6.0

3.2

5.1

3.4

0.0

1.8

Live cycle stage

5.0

1.4

0.0

2.4

3.3

5.8

2.6

6.0

Price changes

2.5

0.0

5.9

5.9

6.0

1.4

3.3

4.3

Tax duty

4.3

5.0

0.0

5.5

5.3

3.4

5.4

4.8

Productivity level

0.5

0.8

6.0

2.6

2.3

1.6

0.5

0.5

Capital intensity level

0.0

0.3

6.0

2.0

1.3

0.2

5.5

4.5

Fixed capital investment activity

3.9

4.1

1.7

0.7

0.0

2.9

6.0

6.0

Innovation investment activity

1.7

6.0

0.0

2.7

0.9

0.3

6.0

1.0

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Table 3. The score estimation of the environmental stability factors Factor/economic sector

Machinery and equipment (DK)

Transport facilities (DM)

Oil and gas extraction (CA)

Metallurgy (DJ)

Chemical production (DG)

Food industry (DA)

Woodworking (DD)

Mineral product (DI)

Technological changes level

1.8

6.0

0.0

5.0

1.1

0.6

6.0

1.9

Elasticity of production by import

1.5

2.3

0.0

0.6

1.1

3.5

0.2

0.1

Competitive pressure

5.0

1.4

0.0

2.4

3.3

5.8

2.6

6.0

Elasticity of demand by income

6.0

2.8

3.9

3.6

2.3

1.1

0.0

3.0

Dependence on market conjuncture

3.7

4.9

4.7

6.0

2.7

0.0

3.1

2.2

Raider suitability

3.4

2.6

0.0

2.1

2.6

4.3

6.0

4.3

Foreign investment intensity

1.7

3.3

0.2

6.0

0.8

0.9

1.0

0.0

Financial responsibility level

5.8

6.0

0.0

4.6

3.6

4.6

5.6

5.2

Level of product changes

1.8

6.0

0.7

0.3

0.4

0.6

0.0

0.8

Level of overdue credits

5.8

2.5

0.0

0.2

1.0

1.6

6.0

0.5

The vectors coordinates of economy sectors are calculated on the basis of the weight coefﬁcients and the score factors estimations (2). IndustryXi ¼

n X

XijW Xij ;

ð2Þ

j¼1 W where IndustryX i – estimation factors group X economic sector i; Xij – weight coefﬁcient j factor i economic sector; Xij – estimation of j factor i economic sector; n – amount of factors in group X (Table 4).

Table 4. Vectors coordinates of the Volga Federal District economy economic sectors [12] Group/economic sector code DK DM CA DJ DG DA DD DI Economic sector Strength −0.2 0.1 0.1 −0.3 2.0 −0.8 −0.2 0.4 Environmental stability −1.2 −2.0 5.3 1.2 2.4 0.6 −0.7 1.1

Strategic position of economic sector can be shown as strategic position quadrangle or strategic position vector. Calculated vectors of economic sectors indicate high differentiation of competitiveness position of economic sectors. On the region territory chemical production, oil and gas extraction, production of nonmetal mineral products have strong competitive position. Other economic sectors have rather week position (woodworking, machinery

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and equipment production, transport facilities, food industry, metallurgy). Introduced above classiﬁcation of the economic sectors allows to get more detailed conclusions. According to place on SPACE diagram economic sectors were classiﬁed on four types (aggressive, conservative, competitive, and defensive), it enables to identify tendencies of development enterprises with the help of strategic decision map. Each group corresponds with a particular strategic position [8, p. 549–559]: • Aggressive - the type strategic position means attractive economic sector and stable environment; • Competitive - the type strategic position means attractive economic sector and unstable environment; • Conservative - the type strategic position means unattractive economic sector and stable environment; • Defensive - the type strategic position means unattractive economic sector and unstable environment; The aggressive sectors group is rather representative. It includes chemical production, oil and gas extraction, production of nonmetal mineral products. According the SPACE diagram for these economic sectors following strategic decisions are the most urgent: focusing (decreasing product line, unique service development, development of unique product characteristics, personnel differentiation and others), conglomerate diversiﬁcation (unconnected company absorption, new product production and others), maintaining the current position (product modernization, quality increasing, costs control, abroad licensing and others), increasing efﬁciency (costs cutting, product line rationalization) [10, p. 306]. The competitive sectors group includes transport facilities production. According the SPACE diagram for these economy sectors the following strategic decisions are the most urgent: resources utilization (to raise a credit, to raise a capital, concentric merger and others), increasing sales (sales department development, product innovations, service development and others), cost increasing (cost control, product designing and others), ﬁnancial improvement (liquidity improvement, debt position decreasing and others), restricting and strategic positioning; The defensive sectors group includes machinery and equipment production and woodworking. According the SPACE diagram for these economy sectors the following strategic decisions are the most urgent: strict economy (decreasing product line, production capacity selling, cost cutting and others), market share protection (brand strengthening, entrance barriers building and others), divestment (business selling, harvest and others) and liquidation. The methodic is adaptation of the strategic decisions development model SPACE for the economic sectors. The methodic can be applied for development of the strategic position factors of the economy sectors, identifying the key factors, strategic position changes variants modeling and development of the strategic decisions corresponding with the strategic position. The method was applied for the economy sectors of the Volga Federal District. It allows ranging general economy sectors of the region on four groups, analyzing the key strategic position factors and developing the strategic development directions.

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4 Conclusions The methodic and the theoretical conclusions can be utilized for developing and implementing the strategic plans of sustainable development of administrativeterritorial units.

References 1. Romanovskaya, E., Garin, A., Dalidovich, K., Lapygin, Y.: Optimization of inventory management in the supply chain based on the process approach. Vestnik of Minin University, No. 1–1(13), C.13 (2016) 2. Maslenchencov, U., Tronin, U.: Strategical and crisis ﬁrm management. Dashkow and K (2004). 884 p. 3. Rowe, A., Mason, R., Mann, R., Mockler, R., Dickel, K.: Strategic Management: A Methodological Approach, 4th edn. Wesley Publishing Company (1994). 1027 p. 4. Veettil, N.M.: Strategy formulation and implementation in manufacturing organizations – The impact on performance. Middlesex University Business School, UK (2008). 434 p. 5. Thompson, J.: Strategic Management: Awareness and Change, 3rd edn. Chapman & Hall, London (1997). 802 p. 6. Savulyak, Ed.: Who is to raiders tastes. Ranking of danger economic sectors. Financial director, vol. 2, pp. 1–6 (2009) 7. Borocki, J.: Process of applying modiﬁed space model for deﬁning company’s strategy. Int. J. Ind. Eng. Manag. (IJIEM) 2, 61–68 (2011) 8. Ishizaka, A., Labib, A.: Analytic hierarchy process and expert choice: beneﬁts and limitations. OR Insight 22(4), 201–220 (2009). University of Portsmouth 9. Radder, L., Louw, L.: The SPACE matrix: a tool for calibrating competition. Long Range Plan. 31(4), 549–559 (1998) 10. Beton, M.: Application of SPACE matrix. Dev. Ctry. Stud. 8, 50–60 (2012) 11. Kharitonovichm, S.A., Garina, E.P., Andryashina, N.S.: Efﬁciency of introduction of innovations in business on the basis of the process approach. Vestnik of Minin University, No. 3(11), C.10 (2015) 12. Garina, E., Kuznetsov, V., Garin, A.: Concept creation of high-tech product: the manual. Minin University, Nizhny Novgorod (2015). 229 p.

Crisis of the Consumer Basket in Russia Marianna S. Santalova4(&), Elvira Lesnikova2, Svetlana Nechaeva2, Ksenia Sadykova3, and Irina Nizovaya1 1

3

Autonomous Non-Proﬁt Organization of Additional Professional Education “Alfa Russ”, Moscow, Russia [email protected] 2 Plekhanov Russian University of Economics, Voronezh branch, Voronezh, Russia [email protected], [email protected] Plekhanov Russian University of Economics, Moscow, Russia [email protected] 4 Moscow Institute of Economics, Moscow, Russia [email protected]

Abstract. The article considers consumer baskets of Russia, Germany, France, the USA, and the USSR. On the basis of the comparative analysis of the principles for the formation of the consumer basket of the studied countries, proposals are made to change the methodology for calculating the consumer basket of Russia, its quantitative and qualitative change and the application of consumer basket monitoring as the main principle of timely subsidized provision of the population. Keywords: Consumer basket Non-food products Services

Living standard Food products

1 Introduction In Russia, the living standards of the population, the consumer basket, and the minimum wage are continuously investigated by scholars, as well as representatives of the authorities at the Federal and regional levels. Constantly attempts are being made to bring the minimum wage to the subsistence minimum [5]. For example, in the Belgorod, Voronezh, Kaluga and other Oblasts, the size of the minimum wage for the able-bodied population in 2016 is set at no less than the subsistence level. In Moscow and Moscow Oblast, in the Murmansk, Sakhalin regions and some others - minimum wage is higher than the subsistence minimum. At the present time, the size of the minimum wage in the country is RUB 7,500, whereas from July 1, 2017 as a whole, according to the Federation, it is planned to increase it by RUB 300. In 2017, the consumer basket was enlarged. But the population, when forming a consumer basket, is divided into three subspecies: able-bodied, the retired and children. Also, the consumer basket is heavily influenced by the inflation rate, which was 12.2 in 2016, whereas, for example, pensions were increased by 4%. The problem is that it is necessary every year or every three years, ﬁve years, to revise and update the composition of the consumer basket, and not just to increase its © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 852–861, 2019. https://doi.org/10.1007/978-3-030-00102-5_92

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value, as the public and individual needs of the population grow, change, and the economy itself changes [8]. The consumer baskets of economically developed countries in terms of their composition and fallibility, the principles of application are more effective and meet the requirements of modern reality. In this connection, the question arises of using the experience of developed countries in the formation of the consumer basket of Russia.

2 Materials and Methods In all countries of the world, the consumer basket, ﬁrst of all, includes food, which usually makes up 20–60% of its value. For comparison, in Western Europe this ﬁgure does not exceed 20%, while in Russia it is about 50%. And while, most Russian families spend on food often more than half of the family budget. The second group of the consumer basket includes non-food items - clothes, shoes, hats, underwear, and medicines. While the third group of the consumer basket consists of services: utilities, transportation costs, cultural events and so on. According to the calculations of the Russian government in 2016, an able-bodied citizen in the country use 100.4 kg per year of potatoes, 114.6 kg of vegetables, 60 kg of fresh fruit, 126.5 kg of bread and bakery products, 58.6 kg of meat and 18.5 kg of ﬁsh products respectively. Services of culture account for 5% of the total cost per month. An average citizen of the Russian Federation should eat bread 300 g on the day of, 280 g of potatoes, 300 g of vegetables, 160 g of fresh fruit, 60 g of sweets, 800 g of milk and dairy products, vegetable oils and fats - 40 g. And also once in 2 days to eat one egg, to be content on the day of 160 g of meat, and to eat for a week 350 g of ﬁsh. As for cultural development, here the able-bodied Russian citizen has a chance to go to the cinema or theater once a month for his subsistence minimum, there is no more money for these purposes. At the same time, the population is divided into able-bodied people, the retired and children [6]. Let’s present in more detail the consumer basket of Russians (Tables 1, 3, 4). Compare the consumer (food) basket of Russia and the consumer basket (products) of the USSR (Table 2). It can be seen due to what in today’s food basket the Russian authorities are trying to keep caloric content - at the expense of bread. But products containing proteins and vitamins, without which there cannot be adequate nutrition, and, consequently, healthy people, are reduced, especially eggs, meat products, vegetables and melons, dairy products. Moreover, these products are not very high-quality, and do not always fulﬁll the function of full-fledged nutrition. Based on the data in the table, it can be concluded that Russians have consumed less food. This table gives an incomplete picture, because in modern reality produce not very high-quality goods and goods wear out much faster. In 2017, the consumer basket in Russia experienced changes: its cost for an adult grew by about RUB 200 (in percent this ﬁgure is about 3.2%), for a child - by RUB 250 (3.9% respectively), and for the retired - by RUB 411 (10% approximately).

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M. S. Santalova et al. Table 1. Food in the consumer basket of Russians, 2016 The volume of consumption per year (on average per person), The retired 98.2

The volume of consumption per year (on average per person), Children 76.6

Name

Unit of measurement

The volume of consumption per year (on average per person), ablebodied population

Bread products Potatoes Vegetables and melons Fresh fruits Sugar and confectionery Meat products Fish products Milk and milk products Eggs Vegetable oil, margarine and other fats Other products (salt, tea, spices)

Kg

126.5

Kg Kg

100.4 114.6

80.0 98.0

88.1 112.5

Kg Kg

60.0 23.8

45.0 21.2

118.1 21.8

Kg

58.6

54.0

44.0

Kg Kg

18.5 290.0

16.0 257.8

18.6 360.7

Thing Kg

210.0 11.0

200.0 10.0

201.0 5.0

4.9

4.2

3.6

Kg

Today, the cost of the necessary minimum for adults is RUB 6,300 per month, for minors – RUB 6,400, and for the retired, only RUB 5,400. In 2017, the consumer basket includes a small amount of clothing, shoes, household appliances and medicines. On the calculation, an adult man will have to buy two jackets, with fur lining and without, and a coat or raincoat for 7.6 years. To the retired the same set of outerwear is calculated for 8.7 years. Children, due to the active stage of growth, this set of clothes will last only 2.6 years. From a minimal set of outerwear, adults will receive a suit for four years, three shirts, trousers and jeans for men and two dresses for women, two sweaters and a suit for sports activities. The retired of this set will be enough for a year more, and children - for 2 years less. Five pairs of shorts, three jerseys for men and a slightly larger list for women, namely two night shirts, two bras and two combinations - this, in the opinion of the state, is necessary for 2.4 years.

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Table 2. Comparative evaluation of the consumer basket of Russia and the USSR (products), per year (able-bodied population) Name

Norm of consumption in the USSR

Bread products Potatoes Vegetables and melons Fresh fruits Sugar and confectionery Meat products Fish products Milk and milk products Eggs Vegetable oil, margarine and other fats

110.0 kg 105.0 kg 146.0 kg 80.0 kg 38.0 kg 84.0 kg 20.0 kg 380.0 kg 280 pcs 13.0 kg

Norm of consumption in Russia 126.5 kg 100.4 kg 114.6 kg 60.0 kg 23.8 kg 58.6 kg 18.5 kg 290 kg 210 pcs 11.0 kg

Deviation

+16.5 kg −4.6 kg −31.4 kg −20 kg −14.2 kg −25.4 kg −1.5 kg −90 kg −70 pcs −2 kg

The conclusion is that for 1.5 years a man will have 7 pairs of socks, and a woman 5 pairs of tights (although tights and socks are required to buy much more often). Shoes for all age groups are purchased with the calculation of “two pairs - for a year” (probably one pair of boots for all seasons, you also need to choose between sandals and shoes, etc.). The consumer basket includes housing and communal services: for example, the state counts 18 square meters of living space, 285 L of water, 10 m3 of gas and 50 kW of energy, 618 trips by public transport a year per person. According to the calculated data, a person must have enough money for 5 cultural events per year - i.e., no changes. The Government of the Russian Federation expects that each person needs about 1 ton of potatoes, 115 kg of vegetables, 60 kg of fruit, 130 kg of bread and flour products, 60 kg of meat and 20 kg of ﬁsh, 20 kg of sugar, 180 eggs, 13 kg of oil and 220 kg of milk. However, a day a person will have to eat 300 g of bread, 280 g of potatoes, 80 g of milk, 50 g of ﬁsh and 180 g of meat. As we can see, in 2017 the consumer basket was renewed, but the quantity of products, goods and services is scanty and absolutely inconsistent with modern realities. Unfortunately, looking at the ﬁgures, it’s easy to see that the true ﬁgures are much higher than those compiled by the state, and absolutely incomparable with contemporary real spending of Russians. In general, in Russia in the list of consumer basket there are 156 items. In different regions, its composition is different [9]. The largest number of products is in the basket of Murmansk Oblast, for example, bread for residents of Murmansk is required for 26 kg more than for residents of Moscow, and fruit – by 5 kg more. At the legislative level in the Russian Federation, the level of the subsistence minimum is calculated in accordance with Federal Law No. 134-FL of 24.10.1997 (the law “On the Subsistence Minimum in the Russian Federation”). In accordance with this document, its value should be reviewed quarterly in each of the regions of the Russian Federation [10]. Compare the cost of living in certain regions of the country (Table 5).

856

M. S. Santalova et al. Table 3. Non-Food Products in the consumer basket of Russians, 2016

3\7.6

The volume of consumption per year (on average per person), The retired 3\8.7

The volume of consumption per year (on average per person), Children 3\2.6

Pieces/years

8\4.2

8\5

11\2

Pieces/years Pairs/years Pieces/years

9\2.4 7\1.4 5\5

10\2.9 4\1.9 4\5.6

11\1.8 6\1.3 4\2.8

Pairs/years Pieces/years

6\3.2 3\1

6\3.5 3\1

7\1.8 27\1

Pieces/years Pieces/years

14\7 19\10.5

14\7 19\10.5

14\7 19\10.5

Percentage of total expenditure on non-food items per month

10

15

12

Name

Unit of measurement

The volume of consumption per year (on average per person), ablebodied population

Upper coat group Upper dressdress group Underwear Hosiery Hats and haberdashery Footwear Schoolwritten goods Linens Goods for cultural and household purposes Essential items, sanitation, medicines

Pieces/years

As you can see, the methodology for calculating the subsistence minimum in the regions is different, even in such close ones as Moscow and Moscow Oblast. As you can see, the methodology for calculating the subsistence minimum in the regions is different, even in such close ones as Moscow and Moscow Oblast. If we consider economically developed countries, for example, in Germany, the Federal Statistical Ofﬁce carefully monitors the standard of living of its residents and constantly, of course, not every quarter, and every ﬁve years, updates the list of products and services (and today there are more than 400) [7]. Every ﬁve years, about 60,000 families are questioned the amount of their incomes as compared to expenses [1] (Table 6). To determine how an average German lives, it is worth considering the consumer basket of Germany. It is made in accordance with the tastes and preferences of the inhabitants of the state. And such social groups as: large families with children; single mothers; the retired; children. This basket corresponds to the modern reality and the list

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Table 4. Services in the consumer basket of Russians, 2016

18

The volume of consumption per year (on average per person), The retired 18

The volume of consumption per year (on average per person), Children 18

6.7

6.7

6.7

L per day

285

285

285

m3 per month KWh. per month Trips per year Percentages of the total value of monthly service costs Percentages of the total value of monthly service costs

10

10

10

50

50

50

619

150

396

5

5

5

15

15

15

Name

Unit of measurement

The volume of consumption per year (on average per person), able

Housing

Square meters of total area Gcal per year

Central heating Cold and hot water supply and water disposal Gas supply Electric power Transport services Cultural services

Other services

Table 5. Selection of the subsistence minimum in the regions of Russia, in RUB. Region \subsistence minimum The ablebodied population The retired Children

Moscow Moscow Oblast

Belgorod Oblast

Voronezh Oblast

Kaluga Oblast

Primorsky Krai

Krasnodar Krai

18,530

12,990

8,363

7,535

9,314

11,885

10,086

11,428 14,009

9,071 11,373

6,698 7,564

6,048 6,781

7,419 8,446

9,255 11,952

7,722 8,940

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M. S. Santalova et al. Table 6. Food in the consumer basket of Germany Name Rye bread Wheat bread Macaroni Breadstuffs Groats Potatoes Vegetables Fruits Sugar Confectionery Sunflower oil Meat Chicken Lard Sausage Fish Milk Butter Cheese

Norm 50 g per day 125 g per day Ration 2 pancakes Ration 240 g per day 383 g per day 266 g per day 66 g per day 35 g per day 14 g per day 100 g per day 215 g per day 30 g per day 110 g per day 125 g per day 0.5 L per day 30 g per day 45 g per day

of services and products included in it is constantly expanding. This is a visit to the ﬁtness club, and ordering pizza at home, and purchasing semi-ﬁnished products, etc. In Germany, the consumer basket is more developed and bread products in it at a rate of 229 g more than in the consumer basket of Russians; Vegetables at 69 g more; Fruit - 102 g; Sugar and confectionery products - 43 g; Meat products - 295 g; Fish 75 g; Oil - 14 g. In the consumer basket of Russians more milk and potatoes, compared with the consumer basket in Germany (Table 7).

Table 7. Household appliances in the consumer basket of Germany (for a family of 3 people) Name Refrigerator Television set Washing machine Smoothing-iron Chandelier Table lamp Clock Radio set

Norm 1 for 4 1 for 5 1 for 3 1 for 2 1 for 2 1 for 2 1 for 2 1 for 2

years years years months months months months months

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Table 8. Clothing and footwear in the consumer basket of Germany Name Winter jacket/winter coat Cloak, suit/autumn coat

Norm for a man 1 for 2 years 1 for 4 years

Sweater, jeans

1 sweater for 1.5 years, 1 jeans for 1.8 years 1 pair for 2 years 5 for six months 5 per year 1 for 4 months 1 pair per month Everyone for 0.5 year 1 per year 1 for 2 months 1 per year 1 per year 1 per year Sneakers 1 pair for 2 years Slippers 1 pair for 2 months 1 for 4 months

Half-woolen trousers Underpants Singlet Swimming trunks Socks Kepi, scarf, hat Gloves Tie Electric shaver Winter boots Autumn shoes Sneakers, slippers Sandals Tights Gumboots Nightgown Brassiere Blouse Sport suit Women’s underwear Half-wool dress, robe, skirt Cotton dress, sweater Swimsuit, trousers, hat, scarf, kerchief

Norm for a woman 1 for 7 years Coat 1 for 6 years Cloak 1 for 5 years

1 for 2 months

1 per year

1 for 3.5 years 1 for 2 years Sneakers 1 pair for 2 years Slippers 1 pair for 2 months 4 pairs for 1 month

1 for 7 months

1 for 1.5 years

1 1 1 1 1 1

per year for 4 months for 0.5 years for 1.5 years for 0.5 years for 0.5 years

Dress for 4 months, sweater for 1.5 years Everyone for 0.5 year

Clothing and footwear for women and men is considered separately (Tables 8, 9). Medicines the population of Germany buys at the expense of insurance [4]. In the consumer basket of Germany declared dishes, bed linen for a family of three people, communication conditions, information, culture, recreation. For example, twice a month person can go to the zoo, cinema, theater, etc. As you can see, the consumer basket in Germany is more complete and detailed. The cost of living in France is income, which is less than 50% of the average wage across the country. In France, it is believed that the composition of the basket is an indicator of the normal standard of living, which changes annually. The names in the

860

M. S. Santalova et al. Table 9. Hygienic products in the consumer basket of Germany Name Toilet soap (100 gr) Laundry soap (250 gr) Shampoo (250 g) Cream for shoes (50 gr) Toothpaste (75 gr) Toothbrush Eau de cologne Comb Toilet paper

Norm 40 pieces per year 40 pieces per year 6 things per year 5 per year 10 per year 7 per year 5 per year 9 per year 50 per year

French consumer basket are more than ﬁve hundred, it itself serves as the deﬁnition of the price index and inflation, from which the minimum amount of labor payment is determined. The Frenchman’s basket includes wine, a visit to beauty salons, and a visit to restaurants [3]. In the USA, the consumption rates are calculated by the level of the average monthly salary for each resident. The subsistence minimum is about 60% of the monthly income. In the States, a person with an income of 800–900 dollars immediately receives social assistance from the state. In the United States there is no concept of a “consumer basket”. It simply calculates a certain set of goods and services for each resident separately, living in a particular state [2]. The indicator used to calculate this kind of consumer basket in the USA is the consumer price index, which shows the average level of price-product ratio for a particular person over a certain period of time. The US principle is to monitor the standard of living of the population, and if the subsistence minimum does not reach a certain point, the state immediately allocates a subsidy. For example, in 2013 the so-called consumer basket included about 300 items, most of which - food, as well as gasoline, cigarettes, alcohol, food outside the house, etc. The calculation is made at the lowest price ﬁxed by the state.

3 Results As a result of the conducted research, we came to the conclusion that the consumer basket in Russia can be considered a crisis basket; whereas its should be updated in terms of the number of titles, including the current needs of the population and market economic conditions (the principle of Germany and France), taking into account social and economic innovation development. The so-called market economic conditions indicate that the products (goods, works, services) produced are not always of high quality and its turnover (consumption) has increased quantitatively. Therefore, the government should think about the ﬁlling of the consumer basket both quantitatively and qualitatively

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Monitoring the living standards of the population (US principle) can be introduced into the practice of Russia. At the same time, it will not be necessary for the needy population to provide certiﬁcates and documents conﬁrming their status when receiving subsidies.

4 Discussion The results of the study were discussed at the conferences of the Plekhanov Russian University of Economics, Moscow, Russia, round tables of the department of commerce of the Voronezh branch of the Plekhanov Russian University of Economics, in the All-Russian Research Institute of Labor, at the meetings of the autonomous noncommercial organization of additional professional education “Alfa-Russ”.

References 1. Consumer basket in Germany. http://center-yf.ru/data/economy/Potrebitelskaya-korzina-vGermanii.php 2. Dennis, J.L.: Happy customers buy more: an investigation of consumer satisfaction and regret of three horticultural products. Degree: Ph.D., DegreeYear: 2004, Institute: Michigan State University (2004) 3. Pronenko, G.A., Voblaya, I.N.: Comparative characteristics of the consumer basket in Russia and European countries. Scientiﬁc and methodical electronic magazine “Concept”, pp. 2581–2585 (2015). http://e-koncept.ru/2015/85517.htm. (T. 13) 4. Schultze, C.L.: The consumer price index conceptual issues and practical suggestions. J. Econ. Perspect. 17(1), 3–22 (2003). American Economic Association 5. Santalova, M.S.: Social policy: de jure and de facto. Man and work, No. 6, pp. 30–31 (2006) 6. Stanishevskaya, S.P., Gubanov, D.A.: To the question of the Russian consumer basket. Economy 2(13). Bulletin of Perm University 7. Statistisches Bundesamt. https://www.destatis.de/DE/Startseite.html 8. Santalova, M.S.: Economic policy of the state: theory, methodology and practice; Ministry of Education and Science of the Russian Federation, Moscow Humanitarian-Economic Institute, Voronezh branch, Voronezh (2004) 9. Santalova, M.S.: Regional aspects of the state economic policy; Ministry of Education and Science of the Russian Federation, Moscow Humanitarian-Economic Institute, Voronezh branch, Voronezh (2003) 10. Santalova, M.S., Kosarev, K.E.: Quality of life in the region. Science and Society, London, Scieuro 2014, No. 2-1 (2014)

Problems and Perspectives of Development of the World Financial System in the Conditions of Globalization Galina V. Vorontsova1(&), Ramazan M. Ligidov2, Tatiana A. Nalchadzhi2, Irina M. Podkolzina3, and Galina V. Chepurko1 1

2 3

North Caucasus Federal University, Stavropol, Russia [email protected] Kabardino-Balkarian State University, Nalchik, Russia Stavropol State Agrarian University, Stavropol, Russia

Abstract. In the modern conditions of deepening of integration of developed countries’ economies, the world ﬁnancial system acquires more important and independence role in the global economic connections. Development of the world ﬁnancial system influences the factors that determine the economic position of a country: growth rates of international exchange and production, rates of economic growth, volumes of gross domestic product, social, demographic, and political processes. The purpose of the research is to determine the problems of development of the world ﬁnancial system in the conditions of globalization; the main consequences of ﬁnancial crisis and its influence on economy of certain countries, including Russia, and to determine the perspectives of its harmonization. After the global ﬁnancial crisis, previous trends of development of the world ﬁnancial system became disrupted, and it wasn’t possible to fully return to them. The new conﬁguration of the system is not yet obvious, but certain elements of its post-crisis structure could be identiﬁed. The research uses the methods of statistical, comparative, and scenario analysis and content analysis. Scenarios of development of the world ﬁnancial system and their consequences for the world and Russian economy are determined and analyzed. The initial tasks for sustainable development of the ﬁnancial system by the example of Russia are given. Keywords: Globalization Institutes Finances Financial system JEL Classiﬁcation Codes: F30

Investments Crisis Strategy

F60

1 Introduction It is beyond doubt that the world economy is based on the world ﬁnancial system, diversity of ﬁnancial connections, and direction of the world ﬁnancial flows, including the diverse everyday ﬁnancial operations. It is obvious that in the conditions of globalization, increase and sustainable functioning of economy of separate countries © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 862–870, 2019. https://doi.org/10.1007/978-3-030-00102-5_93

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and successful functioning and formation of regional economies requires existence of reliable world ﬁnancial system, which is a component of interdependence circles and links of relations in the sphere of ﬁnance (Kolganov 2017). Financial system of each country occupies one of the main positions in macroeconomy, as economic development depends on its state. It solves a lot of tasks of the modern society: low rates of growth of economy, disproportions of formation of the economic system, excessive tension in society that negatively influences the reproduction process, etc. Determining the signiﬁcance of the ﬁnancial system, it is necessary to realize how it functions and work – i.e., the mechanisms of the world ﬁnancial system, and its influence on economy of certain countries, including Russia, and to forecast the main trends of its development.

2 Methodology With the help of theoretical methods of research, the notions “ﬁnance”, globalization”, and “world ﬁnancial system” and their components were studied and generalized; the tendencies of development of the world ﬁnancial system and the world economy on the whole and reasons for emergence of these tendencies were analyzed. These methods were selected due to the fact that they help to study the determined facts, substantiate notions and statements, evaluate the received information, and study speciﬁc scenarios of development of the world ﬁnancial system and determine dependencies between them and forecasted rates of world economy development. An important role belongs to analysis of statistical indicators of socio-economic development of the world economy. Indicators of economic growth for the recent four years for the leading world economies, including the data for GDP, are peculiar for absence of the comprehensive picture – at that, the value of indicators is better in Europe than in the USA. Thus, GDP of the USA grew only by 0.7% in the ﬁrst quarter of 2017 (with the forecast of 1.2%) vs. 2.1% in the fourth quarter of 2016. While GDP of the Eurozone for the similar period grew by 1.7%, coinciding with the analysts’ expectations in the fourth quarter of 2016 as well. China’s GDP grew by 6.9% in the ﬁrst quarter of 2017, with expectations of 6.8%, showing certain positive aspect in economy. The UK’s GDP grew by 2.1% in the ﬁrst quarter of 2017, which is better than 1.9% in the fourth quarter of 2016 but worse than average expected growth of 2.2%. In Russia, the ofﬁcial data on GDP in the ﬁrst quarter of 2017 dropped by 0.3% vs. growth by 0.3% in the fourth quarter of 2016. Corporate reports for the ﬁrst quarter of 2017 show not very good results: after the reports of 340 out of 497 reporting companies of S&P 500, average growth of proﬁt constituted 14.4%, and sales - 8%. In Europe, after report of companies, sales grew by 41.7% with 193 out of 368 companies. However, it is necessary to take into account “lower basis” of the ﬁrst quarter of 2016, when companies from both indices showed reduction of proﬁts and sales, which was especially signiﬁcant in Europe (−28.5% and −8.5%). Due to that, the global index of shares MSCI WORLDR grew by 1.3% over a month, entering a new historical maximum, and its growth reached 7.1% from the

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beginning of the year. The situation in the developing market was more positive than in the developed market, and index of shares of developing countries MSCI EM grew by 2%, reaching the 12.8% from the start of the year. At that, the index of government-issued obligations of the developing market EMBI GLB grew by 1.6% over a month. In the currency market, American dollar dropped as to most developed and developing currencies, but the movements were insigniﬁcant. At that, the dollar index reduced by 1.3% over a month. In the precious metals markets, prices for gold and palladium grew by 1.4% and 3.6%, and for silver and platinum – dropped by 5.3% and 0.2%. In the oil market, prices dropped in 2016 – but the reduction was less signiﬁcant than in 2015. As for the ﬁnancial and economic system, the data from the Eurozone were mostly positive. In the ﬁrst quarter of 2017, as in the fourth quarter of 2016, GDP in the Eurozone grew by 1.7%, fully coinciding with analysts’ expectations. The composite index of business activity reached 56.8 – a new maximum during the time of its calculation since 2013, showing acceleration of growth rates in production and services. The level of inflation in the Eurozone in grew from 1.5% to 1.9% in April 2017 (Fig. 1) (Kolganov 2017).

Dynamics of the level of inflaƟon in the Eurozone 2 1,5 1 0,5 0 2014

2015

2016

2017

-0,5 -1

1

Fig. 1. Dynamics of the inflation level in the Eurozone.

As for GDP in the USA, in the ﬁrst quarter of 2017 it grew by 0.7% vs. 2.1% in the fourth quarter of 2016. The composite index of business activity in the USA according to Markit grew slightly after several months of reduction, from 53 to 53.2. Reports for the second economy in the world – Chinese – were also mixed. China’s GDP in the ﬁrst quarter of 2017 grew by 6.9% vs. 6.8% in the fourth quarter of 2016, showing slowdown of reduction of the indicators of economy’s growth rates. Index of business activities Markit in the production sector in April 2017 dropped from 52.4 to 50.8, showing large slowdown of sector’s growth rates. In April, the main statistics department of the Eurozone published data on state budgets and national debts of European countries for 2016. Due to growth of economies, certain countries managed to reduce relative debt. Success of Ireland over the recent years is impressive. However, only Germany and Ireland reduced absolute debt

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in 2016. Table 1 shows sizes of national debts and budgets of a range of countries with high level of debt. Table 1. National debts and budgets of a range of countries with high level of debt. Country

Japan Greece Italy Portugal USA Canada Spain Ireland Germany Eurozone Latvia

2017 National debt to GDP, % 239 179 133 130 107 99 99 75 68 89 40

National debt to GDP, % −5.7 0.7 −2.4 −2.0 −3.1 0.1 −4.5 −0.6 0.8 −1.5 0.0

2016 National debt to GDP, % 238 177 132 129 106 99 100 79 71 90 36

National debt to GDP, % −6.7 −5.9 −2.7 −4.4 −2.6 0.1 −5.1 −2.0 0.7 2.1 −1.3

2015 National debt to GDP, % 242 180 132 130 105 95 99 105 75 92 41

It should be acknowledged that the possibility to reduce deﬁcits and relative debts appeared with the Eurozone countries not due to growth of economies but due to actions of the European Central Bank. However, the situation with national debt remains difﬁcult with a lot of countries of Europe. In case of Greece, Spain, and Portugal, national debts exceed the yearly volume of GDP. Absolute ($19.9 trillion) and relative (107% of GDP) debts of the USA also grew. However, it should be taken into account that without obligations on accounts of government organizations, this debt constitutes only 80% of GDP (6). A consequence of the ﬁnancial crisis that started in 2015 is deep transformation of the world ﬁnancial system. One of the most signiﬁcant results is aggravation of socioeconomic problems, which include negative tendency for increasing poverty of population. It should be noted that the poverty level exceeds the 2013 level by 1.5 times. It should be taken into account that increase of ﬁnancial crisis in the banking sector was caused by mass issue of credits to poor groups of population. Due to the fact that people do not have enough money or they do not have a job, they cannot return the credits – which negatively influences the activities of the banking system on the whole. Analysis of statistical data showed that economic situation in Russia was less positive than before that. According to the ofﬁcial data, GDP in the ﬁrst quarter of 2017 dropped to 0.3% against growth by 0.3% in the fourth quarter of 2016 (Kolganov 2017). At present, the ﬁnancial system of Russia faced difﬁculties caused by sanctions, depreciation of ruble, dynamics of oil prices, and reduction of oil sales. Countermeasures against Western sanctions are also negative, for they lead to reduction of supply of carbohydrates and reduction of oil prices. Depreciation of ruble and inflation

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increase, which leads to continuing decline of production in certain spheres of industry – which, accordingly, raises the unemployment level on the country and reduces the population’s living standards. A lot of companies of small business cease to exist (Kolganov 2017). The 2015 crisis in Russia influenced crediting of companies and the segment of mortgages. Due to the fact that companies cannot receive credits, they have to reduce production or liquidate the company – which leads to unemployment and deﬁcit of goods.

3 Results There’s a necessity for active policy of governments of the corresponding European companies, aimed at reduction of debt by stimulation of economic growth and reduction of expenditures. It should be noted that delay with these problems will lead to serious risks of emergence of heavy debt crisis. It is possible to suppose that realizing their important role for the whole ﬁnancial market, the favorites of the sphere consciously increased the risk of personal strategies and operations. The US Congress Committee that studied the preconditions of the Great Depression worked for four years, but results of its work determined the rules of the game for the whole ﬁnancial world for long decades. It is possible to suppose that study of circumstances and consequences of the current crisis will be also important for the ﬁnancial sphere. However, the mist important and urgent task – in our opinion – is the fact that there’s no real possibility of changing the ﬁnancial and economic paradigm in which the developed countries have been existing over the several recent decades. As a matter of fact, the world still faces the choice of two evils: either high inflation for reduction of nominal debt load and restoration of crediting at the pre-crisis level, which, quite possible, will lead to larger crisis in the future, or serious reduction of crediting and, as a result – long years of stagnation (Kolganov 2017). Unfortunately, decisions of ﬁnancial and political authorities are influenced not by probable results of current actions in far future but short-term political cycle. The situation is complicated due to the fact that while for developed states stagnation is just a drawback of increase of living standards and preservation of consumption at a rather high level, for Russia stagnation in the world economy might have more severe results. At that, it should be taken into account that there’s a project of development and establishment of ﬁnancial cиcтeмы in which certain most perspective directions of integration are viewed: transport and logistics, agro-industrial policy, freedom of movement of goods and labor resources. Also, directions of economic development until 2030 were determined, among which are the following: – provision of macro-economic sustainability, which envisages achievement of stability of macro-economic indicators, increase of technological level and diversiﬁcation of production and export; – creation of conditions for growth of business activity and investment attractiveness;

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– innovational development and modernization of economy will be achieved with increase of the level of technological potential; – provision of accessibility of ﬁnancial resources and formation of effective ﬁnancial market; within this direction, regulation of securities market is to be improved, the processes of harmonization are to be ﬁnished by 2025, and the national regulating body in ﬁnancial markets is to be created; – development of HR potential, which is related to the necessity for transition to innovational economy and development of high-tech sectors in the conditions of deﬁcit of highly-qualiﬁed labor resources; – implementation of foreign trade potential is dictated by the necessity for diversiﬁcation of trade flows in the conditions of growing competition. As for the Russian Federation, effectiveness of processes of the economic concept of the Eurasian integration will depend on the following factors: – formation of single ﬁnancial market and turning Russia into one of the world ﬁnancial centers; – development of possibilities for foreign trade activities; – creation of common market of electric energy. Integration is a means of development of economic processes, which could be used by different countries as a possibility for development (Momotova and Shepelev 2017). As for free movement of capital, the Russian Council for international affairs considers achievement of large progress by the EAEU until 2025 improbable. As development of the process could be limited by harmonization of the banking regulation and growth of payment flows. Dynamics of the banking sector of Russia will depend on the state of affairs in the world economy. Over the recent ten years, the assets of domestic banking system grew by two times – from 37 to 72.5% of GDP, and credits to non-ﬁnancial sector grew from 18 to 40% of GDP. At that, the main tasks for sustainable development of the ﬁnancial system of the RF, established in the Decree of the President of the RF, include the following (Frenkel et al. 2018): – reduction of critical dependence of the national monetary system on the fluctuations in the international ﬁnancial and commodity markets; – reduction of usage of foreign currency; – development of internal sources of long-term ﬁnancial resources; – development of investment mechanisms of state ﬁnancial policy; – increase of the quality of crediting of strategic spheres of economy; – development of infrastructure of the national ﬁnancial market; – improvement of regulation of activities of ﬁnancial organizations; – ﬁghting the transfer of non-cash money into shadow turnover of cash money; – improvement of managing the state ﬁnancial assets and debt obligations. The result of implementation of this strategy should be provision of economic sovereignty of the RF and sustainability of the national economy to external and internal challenges and threats.

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The state in the ﬁnancial sphere in the world in 2016 became more stable (as compared to January 2017). As the year started from stock market disaster in China, which influenced the reduction of stock market and led to forecasts on coming large ﬁnancial crisis. It is not possible to speak of the change of the trend. Low rates of growth of GDP in a lot of countries are forecasted, and high volatility is preserved in all types of the market. The difﬁculties faced by the Chinese economies could become the sources of destabilization in other countries – both within the Asian-Paciﬁc region and outside it. Thus, Yuan I being depreciated under the influence of the whole range of factors – including acceleration of capital outflow and risks in the Chinese ﬁnancial markets. Together with dollar, Yuan has reached eight-year minimum several times. At that, Chinese government is going to return the annual quota for currency exchange for population. The Chinese People’s Bank reduced the Yuan exchange rate as to dollar by 21 points. The regulator set the exchange rate at 6.9489 per dollar – i.e., at the lowest level since 2008. However, it is possible to say that the Chinese and the global ﬁnancial markets have more conﬁdence in tomorrow (as compared to the beginning of 2016). In 2016, the main Chinese stick indices reduced by 7–8% (Buzgalin and Kolganov 2016). In the ﬁrst half of January 2016, high volatility in the US stock market was observed. In the USA, the indices of business activities DowJones and Standard&Poor’s 500 dropped by 6% in the ﬁrst week of January. Nasdaq dropped even more – by 7.3%. 141 Chinese companies, which shares are traded in the American stock market, lost $45 billion since the beginning of the year (5.1% on average). Due to worries of investors as to corporate income, low prices for energy sources, and the state of economies of the PRC, some other states, and the world economy, high turbulence was preserved in the US stock market and stock markets of other developed countries at the beginning of 2016 (Buzgalin and Kolganov 2016). Participants of the world ﬁnancial market acknowledge the possibilities of improvement of the global ﬁnancial relations with targeted solution of urgent problems. In the current circumstances, the ﬁnancial system with the dominating dollar as the main method of payment for international calculations, cannot stabilize all by itself. All large expenditures of a lot of countries for stabilization of own state ﬁnancial systems provide only a short respite but do not solve the emerging problems. Only by minimization of speculations that undermine balance in ﬁnancial markets and provoke crisis movements and liquidation of monetary tools that do not lead to long-term economic growth is it possible to ﬁnd the tools of the international mechanism of regulation of the world economic system (Momotova and Shepelev 2017). Based on its own monetary and economic potential and gold stock, America equaled dollar to gold, establishing the status of the main currency. It was declared during development of the system that it has to guarantee well-balanced formation of the world economy with the help of application of currency courses. As a matter of fact, this system led to large disproportions, increase of monetary mass, and increase of risks in the ﬁnancial sphere. Redistribution of positions between states is considered a criterion of a peculiarity of the leading economic development and competitive struggle. Exponential growth of

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imbalances in economy started in 1990’s, when the world ﬁnancial system started servicing only the growing needs of the US economy and used the status of USD as a reserve currency. As a result, the yearly deﬁcit of foreign deﬁcit balance of the USA grew to $500– 700 billion in 1980’s. This is the added volume of goods and services that is received by the USA in exchange for dollars. That is, the USA used the results of others’ labor through import of goods by export of their dollars (Ostrovskaya et al. 2017). It is possible to suppose that it is possible to expect volatility in the ﬁnancial markets, and the accumulated imbalanced in the ﬁnancial system have not disappeared. The debt problems of the USA and several countries of the Eurozone reached such scale that they cannot be solved “ideally”. It is possible to solve these tasks by depreciation of the nominal debt through acceleration of inflation processes. Increase of the general level of prices in the long-term will reduce the volume of national debt as to gross domestic product. This process has already been started by American and partially by European authorities. Quick growth of gold prices, which took place recently, was caused by investors’ desire to protect own capitals from depreciation. The increased volatility of the main mass of markets and assets explain the fact that starting from August 2011 the basic interest rate of the Swiss interbank market – three-month LIBOR is around zero, and the Swiss government sold bills for CHF 634.25 million (USD 783.2 million) for the prices of 100.19 of the nominal in August. Thus, in December they will be paid according to the nominal, and the price gives proﬁtability of 0.75% (Buzgalin and Kolganov 2015). The problem is that excessive monetary mass starts “bursting” out of the markets of narrow assets and influencing the increase of general level of prices in most countries of the world. According to the report from the World Bank in July 2016, the average growth of prices for food in the world constituted 33%, as compared to July 2015. Moreover, according to the report from the FRS of the USA, over two months (from late June to late August 2016), the monetary aggregate M2 grew by 5.5% (from $9 to 9.5 trillion). (Zheltonosov and Bondarev 2015). Another problem is that even such unprecedented investments did not solve the task of restoration of stable growth of the world economy. Continuation of the similar tendencies could mean repetition of the economic situation that took place in mid-1970’s, when high inflation was accompanied by stagnation on economy.

4 Conclusions/Recommendations Thus, creation of reliable ﬁnancial system is considered to be one of the main tasks of any state. The world ﬁnancial system should not express interests of one or several states. The world ﬁnancial system is a basis for the whole world economy and has a very important role.

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The Russian government has to take a range of measures for reformation of economy management, which will make Russia more attractive for investments and will minimize oil dependence of the country budget.

References Buzgalin, A., Kolganov, A.: The global capital, 2nd edn., stereotype. Editorial of URSS, Moscow (2016). 336 p. Buzgalin, A.V., Kolganov, A.I.: Anatomy of crisis: limits of risk and capital. The main book on crisis: collection. Edited by A.V. Buzgalin. Yauza: Eksmo, Moscow (2015). 265 p. Zheltonosov, V.M., Bondarev, D.G.: Problems of determining contours of turnover of the global ﬁnancial capital. Finance and credit. No. 1, pp. 23–27 (2015) Zalozhnev, A., Chistov, D., Shuremov, E.: Liberal model: necessity for systemic limitations. Problems of theory and practice of management, No. 7, pp. 8–16 (2015) Kolganov, A.: Landmarks for the ﬁnancial system of Russia. Russian federal edition “Gross domestic product” (e-source) (2017). http://www.vvprf.ru. Access Momotova, O.N., Shepelev, D.R.: Ways of improving the balance of the Stavropol Krai budget. In: Collection of Theses of the 6th International Conference “Financial Architecture and Perspectives of Development of the Global Financial System”, pp. 106–108 (2017) Ostrovskaya, V.N., Tyurina, Y.G., Bogoviz, A.V., Przhedetskaya, N.V., Lobova S.V.: Foreign economic activities of subjects of SME in the context of cooperation of Russia and Europe/Contributions to Economics. No. 9783319606958, pp. 597–603 (2017) Frenkel, A., Tikhomirov, V., Sergienko, Y., Roshchina, L.: Russian economy in 2015-2017. Econ. Policy 11(5), 198–233 (2018)

Increase of Effectiveness of Regulation and Development of Entrepreneurship in the Conditions of Increase of Russia’s Economic Security Irina A. Morozova(&), Olga E. Akimova, Anna A. Khryseva, and Margarita T. Kozhukhova Volgograd State Technical University, Volgograd, Russia [email protected], [email protected], [email protected], [email protected]

Abstract. Purpose. The purpose of the work is to analyze the increase of effectiveness of regulation and development of entrepreneurship in the conditions of strengthening of Russia’s economic security. In order to achieve this goal, the threats to national economic security and the main problems of development of entrepreneurship are viewed. Methodology. The authors use the methods of general and systemic analysis, modern approaches to analysis and management of increase of effectiveness of development. The methodology of criterial evaluation of target indicators of development of entrepreneurship is offered. Results. Based on the performed analysis, the main directions of improving the system of regulation and development of entrepreneurship on the basis of implementing the strategy of strengthening of Russia’s economic security are determined. Conclusions/Recommendations. The authors offer the algorithm of improving the system of regulation and development of entrepreneurship, which allows determining correspondence of the key problems to the purposes of entrepreneurship’s development, as well as developing and implementing the program of measures for their elimination. Keywords: Entrepreneurship Economic security JEL: M210

Regulation Strategy Import substitution

К2

1 Introduction At present, Russia undergoes a complex period of economic and political life: foreign political situation is aggravating, the domestic economic and ﬁnancial crisis continues, and the scale and urgency of socio-economic and political problems grow. The situation is aggravated by the sanctions from the USA and the EU, which allowed determining mismatch between the resource potential of the RF and its place in the global economy. Russia’s entrepreneurship is not ready for import substitution, © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 871–882, 2019. https://doi.org/10.1007/978-3-030-00102-5_94

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implementation of innovations, and their commercialization (Goncharova 2015). Despite the growth of small and micro-companies, entrepreneurship in Russia does not stimulate implementation of the national economic interests. Small business is important only for the purpose of supporting the income level. As a matter of fact, such entrepreneurship is forced! Despite the fact that in 2016 the share of forced entrepreneurship reduced by 31%, it is possible to state its growth starting from 2008, and, accordingly, reduction of voluntary entrepreneurship (Fig. 1). 120 Forced entrepreneurship

100

19

21

30

Voluntary entrepreneurship

29

80

32

27 36

35

39

64

65

61

31

60

81

40

70

79

71

68

73

69

20

0

2006 2007 2008 2009 2010 2011 2012 2013 2014 2016

Fig. 1. Structure of motivation in Russia, 2006–2016, % (Verkhovskaya et al.).

Comparing the structure of motivation of entrepreneurs in Russia for 2011 and 2016, it is possible to determine a very curious tendency. Despite the high share of voluntary entrepreneurship, in 2016 the material motive with early (less than 3.5 years in business) and emerging entrepreneurs became leading. In 2011, independence for emerging entrepreneurs was a more signiﬁcant motive, and the situation has changed drastically! The gap between the two motives grows: while in 2011 “independence” exceeded “growth of income” by 1%, in 2016 “growth of income” exceeds “independence” by 7.9%! Moreover, the motive “supporting income” is the leading one for all groups of entrepreneurs. Due to this, it is not possible to characterize the structure of motivation as favorable. According to the above factors, it is necessary to acknowledge that external circumstances are the reason for most than half of Russian entrepreneurs’ doing business. Ineffective structure of national economy, which is oriented at manufacture of products with low added value, becomes more popular, while inflow of capital into development of the spheres that determine post-industrial structure of economy, is

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insufﬁcient, and the share of high-tech spheres reduces. Besides, “Russian banks are not only uncompetitive in the world ﬁnancial markets but also cannot satisfy the credit demand of the national economy. Thus, entrepreneurship should be viewed as a central element of the system of national economic security and growth point for domestic economy for overcoming the existing negative tendencies in its development (Fig. 2). Implementation of the strategy of strengthening of economic security envisages effective state regulation of entrepreneurial activities, which stimulates increase of social and ecological responsibility of business, as a result of which its public support is achieved – which leads to increase of proﬁt, development of entrepreneurship, and, ﬁnally, sustainable Russia’s economic security.

Implementing the strategy of strengthening of Russia’s economic security

Effective state regulation

Social and ecological responsibility of business

Sustainable economic security

Increase of profit, development of business

Public support of state and business

Fig. 2. The process of development of entrepreneurship as a result of implementing the strategy of strengthening of Russia’s economic security.

As a result of studying the threats to national economic security and problems of development of entrepreneurship, their common character is determined (Table 1). Internal threats are predetermined by internal processes that take place in domestic economy, and could be eliminated by influencing these processes and changing the internal situation in the Russian economy. The above external threats do not depend on internal situation in domestic economy, but they could be influence incorrectly and reduced. As is seen from Table 1, threats to economic security are obstacles for development of entrepreneurship in Russia. As correlation between prospering of society and development of entrepreneurship is obvious, the measures for development of entrepreneurship will stimulate Russia’s economic security (Kozhukhova and Mamina 2014).

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Table 1. Common threats for Russia’s economic security and development of entrepreneurship (Morozova and Kozhukhova 2015). Common threats

Influence on entrepreneurship

Influence on economic security

Internal threats High level of economy monopolization

Weak development of small and medium entrepreneurship

Unfavorable conditions of doing business

Mono-proﬁle character of the system of national economy

Absence of demand from society for social responsibility of business Weak ecological control from the state

Lack of motivation for social responsibility

Weak level of development of entrepreneurship Low level of economic growth and development Social irresponsibility of business

Weak state stimulation of innovational activities of companies External threats Instability of development of the global economy

Absence of possibilities and motivation for innovational activity

Implementation of sanction measures Low quality of imported goods

Lack of motivation for ecological responsibility

Risk of aggravation of economic conditions for entrepreneurship Violation of external economic connections with intermediaries High level of foreign competition

Ecological irresponsibility of business Weak development of innovations

Russia’s economy’s susceptibility to crises Violation of foreign economic activities Threat to life and health of Russian consumers

2 Methodology For improving the system of regulation and development of entrepreneurship on the basis of implementing the strategy of strengthening of Russia’s economic security, it is necessary to analyze the existing system, which will allow determining its drawbacks and directions of improvement. For this, the authors offer to use the developed methodology of evaluating the effectiveness of the system of regulation and development of entrepreneurship. This methodology envisages consecutive analysis of conditions for entrepreneurship and the system of its regulation. The ﬁrst stage envisages criterial evaluation of target indicators of the system of regulation and development of entrepreneurship. The second stage envisages analysis of expenditures for regulation of entrepreneurship. At the third stage, ratio of target indicators of development of entrepreneurship to expenditures for regulation of entrepreneurship is determined (Fig. 3).

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Fig. 3. Scheme of evaluating the effectiveness of the system of regulation and development of entrepreneurship.

Let us perform evaluation of effectiveness of the system of regulation and development of entrepreneurship in Russia with the help of the developed methodology; the values are determined with the method of expert evaluations (Table 2).

Table 2. Criterial evaluation of the level of the institutional environment for entrepreneurship. Evaluation criteria Observation of ownership rights Corruption and unlawful influence on business Load of administrative regulation Effectiveness of judicial system

Assigned values 1 2 Rarely Often observed violated Very high High

3 Sometimes violated Medium

4 More often observed Low

5 Always observed Very low

Very low low

Medium

High

Very high

Very low low

Medium

High

Very high

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Within the developed methodology, the following target indicators of development of entrepreneurship are offered: – – – – – – – –

level of development of the institutional environment for entrepreneurship; level of development of infrastructure for entrepreneurship; level of competition in the country – in the top-priority spheres of economy; level of inflation in the country; level of taxation of entrepreneurship; accessibility of ﬁnancial and investment resources; quality of provision of state services for business; stability of socio-political and economic situation in the country.

According to the offered methodology, criterial evaluation of target indicators of development of entrepreneurship is performed in the following way (Tables 2, 3, 4, 5, 6, 7, 8 and 9). Table 3. Criterial evaluation of the level of development of infrastructure for entrepreneurship. Criteria of evaluation

Assigned values 1 2 Level of development of transport infrastructure Very low Low Quality of labor resources Very low Low Information infrastructure Very low Low

3 Medium Medium Medium

4 High High High

5 Very high Very high Very high

Table 4. Criterial evaluation of the level of competition in the country. Criteria of evaluation Herﬁndahl–Hirschman Index (HHI) in the top-priority spheres of economy Share of small companies in the structure of entrepreneurship Share of medium companies in the structure of entrepreneurship

Assigned values 1 2 3 4 5 21%

1–5% 6–10%

11–15%

16–20%

>21%

Table 5. Criterial evaluation of the level of inflation in the country. Criteria of evaluation Expected level of inflation in current year Level of inflation in previous year Expected level of inflation in the next year Expected level of inflation in 5 years

Assigned 1 >10% >10% >10% >10%

values 2 6–10% 6–10% 6–10% 6–10%

3 4–5% 4–5% 4–5% 4–5%

4 1–3% 1–3% 1–3% 1–3%

5 > > > > K1 = PK1 + NK1 + BK1 ! max > > > > > < K2 = PK2 + NK2 + BK2 ! max > > K3 = PK3 + NK3 + BK3 ! max > > > > > > Kn = PKn + NKn + BKn ! max > > > > : 0 PKn + NKn + BKn 10

ð1Þ

where: Ot - estimated industry; K1, K2, K3, Kn - estimated branch enterprises; Pk - level of power efﬁciency; Nk - scientiﬁc centers and institutes; Bk – construction design ofﬁces. As a consequence, present system of equations at the time of individual companies performance estimate allows obtaining a metric of the innovative capacity of the branch (as an aggregate of particular companies). Having scores of different branches capacity, if necessary, we can identify the most passive elements of the system or redistribute an available resource base to priority development guidelines.

4 Conclusions The results of research highlighted in this article include: • We identiﬁed the role of each stakeholder during innovation adoption in the industrial sector represented in given scheme; • We established the mechanism for innovation in the industrial segment of Vladimir region, which allows visualizing the sequence of stages during interaction between subjects of innovation activity; • On the basis of analysis we revealed the branches of industrial segment in Vladimir Region with the lowest production indices; • We presented the graph of interaction between all branches of industrial segment in Vladimir Region displaying interrelation level of innovation activity subjects; • We developed an evaluation method of prospects for industrial enterprise implementation at a certain point, which enables estimating the level of innovative prospects, both for a single enterprise, a group of companies, and industrial segment as a whole; • We offered a mathematical model to estimate an innovative development level for each element of described technique.

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References Barinov, M.A., Donichev, O.A., Romanova, A.D.: A technique for analysis and assessment of innovative capacity of regional social and economic systems. Economic analysis: theory and practice. FiK, vol. 16(2), pp. 260–273 (2017a). ISSN 2311-8725, ISSN 2073-039X Barinov, M.A., Donichev, O.A., Romanova, A.D.: Assessment method of innovative capacity for social and economic systems. Regional economy: theory and practice. FiK, vol. 1(436), pp. 169–181 (2017b). ISSN 2073-1477 Goikher, O.L., Arkadieva, O.S.: Monitoring model of investment processes in the regional light industry (the case of Vladimir region). News of higher education institutions. Technology of the textile industry, No. 4(352), pp. 42–47 (2014) Goikher, O.L., Bugrova, O.S.: An innovation mechanism in the region due to resourceconsuming optimization. Management of the XXI century, Drivers of social and economic development. In: Zarubin V.G. (ed.) Collection of Scientiﬁc Articles on the Proceedings of the XVI International Scientiﬁc and Practical Conference, Russian State Pedagogical University named after A.I. Herzen, Institute of Economics and Management, pp. 77–83 (2016a) Goikher, O.L., Bugrova, O.S.: Monitoring model of innovations in social and economic system (the case of Vladimir region). Economics and Entrepreneurship, No. 10 (Part 2), pp. 219-223 (2016b) Goikher, O.L, Arkadieva, O.S.: The main aspects of innovative regional development (the case of Vladimir region). Innovations, No. 5(199), pp. 104–106, OJSC “Transfer”, St. Petersburg (2015). ISSN 2071-3010 Zakharov, P.N., Nazvanova, K.V., Posazhennikov, A.A.: Synergetic effect of innovative development in regional textile cluster. In: Zakharov P.N., Nazvanova K.V., Posadzhennikov A.A. (eds.) Federalism, No. 4(88), pp. 99–112 (2017) Zakharov, S.S.: Algorithm for constituting and pursuing regional investment and industrial policy. In: International Research and Practical Conference “Strategic Development of Regional Social and Economic Systems: An Innovative Approach”, pp. 46–58. Transit-X, Vladimir (2017) Nazvanova, K.V., Zakharov, P.N.: Improvement of methodological approaches to the development efﬁciency assessment of regional economic systems: an aspect of innovation. In: Nazvanova, K.V., Zakharov, P.N. (eds.) 138 p. Transit-X, Vladimir (2015) An ofﬁcial website of the Territorial Body of the Federal State Statistics Service for Vladimir Region. http://vladimirstat.gks.ru. Accessed 13 Feb 2018

Improvement of Methodological Approaches to the Effectiveness Assessment of Innovation Development of Regional Economy Pavel N. Zakharov(&), Karina V. Nazvanova, and Artur A. Posazhennikov Institute of Economics and Management, Vladimir State University named after Alexander and Nikolai Stoletovs, Vladimir, Russia [email protected], [email protected], [email protected]

Abstract. The article is devoted to the study of theoretical and applied problems and perspectives of assessment the effectiveness of innovation development of modern economy. Evaluation of innovation potential helps to identify opportunities for effective growth and objective ideas about innovative development. The system of indicators which is necessary for an estimation of efﬁciency of innovation development of economy in regions of the Central Federal District, consisting of three blocks of indicators, is investigated. In the course of the research, an algorithm of assessment of the effectiveness of innovation development has been developed, which includes four stages. The approbation of the method proposed by the authors is made, which allowed to form regions of the Central Federal District into groups, that characterize the level of their innovation development of the economy. Conducted in accordance with the proposed methodology analysis allowed to draw conclusions regarding the guidelines for the economic development of the Central Federal District regions. Keywords: Innovation development Regional economics Assessment of innovation development Indicators of innovation development JEL Classiﬁcation Codes: E 21

O 11

1 Introduction The transition to innovative type of management depends on the level of technological and economic development of the regional economy and the innovative potential of the territory, including not only the availability of a resource, but also an effective component. Monitoring and evaluation of the effectiveness of innovation economic development at regional level reduces the risk of investment in productive activities in general, attracts additional funding and investors, forms new approaches to the commercialization of scientiﬁc and technical products and developments. Formation of innovation economy supposes the existence of a certain set of «basic» conditions that determine the available resources, mechanisms and technologies for their transformation into ﬁnal product and constituting a regional innovation potential. © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 1155–1168, 2019. https://doi.org/10.1007/978-3-030-00102-5_122

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For effective management of the regional economic system and formation of innovation economy an objective assessment of the territory potential is needed, both before the beginning of the transformation (assessment of the resource availability) and at their completion (performance assessment), because efﬁciency, as a social and economic category, combines not only the effect obtained, but also the costs (resources) for achieving it. The effectiveness of innovative economic development at the meso level depends on the impact of different factors. It is preferable to use complex performance indicators than to reduce performance to economic indicators that measure activity in absolute terms.

2 Methodology The proposed integral index (Nazvanova 2015) of the effectiveness of innovation development of the economy is built on the basis of three blocks of indicators. The ﬁrst block of indicators reflects the regional availability of the potential for creating innovations, ﬁrst of all, human resources, as the main source of generation of new ideas and developments, as well as innovative-active enterprises and organizations (Palamarchuk 2007). The second block of indicators reflects the ﬁnancial capabilities of the region in the production of competitive innovative products, as well as the investment potential of the territory. Indicators of this block should reflect the costs of enterprises for research and development, technological innovation, information and communication technologies, purchase of new equipment, as well as the investment activities of the entity. Indicators of the ﬁrst and second blocks constitute a single resource sub-index. The third block of indicators reflects the effectiveness of formation of innovation economy and innovation development. The economy can be considered truly innovative if the results of innovation activity have an impact not only on the indicators of innovation infrastructure, but also increase the level of social and economic development of the territory, including covering the results of industrial production, small business dynamics and labor productivity growth rates (Lobov and Berkovich 2012). Thus, the criteria for the effectiveness of formation of innovation economy can be considered as indicators of inventive activity of the population, increasing the efﬁciency of resource use (the growth of the index of industrial production, labor productivity and reduction in energy costs) (Malkova and Lebedeva 2013), the availability of high-tech industries with an increasing share of innovative products (Zakharov et al. 2017) and high level of innovation in information and communication environment. The indicators that make up the resource and performance sub-indices of the innovation development of the economy have unequal dimensions. In order to bring them to a comparable form, we apply the method of linear scaling, the essence of which is to display the value of each indicator in the interval from 0 to 1, keeping all the proportions between the individual values. The scaled value of indicator is obtained as a result of dividing the difference between the observed and the minimum value of the indicator at its range. In the case when the indicator is negatively associated with the integral index of the effectiveness of innovation development of the economy, reverse linear scaling is applied - the index obtained on a linear scale is subtracted from 1 (Table 1).

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Table 1. Indicators of integral index of effectiveness of innovation development of economy Indicators of assessment of

Indicators of evaluation of

potential in CREATING of

PERFORMANCE of innovation

innovations

development (weight 50%)

(weight 20%)

educational institutions of higher

1. Factor of inventive activity (the

and

total number of patent applications

secondary

vocational

education per 10,000 people. 2. Share of employees with higher education

in

the

number

of

employed in the economy, %. 3. Number of researchers with academic

degrees

per

10,000

people. 4. Share of personnel engaged in research and development in the number of employed in economy, %.

INDICATORS OF RESULT SUB-INDEX

INDICATORS OF RESOURCE SUB-INDEX

1. The number of students of

received for 10,000 people). 2. Number of issued patents per 10,000 people. 3.

The

number

of

advanced

manufacturing technologies used in relation to the total number of enterprises in the region. 4. The volume of innovative goods, works, services in % of the total volume of shipped goods, works, services. 5. Growth rate of number of small

5. Level of innovative activity of

enterprises

organizations, %.

and retail trade enterprises, repair of

(excluding

6. Share of the fixed assets, %.

motor

vehicles,

wholesale

motorcycles,

Indicators of assessment of

household products and personal

potential in FINANCING of

items), %. 6. Labor productivity (consolidated

innovations

indicator):

(weight 30%) 1. Share of domestic costs for

- rate of labor productivity growth

research and development in the

(weight 50 %);

total amount of Gross Regional

- level of labor productivity (weight

Product, %.

50 %).

2.

Share

of

expenses

for

technological innovations in the

7. Index of industrial production, %.

total volume of shipped goods of

8. Energy intensity.

own production, performed works

9. Level of innovation in the region's

and services by own strength,%.

information

3.

environment

Share of expenditures

on

and

communication (consolidated

information and communication

indicator):

technologies in the total Gross

- number of connected subscriber

Regional Product, %.

units

4. Rate of investment into fixed

communication per 1000 population

assets,%.

(weight 50 %);

5. Gross fixed capital formation,

-

in % to the previous year.

organizations (weight 50 %).

6. Volume of foreign investment to national economy in proportion to population.

[Source: compiled by author]

of

level

mobile

of

radiotelephone

Internetization

of

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To determine the weights of each block, an expert evaluation was carried out in the form of a questionnaire. Experts recognized the third block of performance of innovation development (49%) as the most signiﬁcant group of indicators. Weights for the ﬁrst and the second block are set at 21.5% and 29.5%, respectively. The authors suggest, for convenience of calculation, to round off the weighting values obtained as a result of an expert poll to 20-30-50%. The methodological basis for this system of indicators are the principles and indicators used in the construction of foreign ratings of innovation development of the economy (Furman et al. 2002; Hollanders et al. 2010; Oslo Manual 2010), as well as the experience gained by Russian researchers in the development of monitoring systems and indixes of innovation development of Russia’s regions (Andreev 2005; Kosterova and Berchenko 2005; Lapaev 2011; Bortnik et al. 2012; Goykher and Bugrova 2017). Usage of signiﬁcant number of indicators, tested in international practice and adjusted according to characteristics of Russian statistics, makes it possible to obtain an objective assessment of the effectiveness of innovation economic development at the meso level. Algorithm of proposed methodology for assessment of the effectiveness of innovation economic development at the meso level includes four stages. Methodology structure is shown below (Fig. 1).

Fig. 1. Structure of methodology of effectiveness assessment of innovation development of regional economy.

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At the ﬁrst preparatory phase the following procedures are performed: • Analysis of the main tendencies of innovation development of the territory at the theoretical level, identiﬁcation of suitable data and veriﬁcation of their availability in statistical reporting and the formation of a system of indicators. • Collecting necessary data and calculating the selected indicators for the time interval selected for the study. Second stage. Evaluation of effectiveness of innovation development of the economy at the meso level. 1. Rationing of selected indicators by means of full normalization (linear scaling), i.e. by dividing the difference between the observed xtij and the minimum value of the exponent at its range. If the relationship between the indicator and the performance index is positive, the calculation is made according to formula (1), if the connection is negative – according to formula (2): ptij ¼

xtij xtimin xtimax xtimin

ptij ¼ 1

xtij xtimin t ximax xtimin

ð1Þ ð2Þ

where ptij – value of the converted indicator i for region j in the considered period t; xtij – value of the indicator i for region j in the period t; xtimax ,xtimin – maximum and minimum values of the indicator i among all regions in the period t. 2. Deﬁnition of resource and result sub-indices of innovation development and calculation of integral index of the effectiveness of innovation development of the economy. 1. Resource sub-index of assessment of potential in creating of innovations: t Ipotential ð jÞ ¼

k 1X pt k i¼1 ij

ð3Þ

where ItpotentialðjÞ – resource sub-index of assessment of potential in creating of innovations for region j in the period t; ptij – normalized indicators of resource sub-index of assessment of potential in creating of innovations for region j in the period t; k – number of indicators pertaining to the ﬁrst block.

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2. Resource sub-index of assessment of potential in ﬁnancing of innovations: t Ifinance ð jÞ ¼

z 1X pt z i¼1 ij

ð4Þ

where ItfinanceðjÞ – resource sub-index of assessment of potential in ﬁnancing of innovations for region j in the period t; ptij – normalized indicators of resource sub-index of assessment of potential in ﬁnancing of innovations for region j in the period t; z – number of indicators pertaining to the second block. 3. Resource sub-index of innovation development of the economy: t Iresource ð jÞ

¼

t t Ipotential ð jÞ þ Ifinanceð jÞ

2

ð5Þ

where ItresourceðjÞ – resource sub-index of innovation development of the economy for region j in the period t; ItpotentialðjÞ – resource sub-index of assessment of potential in creating of innovations for region j in the period t; ItfinanceðjÞ – resource sub-index of assessment of potential in ﬁnancing of innovations for region j in the period t; 4. Result sub-index of innovation development of the economy: t Iresult ð jÞ ¼

m 1X pt m i¼1 ij

ð6Þ

where ItresultðjÞ – result sub-index of innovation development of the economy for region j in the period t; ptij – normalized indicators of result sub-index of innovation development of the economy for region j in the period t; m – number of indicators pertaining to the third block. 5. Integral index of the effectiveness of innovation development of the economy: t t t t IEID ð jÞ ¼ 0; 2 Ipotentialð jÞ þ 0; 3 Ifinanceð jÞ þ 0; 5 Iresultð jÞ

ð7Þ

where ItEIDðjÞ – index of the effectiveness of innovation development of the economy for region j in the period t; ItpotentialðjÞ – resource sub-index of assessment of potential in ﬁnancing of innovations for region j in the period t; ItfinanceðjÞ – resource sub-index of assessment of potential in ﬁnancing of innovations for region j in the period t;

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ItresultðjÞ – result sub-index of innovation development of the economy for region j in the period t. 4. Distribution of regions in ﬁve groups according to the level of innovation development efﬁciency (for each sub-index and the ﬁnal integral index of the effectiveness of innovation development). The average growth rate and the ﬁnal value change of the indicator for each sub-index and the ﬁnal integral index of the effectiveness of innovation development of the economy are also calculated (Table 2). Table 2. Grouping of regions according to the rate of effectiveness of innovation development of economy Group Rate of effectiveness of innovation development of economy Obtained value 1 group Strong innovators 0.601–1 2 group Medium-strong innovators 0.501–0.6 3 group Middle innovators 0.401–0.5 4 group Medium-weak innovators 0.301–0.4 5 group Weak innovators 0–0.3 [Source: compiled by author]

5. Construction of matrices «resource availability–performance» for comparative evaluation of potential usage for innovation development in relation to effectiveness of formation of innovation economy. Regions are distributed according to the level of resource and result sub-indices relative to the average value for the Russian Federation of the above sub-indices during the period under consideration. Regions that got into the ﬁrst quadrant of the matrix (values of resource and result sub-indexes are above the Russian average) are characterized by a sufﬁcient volume of innovation potential and high level of innovation development effectiveness. The regions that got into the second quadrant of the matrix (value of resource sub-index is below the Russian average, value of result sub-index is above the average for the Russian Federation), have insufﬁcient level of resource availability with a high level of capacity utilization. The regions that got into the third quadrant of the matrix (value of resource subindex is higher than the average for the Russian Federation, value of result sub-index is below the Russian average), the potential is not fully utilized. Regions that got into the fourth quadrant of the matrix (values of resource and result sub-indexes are below the Russian average) are characterized by low level of resource availability and low effectiveness of innovation development. At the third ﬁnal stage of the methodology an overall analysis of the results for each stage is carried out, assessment of the effectiveness of innovation economy formation is conducted, as well as the development of strategic planning areas in order to neutralize limiting factors of innovation development. It should be mentioned that it is necessary to take into account the speciﬁcs of territory development and its sectoral focus when calculating the resource sub-indexes,

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assessing the potential for creating and ﬁnancing of innovations, result sub-index and integrated index of the effectiveness of innovation economic development, during comparison of efﬁciency levels of innovation economic development. In this regard, high ratings of innovation development efﬁciency should have the regions which are strong industrial, science-intensive centers, other territories should have average indicators with positive growth dynamics, directly proportional to the degree of overall economic development. The methodology for effectiveness assessment of innovation economic development at meso level was tested on regions of the Central Federal District in comparison with the average values for the Russian Federation and the Central Federal District.

3 Results Results of calculation of integral index of the effectiveness of innovation economic development, as well as the ﬁnal changes in the sub-indexes and the average growth rates over the period are presented in Table 3.

Table 3. Dynamics of integral index of the effectiveness of innovation development of the economy in the regions of Central Federal District and their distribution by groups for the period 2008–2016. Region

Value of index 2008

2010

Groups 2012

2014

2015

2016

2008

2010

2012

2014

2015

2016

Change

Average growth, %

Russian average

0,297

0,269

0,305

0,349

0,311

0,320

5

5

4

4

4

4

0,023

101,55

average for Central Federal District

0,340

0,336

0,397

0,449

0,446

0,472

4

4

4

3

3

3

0,132

104,57

Belgorod region

0,328

0,235

0,232

0,222

0,284

0,312

4

5

5

5

5

4

-0,016

100,64

Bryansk region

0,279

0,334

0,291

0,301

0,340

0,355

5

4

5

4

4

4

0,076

103,37

Vladimir region

0,291

0,219

0,268

0,346

0,300

0,286

5

5

5

4

4

5

-0,005

102,25

Voronezh region

0,307

0,280

0,309

0,339

0,382

0,306

4

5

4

4

4

4

-0,002

100,70

Ivanovo region

0,317

0,276

0,244

0,217

0,130

0,171

4

5

5

5

5

5

-0,146

95,82

Kaluga region

0,507

0,428

0,414

0,357

0,395

0,381

2

3

3

4

4

4

-0,127

97,07

Kostroma region

0,207

0,280

0,207

0,181

0,188

0,179

5

5

5

5

5

5

-0,028

98,86

Kursk region

0,257

0,178

0,264

0,323

0,275

0,263

5

5

5

4

5

5

0,006

102,72

Lipetsk region

0,243

0,312

0,277

0,390

0,321

0,324

5

4

5

4

4

4

0,082

105,39

Moscow region

0,376

0,328

0,393

0,521

0,475

0,537

4

4

4

2

3

2

0,162

105,35

Oryol region

0,313

0,267

0,250

0,287

0,253

0,240

4

5

5

5

5

5

–0,073

98,47

Ryazan region

0,270

0,199

0,282

0,246

0,214

0,237

5

5

5

5

5

5

–0,033

99,45

Smolensk region

0,234

0,234

0,196

0,231

0,201

0,211

5

5

5

5

5

5

–0,023

99,46

Tambov region

0,297

0,196

0,275

0,336

0,298

0,289

5

5

5

4

5

5

–0,008

101,86

Tver region

0,294

0,266

0,291

0,233

0,230

0,278

5

5

5

5

5

5

–0,017

99,81

Tula region

0,272

0,256

0,280

0,282

0,313

0,325

5

5

5

5

4

4

0,053

102,96

Yaroslavl region

0,378

0,331

0,329

0,344

0,294

0,311

4

4

4

4

5

4

–0,067

99,10

Moscow city

0,502

0,533

0,643

0,676

0,704

0,712

2

2

1

1

1

1

0,211

104,73

[Source: compiled by author]

For six regions of the federal district, as well as for the average in the Central Federal District and the Russian Federation, we can see the increase of the index of effectiveness of innovation economic development. Moscow (0.211) is the leader in

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1163

terms of a positive change in the index, and according to the average rate of its growth the Lipetsk region is leading (105.39). Minimum average growth rates correspond to the Ivanovo (95.82), Kaluga (97.07), Kostroma (98.86), Oryol (98.47) regions. Table 4 shows the distribution of regions by groups that characterize the level of innovation development of the economy and its effectiveness, according to which in 2008 the regions were divided into groups of medium-strong, medium-weak and weak innovators.

Table 4. Distribution of Central Federal District regions by groups that characterize the level of innovation development of economy. Year Level of development Strong innovators Mediumstrong innovators Middle innovators Mediumweak innovators

Weak innovators

2008

2012

2016

Moscow city

Moscow city

Kaluga region Moscow city

Moscow region

Kaluga region

Average for Central Federal District Belgorod region Voronezh region Ivanovo region Moscow region Oryol region Yaroslavl region Bryansk region Vladimir region Kostroma region Kursk region Lipetsk region Ryazan region Smolensk region Tambov region Tver region Tula region

[Source: compiled by author]

average for Central Federal District Voronezh region Moscow region Yaroslavl region

Belgorod region Bryansk region Vladimir region Ivanovo region Kostroma region Kursk region Lipetsk region Oryol region Ryazan region Smolensk region Tambov region Tver region Tula region

Average for Central Federal District Belgorod region Bryansk region Voronezh region Kaluga region Lipetsk region Tula region Yaroslavl region Vladimir region Ivanovo region Kostroma region Kursk region Oryol region Ryazan region Smolensk region Tambov region Tver region

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By 2012 four groups were stood out: the Kaluga region lost its positions and moved to the group of medium innovators. In 2016 the regions are divided into ﬁve groups: the Moscow region fell into the group of medium-strong innovators, the Kaluga region deteriorated its positions and moved to the group of medium-weak innovators. There is a tendency of reducing the number of regions in the group of weak and increasing the group of medium-weak innovators. Analysing the average growth rates of the indexes, we can assume that the level of development of the Bryansk, Lipetsk and Tula regions will correspond to the average innovators, the level of development of the Vladimir, Kursk and Tambov regions will be similar to medium-weak innovators if the existing trends continue. We also construct the «resource availability–performance» matrices for comparative assessment of potential using values of innovation development in relation to the effectiveness of formation of innovative economy. Regions of Central Federal District are divided according to the level of the resource and results sub-indexes relative to the average value of the above-mentioned Russian sub-indexes in 2016 (Table 5). Speciﬁcally, regions with leading positions have simultaneously high values of the resource and result sub-indexes. However, there are cases where this condition is not met. If there is a high value of resource sub-index and low value of result sub-index, it means that created potential is not fully realized during formation of innovation economy, there is a lag effect. Another situation is when the low value of resource subindex is observed in the region with a high result value. In this case, the reason may be not only the delay effect, but also the influence of other factors unaccounted during the formation of resource sub-index. Table 5. Distribution of regions of the Central Federal District by «resource availability– performance» matrix in comparison with the average values in the Russian Federation in 2016

Resource subindex (0,389)

Higher than Russian average

Lower than Russian average

[Source: compiled by author]

Result sub-index (0.243) Higher than Russian average Average for Central Federal District Kaluga region Moscow region Moscow city Belgorod region Bryansk region Vladimir region Lipetsk region Tula region Yaroslavl region

Lower than Russian average

Voronezh region Ivanovo region Kostroma region Kursk region Oryol region Ryazan region Smolensk region Tambov region Tver region

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Regions that got into the ﬁrst quadrant of the matrix in 2016 (values of resource and result sub-indexes are above the Russian average), are characterized by a sufﬁcient volume of innovation potential and a high level of innovation development effectiveness – Kaluga, Moscow regions and Moscow city. Regions that got into the second quadrant of the matrix, for which the value of resource sub-index is below the Russian average, value of result sub-index is above the average for the Russian Federation, have insufﬁcient level of resource availability with a high level of the effectiveness of potential usage: Belgorod, Bryansk, Vladimir, Lipetsk, Tula and Yaroslavl regions. The third quadrant of the matrix did not contain any region characterized by incomplete usage of potential, because the value of resource sub-index is higher than the average for the Russian Federation, value of result sub-index is below the Russian average. Regions that got into the fourth quadrant of the matrix (values of resource and result sub-indexes are below the Russian average) are characterized by low level of resource availability and low effectiveness of innovation development – Ivanovo, Kostroma, Oryol, Ryazan, Smolensk, Tver regions, they have negative values of growth and negative average rates of growth for index of effectiveness of innovation development. Considering the position of the Vladimir region according to integral index of the effectiveness of innovation economic development (Table 6), we come to the conclusion that the region is a rather weak innovator in all respects. Summarizing the results of assessing the level of resource availability and performance of the region, as well as analysis of factors hindering investment and innovation development, the following conclusions and proposals can be made to improve the effectiveness of regional innovation development: 1. sub-index of assessment of potential in creating of innovations has a positive trend in growth: level of innovative activity of enterprises is increasing with conﬁdent rates, number of researchers with academic degrees, as well as employees with higher education is increasing also. To increase the level of the sub-index and to solve the problem lack of qualiﬁed personnel, it is necessary to increase the number of personnel engaged in research and development. As a method of solution, we propose active work with universities and research centres for training and retraining of specialists for innovative enterprises, as well as personnel for the management of innovation and technology business; 2. sub-index of assessment of potential in ﬁnancing of innovations has a negative tendency: the share of domestic expenditures for research and development in the total volume of GRP, the rate of investment in ﬁxed assets and its gross accumulation is reduced. General increase in innovation potential of organizations is noted at the expense of increasing costs for technological innovations, but they require a solution to the investment problem. As possible methods for solving the problems of lack of own ﬁnancial resources and foreign investment in the economy, it is possible to propose the development of regional and municipal programs to support innovations of important social and economic nature, the provision of tax incentives for entrepreneurs, holding competitions and offering grants to support innovative projects with market orientation, formation of funds for ﬁnancing of risky long-term projects, etc.;

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Table 6. Dynamics of indexes for assessing the innovation economic development of the Vladimir region for the period 2008–2016 Index

Value

Groups

Change

Average gro wth, %

5

0,051

103,2

5

5

-0,056

102,9

4

5

5

-0,003

101,5

5

4

4

5

0,002

104,7

5

4

4

5

-0,005

102,3

2008

2010

2012

2014

2015

2016

2008

2010

2012

2014

2015

2016

Resource sub-index of assessment of potential in creating of innovations

0,243

0,284

0,280

0,277

0,276

0,294

5

5

5

5

5

Resource sub-index of assessment of potential in ﬁnancing of innovations

0,355

0,164

0,247

0,346

0,277

0,299

4

5

5

4

Resource sub-index of innovation development of the economy

0,299

0,224

0,264

0,311

0,277

0,296

5

5

5

Result sub-index of innovation development of the economy

0,273

0,226

0,275

0,373

0,324

0,275

5

5

Integral index of the effectiveness of innovation development of the economy

0,291

0,219

0,268

0,346

0,300

0,286

5

5

[Source: compiled by author]

3. result sub-index of innovation development of the economy of the Vladimir region has a positive trend and a steady average growth rate (104.7). It should be noted that by 2016 the indicator of effectiveness of innovation economy formation has exceeded the Russian average by increasing the volume of innovative goods, works and services in the total volume of shipped goods, works, services, energy intensity and the level of innovation in the information and communication environment of the region. Further increasing of result sub-index is hampered by negative growth rates in the number of small enterprises, as well as a low index of industrial production. The problem of increasing of small businesses is being resolved both at the federal and regional levels; for example the creation of support and support funds, tax incentives, loans and guarantees, etc.

4 Conclusions All conclusions and results of application of the methodology for the Vladimir region and the proposed directions for increasing the efﬁciency of innovation economic development are presented in Table 7. Summarizing the foregoing, developed methodology for assessing the effectiveness of innovation economic development at the meso-level allows: – to form an idea of the dynamics, effectiveness of innovative development and effectiveness of the formation of an innovative economy at the meso-level; – to compare and to rank different regions in terms of the level of effectiveness of innovative economy formation, to identify prosperous and weak territories;

Improvement of Methodological Approaches to the Effectiveness

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– to identify problem areas of innovative development at the meso level, to improve the directions of strategic planning and effective use of innovation potential. Table 7. Suggested directions for increasing the effectiveness of innovation development of the economy of the Vladimir region. Development trends

Prospects and development priorities for the leveling of constraints

Measures for improving the efﬁciency of innovation development of the economy

Potential in creating of innovations Factor – sub-index of assessment of potential in creating of innovations Active work with Increasing the number of 1. Increasing the level of universities and research qualiﬁed personnel engaged innovative activity of centres for training and in research and development enterprises retraining of specialists for 2. Increasing the number of innovative enterprises, researchers with academic personnel for the degrees, workers with higher management of innovation education and technology business Potential in ﬁnancing of innovations Factor – sub-index of assessment of potential in ﬁnancing of innovations 1. Development of regional 1. Solving of problems 1. Reduction the share of and municipal programs to related to the lack of own domestic costs for research support innovations, which ﬁnancial resources and development in the total are of important social and 2. Increase the rate of volume of GRP, the rate of economic nature investment in ﬁxed assets investment in ﬁxed assets 2. Providing tax incentives and the volume of foreign and its gross accumulation for entrepreneurs investment in the economy 2. General increasing of 3. Conducting competitions innovation potential of and offering grants to support organizations innovative projects with 3. Increased costs for market orientation technological innovation 4. Formation of funds for ﬁnancing risky prospective projects, etc Effectiveness of formation of innovation economy Factor – result sub-index of innovation development of the economy Problem of increasing of Solving of problems 1. Increasing the volume of small businesses is being associated with negative innovative goods, works, resolved both at the federal growth rates in the number services in the total volume and regional levels; for of small enterprises, as well of goods shipped, works, example the creation of as a low industrial services support and support funds, production index 2. Increasing the level of tax incentives, loans and energy intensity and guarantees, etc innovation of the information and communication environment [Source: compiled by author]

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References Andreev, Y.: Monitoring of regional scientiﬁc and technical policy. Reg. Sci. J. 3(52), 89–105 (2005) Bortnik, I., Senchenya, G., Mikheeva, N., Zdunov, A., Kadochnikov, P., Sorokina, A.: System for assessment and monitoring of innovative development of Russian regions. Innov. Econ. 9 (167), 48–61 (2012) Furman, J., Porter, M., Stern, S.: The determinants of national innovative capacity. Res. Policy 31(6), 899–933 (2002) Goykher, O., Bugrova, O.: Basics of an integrated approach to innovation development of the region based on monitoring procedures. J. Econ. Entrep. 8(4), 1163–1167 (2017) Hollanders, H., Tarantola, S., Loschky, A.: Regional Innovation Scoreboard (RIS) 2009. Pro Inno Europe, 76 p. (2010) Kosterova, R., Berchenko, N.: Assessment of the level of rational use of the economic potential of the region. Reg. Econ. Sociol. 1, 192–197 (2005) Lapaev, D.: Comparative evaluation of the effectiveness of innovative development of economic systems. Integral 6, 46–47 (2011) Lobov, A., Berkovich, M.: Energy saving in the region: the state and directions of realization in everyday life. Bull. Kostroma State Technol. Univ. Ser. Econ. Sci. 1(2), 19–21 (2012) Malkova, T., Lebedeva, O.: Methodical approaches to the evaluation of investment and innovation activity and the attractiveness of the integrated heat and power infrastructure. Bull. Ivanovo State Power Univ. 3, 81–84 (2013) Nazvanova, K.: Index of assessing the effectiveness of innovative development of the economy. Bulletin of the Vladimir State University named after Alexander G. and Nicholas G. Stoletovs. Series: Economic Sciences 3(1) (2015). http://vestnik-es.vlsu.ru Oslo Manual: Guidelines for Collecting and Interpreting Innovation Data (translation to russian), 2nd edn. CISN, Moscow (2010) Palamarchuk, A.: Analysis of major industrial production assets. Reference book of economist 9 (51) (2007). http://www.proﬁz.ru/se/9_2007/analizosnpromf/ Zakharov, P., Nazvnova, K., Posazhennikov, A.: Synergetic effect of innovation development of textile cluster of the region. Federalizm 4(88), 99–112 (2017)

Hannah Arendt and Herbert Marcuse’s Critique of Modernity Evgeniya Bujor(&), Alexey Volobuev, and Elena Kuzina Financial University under the Government of the Russian Federation, Moscow, Russia [email protected], {AVVolobuev,ESKuzina}@fa.ru

Abstract. The article is devoted to comparative analysis of the critique of modernity put forth by two prominent Western thinkers of 20-th century – Hannah Arendt and Herbert Marcuse. The author contends that despite belonging to different philosophical schools both thinkers provided a thoughtful critique of the modern society in the same spirit of its negative consequences for the individual freedom of man. For both Arendt and Marcuse human freedom is the utmost value that has been deprived in the modern society. Both thinkers treat man as an imminently social being, therefore for them the search of the way for restoration of the individual freedom is intricately related with the radical changing of the society. Arendt developed a peculiar teaching that human freedom is available only in the public realm of political action that has been suppressed in the modern society and contended that the restoration of the freedom is possible only by emancipation of the political realm from the captivity of the underlying social areas of production of means of living and cultural objects. As for Marcuse he proceeded in Hegelian-Marxian tradition and for him the regaining of individual freedom was related with total revolutionary change of the society in the direction of the future project set up by enlightened reason. Marcuse admits the encapsulation of modern society and elimination of the social subjects of the historical changes (classes), therefore he suggests that the resistance to the oppressive nature of modern society (where no one is free) shall be implemented on the level of individual consciousness through conscious adoption of the dissent ideas. Keywords: Arendt Marcuse Modernity Individual Freedom Public sphere Authentic existence action Benevolent domination Critical theory Abolition of history False consciousness True consciousness One-dimensional society Master-slave dialectic Reiﬁcation Emancipatory potential JEL Classiﬁcation Codes: Z 1

Z2

© Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 1169–1180, 2019. https://doi.org/10.1007/978-3-030-00102-5_123

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1 Speciﬁcs of Hannah Arendt’s Understanding of “Authentic Existence” Hannah Arendt’s (1906–1975) criticism of modernity is based on a peculiar combination of entwined motives, perceived from existential and socio-political philosophy. One of the most prominent motives on the part of existentialism, assimilated by H. Arendt, is the belief that man does not have any substantial nature that could be expressed by a set of essential features, e.g., through the possession of reason as a speciﬁc generic feature that distinguishes humans from other living beings [2; p. 10; 181; 193]. The peculiarity of man lies not in the possession of one or another inherent essence but in a fact that man is not determined a priori, is not a “natural creature”, able to develop inherently born capabilities. The essence of a human is his existence what means that a person is what he makes of himself in the course of life. However, this doesn’t mean that a person fulﬁlls himself unconditionally. There are fundamental parameters of human existence – “life itself, natality and mortality, worldliness, plurality, and the earth”, according to which a person acts [2; p. 11]. And it is on the basis of the analysis of human activity in the given conditions of existence that a critical assessment of being is possible. The second existentialist motive that influenced Arendt’s thought, is the use of the concepts of “authentic” and “inauthentic” existence, associated with the fact that in the course of life, a person, as a rule, falls under numerous self-objectiﬁcations, identifying oneself with certain sociocultural images and roles. Inauthentic existence occurs when an individual assimilates a social role, starting to identify self by the external models. These motives – the absence of pre-established essence and the problem of authentic existence – deﬁne the critical dimensions of Arendt’s thought. In fact, the true existence of a person is his or her freedom. In the existential paradigm, a person is understood as an unﬁnished project, designing self in the light of the fundamental conditions of human existence. Yet, Arendt makes an important step in deﬁning the conditions of possibility of man’s freedom by positing the clearly deﬁned area in which a person’s freedom is possible, in other words where human activity may avoid “essentialist” objectiﬁcation. Arendt considers man not as a metaphysical being but as an imminently active social being, so that the fundamental conditions of human existence have socio-historical framing. This means that both authentic and inauthentic existences take place only inside society, not outside it. The fundamental conditions of human existence line up with the fundamental social activities, i.e. activities, not carried out by an isolated individual, but either in cooperation with the others or taking the others into account. In this sense, it is possible to make a philosophical assessment of society from the criteria whether it allows such socially signiﬁcant activities that would enable men to lead the authentic existence, that is, whether the humans have the possibility to reproduce themselves as “open projects” avoiding any kind of sociohistorical objectiﬁcations. According to Arendt, the fundamental human practices are Labor, Work, and Action [2, p. 7]. Each of these practices rises to the basic needs of existence – the need to sustain life, to build the world and to communicate with other subjects. The ﬁrst two activities are aimed at creating the means of living and production (the latter includes not only tools and dwellings but also various artifacts,

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including the cultural objects). Action, in turn, is aimed at the creation of a human relationship. Yet – and this is a feature of Arendt’s methodological approach – Action is being attributed to a special social sphere of politics, which doesn’t include the relations that the individuals enter into while producing material goods: “the political realm rises directly out of acting together… Thus action not only has the most intimate relationship to the public part of the world…, but is the one activity which constitutes it.” [2; p. 198]. The described approach allows Hannah Arendt to carry out a differentiated explication of the fundamental types of human activities, placing each of them in the respective social area. Moreover, these activities are easily arranged in a hierarchy, where the top position is occupied by Action, representing the highest type of human activity located over the two subject types, thus being superior to the forms of relations in which people enter in the process of Labor and Work. Notably, in this case, it is impossible to speak about Hegel’s Aufhebung because these types of social activities lie in the non-intersecting planes. Indeed, the realization of Labor, Work, and Action can easily be correlated with the Hegelian stages of Objective Spirit: lifeworld, civil society, and state. However, in the Hegel’s model each subsequent stage absorbs the previous one and cancels it, which is not the case for the Arendt’s model: unlike Hegel’s, there is no single universal human activity that is realized in different forms, while passing different stages in its development and, accordingly, cancelling and preserving them in itself. Thus, there is no history in the Hegelian and Marx’s sense, grasped as a progressive accumulation of cultural meanings; there is no single cell, from which a single tree of history grows. Arendt presents the fundamental conditions of human existence and the relevant activities as irrevocable and non-deductible to one another, while seeing only different forms of their combination throughout the social history. So, what should be their combination so that a person may achieve the authenticity of the existence? According to Arendt, in Labor and Work a person is not able to overcome her own external determinism while being inside of it; she cannot avoid the necessity, imposed on her by the seal of nature: “the elimination of necessity, far from resulting automatically in the establishment of freedom, only blurs the distinguishing line between freedom and necessity” [2; p. 71]. The authentic human existence is only possible in Action, superstructured over the areas of Labor and Work. Sociologically that means that a special area of activity should be available in a society, free from the determinism of Labor and Work, where people could enter not instrumental but disinterested relations, more precisely, where people would be interested in others as in themselves, where the free development of every single person would be a condition for the development of all men and vice versa. Contradictions and difﬁculties related to the maintenance of life and culture must remain outside this specially privileged sphere, which is called the public sphere. Action, unfolding in the public sphere, being an island of freedom, surrounded by the kingdom of necessity, is an activity that is not directed at anything else but at the reproduction of this very public sphere, the sphere of openness and transparency, where it is only possible to achieve the authenticity of existence, where there is no rigid ﬁxing of the roles and the related subordination and objectiﬁcation [2; p. 182]. If the authenticity of human existence is equal to the striving to be free, i.e. not being determined externally, then freedom is only possible in the autonomous public realm. In other

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words, in a good, or just, if we use the terms of the classical philosophy, society, there should exist a special, pure sphere, where Action, which is one of the non-deductible types of the fundamental human activities, may be carried out without being affected by the needs of the maintenance of life and the arrangement of the world. Translating this statement into the language of Hegel’s philosophy, the just society is the one where family, civil society, and state are found in such a combination where they could exist autonomously, without the “colonization” of each other. Arendt ﬁnds the described social structure to be embodied in the Ancient Greek polis with its clear division of the private, social and public spheres. In the polis’ public sphere, with the greatest relevance in the history of the mankind, had been realized what Arendt called natality, the ability of a spontaneous initiative to start something new: “action… is the actualization of the human condition of natality [2; p. 178].

2 Arendt’s Critique of Late Modernity and the Prospects for Overcoming Its Crisis H. Arendt criticizes late modernity exactly from these positions of the optimal combination of the three institutionalized spheres, corresponding to the main types of human activity. A peculiar feature of modernity is the loss of non-reducible speciﬁcity and autonomy of these spheres, which leads to the loss of the political and public dimension, in which only the Action may be practiced. From this standpoint, and in contrast to Hegel, the modern era is deﬁned by the prevalence not of the state, which absorbs the family and civil spheres, but by the prevalence of the civil society, that spreads and in fact colonizes previously unscathed activities: “the modern age… introduced the utter extinction of the very difference between the private and public realms, the submersion of both in the sphere of the social” [2; p. 69]. We face the elimination of the public realm of spontaneous activity in which a person was able to retain a properly human existence and not to fall into a reiﬁed being. The authentic existence which can only be in the sphere of political and public interactions thus becomes impossible in the modern age. The blurring boundaries among the areas of human existence are expressed, according to Arendt, by the fact that the activities that had previously been conﬁned to the private sphere are now being brought into the center of public, open discourse. She writes about Robespierre: “he had abandoned… his own “despotism of liberty”, his dictatorship for the sake of the foundation of freedom, to the “rights of the SansCulottes”, which were “dress, food and the reproduction of their species” [1; p. 60]. Economic and social issues have become the subjects of public attention and concern. In fact, the private, household sphere, which had previously ensured the reproduction of life, has also lost its former signiﬁcance. Nowadays Labor, the production of consumer goods, has shifted to the public area, that is, the institutionalization of economic activity occurred. The boundaries of the private world, which previously served as a safe harbor, a refuge from the troubles of the social world [2; p. 71], were erased, resulting in blurring the concept of private property and replacing it with the concept of social wealth [2; p. 61]. In short, there happened a complete submission of an individual to society, because the social sphere has grown to the limits of the human

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universe. At the same time, it also failed to avoid distortion: it has become completely dependent on the economy, the production and distribution of material goods. The modern age has acquired the features of one-dimensionality, with the thinning and de facto disappearance of the lifeworld (with all its uniqueness and identity) and the public world. Or, rather, both of these worlds are now being formed according to the logic of economic production, which has become the ﬁrst public concern, leading to the triumph of the logic of management and utilitarian calculation. There is a strict division of labor and the consolidation of the roles in the economy, which, by the way, never occurred to such extent in the authentic sphere of the lifeworld, not to mention the public sphere. Now the good management of an enlarged and growingly complicated social organism has become the main concern of the public sphere. If earlier the public sphere produced power, which was, in fact, nothing more than the sovereignty of the community of the equal and free, now it produces domination, penetrating into all corners of public life. If the authentic public power doesn’t contradict freedom and carries it inside with all the risks and responsibility [2; pp. 200–201], then domination, which has become an adequate political correlation of the triumphant social world, is primarily concerned with the issues of stability and well-being. A person, having lost the private world, that served her as a stronghold of the existential reliability, as well as the public world, that asserted her dignity, is now engulfed in dread of uncertainty of existence, relying on superhuman, alienated and impersonal institutions of domination, which have become the safeguards of the welfare and progressive-cumulative development of the social organism: “happiness was not located in the public realm which the eighteenth century identiﬁed with the realm of government, but the government was understood as a means to promote the happiness of society, “the only legitimate object of good government” [1; p. 128]. Benevolent domination took place of the authenticity of existence that has been associated with the risk of uncertainty, defeat, and ostracism [2; p. 192; 197] – in this way one can summarize the features of modernity, as described by Arendt. What are the prospects for overcoming the described situation that can be found in the works of Hannah Arendt? The ultimate goal is to restore the authentic existence, which means, in turn, the restoration of the autonomy of the public realm. Arendt does not accept a progressivist understanding of history, instead she proclaims the retrospective ideal of the ancient polis. If history doesn’t provide any progress in essential foundations of human being, if the basic features of human condition remain the same, so that only their different combinations are possible – then there are no grounds to assume that the future will bring previously unseen phenomena. According to Arendt, it seems impossible to achieve universal freedom (assuming its extension to all levels of human existence), as Labor and Work themselves exclude the possibility of avoiding the objectiﬁcation and associated compulsory discipline that eliminates freedom as a spontaneous and self-determined activity. Freedom, which means authentic existence, is achievable only by practicing Action, for the implementation of which a special sphere of public realm is required. The most signiﬁcant prospect of “regaining” the lost dimension of freedom is the regeneration of the former autonomy of the public realm under the guiding light of the ideals of the antiquity. The peculiarity of Arendt’s historicism consists in basing the social imperative on the historical patterns instead of proclaiming an attainment of the state of universal freedom that have never been

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observed before. It reveals the peculiarity of Arendt’s philosophical position: a new shall be built on the basis of restoration of the cultural meanings that have been already embodied in the past. Sure, there’s a rational and reflexive aspect in this project, because the removal of oblivion is only possible through retrospective analysis that shall be exercised by the reason. The mere engagement of reflection and rational comprehension make it obvious that the immediate restoration of harmonious coexistence of the three fundamental realms of human existence is no longer possible, what gives to this project a flavor of the bitterness of the need for recovery of the once lost treasury. Finally, the integrity of a human existence can be achieved only when the authentic rights are restored not only in the sphere of Action but also in the sphere of Labor, and Work. This especially concerns the private realm, “lifeworld”. Therefore Arendt addresses the need for attention to all manifestations of life, to the restoration of trampled dignity of the Earth that symbolizes the sphere of Labor, birth, and continuation of life; and to the restoration of the value of the World, embodying the space of culture-forming Work. This means the restoration of self-importance of these areas of the human being, their gradual release from the competence of politics as a benevolent administration, and thus the liberation of the public sphere itself, which is the highest realm and, therefore, is the most difﬁcult one to be recovered. The authentic existence, which is fundamentally realized only in the public sphere, is not possible without restoration of the moral dignity of Labor and Work as well.

3 Dialectics of History in H. Marcuse’s “Critical Theory” The ontological and methodological foundations of Herbert Marcuse’s (1898–1979) critique of modernity and the prospects for overcoming its crisis differ from Hannah Arendt’s what makes their conceptions interesting for a comparative analysis. Just like Arendt, Marcuse also raises the question of the possibility of exercising human freedom and refers to history for this purpose. As D. Held puts it, “critical thinking is oriented, according to Marcuse, toward the understanding of all forms of social practice and the factors which hinder their self-consciousness and free development” [3; p. 224]. However, his understanding of history is completely different: unlike Arendt, Marcuse believes that history has a universal dimension – history is not a combination of different types of human activity but is permeated by a single logic with an inherent principal contradiction. This contradiction is a discrepancy between the generic essence (Wesen) of man and his actual existence (Dasein). The man’s generic essence, by and large, is his freedom, full and comprehensive development. History is a gradual and cumulative process of overcoming the discrepancy between the essence and actual existence, as pointed out in the Hegelian tradition. In this sense, one may speak about the end of history or, which is actually the same in this case, the end of the prehistory and the beginning of the true history – when the essence fully realizes in the actual existence, and when the actual existence is no longer a distorting and incomplete embodiment of the essence. In frames of this tradition, history has a goal-oriented character, in contrast to the empirical approach, which adheres to the phenomenal reality and sees history nothing else but a combinations of empirical facts (it shall be

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noted that Arendt’s existentialism can be not classiﬁed as part of the empirical and phenomenological tradition, as she admits fundamental conditions of human existence, thus setting up an over-empirical framework for the understanding of history). According to the Hegelian-Marxian philosophical tradition, the transition of essence into actual existence should have a mediating character. The mean of such mediation in the social dimension of human existence is, according to this tradition, work understood, contrary to Arendt, not as just one of the varieties of human activity, but as a universal activity aimed at the transformation of the nature in general and the nature of man, in particular. Only through work, the human essence may manifest itself in the available forms of existence, which is called humanization of both, nature and man. Work, however, is a social phenomenon, as it includes not only a practicaltransforming activity relating to nature but also as a struggle for mutual recognition, for the afﬁrmation of the human dignity of one individual in the eyes of another. This is the Hegelian master-slave dialectic, with which history begins. It should be noted, however, that initially the human essence was embodied neither in the slave nor in the master, but in the dynamic contradiction between them so that the development of the essence is carried out by overcoming the certain type of contradiction. In this sense, the engine for history is the force of negation that is organic part of the development of the essence and that manifests itself in the work, simultaneously asserting and overcoming the opposites. Although by itself the essence is not negative, its manifestation occurs by the negative overcoming of the existing order of phenomena. Of course, this negation has dialectical character, therefore it doesn’t imply the complete destruction of the existing manifestations and their replacement with a set of the completely new, nonexistent ones: “dialectics is a process in a world where the mode of existence of men and things is made up of contradictory relations, so that any particular content can be unfolded only through passing into its opposite. The latter is an integral part of the former, and the whole content is the totality of all contradictory relations implied in it” [7; p. 66]. Negation is the cancelation of this actual contradiction while preserving the previously achieved state, otherwise, history wouldn’t have taken place: “negative thinking is historical thinking and historical thinking is critical thinking…” [3; p. 229]. Thus, as history progresses, there occurs further afﬁrmation of the essence, however, retaining its negative potential, caused by its uneven implementation in different aspects of reality. This is the logic of historical progress, underlying the critical theory, and exactly this logic was undermined in the epoch of late modernity.

4 Modernity as the “Abolition of History” and the Potential for Restoration of “True Consciousness” H. Marcuse contends that there is a visible threat of breaking the master-slave dialectics in the age of late modernity [8; pp. 43–44], which means the abolition of history as a process of liberation without bringing it to its end. Marcuse argues that “liberating subjectivity constitutes itself in the inner history of the individuals” [5, p. 5]. Certainly, the termination of dialectics could be caused by the fact that modernity had ﬁnally realized the full emancipation of a man, had achieved the reconciliation of all contradictions of reality. Yet, for Marcuse late modernity – and this is the burden of his

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critique – has not at all fulﬁlled the generic essence of man and at the same time it had almost abolished the power of negation, critical power of judgment. He points out that technological advance is morally neutral by itself: “Technics by itself can promote authoritarianism as well as liberty, scarcity as well as abundance, the extension as well as the abolition of toil”. [9] The very understanding of technics by Marcuse is also notable: “Technics is the methodological negation of nature by human thought and action. In this negation, natural conditions and relations become instrumentalities for the preservation, enlargement, and reﬁnement of human society”. [4, p. 45]. He also insists that mentality of civilization is nature bases and fueled by instincts. The vicissitudes of the instincts are the vicissitudes of the mental apparatus in civilization. The animal drive become human instincts under the influence of the external reality. [6, pp. 11–12]. This means that the social environment has become so tight and impervious that it is able to neutralize the elements that are not integrated, not reconciled. “Contemporary society seems to be capable of containing social change - qualitative change which would establish essentially different institutions, a new direction of the productive process, new modes of human existence” [8; P. XIV]. Marcuse contends that this is the main distortion of late modernity, namely: not being able to integrate and reconcile the contradictions, it paralyzes their negative-liberating potential. The preservation of the established order doesn’t entail a unilateral beneﬁt to the dominant strata as in the context of the break of the master-slave dialectic and continued suppression of the marginalized strata a total lack of freedom arises extending to the masters as well. In other words, a completely new type of domination is established, when everyone is unfree in the conditions of seeming freedom [8; p. 63]. For Marcuse, freedom is precisely the force of negation of the prevailing, established phenomena; all other dimensions of freedom are false and imposed. On the other hand, Marcuse, as a social philosopher, knows only the freedom manifesting in social action, predominantly in the form of revolutionary transformation of society. Freedom, therefore, is the power of a socially embodied negative or dialectic mind. Moreover, this negation cannot be carried out from the standpoints of the previous stages. To some extent, freedom by Marcuse is a total renewal of society; largely, it is an action with an open ending. Further on, at every stage of transformation, there should be a social carrier of negative mind, subject of history, without whom the historical process loses its emancipatory potential. Hence, the dialectic mind must have a carrier, totally denying the existing society [8; pp. 33–34]. However, late modernity is characterized by an unprecedented ability to incorporate negative social elements without resolving their inherent contradictions. How is it possible? How can we describe a society that has reached such a degree of power that it can avert the threat of its transformation while simultaneously conserving its seemingly tolerant character? According to Marcuse, this is a society of total manipulation, which became possible due to the high degree of the development of productive forces based on technical rationality. It causes alienation: “For the vast majority of the population, the scope and mode of satisfaction are determined by their own labor; but their labor is work for an apparatus which they do not control, which operates as an independent power to which individuals must submit if they want to live. And it becomes the more alien the more specialized the division of labor becomes. Men do not live their own lives but perform pre-established functions. While they work, they do not fulﬁll their

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own needs and faculties but work in alienation”. [6, p. 45] The ability of modern society, if not now, then in the short term, to provide all its members with an adequate level of consumption doesn’t matter much to Marcuse since its main structural contradiction - between the social form of production and the private method of appropriation, being the main source of irrationality – remains unaltered: “… it becomes clear that something must be wrong with the rationality of the system itself. What is wrong is the war in which men have organized their societal labor” [8; p. 190]. Clearly, it is not enough to ensure the sufﬁcient consumption level to neutralize the negative consciousness. Indeed, in this case, the purpose of history would be unserious, seen as freedom from needs and not as freedom of positive human development. However, negative consciousness doesn’t directly depend on material needs, and although it has been accompanied by these needs throughout history, it has an autonomous character. The age of modernity begets for the ﬁrst time in history an open manipulation of consciousness, so there would be no reflective gap between the consumerist character of the modern society and the consciousness, evaluating it. Consciousness itself becomes a consumer, limited to the consumption of the intellectual products created for it. Moreover, the products don’t have to be apologetic, because even apparently alternative projects are assimilated by society, becoming its components. How does something, appearing as a threat to society, become a part of it? This happens, explains Marcuse, because in the modern society the exchange value prevails over the consumer value, with the latter being determined solely by the market value of the material or ideal product. The market is the universal melting pot making everything safe for society. A universal commodiﬁcation occurs, transforming any product of human activity into a commodity. Nothing exists in this society without a market value. The value of a material or ideal product is determined not by its importance to people, neither by an individual assessment of its usefulness, nor by its utility, but exceptionally by its position in the market [8; p. 64]. Individual choice is no longer possible as everything has the opposite side of objectivity and imposition. There emerges a paradox phenomenon of ambiguous and at the same time false consciousness, with the falsehood largely due to the inability to notice this ambiguity. The unrecognizable ambiguity of consciousness lies in the fact that even what appears to be an individual choice is, in fact, market-imposed, where everything is conditioned by the exchange rate; the falsehood lies in the representation of this situation as a true realization of individuality. As Marcuse puts it, different products produced by the modern society “promote a false consciousness which is immune against its falsehood” [8; p. 16]. As a result, consciousness becomes one-dimensional, comfortable, constrained but happy. Previously two-dimensional, in terms of Marcuse, consciousness and culture represented the realm where dissatisfaction caused by the social contradictions accumulated and the alternatives were being developed; a one-dimensional society lacks political, social, and cultural context where trends, immanently belonging to the society and at the same time opposing it, could emerge. The modern society is one-dimensional [8; p. 16] not because of the dominance of one ideology, or direct and forceful suppression of the dissent, but because it has lost the two-dimensional nature, allowing some elements to be a part of society at the same time denying it. All ideas have been deprived of the opportunity to put forward viable alternatives.

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What could be a way out of the encapsulation of modern society where every potential of transcendence is repressed, any new activity is immediately regulated by the invisible hand of the market? According to Marcuse, the task is to restore the master-slave dialectic, as any other perspective, e.g., a certain external catastrophe, would be not the transcendence of the history, but its abruption. Therefore, it is necessary to rebuild the history’s immanent logic. But if there can no longer be any social mediator (class, strata), who can fulﬁl the role of the immanent negating force there remains only one opportunity – to restore the negative consciousness at the individual level. This reckons, above all, the clear understanding that the embodiment of the generic essence of man did not happen, the alienation was not resolved but, on the opposite, became total and overlooked by “happy consciousness”. Marcuse is aware that only a few may experience the tension between what is and what should be amid “effective capitalism”. According to the philosopher, the potential for freedom must be found inside, and in the age of late modernity, the struggle moves to the level of an individual, being waged for the inner dimension of freedom. The universal reiﬁcation made the majority of population to use the mind only instrumentally; yet the loss of the internal subjective dimension could not be ﬁnal, so Marcuse. The philosopher notes: “The distinction between true and false consciousness, real and immediate interest still is meaningful” [8; p. XVI], despite the fact that “the subject which is alienated is swallowed up by its alienated existence” and that there’s now “only one dimension” where “false consciousness of their rationality becomes the true consciousness” [8; p. 15]. Marcuse’s methodology assumes the impossibility of refusing from the notion of the subject, since without the subject history is impossible, and moves it deeper into the individual. “The idea of “inner freedom” here has its reality: it designates the private space in which man may become and remain “himself.” [8; p. 14]. The degradation of the inner dimension of the individual mind could go as far as it gets without being ultimate. Critical ideas should be assimilated consciously because a spontaneous action is possible only at the level of individual consciousness where the propensity of critical thought cannot be completely silenced. “…the slaves must be free for their liberation before they can become free…” [8; p. 53]. Sure, such abstract mastering of ideas should be accompanied by a detection of contradictions and irrationalities in reality itself, since the contradictions of social reality may provide impetus and motivation for the assimilation of the ideas. Sprouts of the future are planted in the present, they should be noted and taken care of [3; p. 76].

5 Assessment of the Emancipatory Potential of Hannah Arendt’s and Herbert Marcuse’s Concepts The critical force of reflection stands still as an impregnable stronghold for both Herbert Marcuse’s dialectical thinking and Hannah Arendt’s phenomenological mind. The philosophers agree that the ﬁrst step shall be an appeal to reflection as a recollection and subjective assimilation of the values of true existence and true consciousness. They both converge that there is no place for freedom in late modernity, although their concepts of freedom differ: Arendt sees freedom as a speciﬁc public sphere of human interaction that exists in authentic purity; while for Marcuse freedom

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is a total transformation of social reality with the preservation of the advantages achieved by technological rationality. Therefore, Arendt follows the ideal of the Antiquity, whereas Marcuse perceives any appeal to the previous stages of the development as one of the versions of alienation. Marcuse’s thought is, in fact, part and parcel of the logic of modernity (which he criticizes), arguing the possibility of quick – revolutionary – transition into the realm of freedom. His thinking has progressive dimensions, suggesting that modernity itself represents a progressive stage of human history so that a new society should be achieved not by returning to an old social ideal but by a creation a new one. Marcuse asserts the modernist belief in the triumph of reason, the ideal of which is a pure project. For Arendt, as far as we understand, a major role is played by the presence of the tradition viewed as a carrier of the ancient ideal that should be restored. It is difﬁcult to say what facets would Arendt’s concept take if there was no historical sample which was granted a constitutive character. However, despite all the differences, both thinkers turn to the product of modernity – reason as the only means of implementing their projects.

6 Conclusions The philosophers emphasize the importance of reflection as a critical tool for consciously assimilating the historical social ideal in one case, and the mainstream historical trend (hampered but yet not broken) and its driving forces in the other. But if for Marcuse critical reflection is an integral part of the dialectical thinking, which is, in turn, the locomotive power of history, so that the critical assimilation of reality is already the beginning of its overcoming, then in Arendt’s viewpoint, the further role of the reason in its restorative project is not that clear because every tradition that passed through the crucible of reflection loses the innocence and starts a new, different life. Can there be an indirect return to the original meaning? Once adopted as the crucial element of thinking the reason can be hardly eliminated. Should the very need for the return to the past ideal, that was coined by Arendt, and that entered the arsenal of the contemporary thinking through her works, be a sign of the senile decline of the modern civilization, the beginning of its end? It seems that the Arendt’s critique of modernity acquires a great degree of sympathy by its reference to the ideals of the Antiquity, but at the same time it makes her project utopian. On the contrary, Marcuse’s critique of modernity and the appeal to restore the inner dimension of freedom and independence of the critical judgment as the means of the further development of society – no matter how unattractive they may appear to someone for ideological reasons (e.g., for a liberal conservative) - still seem to be realistic.

References 1. Arendt, H.: On Revolution. Penguin Books (1990) 2. Arendt, H.: The Human Condition. The University of Chicago Press, Chicago (1989) 3. Held, D.: Introduction to Critical Theory. Horkheimer to Habermas. Hutchinson, London (1980)

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4. Kellner, D.: Philosophy, Psychoanalysis and Emancipation: Collected Papers of Herbert Marcuse (Volume 5). Routledge, London (2011) 5. Marcuse, H.: The Aesthetic Dimension: Toward a Critique of Marxist Aesthetics. Beacon Press, Boston (1978) 6. Marcuse, H.: Eros and Civilization: A Philosophical Inquiry into Freud. Beacon Press, Boston (1955) 7. Marcuse, H.: Reason and Revolution. Hegel and the rise of social theory. Routledge & Kegan Paul, London (1986) 8. Marcuse, H.: One-Dimensional Man. Translated from English. REFL-book (1994) 9. Marcuse, H., Kellner, D.: Some social implications of modern technology. In: Kellner, D. (ed.) Technology, War and Fascism. Routledge Press, London (1998)

Prospects of Using Virtual Technologies in Modern Corporate Business Systems Elena Klochko(&) and Olga Brizhak Institute of Economics, Management and Business, Kuban State Technological University, Krasnodar, Russia [email protected], [email protected]

Abstract. Prospects of using virtual technologies in modern corporate business systems are examined in this article. These technologies specify actions of the participants, update and modernize them, accumulating the best options for cooperation and competition in the system environment. Information technologies used in the process of enterprise management, allow to convert organization structure into a network form. The traditional form of corporate organization acquires new qualities, not comparable to its previous form of existence: management processes are improved, a company undergoes a flexible reconﬁguration of all its resources, company sees the growth of the level of its general flexibility and adaptability to external and internal environment. On the basis of empirical study the authors identify factors that slow down the process of virtualization of corporate business systems in Russia. Keywords: Virtual technology Corporate business systems Network form of organization Information and communication technologies Russian economy JEL Classiﬁcation Codes: A12

O10 O30 P12 M21

1 Introduction The current stage of the evolutionary process witnessed the formation of a rather sustainable phenomenon of a “new economic reality”. It is a reaction of economic systems to qualitatively new technological challenges (Glazyev 2015; Krugman 2005), widespread use of new information technologies, modifying most aspects of socioeconomic life of the society. Technological revolution led to a qualitative transformation of productive forces and radically changed the material and technical base of production with the help of computer technology and the worldwide Internet system - a global information resource and a reflected form of global productive forces, created and only collectively. Virtualization affects economic relations in the sphere of production, which results in an increasing polarization of corporate capital and its ﬁctitious form. Special character of its virtual form acquires new qualitative basis in network corporations, generating conditions for acceleration of bogus transactions using Internet technologies (Brizhak 2017a, 2017b). Thus, virtualization weakens cause-and-effect relationships in © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 1181–1192, 2019. https://doi.org/10.1007/978-3-030-00102-5_124

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the real sector of the economy and creates a gap between the latter and the ﬁnancial market. Virtualization becomes a kind of replacement reality by its simulation, i.e. an image of reality (Ivanov 2012). Virtualization is an evolutionary process, a transition from one form to another one with greater potential. This transition takes imaginary quality base form image for a really existing one, possesses a high degree of reflexivity (Kroker and Weinstein 1994), progressive indeterminism (Ivanov 2000), simulativeness (Parinov and Yakovleva 2010) and illusiveness (Soros 1998). The phenomenon of substitution of reality by images allows us to tackle a particular paradox: computerisation of life does not lead to virtualization society, but on the contrary virtualization of society leads to computerization of life. Virtual reality transforms traditional organizations into corporate business systems with elements of workflows. A developed virtual communication space makes the demands of traditional organizations (social security account, timely appearance) irrelevant, changes its structural aspects, allowing a customer to participate directly in the work of the organization in network availability. Among the main differences between corporate business system and traditional organization (Tkacheva 2010) the authors outline the following: • organization is an artiﬁcial entity with speciﬁed objectives while corporate business system is a naturally formed task-oriented off-target system; • organization has clear boundaries in a corporate, business system does not have the equivalent; • corporate business system evolves along with the environment being its natural part, whereas organizations are created as an alternative to external environment. The difﬁculties encountered during the process of development of corporate business systems are mainly connected with the difﬁculties of virtualization of business processes that can be considered as elements of virtual corporate business systems (Brizhak 2017a, 2017b). The authors share the point of view of M. Castells, who claims that in the information society everything depends on the speed of adaptability and reaction on the global market demands, which makes network the most important factor. (Castells 2000). In order to survive large corporations have to transform into a network, where strategic alliances are created and disintegrated in accordance with particular circumstances and participants. It is the era of virtual self-programmed and self-managed organizations, which derive from the principles of decentralization, participation and coordination.

2 Materials and Methods The complexity of the emergence of virtual economy is neither about inventing a new scheme, reflecting the virtual philosophy of enterprise, nor about formalization of relations formed by Internet space and information systems, but about ﬁnding a basis for creation and manifestation of these relationship between people. The centre and source of changes in technology, product, culture, organization is a person whose

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willingness and ability carry out conversions and specify a certain direction of development (Porter 1985). According to V. Bandurin “virtualization of business is the simultaneous existence of modern corporations in the two spaces: real and virtual ones (Bandurin 2008) which deﬁnes certain features of their production process and organizational structure”. In his view, traditional companies tend to create huge pyramidal hierarchy, which often leads to an excessive bureaucratization. Virtual organizations, by contrast, are characterized by small material means and are often dispersed, have increased competitiveness as a result of the dynamically developed capacity for flexibility and creativity that in their turn derive from an inclination of management to a horizontal manner, network style of organization management, absence of external borders. Any corporate business system is dualistic in nature as it consists of a set of both physical and virtual components. Each corporate business system has to determine its own and only suitable set of virtual and non-virtual components. Let us analyze a set of components and features of virtual organization management, shown in Table 1.

Table 1. Speciﬁcs of components of the virtual business systems management. Component of an organization Coordination of activities The nature of activities Innovation Motivation Relations within networks

Management in virtual organization Anywhere on the planet, if there is access to the Internet; creating and maintaining an atmosphere of conﬁdence in the team, network monitoring Distributed production type, self-management, logistic and informational nature of cooperation, a growing role of the customer in the process of production Management of innovative business model in the framework of innovation flow of an enterprise Self motivation, motivation of employees through work Based on a series of agreements and mutual ownership

A. Virtual coordination, unlike non-virtual, requires investments in technology and training. Employees of corporate business systems must be familiar with virtual coordination systems, be able to independently manage information technologies. Among the advantages of virtual coordination: reduced time and costs for coordinating and enhancing the efﬁciency of the company (Kuritsky 2000). B. Virtual mode of integration into the business space corresponds to Distributed production type, self-management, logistic and informational nature of cooperation, a growing role of the customer in the process of creation and production of necessary products (Meytus 2004). The key success factors for virtual enterprise business systems contribute to efﬁcient production organization. An innovative business model initially underpinned by a new type of manufacturing process, which enables the customer to

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become co-producer of manufactured products. Working in tandem with a consumer, virtual network creates a unique personalized product that is “paid” and “bought” even before its creation. C. Innovative business model of this organizational form is closely related to the innovation stream. It is a complex of innovative projects, in the framework of which innovations are put in practice at various stages of the life cycle. Within the framework of the innovation stream from all the totality of partner enterprises included in the virtual network form innovative chains (Strelets 2003). Moreover a speciﬁc virtual type enterprise can be a member of several chains. Currently, there is no longer any need to concentrate innovations in one place, which only huge corporations can afford. The team working on the project can include staff geographically remote from each other, they can work either in ofﬁces or at home. However, virtual work can be limited (see para. A). D. Only external stimulation of the organization environment cannot maintain a constant attention to the work, so the content of work of the virtual staff must be designed in such a way that an employee was interested directly and felt its responsibility (Milner 2004). This can be achieved if the work is: completed- an employee must see the ﬁnished result; various-an employee must use different knowledge and types of skills; meaningful for both the employee and to other people; standalone - an employee must have freedom of action when he does his work; have feedback - an employee must have a complete and accessible information on the implementation of his work (Tkacheva 2009). E. Creating networks with suppliers and customers gives the opportunity of implementing “virtual supply chains” that allows to: • reduce transaction costs of network agents; • improve the efﬁciency of business process management in virtual organizations; • in order to satisfy customers better, if necessary, a reconﬁguration of agents inside a virtual project can be made; • improve the information feedback between members of the chain.

3 Results This empirical research includes synthesis of quantitative and qualitative methods. This combination of methods was determined by the absence of scientiﬁc tools, allowing conducting adequate quantitative measurement of virtual corporate business systems, as well as by the need to undertake a more detailed qualitative analysis of what is hidden behind the “ﬁgures”. Dynamics of virtual organizations in SFD over the period from 2009 to 2017, based on interviews with the participants of the research, is shown in Table 2. Mainly the growth of virtual organizations in the SFD has been fuelled by the increase in the number of participants of the IT-market and ﬁnancial services market.

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Table 2. Dynamics of virtual organizations in the economy of the SFD over 2009–2017 years (calculated by the authors based on the survey). Type of virtual organization IT outsources Outsources in ﬁnancial services Human resources outsource Total

Years 2009 2010 2011 2012 2013 2014 2015 2016 2017 1380 2640 3120 3900 4092 4948 5448 5536 5684 1035 1980 2340 2925 3069 3711 4081 4152 4263 345 660 780 975 1023 1237 1360 1384 1421 2760 5280 6240 7800 8184 9896 10889 11072 1136

We have elaborated and circulated a questionnaire, connected to identifying features of management of such companies’ assets as human capital and knowledge capital among CEOs. This kind of research allowed acquiring a considerable amount of empirical data, which made provided opportunity to deepen the study of identiﬁed qualitative trends. Necessary conditions for participation were the following: the period of work on the Russian market at the time of study of not less than 1 year, the number of staff number at least 5 people. Representative sample comprised 42 outsourcing companies of Southern Federal District, among them: 12 outsourcing IT-companies; 17 ﬁnancial and banking transactions outsourcing companies; 13 human resources outsourcing companies.

17%

Krasnodarskiy Kray 35%

Republic of Adygea Rebublic of Kalmukia

12%

Astrakhan Region Volgograd Region 15%

9%

Rostov Region

12% Fig. 1. Partially virtual organizations of SFD, participants of the survey, %

Thus, partially virtual corporate business system of SFD is the following: Krasnodar Krai - 35%, Republic of Adygea-9, Republic of Kalmykia, Astrakhan region - 15, Volgograd region - 12, Rostov region - 17% (Fig. 1). During the study of the features of asset management of virtual enterprises and their organizational structure, the authors encountered several difﬁculties:

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– the absence of clear system of measuring assets of such companies and the efﬁciency of the organizational structure (and the activity itself) of virtual service organizations; – the absence a relatively long period of time (over a year) of the virtual service organizations activity; – the absence of few cross sections of the research, presence of only a fundamental one. The reasons why the quality system was chosen to study the speciﬁc assets of this organizational form, are the following: – absence of statistics and indicators for comparison and testing of the indications, developed by the author, with those existing in Russian practice; – absence of public transparent reliable information about the ﬁnancial state of virtual organizations in Russia, comparable indicators; – an obtained qualitative information is important for the research. Analysis of responses showed the speciﬁcs of human capital management in virtual organizations of the Southern federal district. Virtual organizations see a change in employees’ selection approach, meaning innovative technology selection, which provide an opportunity to increase efﬁciency and cost-effectiveness of selection. They include: electronic sites of recruiting companies and internal sites of companies, electronic bulletin boards, online resources for ﬁnding a job. The implementation of such forms of selection allows reducing the costs of recruitment, but also poses a new kind of threat. Therefore, a combined selection can be considered the most acceptable form of selection (Tkacheva 2010). In the examined organizations the decision-making over the selection of the most part workers depends on the analysis of desired characteristics-86% of respondents agreed with this statement. The vast majority of respondents (98%) agreed that the process of staff training is important for the company, since the staff effectiveness conditions the competitiveness of an enterprise. Our earlier research has revealed the growing interest of managers of outsourcing organizations in a distance form of training. The study showed that staff remuneration system is mainly related to ﬁnancial results- responded 64% of those surveyed. Such a feature in the motivation of employees can be linked to the speciﬁcity of the examined organizations: mostly they were small and medium-sized enterprises with not numerous staff. As the external stimulation of the organization environment only cannot maintain a constant attention to the work, the content of work of the virtual staff must be designed in such a way that an employee was interested directly and felt its responsibility (Tkacheva 2009). When promoting employees in outsourcing companies, the emphasis is made on the merits of the employee- indicated 81% of respondents (Fig. 2). The views of respondents divided almost equally on such promotion factor as personal relations between manager and employee: 52% agree with this statement, 48% do not.

Prospects of Using Virtual Technologies 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

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81% 57% 48%

52% 43%

merits personal

19%

disagree

attitude

agree

Fig. 2. Factors considered when promoting employees in outsourcing companies of SFD.

However, almost half of the leaders believe that the staff members cannot be promoted in accordance with personal relationships, as this may adversely affect the efﬁciency of the company. In traditional companies, the most common grading system is the certiﬁcation, which estimates the conformity of qualities and capacities of the staff member with an occupied position. In corporate business systems of virtual type, based on a system of internal motivation, professionalism and lifelong learning, there is no need for regular expensive certiﬁcations aimed at monitoring and formal assessment. Thus, certiﬁcation in virtual organizations takes a new form. We believe that we can distinguish two types of assessment: • assessment based on the control can be used if applied to virtual staff with routine functions, a high degree of work regulations and easily measurable results. The main instruments of certiﬁcation of such staff- members is a detailed schedule of results control, systematic assessment procedures with a feedback for an employee; • assessment based on trust is applied to the key specialists, professionals. The assessment process is carried out according to the results of a project that is closely linked to personal, team and organization forms of remuneration; must provide feedback. Effective assessment must necessarily be complemented by a study of the views of the staff members about the company, obtaining information on employees’ satisfaction with their work, play a role of a motivating instrument. The survey showed that 51% of employees of partially virtual organizations are assessed quarterly, 36%-twice a year, 13%- annually. These data include information about employees, receiving feedback on their work: 49% of them receive feedback on their activities on a monthly basis, 26% - quarterly, 20% - twice a year. Regular monitoring provides CEOs of surveyed enterprises with an opportunity to improve efﬁciency of staff, stress their importance and signiﬁcance for the company. The survey revealed that in 73% of companies more than 50% of employees have access to the necessary information, in 21% of companies 50% of the employees have this right. The percentage of employees with access to information is high, because of the following circumstance. Virtual service organizations operate in conditions of

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greater uncertainty and risk than their traditional counterparts. Therefore, their staff should be given maximum freedom of action when addressing organizational issues, coupled with the increase of the responsibility they bear for their actions. This is achieved due to the fact that the company hire highly qualiﬁed specialists, who work, if necessary, independently and are capable to ﬁnd a way out of difﬁcult situations. Management services can provide the necessary counselling and practical help in unusual situations. In corporate virtual business systems communications are becoming a priority due to the fact that they mediate the process of values production. The research showed that 67% of managers evaluated the effectiveness of staff interaction as effective, 28% as ineffective, 5% were unsure. Management of companies should focus on informal communication, regulation of information flows, strengthening of planning and information monitoring procedures, integration of communication features and knowledge sharing. Leaders of 84% partially virtual organizations encourage the initiative of employees, realizing that creativity will give the opportunity to develop their business. However, 14% of respondents replied that the initiative of staff is not encouraged. The main value in organizations operating in the information economy is the people and their knowledge. Moreover, the main rule of knowledge management is the development of knowledge. The results of the research showed that 96% of managers of outsourcing companies found it necessary to develop staff knowledge. Survey of the heads of partially virtual corporate business systems showed that most employees of their companies strive to improve their performance-81% of respondents, 16% of respondents indicated the absence of such desire, 3% were unsure. In the performance of their duties staff members of outsourcing companies want to satisfy the demands of the highest level: self-actualization, self-esteem. The same reason condition a desire of highly skilled specialists to improve their performance constantly. Within the framework of the virtual service organizations, there emerges a new approach to staff turnover, which is based on an increased staff mobility, which in its turn is considered to be natural and creates an opportunity for the further development of staff members. However, the research showed the stability of staff team of outsourcing companies: percentage of the employees dismissed at their own request is extremely low-5% by the wish of the company-7%. This situation is derived from the fact that examined organizations formed a system, capable to retain the most talented and competent staff: (1) development of staff knowledge is regarded as a condition for the competitiveness of the company; (2) initiative of employees is encouraged; (3) staff has access to the necessary information; (4) staff consistently receives an assessment of their activity; (5) company when promoting a staff member takes into account personal contribution to the company. Performance evaluation of staff of partially virtual organizations revealed that the comparative ﬁgures of staff of the examined enterprises is higher than that of employees of ﬁrms-competitors (Figs. 3 and 4). Respondents characterized those indicators: level of education of employees is about the same at all enterprises of the branch, the level of professionalism is higher

Prospects of Using Virtual Technologies 0,7

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61% 59%

0,6

52% 48% 37% 41%

0,5 0,4

level of education qualification

0,3 0,2

motivation

0,1

2%

0

low

average

high

Fig. 3. The quality of work of the employees of partially virtual organizations (1–3)

80%

68%63% 72%

70% 60% 50%

satiafaction of staffmembers adaptsbility

35% 28% 26%

40% 30%

efforts

20% 10% 0%

4%2% 2% low

average

high

Fig. 4. The quality of work of the employees of partially virtual organizations (4–6 indicators).

(61% of respondents), level of motivation is high (59%), job satisfaction is enough high (68% of respondents), adaptation of the personnel is high (63% of those surveyed), and efforts are above-average (72% of respondents). Consequently, the overall capacity of employees of outsourcing companies is higher than this of competitors-62.5% of respondents. Summing up the results of the analysis of subsystems in human capital management, the authors outline that corporate business systems, speciﬁc knowledge of workers make up their competitive edge on the labour market. Therefore, the “value” of an employee depends on the amount of knowledge that he has. Moreover a highly qualiﬁed modern specialist does not have a rigid binding to organization, because he has an ability to produce information products outside its structures. So he sells enterprise owners the particular results of their creative intellectual activity.

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The modern system of motives considerably differs from the motivation system at the beginning of the 21st century. Staff no longer considers ﬁnancial incentives as dominant. The forefront in the system of incentives belongs to the possibility to enhance their intellectual level, solidarity and the meaning of work. The predominance of horizontal flows of information leads to horizontal cooperation scheme, improving the adaptability and flexibility of the management structure of enterprises. The advantages of this cooperation are evident when working in a team, that gives opportunity to: create a group of like-minded people; ensure the full equality of all team members; flexibility in distribution of functions; free and rapid exchange of views; use freedom of operational action.

4 Discussion The relevance of the development prospects of virtual technologies in modern corporate business systems necessitated development of the algorithm of its application. Activities in order to implement of the proposed algorithm include: 1. Identiﬁcation of directions of development of human capital management systems in accordance with the type of corporate business systems of a virtual type. 2. Establishing the institutional grounds for each participant of business processes in accordance with the forms of interaction of virtual agents. To regulate the process using the following tools: a set of rights of participants in the project; system of personal statuses; system of roles of participants; passport of a participant. 3. A choice of standard instruments of the system’s legitimacy achievement from the existing ones (declaration on the values of the virtual network; agreement on participation in the project; the system of statuses and roles of participants, etc.) and their adjustment according to the virtual project and the composition of its participants. 4. Sectoral coordination body is engaged in negotiations with free agents of virtual community with the best possible performance on the basis of the participant’s passport and a catalogue of key competences. 5. The distribution of tasks and roles between all the participants in the virtual service organization with the help of the information system. 6. The appointment and support of personal meetings of the participants through chats, forums and videoconferences, initiation and support of repetitive communication schemes. 7. A conflict between the project participants is limited and include only its parties, without involving other agents of virtual network. 8. Adjustment of the participants’ roles, statuses and activity ratings in the process of implementing a virtual project. 9. Evaluation of the efﬁciency of the participants using tools such as passport of a virtual organization; passport of a participant; report on the implementation of the project, payment and settlement system.

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10. The ﬁnal adjustment of status of participants and activity ratings after the completion of the virtual project, demonstration of the results in a report in a special section of information portal.

5 Conclusions A research portrays a number of factors, slowing down the active development of the process of virtualization in Russia. Having speciﬁed them in the research in relation to corporate business systems virtualization, the authors concluded that the main barriers hindering its development, are: On the macro level: the absence of a uniﬁed legal system covering all areas of the virtual economic activity; application of pre-existing network information institutions without adjusting their basic components to account Russian speciﬁcs and conditions; the absence of a system of state statistics for accounting of virtual objects of economic activity; On the micro level: the high cost of information and communication technologies; the lack of interest on the part of economic actors in the implementation of innovative projects within the framework of the virtual sector; inefﬁcient use of software and computing systems in Russian society, caused by a low level of skills for their application; the lack of well-articulated state institutions for regulation of the functioning of the virtual sector and the monopolization of information niches by private institutions, commodity-orientated type of Russian economy. Acknowledgments. The reported study was funded by RFBR according to the research project No. 17-02-000384.

References Bandurin, V.: Informatization and globalization in innovation economy. In: Bandurin, V.V., Esipovsky, I.E., Ushakov, D.S. (ed.) In chief Doctor of economic sciences, Professor V.S. Balabanova. Spb.: Piter, 31 p. (2008) Brizhak, O.V.: Corporate emission mechanism and ﬁnancial market: the modern transformation. Econ. Revival Russia 4(54), 67–73 (2017) Brizhak, O.V.: Speciﬁcs of formation and development of Russian business. In this Edition: Reproduction of Russia in XXI century: dialectics of controlled development: collective monograph; Moscow, 2017, 137 p. (2017b) Glazyev, S.Y.: Formation of a new institutional system under conditions of the shift of dominant technological modes. Sci. Works Free Econ. Soc. Russ. 190(1), 37–45 (2015) Efremov, V.S., Zudov, D.V.: Problems of economics and organization of @-business. Manag. Russ. Abroad 4, 8 (2000) Ivanov, D.: The origins of virtualization. Electronic resource. http://www.top-manager.ru. Accessed 31 Mar 2012 (2012) Ivanov, D.: Phenomenon of computerization as a sociological problem. Problems of theoretical sociology. Iss., Spb, 202 p. (2000)

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Castells, M.: Information era: economy, society and culture. Red. O.I. Shkaratan. HSE, 36 p. (2000) Kuritsky, A.B.: Internet Economy: Regularities of Formation and Operation, pp. 27–28. Publishing House of the St. Petersburg University, St. Petersburg (2000) Milner, B.Z.: Theory of organization: Tutorial, 2nd edn. Revised and amended M.: Infra-m, 569 p. (2004) Meytus, V.: Virtualization of production. Probl. Theory Pract. Manag. 1, 93p (2004) Parinov, S., Yakovleva, T.: 21-century Economy based on Internet technologies (electronic resource) (2010). http://rvles.ieie.nsc.ru/parinov/economy21.htm (date of circulation 15.01. 2012) Soros, J.: The Alchemy of ﬁnance, 416 p. (1998) Strelets, I.A.: New Economy and Information Technology, p. 10. Publishing House “Examen”, East Williston (2003) Tkacheva, E.N.: Methods of Ensuring the Effectiveness of Functioning of Virtual Organizations in the Information Economy: Monograph, p. 106. Publishing House JuIM, Krasnodar (2010) Tkacheva, E.N.: Features of the Formation and Development of Virtual Organizations in Russian Economy: Monograph, pp. 88–97. Publishing House JuIM, E.N. Tkatchev -Krasnodar (2009) Kroker, A., Weinstein, M.: Data trash. The theory of the virtual class. Monreal, p. 67 (1994) Krugman, P.R.: Wells R. Economics, p. 1200. Worth Publishers, New York (2005) Porter, M.E.: Competitive Advantage: Creating and Sustaining Superior Performance, p. 67. Free Press, New York (1985)

Using Internet Services in Teaching Methodology Marina L. Gruzdeva ✉ , Zhanna V. Smirnova, Zhanna V. Chaikina, Olga V. Golubeva, and Olga T. Cherney (

)

Nizhny Novgorod State Pedagogical University named after Kozma Minin (Minin University), Nizhny Novgorod, Russian Federation [email protected], [email protected], [email protected], [email protected], [email protected] Abstract. Introduction: The article is devoted to the use of various means and technologies of the Internet on technology lessons. As the authors of the article show, recently a lot of sites, applicable for joint work, so-called Web 2.0 tools that have been developed and put into operation. Many of them can facilitate the work of teachers, make the material more visible, more quickly monitor the performance of homework, etc. The authors are sure that such services as googletables and google-presentations can reduce the organizational time in the lesson, which is so expensive for practical classes, will make it possible to disassemble more new material, increase the eﬃciency and speed of the practical work. Materials and methods: In the article, various methods of the lesson organi‐ zation with application of services of a network the Internet are considered: when studying a new topic, when working on a project, with diﬀerentiated work in a lesson, etc. Results: the article describes the services of the Internet, which the technology teachers can use in their professional activities: graphical service for creating a layout and interior of the house Planoplan, services that allow you to create schemes for embroidery and share already created schemes with other embroi‐ derers (igolki.net, x.fanreal.ru, crosti.ru) and others. Discussion: the article discusses the complexity of the use of virtual services in the study of the subject of Technology, namely the fact that the student needs to learn the manual operations used for centuries that were not worked out on a single generation of students with virtually no changes in the methodology. In addition, there are practically no services developed speciﬁcally for the method of teaching the subject of Technology. Conclusions: Internet technologies have ﬁrmly taken their positions in the life of modern society. Teachers should use all the tools that can attract the atten‐ tion of a new generation to teach them their subject. Keywords: Information technologies · Training services · Web 2.0 services Technology teaching methodology

1

Introduction

Information technology penetrates deeper into the learning process. A huge inﬂuence on this is provided by the development of the Internet network, which allows teachers © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 1193–1199, 2019. https://doi.org/10.1007/978-3-030-00102-5_125

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and students to quickly exchange in the distance new trends in science, their methods of work. In the last decade, many sites have been developed and put into operation, which are applicable for joint work, the so-called Web 2.0 tools. Many of them can facilitate the work of teachers; make the material more visible, more quickly monitor the performance of homework, etc. Like teachers of other subject areas, technology teachers actively introduce new methods and techniques into teaching: work with projects, teamwork, etc., the intro‐ duction of which greatly facilitates the use of Internet technologies in working with students. Services such as google tables and google presentations can shorten organi‐ zational time in a lesson that is so expensive for practical classes, will make it possible to disassemble more new material, increase eﬃciency and speed of doing practical work. In the framework of this article, it is planned to consider the possibilities of various means of Web 2.0 technology in relation to lessons in technology lessons.

2

Theoretical Bases of Research

Joint planning of projects and various activities; writing articles, reviews and other crea‐ tive works; publication and discussion of advanced pedagogical practices; conducting remote workshops, trainings, etc.; conducting network projects, competitions; the mainte‐ nance of network portfolios is possible with the help of creating joint hypertext materials (http://letopisi.ru, https://wiki.mininuniver.ru, https://sites.google.com). To collect infor‐ mation, store and share various information resources; the accumulation of advanced teaching practices should use cloud storage, such as https://disk.yandex.ru, https:// onedrive.live.com, https://drive.google.com [2]. Carrying out “brainstorming”; joint writing of reviews, annotations, articles; joint calendaring of events; on-line questioning; collective development of programs, eval‐ uation tools, etc.; various monitoring can be carried out using collaborative document editing services (https://docs.google.com/document, https://docs.google.com/spread‐ sheets, https://www.google.com/calendar, https://onedrive.live.com). Eﬀective tools for use in the methodological activities are knowledge maps, time tapes, denotatory graphs, infographics, word clouds and other visualization tools. They are good for brainstorming, planning activities, presenting the results of work, analyzing problems, reﬂecting, visualizing various events. Examples of services: https:// bubbl.us, http://www.mindmeister.com, http://www.timetoast.com, https://www.tikitoki.com, http://www.wordle.net, http://www.gliﬀy.com, https://piktochart.com. [4] Interactive on-line boards are used to conduct brainstorming sessions, create joint creative works and interactive newspapers. Examples of services for creating virtual boards: http://www.twiddla.com, http://www.stixy.com, https://padlet.com. There are three types of interaction between a teacher and a virtual environment: consulting, communicative and creative. In the case of consultative interaction with the environment, the teacher acts as a learner: he receives information. Communicative component of the teacher’s interaction with the virtual environment allows you to interact with the methodical services of the on-line training room, express your opinion

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on various issues, participate in brainstorming sessions, virtual methodological councils, projects, etc. [9]. Social networks, in particular vk.com, are also convenient for use by the educator for educational purposes. For eﬀective work, a group is created in which all the material necessary for studying the subject is collected, links to interesting sites, news. Discus‐ sions on problem issues are created, updates are sent to each participant of the group [6]. The advantage of using vk.com is that most students are already registered on this resource and know how to work with it. At the same time, students often go to their pages, read news, talk. Consequently, all material will reach students without special notiﬁcations about it. If the material is urgent for communicating to the students (changes in the schedule, diﬃculties with organizing the upcoming lesson), you can create a conversation with the students, and each student who has the SMS notiﬁcation function will be guaranteed to be informed. In addition, the service works on all devices that have access to the Internet. But there is also a negative side: many students have already generated pages with certain content, which they may not want to share with the teacher. Therefore, you do not need to force them to be added to friends for direct communication. Enough of their entry into the group of teachers (class).

3

Methodology of the Study

The lessons of technology in the school assume the availability of practical lessons, combined lessons, lessons - laboratory work. The use of interactive means of the Internet within the subject of technology is possible not only during the lesson, but also during the preparation for the lesson. This helps to signiﬁcantly reduce the time spent on the organizational part and on the submission of new material. Complexity in the use of virtual services in the study of the subject of technology is that the child needs to learn the manual operations used for centuries, worked out not on one generation of students with virtually no changes in the methodology. In addition, there are practically no services developed speciﬁcally for the method of teaching the subject of Technology. However, at the same time, many services allow you to create schemes for embroi‐ dery and share already created schemes with other embroiderers. These services are igolki.net, x.fanreal.ru, crosti.ru and others. And although experienced embroiderers warn against using these services, since the schemes turn out to be substandard, beginner embroiderers often go to similar resources to embroider pictures from a photo. In the technology class, for example, you can teach students how to work with similar services and explain how a simple run through the program diﬀers from creating a quality scheme. Internet technologies can be used in the study of the section “Household Tech‐ nology” when planning interiors. Recently, the Internet has a good graphical service for creating the layout and interior of the house Planoplan. It is in the beta testing stage, but it is already well developed and suitable for constant work with students in the classroom. Planoplan is a 3D-planner of premises and interior with rendering of high-quality images on the server side. You can move around the created room in several modes: 3D

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walks, virtual tour, virtual reality (the Oculus Rift helmet is supported). The scheduler is developed on the Unity platform (game engine) [8]. The use of Internet services allows you to apply the following methodologies in the lessons: 1. When studying a new topic: – search for information on the Internet; – drafting up a plan-summary of the text; – analysis of the text and drawing up a chart or table; – writing questions; – search for answers to questions posed by the teacher; – work with pictures displayed on the web; – search for statistical data and their analysis; – the development of new skills with the help of appropriate services. 2. Knowledge control can be carried out using a variety of test services, online quizzes, surveys. 3. Work on the project involves working with various services, involving information retrieval, costing, and discussion with competent people in matters related to the project [5]. You can also use resources such as: – virtual libraries; – virtual museums; – various information educational servers; – websites of mass media; – encyclopedias and reference books. 4. Participation in teleconferences and chats. Teachers of foreign languages, which allow students to communicate with peersnative speakers, have long used such technologies. Within the framework of other subjects, it is possible to organize video bridges and chats with scientists, skilled handicraftsmen, professional chefs, teachers in universities and secondary schools, peers from other schools, etc. 5. Use of e-mail. For educational purposes, it is recommended to create a mailbox (for example, on a gmail server). This will allow not only exchanging letters and sending home tasks to the teacher in the mail, but also using all the possibilities of services provided by Google [12]. 6. Diﬀerentiated work in the lesson. Issue various tasks in the lesson. For the strong - the preparation of reports, presen‐ tations or pages on the site, for the weak - the search for answers to questions asked. 7. Selection or compilation of multi-level tasks on Internet services. Using the services of the Internet, you can organize the work of students in the class as follows: – front (using virtual travel sites, developing global network projects, etc.); – individually (for search, selection and analysis of educational information); – in groups (for example, when performing a general educational project) [10]. – The choice of optimal organizational forms and methods is ultimately left for the teacher.

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As a result of the study, we identiﬁed the main motives for using Internet services by students [1]: – – – – –

for information; to access information that is not reﬂected in traditional sources; for the possibility of virtual travel through the sites of museums, libraries, etc.; to participate in global children’s network projects; for interactive communication with their peers, etc.

The purpose of the lesson with the use of Internet services consists of the following aspects: Educational aspect, aimed both at the perception of the students of the educational material, and on the comprehension of the connections and relationships in the objects of study. Developing aspect, aimed at the development of cognitive interest in students, to enhance the creative activity of students. Educational an aspect aimed at fostering a scientiﬁc worldview, the ability to clearly organize independent and group work, fostering a sense of comradeship and mutual assistance [7, p. 54]. Using the services of the Internet and integrating them into the educational process, you can more eﬀectively solve didactic tasks. The method of organizing a lesson with the use of Internet services: 1. The teacher plans his lessons with the involvement of various services. When choosing the subject of the discipline, it is necessary to choose those, when studying which Internet services will most closely ﬁt into the learning process, and, accord‐ ingly, the maximum educational eﬀect will be achieved [11]. 2. The teacher preliminarily ﬁnds the best resources and compiles a list of sites that the students will need to meet while performing the task of the teacher. For example, the task for a group of students is to create a reference portal with Web addresses by topic or a speciﬁc task that the teacher deﬁned. It is possible to build a lesson (or even a block of classes) based on one site, if its information ﬁeld is suﬃcient for this. 3. In addition to searching for information on the instructions of the teacher, you can oﬀer and another type of work with the resources of the Internet: by oﬀering a list of Web sites, the teacher asks learners to get acquainted with the information presented there and evaluate the sites, in terms of the quality of the information provided. This type of task requires not just ﬁnding information, but also making a decision, expressing one’s opinion and justifying it. In this case, the sphere of activity of students is as follows: – It is necessary to evaluate the Web site, determine the quality and plausibility of the information provided; – It is necessary to compare the presentation of the same themes in diﬀerent sources; – for diﬀerent tasks, students will be forced to use diﬀerent uses of diﬀerent research strategies; – it is necessary to organize the work: write a research report.

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4. Students perform public tasks in public. It is generally known that the material is best understood and remembered when it is explained to each other. The teacher determines the volume and form of the story individually. In addition to classes in the class, students can search for additional information on the subjects themselves. In addition, students can exchange received knowledge, unite with other classes, comprehend the information received and publish their copyright materials on the Internet.

4

Analysis of Research Results

To conduct lessons in the school using Internet services, we chose two sections: “Interior of a residential house” and “DPI. Counting embroidery.” With regard to the topics of the program of the discipline “Technology” in the 6th grade, the services of the Internet can be systematized as follows: 1. 2. 3. 4. 5. 6.

Introductory lesson: google presentations, app.emaze. Cooking: package “For home and oﬃce” from google, cacoo, boobl.us. Interior of the apartment house: Planplan, Autodesk Homestyler. Needlework: Igolki.net, crosti.ru, panna.ru/calc. Sewing: Method Draw, svg-edit. Checking the homework, conducting test and control works: learningapps, forms from google, Zondle [3].

To assess the eﬀectiveness of using Web 2.0 tools in teaching, a diagnosis of moti‐ vation for adolescents was conducted using the method of M. Lukyanova at the begin‐ ning and the end of the quarter. The analysis of the results showed a qualitative improve‐ ment in the students’ motivations. At 25% of the students, the training one replaced the positional motivation.

5

Conclusions

In general, students are positive about the computerization of training, they liked the classes conducted using the Internet. The students became more active in the lessons, they learned the material more easily, the lessons were organized and with good disci‐ pline. Internet technologies have ﬁrmly taken their positions in the life of modern society. The new generation of Web 2.0 software has become a turning point in the history of the Internet. It allowed not only to spread the information that we own on the general review, but also to receive a response to it, share our developments, create minicommunity on the network. Modern education is inconceivable without modern tech‐ nology. Teachers should use all the tools that can attract the attention of a new generation to teach them their subject. Services have a wide variety that allows them to be applied at various stages of training: from studying the theoretical material to checking the homework and even conducting virtual tours.

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References 1. Akimov, S.S., Andreeva, N.S., Korovina, M.A.: Possibilities of application of information technologies in additional education of children. In: Pedagogical skill: Materials II International scientiﬁc Conference, pp. 153–157. Buki-Vedi, Moscow (2012) 2. Gruzdeva, M.L., Bakhtiyarova, L.N.: Pedagogical methods and methods of work of university teachers in conditions of information educational environment. Theory Pract. Soc. Dev. 1, 166–169 (2014) 3. Gorshkova, T.A., Shevchenko, S.M., Grishutkina, N.G., Pachurin, G.V.: Possibilities of application of web 2.0 services in the study of technology in the 6th grade. Fundam. Res. 9(3), 430–433 (2015) 4. Internet services in education: educational and methodological collection of materials of the II International Scientiﬁc and Practical Conference on June 20, 2014 and the materials of the contest “Kaleidoscope of Services in Education. In: Koropovskaya, V.P., Kurganova, N.A., Yu, A.N. (eds.) Omsk, p. 213 (2014) 5. Krupoderova, E.P.: Organization of project activities using modern network technologies. Inf. Educ. 1, 50–52 (2012) 6. Krupoderova, E.P., Koropovskaya, V.P.: The use of social services for the formation of ICT competence of students. Sci. Sch. 4, 19–21 (2010) 7. Patarakin, E.D.: Social interactions and network learning 2.0. In: NP Modern technologies in education and culture (2009). 176 pp 8. Planoplan - program for interior design (2017). http://www.dr-web.ru/soft/planoplanprogramma-dlya-proektirovaniya-intererov.html. Accessed 26 Dec 2017 9. Samerkhanova, E.K., Krupoderova, E.P., Krupoderova, K.R., Bakhtiyarova, L.N., Ponachugin, A.V.: Students’ network project activities in the context of the information educational medium of higher education institution. Int. J. Environ. Sci. Educ. 11(11), 4578– 4586 (2016) 10. Smirnova, Z., Gruzdeva, M.L., Chaykina, Z., Terekhina, O.S., Tolsteneva, A.A., Frolova, N.H.: The role of students’ classroom independent work in higher educational institutions. Indian J. Sci. Technol. 9(22), 95568 (2016) 11. Manzuoli, C.H., Cifuentes, Y.S.: Computing education competence in higher education: challenges for teachers. Am. J. Educ. Res. 1(9), 406–412 (2013). https://doi.org/10.12691/ education-1-9-9 12. de Leraa, E., Almirallb, M., Fernândezb, C., Gisberta, M.: Universitat Oberta de Catalunya, Barcelona, Spain. Designing innovative open spaces for learning: the case of the Open University of Catalunya. In: 3rd. International Conference on New Horizons in Education, 5 October 2012, vol 55, pp. 1000–1008 (2012)

Influence of Innovations on Regional Socio-Economic Development Aleksei V. Bogoviz1(&) , Julia V. Ragulina1 and Mariana K. Barcho2

,

1 Federal State Budgetary Scientiﬁc Institution “Federal Research Center of Agrarian Economy and Social Development of Rural Areas – All Russian Research Institute of Agricultural Economics”, Moscow, Russia [email protected], [email protected] 2 Federal State Budgetary Educational Institution of Higher Education, Kuban State Agrarian University named after I.T. Trubilin, Krasnodar, Russia [email protected]

Abstract. The purpose of the work is to determine the influence of innovations on socio-economic development of regions of modern Russia and to determine the problems and develop recommendations for provision of innovationsoriented socio-economic development of modern Russia’s regions. The methodology of the work includes regression and correlation analysis – which are used for compilation of regression curves that reflect the influence of innovations on socio-economic development of regions. The research objects are regions of the Central Federal District of the RF, the research is performed on the basis of the 2017 data. As a result, it is determined that influence of innovations on socio-economic development of these regions is not only critically low and statistically insigniﬁcant, but is not always positive. Therefore, socio-economic development of Russia’s regions is not innovations-oriented. This is caused by such problems as lack of ﬁnancing of measures in the sphere of innovations, violation of integrity of the innovational process in the region, foundation on state ﬁnancing of innovations in region with insufﬁcient control, and low interest of region’s companies in innovational development. In order to solve these problems, the complex of authors’ recommendations is offered, and the authors’ mechanism of innovations-oriented socio-economic development of region is compiled. Keywords: Innovations Socio-economic development Innovational activity Competitiveness Region Modern russia

1 Introduction The 21st century is the age of domination of innovations, which determine effectiveness and, therefore, successfulness of functioning and development of economic systems at all levels: global (level of the global economy), macro-economic (level of national economic systems) and meso-economic (level of regional economic systems as a part of the national economic systems) in the market economic conditions. © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 1200–1207, 2019. https://doi.org/10.1007/978-3-030-00102-5_126

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Systemic interaction between the levels of the modern global economic system predetermines the necessity for achieving the target indicators of innovational development at the macro-economic and global levels of manifestation of high innovational activity at the meso-economic (regional) level, as it is the place of the largest changes and foundations for growth and development of the whole system. Thus, the main load for execution of the plans of innovational development is set on a modern region. Thus, implementation of the Strategy of innovational development of the RF until 2020, adopted by the Decree of the Government of the RF dated December 8, 2011, No. 2227-r., envisages manifestation of high innovational activity by Russia’s regions in the interests of increasing and supporting global competitiveness of the regions and of the country’s economy on the whole (Analytical center with the Government of the RF 2018). However, underrun as to the terms of implementation of this strategy and failure to achieve certain tasks (increase of the share of companies of industrial production that implement technological innovations in the total number of companies of industrial production to 40%, increase of the share of export of Russian high-tech goods in the total global volume of export of high-tech products to 2%, etc.) is the basis for considering (research hypothesis) that innovations perform weak influence on socioeconomic development of Russia’s regions, which is a restraining factor on the path of practical implementation of this strategy. The purpose of the work is to determine the influence of innovations on socioeconomic development of modern Russia’s regions and to determine the problems and develop recommendations for provision of innovations-oriented socio-economic development of modern Russia’s regions.

2 Materials and Method The theoretical basis of the research consists of the works of modern scholars and experts on the issues of socio-economic development of region (Bashkirova and Lessovaia 2018; Bulut and Öner 2017; Bürcher 2017; Jurzina et al. 2017; Kohoutek et al. 2017; Mushongera 2017), and on the issues of manifestation of innovational activity by a modern region: (López-Bazo and Motellón 2018; Lowe and Wolf-Powers 2018; Popkova et al. 2017, 2018; Pugh 2018; Schmidt et al. 2018; Bogoviz et al. 2018; Ragulina et al. 2018; Veselovsky et al. 2017; Veselovsky et al. 2018a, 2018b). The methodological tools of this work are based on application of the methods of regression and correlation analysis, with the help of which regression curves are compiled, which reflect the influence of innovations (x) on socio-economic development of regions (y). The research objects are the regions of the Central Federal District of the RF, the research is performed on the basis of 2017 data (Table 1).

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Table 1. Indicators of innovations and socio-economic development of regions of the Central Federal District of the RF in 2017. Number of organizations that conduct R&D

Region

Index of socioeconomic position of region, points

Belgorod Oblast Bryansk Oblast Vladimir Oblast Voronezh Oblast Ivanovo Oblast Kaluga Oblast Kostroma Oblast Kursk Oblast Lipetsk Oblast Moscow Oblast Orel Oblast Ryazan Oblast Smolensk Oblast Tambov Oblast Tver Oblast Tula Oblast Yaroslavl Oblast

52.353 19 (19th position) 22 39.786 (52nd position) 43.846 28 (40th position) 63 54.964 (17th position) 24 29.476 (70th position) 42 45.139 (35th position) 7 25.706 (75th position) 19 44.961 (37th position) 27 51.812 (22nd position) 250 38.597 (4th position) 31.483 18 (68th position) 27 44.794 (38th position) 27 35.192 (61st position) 32 42.209 (46th position) 36 38.799 (55th position) 50.652 24 (25th position) 44 43.031 (44th position)

Internal expenditures for R&D, RUB million

Developed leading production technologies

Used leading production technologies

Share of Share of innovational organizations products, % that conduct innovations, %

1,779.9

51

2,335

10.3

7.3

704.3

13

1,512

14.1

18.8

4,511.5

11

5,283

6.8

5.8

6,436.1

26

2,275

10.6

5.9

642.0

27

720

11.6

0.2

9,283.7

38

2,387

3.2

2.7

137.1

0

1,666

8.5

6.7

4,948.7

0

1,291

8.6

7.6

352.3

1

3,401

6.5

10.5

107,311.1

109

16,532

19.2

15.8

644.4

1

1,647

8.5

0.5

2,026.2

5

1,445

7.4

6.2

1,414.8

10

1,672

12.3

1.8

1,666.8

3

1,981

6.9

4.5

4,786.3

3

4,193

10.6

5.5

5,574.8

34

2,546

7.9

11.2

8,720.7

206

2,962

10.9

14.9

Source: compiled by the authors based on: (RIA Ranking 2018) and (Federal State Statistics Service 2018).

3 Results The results of the performed regression and correlation analysis are shown in Fig. 1. Regression curves in Fig. 1 show that the index of socio-economic position of regions of the Central Federal District of the RF in 2017 grows by 0.002 points with growth of the number of organizations that conduct R&D (correlation – 0.02%); with growth of the number of developed leading production technologies – by 0.017 points (correlation – 1.16%); with growth of the number of used leading production technologies – by 0.0025 points (correlation – 0.65%); with growth of the share of

Socio-economic position

Socio-economic position

Influence of Innovations on Regional Socio-Economic Development 60

60

1203

60

40

40 40 y = 0.0021x + 41.843 20 y = -2E-05x + 42.092 20 y = 0.0169x + 41.396 R² = 0.0002 R² = 0.0028 R² = 0.0116 0 0 0 0 100 200 300 0 50000 100000 150000 0 100 200 300 Number of companies that… Internal expenditures for… D ev el op ed le ad in g… 60 60 60 20

40

40 y = 0.4287x + 38.754 20 20 y = -0.5776x + 47.498 R² = 0.0768 R² = 0.063 0 0 0 0 10000 20000 0 10 20 10 20 30 0 Used leading technologies Share of innovational… Share of innovational…

20

40

y = 2E-05x + 41.876 R² = 6E-05

Fig. 1. Regression curves that reflect the influence of innovations (x) on socio-economic development of regions (y) of the Central Federal District of the RF in 2017. Source: compiled by the authors.

innovational products – by 0.4287 points (correlation - 0.76%); with growth of the share of innovational organizations it decreases by 0.578 points (correlation - 0.63%); with growth of internal expenditures for R&D, it decreases by 0.0025 points (correlation – 0.28%). This means that influence of innovations on socio-economic development of regions of the Central Federal District of the RF in 2017 is not only critically low (growth of the values of indicators of innovations ensures a slight growth of the index of socio-economic position) and is statistically insigniﬁcant (correlation - in all models of paired linear regression below 45%), and is not always positive. Therefore, socio-economic development of Russia’s regions is not innovationsoriented. It should be noted that region is the most important component of economy, and national strategies of the system’s development are implemented at the regional level – of which the national statistics is formed. That’s why it is no wonder that in 2017 Russia is peculiar for the low level of innovational development of the economic system, with 38.76 points out of 100 as to the value of the global innovational index and occupying 45th position among 127 countries of the worlds (INSEAD, WIPO, Cornell University 2018), and the low level of global competitiveness, with 4.6 points out of 6 as to the value of the corresponding index and occupying 38th position among 137 countries of the world (World Economic Forum 2018). Additional logical (qualitative) analysis allowed determining the most probable reasons of weak and sometimes even negative influence of innovations on socioeconomic development of modern Russia’s regions: – lack of ﬁnancing of measures in the sphere of innovations (R&D, implementation of innovations), which does not allow for full implementation of potential of their efﬁciency: volume of ﬁnancing of most R&D in Russia is determined by the grant volume (before start of the project), so appearance of the need for additional

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ﬁnancing in the process of implementation of the project leads to insurmountable deﬁcit of ﬁnancing, which does not allow for successful ﬁnish of the project. – violation of integrity (separation of different stages) of the innovational process in the region: R&D institutes and entrepreneurial structures of the region do not cooperation on a constant basis; – foundation on state ﬁnancing of innovations in the region with absence of strict requirements to the results and insufﬁcient control from state regulators: entrepreneurial structures are interested in obtaining state ﬁnancing, but, as a rule, do not use it for efﬁcient innovational development; – low interest of region’s companies in innovational development: the risk component of manifestation of innovational activity is very high due to weak connection with R&D institutes and instability of demand for innovational products. The above problems are serious barriers on the path of formation of innovational economy in modern Russia, which is peculiar for high and sustainable global competitiveness. For provision of innovations-oriented socio-economic development of modern Russia’s regions, we offer the following recommendations that are aimed at successful and complex solution of all determined problems: – stimulating innovational activity of region’s entrepreneurial structures: creating and supporting high level of competition at the regional sectorial markets, provision of preferences (subsidies and special conditions) for regional taxes, co-ﬁnancing (subsidizing, crediting) innovational activity, etc.; – stimulating efﬁciency (including practical application) of R&D, conducted by region’s institutes: inclusion of the corresponding requirement into the system of evaluation of effectiveness of their activities, ﬁnancing, and licensing; – stimulating demand for innovational products by consumers (residents) of region: for example, by setting additional payment for using old cars that deal damage to region’s environment, etc.; – monitoring and control over the innovational process in the region: evaluation of integrity, efﬁciency, and effectiveness. According to the given recommendations, we developed the following proprietary mechanism of innovations-oriented socio-economic development of region (Fig. 2). As is seen from Fig. 2, the initiator of starting the mechanism is the state which is the subject of regulating the process of innovations-oriented socio-economic development of region. The management objects are R&D institutes, entrepreneurial structures and consumers (residents) of region. Due to their close and mutually profitable interaction, integrity of the innovational process is ensured (dotted line in Fig. 2, italics – its stages). Under the effect of this mechanism, growth of efﬁciency of R&D, growth of innovational activity of regional entrepreneurial structures, and growth of demand for innovational products from regional consumers are achieved. As a result, activation of innovational development of the region takes place, together with increase and of its global competitiveness.

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Subject of management: state regulators of economic activities in the region stimulating stimulating innovational activity, efficiency of R&D, monitoring, and control monitoring and Supplying innovations supplying innovational sontrol (technologies, equipment, product (goods, works, personnel) services) Management object 1: R&D institutes of the region

Management object 2: entrepreneurial structures of the region

stimulating demand for innovational products

Management object 3: consumers (residents) of the region

Demand for Demand for R&D, consumption of innovational products conduct of R&D purchase and payment for innovational results and payment and creation of products innovations implementing innovations and creating innovational products growth of demand for growth of efficiency of innovational products growth of innovational activity R&D Result: Activation of region’s innovational development, increase and supporting its global competitiveness

Fig. 2. The mechanism of innovations-oriented socio-economic development of region. Source: compiled by the authors.

4 Conclusions Thus, the offered hypothesis is proved; it is substantiates that as of now (2018) innovations have insigniﬁcant and sometimes even negative influence on socioeconomic development of modern Russia’s regions. This is caused by such problems as lack of ﬁnancing of measures in the sphere of innovations, violation of integrity of the innovational process in the region, foundation on state ﬁnancing of innovations in the region with insufﬁcient control, and low interest of region’s companies in innovational development. For solving these problems, the authors’ recommendations are offered: stimulation of innovational activity of region’s entrepreneurial structures, stimulation of efﬁciency of R&D, stimulation of demand for innovational products by region’s consumers, and monitoring and control of the innovational process in the region. Perspectives of complex and highly-effective application of these recommendations are shown by the developed authors’ mechanism of innovations-oriented socio-economic development of region.

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References Bashkirova, N.N., Lessovaia, S.N.: State and business co-operation in settling socio-economic issues: forward to sustainable development of ecologically unfavorable regions. IOP Conf. Ser. Earth Environ. Sci. 107(1), 012128 (2018) Bogoviz, A.V., Sozinova, A.A., Ostrovskaya, V.V.: Approaches to managing economic growth of socio-economic systems. Stud. Syst. Decis. Control 135, 131–137 (2018) Bulut, H., Öner, Y.: The evaluation of socio-economic development of development agency regions in Turkey using classical and robust principal component analyses. J. Appl. Stat. 44 (16), 2936–2948 (2017) Bürcher, S.: Regional engagement of locally anchored ﬁrms and its influence on socio-economic development in two peripheral regions over time. Entrep. Reg. Dev. 29(7–8), 692–714 (2017) INSEAD, WIPO, Cornell University: The Global Innovation Index 2017 (2018). http://www. globalinnovationindex.org/. Accessed 05 Aug 2018 Jurzina, T., Egorova, N., Zaruba, N., Kosinskij, P.: Tools of realization of social responsibility of industrial business for sustainable socio-economic development of mining region’s rural territory. In: E3S Web of Conferences, vol. 21, p. 04010 Kohoutek, J., Pinheiro, R., Čábelková, I., Šmídová, M.: The role of higher education in the socioeconomic development of peripheral regions. High. Educ. Policy 30(4), 401–403 (2017) López-Bazo, E., Motellón, E.: Innovation, heterogeneous ﬁrms and the region: evidence from Spain. Reg. Stud. 52(5), 673–687 (2018) Lowe, N.J., Wolf-Powers, L.: Who works in a working region? Inclusive innovation in the new manufacturing economy. Reg. Stud. 52(6), 828–839 (2018) Mushongera, D.: Beyond GDP in assessing development in South Africa: the Gauteng cityregion socio-economic barometer. Dev. South. Afr. 34(3), 330–346 (2017) Popkova, E.G., Bogoviz, A.V., Ragulina, Y.V., Alekseev, A.N.: Perspective model of activation of economic growth in modern Russia. Stud. Syst. Decis. Control 135, 171–177 (2018) Popkova, E.G., Popova, E.A., Denisova, I.P., Porollo, E.V.: New approaches to modernization of spatial and sectorial development of Russian and Greek regional economy. Eur. Res. Stud. J. 20(1), 129–136 (2017) Pugh, R.: Questioning the implementation of smart specialisation: regional innovation policy and semi-autonomous regions. Environ. Plan. C Polit. Space 36(3), 530–547 (2018) Ragulina, Y.V., Bogoviz, A.V., Alekseev, A.N.: Modeling the management of innovational processes in regional economy. Adv. Intell. Syst. Comput. 622, 568–573 (2018) Schmidt, S., Müller, F.C., Ibert, O., Brinks, V.: Open Region: creating and exploiting opportunities for innovation at the regional scale. Eur. Urban Reg. Stud. 25(2), 187–205 (2018) Veselovsky, M.Y., Izmailova, M.A., Bogoviz, A.V., Ragulina, Y.V., Lobova, S.V.: Fostering the engagement of corporate establishments in the innovation-driven development of Russia’s regions. J. Appl. Econ. Sci. 12(4), 945–959 (2017) Veselovsky, M.Y., Izmailova, M.A., Bogoviz, A.V., Lobova, S.V., Alekseev, A.N.: Innovative solutions for improving the quality of corporate governance in Russian companie. Qual. Access Success 19(162), 60–66 (2018a) Veselovsky, M.Y., Izmailova, M.A., Bogoviz, A.V., Lobova, S.V., Ragulina, Y.V.: System approach to achieving new quality of corporate governance in the context of innovation development. Qual. Access Success 19(163), 30–36 (2018b) World Economic Forum: The Global Competitiveness Report 2017–2018 (2018). https://www. weforum.org/reports/the-global-competitiveness-report-2017-2018. Accessed 05 Aug 2018

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Analytical center with the Government of the RF: Strategy of innovational development of the RF until 2020, adopted by the decree of the Government of the RF dated December 8, 2011, No. 2227-r (2018). http://ac.gov.ru/ﬁles/attachment/4843.pdf. Accessed 05 Aug 2018 RIA Ranking: Ranking of socio-economic position of subjects of the RF – 2017 (2018). http:// www.riarating.ru/infograﬁka/20170530/630063754.html. Accessed 05 Aug 2018 Federal State Statistics Service of the RF: Regions of Russia. Socio-economic indicators (2018). http://www.gks.ru/wps/wcm/connect/rosstat_main/rosstat/ru/statistics/publications/catalog/ doc_1138623506156. Accessed 05 Aug 2018

Perspectives of Growth of Labor Eﬃciency in the Conditions of the Digital Economy Aleksei V. Bogoviz1 ✉ (

1

)

, Svetlana V. Lobova2 , and Julia V. Ragulina1

Federal State Budgetary Scientiﬁc Institution “Federal Research Center of Agrarian Economy and Social Development of Rural Areas – All Russian Research Institute of Agricultural Economics”, Moscow, Russia [email protected], [email protected] 2 Altai State University, Barnaul, Russia [email protected]

Abstract. The purpose of the work is to determine the current inﬂuence of the process of digitization of economy on labor eﬃciency in diﬀerent countries and to determine the perspectives of growth of labor eﬃciency in the conditions of the digital economy and to develop recommendations for activating this process. It is achieved with the help of regression and correlation analysis. The research is performed in two stages. At the ﬁrst stage, the research is performed by the example of modern Russia based on the 2012–2016 data. At that, the index of labor eﬃciency and growth of highly-eﬃciency jobs based on the data of Federal State Statistics Service is are calculated. Due to absence of oﬃcially calculated general index of the digital economy, the indicators of the digital economy that are found in the statistical bulletin of the Higher School of Economics are used. Emphasis in made on the indicators of digitization of entrepreneurship, as they are connected to labor eﬃciency. At the second stage, the research is conducted by the example of the countries of Europe based on the data of the OECD and Digital single market for 2016. As a result, it is concluded that a perspective methods of using the possibilities of the digital economy is provision of growth of labor eﬃciency, which stimulates the increase of population’s living standards. At present, we observe zero or negative inﬂuence of the process of digitization of entrepreneurship on growth of labor eﬃciency in diﬀerent countries, which is caused by incompletion of the transitional period from the post-industrial to the digital economy. In order to accelerate the process of transition to the digital economy and to maximize the probability of gaining the advantage that is related to growth of labor eﬃciency, the authors oﬀer recommendations for state regu‐ lation of this process and show a mechanism of growth of labor eﬃciency in the conditions of the digital economy. Keywords: Growth of labor eﬃciency · The digital economy · Digitization Digital competence · Competition as to the level of digitization

© Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 1208–1215, 2019. https://doi.org/10.1007/978-3-030-00102-5_127

Perspectives of Growth of Labor Eﬃciency

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Introduction

The most important task of the digital economy, as a new model of socio-economic development of modern economic systems, is increasing the living standards of people. However, the inﬂuence of the digital economy on these systems cannot be considered positive, and the set task is not achieved. Thus, on the one hand, under the inﬂuence of the tendency of digitization, conduct of economic activities are simpliﬁed (due to automatization), state services become more accessible (due to development of Egovernment), and possibilities for communication expand (due to electronic communi‐ cation). However, on the other hand, in the conditions of the digital economy, requirements that are set to a modern human – not only in the aspect of digital competence but also in the aspect of digital literacy of consumer – grow. Moreover, transition to using digital technologies in everyday and business life eliminates human’s participation from a lot of economic processes. Not all citizens of modern countries are able to quickly adapt to the current changes in the conditions of the digital economy – which leads to social dissatisfaction and opposition to distribution of digital technologies. Thus, the problem of search and scientiﬁc substantiation of the possibilities and perspectives of practical achievement of the main task of the digital economy – increase of living standards – becomes very topical. The working hypothesis of the research is the authors’ idea that a perspective means of solving this problem is using the possibil‐ ities of the digital economy for ensuring growth of labor eﬃciency. The purpose of the work is to determine the current inﬂuence of the process of digitization of economy on labor eﬃciency in countries of the world, to determine perspectives of growth of labor eﬃciency in the conditions of the digital economy, and to develop recommendations for activation of this process.

2

Materials and Methods

A theoretical basis of the research is materials of works of modern scholars on the issues of formation and development of the digital economy, as well as its inﬂuence on economic systems: (Bogoviz et al. 2017; Chakpitak et al. 2018; Cheng and Foley 2018; Goldstein 2017; Teoh and Mahmood 2017; Sukhodolov et al. 2018; Kravets et al. 2013; Kuznetsov et al. 2016; Popova et al. 2015; Przhedetskaya and Akopova 2016; Sibirskaya and Shestaeva 2016). The theoretical basis of the research includes the mate‐ rials of works of various authors on the issues of measuring and increasing labor eﬃ‐ ciency: (Diao et al. 2018; Djido and Shiferaw 2018; Elmawazini et al. 2018; Hecht 2018; Samargandi 2018; Bogoviz et al. 2018a, b; Bogoviz et al. 2018c; Popkova et al. 2017). On the whole, the problem of the research has been studied in a fragmentary manner, and, despite elaboration of the theory, methodology, and practice of the digital economy and labor eﬃciency, perspectives of growth of labor eﬃciency in the conditions of the digital economy are poorly studied and require further research.

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The oﬀered hypothesis is veriﬁed with application of the methods of regression and correlation analysis. The authors conduct automatized calculations in Microsoft Excel, aimed at determining dependence of labor eﬃciency on the level of development of the digital economy. At the ﬁrst stage, the research is conducted by the example of modern Russia based on the 2012–2016 data. At that, the index of labor eﬃciency and growth of highly-eﬃcient jobs based on the data of the Federal State Statistics Service are calculated. Due to absence of oﬃcially calculated general index of the digital economy, the indicators of the digital economy that are found in the statistical bulletin of the Higher School of Economics are used. Emphasis is made on the indicators of digitization of entrepreneurship, as they are connected to labor eﬃciency. The initial data are given in Table 1. Table 1. Dynamics of indicators of labor eﬃciency and indicators of the digital economy in Russia in 2012–2016. Indicators 2012 Usage of software in organizations for doing 49.9 business, % Usage of software in organizations for 50.1 conducting ﬁnancial payments in the online form, % Usage of software in organizations for solving 49.7 organizational, managerial, and economic tasks, % Usage of the Internet for sales, % 10.8 Usage of the Internet for purchases, % 13.8 Web-sites of organizations, % 39.6 Provision of mobile devices for employees for 28.5 access to the Internet, % Index of labor eﬃciency, % to the previous year 103.3 Growth of highly-eﬃciency jobs, % 6.9

2013 51.0

2014 51.9

2015 2016 52.8 54.0

51.6

52.5

53.2

54.7

50.4

51.3

52.4

53.3

11.3 14.3 40.3 26.9

11.9 15.1 41.0 32.4

12.4 15.9 42.2 35.1

12.6 16.7 43.0 37.0

102.2 4.5

100.7 −9.1

97.8 −4.8

99.8 6.9

Source: compiled by the authors based on: Higher School of Economics (2018), Federal State Statistics Service (2018).

At the second stage, the research is conducted by the example of countries of Europe based on the data of the OECD and Digital single market for 2016 (Table 2). Table 2. Values of the index of the digital economy and the level of labor eﬃciency in countries of Europe in 2016. 2016

Belgium

Estonia

Finland

Index of the digital economy, points

19.48

14.49

19.11

Germany 17.88

France 13.79

Greece 12

12.16

13.45

15.93

18.31

Labor eﬃciency, $

64.7

30.3

51.7

59.9

60

30.9

31.1

47.5

26.6

81.2

Source: compiled by the authors based on: OECD (2018), Digital single market (2018).

Hungary

Italy

Latvia

Luxembourg

Perspectives of Growth of Labor Eﬃciency

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Results

As a result of regression and correlation analysis at the ﬁrst stage (by the example of modern Russia), the following results were obtained (Table 3). Table 3. Dynamics of indicators of labor eﬃciency and indicators of the digital economy in Russia in 2012–2016. Independent variables

Usage of software in organizations for doing business, % Usage of software in organizations for conducting ﬁnancial payments in the online form, % Usage of software in organizations for solving organizational, managerial, and economic tasks, % Usage of the Internet for sales, % Usage of the Internet for purchases, % Web-sites of organizations, % Provision of mobile devices for employees for access to the Internet, %

Index of labor eﬃciency Regression* −1.10%

Growth of highlyeﬃcient jobs Correlation Regression Correlation 67.93% −0.77% 2.77%

−0.97%

62.00%

−0.71%

2.76%

−1.24%

71.64%

−0.83%

2.72%

−2.57% −1.52% −1.31% −0.41%

82.01% 69.59% 72.31% 68.73%

−3.28% −1.02% −0.75% −0.73%

11.20% 2.65% 1.98% 6.06%

*Regression – coeﬃcient b in the model of paired linear regression y = a + bx; correlation – coeﬃcient of correlation y and x, denoted as R2. Source: compiled by the authors.

The data of Table 1 show that formation of the digital economy in Russia leads to reduction of labor eﬃciency. Reduction of the values of the labor eﬃciency index is predetermined by the process of digitization of the Russian entrepreneurship (correlation constitutes 70.60%), while the negative growth of highly-eﬃcient jobs is not related to this process (correlation constitutes 4.31% on average). It may be caused by insuﬃcient development of the digital economy in Russia and foundation on separate indicators. For more precise veriﬁcation of the oﬀered hypoth‐ esis, let us pass to the second stage of conduct of regression and correlation analysis (by the example of countries of Europe). As a result of analysis, we obtained the regression value −0.08% and correlation value 0.02%. This means that growth of the digital economy index by 1 leads to reduction of labor eﬃciency in countries of Europe by 0.08% with correlation 0.02%. Therefore, it is possible to state that the digital economy does not stimulate growth of labor eﬃciency and may lead to reduction of labor eﬃciency in certain countries (e.g., Russia). The performed logical analysis showed that it could be caused by the necessity for employees of the companies, which transfer business processes into the digital form, to master new digital technologies – i.e., provision of digital competence.

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Before the competences of using new digital technologies are fully mastered and suﬃcient experience of their practical application is accumulated, the expected accel‐ eration is replaced by slowdown of business processes due to increased complexity of their implementation by employees. Due to this, zero or negative inﬂuence of the process of formation of the digital economy on labor eﬃciency is caused by the initial stage of this process. Future perspectives of growth of labor eﬃciency in the conditions of the digital economy are caused by the fact that due to transfer of a lot of business processes into the digital form and their partial or full automatization, their large acceleration is achieved, which allows reducing the number of used employees and reducing the load onto them (including the working time) with increase of the volume of production of goods and services. The authors oﬀer the following recommendations (for state regulators) for activation of this process. Firstly, it is necessary to provide normative and legal and information support, aimed at institutionalization of the process of digitization of entrepreneurship, demonstration of possibilities and perspectives of increase of labor eﬃciency in the conditions of the digital economy, and prioritization of obtaining this advantage. Secondly, it is expedient to stimulate digitization of entrepreneurship. Partial tran‐ sition to usage of digital technologies causes additional complexity for modern employees, as they have to diversify professional competences, both with traditional and digital technologies. Such stimulation may include credit, tax, and other support of companies that implement modernization on the basis of new digital technologies.

Purpose: provision of increase of population’s living standards in digital economy Implemented measures: normative and legal and information support; stimulation of digitization of business; Stage 1. State stimulation stimulation of employees’ mastering digital competences.

Stage 2. Digitization of entrepreneurship

Stage 3. Growth of labor efficiency

Implemented processes: digitization of business processes; mastering of digital competences employees.

by

Intermediary results: acceleration of business processes; reduction of load onto employees and reduction of their number with growth of production volume.

Result: competition of companies and employees as to the level of digitization

Result: formation of digital economy

Final result: large growth of labor efficiency at companies

Result: increase of accessibility of goods and services in economy, which ensures growth of real incomes of population

Fig. 1. The mechanism of growth of labor eﬃciency in the conditions of the digital economy. Source: compiled by the authors.

Perspectives of Growth of Labor Eﬃciency

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Thirdly, it is necessary to stimulate mastering of digital competences by modern employees in the labor market for their more successful employment and stimulation of competition according to the level of digital competence. Implementation of this measure may include provision of a possibility to undertake additional training for employees for development of digital competences on the basis of employment centers. Based on the above, the mechanism of growth of labor eﬃciency in the conditions of the digital economy is presented by the authors graphically in Fig. 1. As is seen from Fig. 1, growth of labor eﬃciency is achieved only at the ﬁnal stage of formation of the digital economy. This stimulates increase of accessibility of goods and services in economy with achievement of reduction of prices for them and increase of their quality, which ensures growth of real income of population – which is one of the key indicators of increasing the population’s living standards. The state has an important role in this process, as only achieving and supporting high level of competition of companies and employees as to the level of digitization can lead to advantages in growth of labor eﬃciency.

4

Conclusions

The results of the performed research conﬁrmed the oﬀered hypothesis and showed that a perspective means of using the possibilities of the digital economy is provision of growth of labor eﬃciency, which stimulates the increase of population’s living stand‐ ards. At present, the inﬂuence of the process of digitization of entrepreneurship on growth of labor eﬃciency is zero or negative, which is caused by incompletion of the transitional period from the post-industrial to the digital economy. For accelerating the process of transition to the digital economy and maximization of probability of gaining the advantage that is related to growth of labor eﬃciency, the work oﬀers authors’ recommendations for state regulation of this process, as well as the mechanism of growth of labor eﬃciency in the conditions of the digital economy. However, the possibilities of state regulators in the sphere of stimulating the compe‐ tition of companies and employees as to the level of digitization and eﬃciency of this process could vary in diﬀerent economic systems. That’s why the results of the performed research are limited by generalization of the authors’ conclusions and recom‐ mendations. For overcoming this limitation during further studies, it is recommended to pay attention to their adaptation to peculiarities of modern socio-economic systems. Acknowledgments. The reported research was funded by Russian Foundation for Basic Research and the government of the Altai region, Grant No. 18-410-220015.

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References Bogoviz, A.V., Lobova, S.V., Saveleva, N.A., Lysak, I.V., Makarenko, S.N.: Highly-eﬀective management of the process of innovations commercialization as a basis of development of modern human society. Advances in Intelligent Systems and Computing, vol. 622, pp. 298– 304 (2018a) Bogoviz, A.V., Ragulina, Y.V., Alekseev, A.N., Anichkin, E.S., Dobrosotsky, V.I.: Transformation of the role of human in the economic system in the conditions of knowledge economy creation. Advances in Intelligent Systems and Computing, vol. 622, pp. 673–680 (2018b) Bogoviz, A.V., Ragulina, Y.V., Alekseev, A.N., Lavrov, M.N., Kletskova, E.V.: Economic stimuli for creation of highly-eﬃcient jobs for a modern human. Advances in Intelligent Systems and Computing, vol. 622, pp. 624–630 (2018c) Bogoviz, A.V., Ragulina, Y.V., Komarova, A.V., Bolotin, A.V., Lobova, S.V.: Modernization of the approach to usage of region’s budget resources in the conditions of information economy development. Eur. Res. Stud. J. 20(3), 570–577 (2017) Chakpitak, N., Maneejuk, P., Chanaim, S., Sriboonchitta, S.: Thailand in the era of the digital economy: how does digital technology promote economic growth? Studies in Computational Intelligence, vol. 753, pp. 350–362 (2018) Cheng, M., Foley, C.: The sharing economy and digital discrimination: the case of Airbnb. Int. J. Hosp. Manag. 70, 95–98 (2018) Diao, X., Kweka, J., McMillan, M.: Small ﬁrms, structural change and labor productivity growth in Africa: evidence from Tanzania. World Dev. 105, 400–415 (2018) Digital single market: The digital economy & Society index (2018). https://digital-agenda-data.eu/ charts/desi-components#chart={“indicator”:“DESI”,“breakdown-group”:“DESI”,“unitmeasure”:“pc_DESI”,“time-period”:“2017”}. Accessed 07 Apr 2018 Djido, A.I., Shiferaw, B.A.: Patterns of labor productivity and income diversiﬁcation – empirical evidence from Uganda and Nigeria. World Dev. 105, 416–427 (2018) Elmawazini, K., Saleeby, E.G., Ibn el Farouk, A., AL-Naser, B.: Tripartite decomposition of labor productivity growth, FDI and human development: evidence from transition economies. Econ. Change Restruct. 51(2), 153–171 (2018) Goldstein, H.: Editorial: the digital economy act and statistical research. J. R. Stat. Soc. Ser. A Stat. Soc. 180(4), 945–946 (2017) Hecht, J.: Research and development and labour productivity: do high-tech ﬁrms exhibit labouror capital-saving technical change? Appl. Econ. 50(16), 1790–1811 (2018) Kravets, A.G., Gurtjakov, A.S., Darmanian, A.P.: Enterprise intellectual capital management by social learning environment implementation. World Appl. Sci. J. 23(7), 956–964 (2013) Kuznetsov, S.Y., Tereliansky, P.V., Shuvaev, A.V., Natsubize, A.S., Vasilyev, I.A.: Analysis of innovate solutions based on combinatorial approaches. ARPN J. Eng. Appl. Sci. 11(17), 10222–10230 (2016) OECD: Level of GDP per capita and productivity (2018). http://stats.oecd.org/Index.aspx? DataSetCode=PDB_LV. Accessed 07 Apr 2018 Popkova, E.G., Bogoviz, A.V., Lobova, S.V.: Vacuum in the structure of human capital: a view from the position of the theory of vacuum. In: Human Capital: Perspectives, Challenges and Future Directions, pp. 163–181. Nova Science Publishers, Inc., Hauppauge (2017) Popova, L., Litvinova, T., Ioda, E., Suleimanova, L., Chirkina, M.: Perspectives of the growth of economic security by clustering of small innovational enterprises. Eur. Res. Stud. J. 18(Special Issue), 163–172 (2015)

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Przhedetskaya, N.V., Akopova, E.S.: Imperative of state in the process of establishment of innovational economy in the globalizing world. Eur. Res. Stud. 19(2), 79–85 (2016) Samargandi, N.: Determinants of labor productivity in MENA countries. Emerg. Mark. Finan. Trade 54(5), 1063–1081 (2018) Sibirskaya, E.V., Shestaeva, K.A.: The contents of innovative in the Russian Economy. Knowledge - Economy - Society. Contemporary aspects of economic transformation. Edited by Pawel Lula, Tomast Pojer, pp. 27–37. Cracov Uniwersity of Economics, Krakow, Poland (2016) Sukhodolov, A.P., Popkova, E.G., Kuzlaeva, I.M.: Internet economy: existence from the point of view of micro-economic aspect. Studies in Computational Intelligence, vol. 714, pp. 11–21 (2018) Teoh, C.S., Mahmood, A.K.: National cyber security strategies for the digital economy. J. Theor. Appl. Inf. Technol. 95(23), 6510–6522 (2017) Higher School of Economics: The digital economy: short statistical bulletin (2018). https:// www.hse.ru/data/2018/02/19/1165383719/ice2018kr.pdf. Accessed 07 Apr 2018 Federal State Statistics Service: Indicators for monitoring the evaluation of eﬀectiveness of activities of subjects of the RF (2018). http://www.gks.ru/free_doc/new_site/rosstat/pokmonitor/pok-monitor.html. Accessed 07 Apr 2018

Shift of the Global Investment Flows in the Conditions of Formation of Digital Economy Aleksei V. Bogoviz1 ✉ (

1

)

, Svetlana V. Lobova2 , and Julia V. Ragulina1

Federal State Budgetary Scientiﬁc Institution “Federal Research Center of Agrarian Economy and Social Development of Rural Areas – All Russian Research Institute of Agricultural Economics”, Moscow, Russia [email protected], [email protected] 2 Altai State University, Barnaul, Russia [email protected]

Abstract. The purpose of the work is to study the process of shift of the global investment ﬂows in the conditions of the digital economy formation and to develop the concept of attraction of direct foreign investments into Russia’s economy in the conditions of the digital economy formation. The authors use the methods of regression and correlation analysis. The authors determine the dependence of the volume of direct foreign investments on the level of the digital economy development (number of strategies of digital development) in 2010– 2017. The research objects are aggregated economic systems in modern global economy, classiﬁed according to the UNCTAD. It is concluded that the level of development of digital technologies is an important factor that inﬂuences the movement of global investment ﬂows. Under the inﬂuence of this factor, there are such tendencies of shift of the global investment ﬂows as large increase of the volume of direct foreign investments into the spheres of information and tele‐ communication, change of the direction of the global investment ﬂows, which consists in their re-orientation from the countries with developed economy to the countries with developing economy, and increase of the inﬂuence of the factor of development of digital technologies on movement of the global investment ﬂows. The authors determine characteristics of modern Russia from the positions of the global investment ﬂows in the conditions of the digital economy formation, which predetermined low attractiveness of the Russian economy for international investors. For solving this problem, the authors oﬀer a concept of attraction of direct foreign investments into the Russian economy in the conditions of the digital economy formation. Keywords: Shift of the global investment ﬂows · Digital economy Modern Russia

1

Introduction

Investments are one of the most important forms of resources and an inseparable compo‐ nent of successful socio-economic development of economic systems. The larger the volume of incoming investment ﬂows into the country’s economy, the wider its © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 1216–1223, 2019. https://doi.org/10.1007/978-3-030-00102-5_128

Shift of the Global Investment Flows

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possibilities for implementing innovational projects, development of domestic entre‐ preneurship, increase of global competitiveness, and increase of economic growth rates. That’s why countries of the world compete for attraction of direct foreign investments. In this process, an important role belongs not only to traditional characteristics of the economic system – i.e., high proﬁtability with acceptable risk level – but also to its correspondence to actual tendencies of development of the global economy at the current stage, which ensures adaptation to interests and requirements of international investors and supporting investment attractiveness of the country as a high level. Modern investors are selective; they think strategically and show social responsi‐ bility, preferring the projects that have attractive quantitative and qualitative character‐ istics – which means that they stimulate innovational development and social progress of economic systems in the long-term. Thus, the problem of determining the logic and tendencies of movement of the global investment ﬂows becomes very topical. The authors oﬀer a hypothesis that an important factor of movement of the global investment ﬂows is digital economy. The purpose of the work is to study the process of shift of the global investment ﬂows in the conditions of the digital economy formation and to develop a concept of attraction of direct foreign investments into Russia’s economy in the conditions of the digital economy formation.

2

Materials and Method

New tendencies of movement of the global investment flows in the global economic system are viewed in the works of such authors as Bathelt and Li (2014), Giusep‐ pina (2016), and Hlaing and Kakinaka (2018). Investment characteristics of the digital economy, as well as peculiarities of its formation and development in the modern economic systems, are reflected in the works of such scholars as Bogoviz et al. (2017a, 2017b), Chakpitak et al. (2018), Cheng and Foley (2018), Goldstein (2017), Teoh and Mahmood (2017), Sukhodolov et al. (2018), Kravets et al. (2013), Kuznetsov et al. (2016), Popova et al. (2015), Przhedetskaya and Akopova (2016), Sibirskaya and Shestaeva (2016), Bogoviz et al. (2018a, 2018b), and Ragulina et al. (2018). Overview of scientiﬁc literature on the selected topic showed that despite elaboration of the theoretical aspects and statistical data that characterize movement of the global investment ﬂows and the process of formation and development of the digital economy, the issues of investing and formation of the digital economy are usually studied sepa‐ rately. Due to this, the issue of shift of the global investment ﬂows in the conditions of the digital economy formation is poorly studied and requires further research. This issue is studied here with the help of the methods of regression and correlation analysis. The authors determine dependence of the volume of direct foreign investments on the level of development of the digital economy (number of strategies of digital development) in 2010–2017. The research objects are aggregated economic systems in the modern global economy, classiﬁed according to the United Nations Conference on Trade and Development (UNCTAD). The initial data are given in Table 1.

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Table 1. Indicators of development of the digital economy and the volume of direct foreign investments in aggregated economic systems in the modern global economy in 2017. Aggregated economic system Number of strategies of digital in the modern global economy development in the system Countries with developed 32 economy Countries with developing 59 economy Countries of Africa 25 Countries of Asia 16 Countries of Latin America 18 and the Caribbean Countries with transitional 11 economy Global economy 102

Volume of direct foreign investments, $ billion 1,050 740 65 515 130 85 1,870

Source: Compiled by the authors based on: UNCTAD (2018b).

3

Results

As a result of the research, the authors determined the following tendencies of shift of the global investment ﬂows in the conditions of the digital economy formation, which are clearly visible in 2018. The ﬁrst tendency is large increase of the volume of direct foreign investments in the sphere of information and telecommunications. While in 2010 these spheres were not distinguished and were viewed in the sphere that uniﬁed transport, storage and communications, the share of which constituted 6.4% in the general structure of direct foreign investments (UNCTAD 2018c), in 2017 these spheres were distinguished sepa‐ rately, and their share constituted 55% of investments in developed countries and 50% in countries with transitional economy (UNCTAD 2018a). The second tendency is change of direction of the global investment ﬂows, which consists in their re-orientation from countries with developed economy to countries with developing economy. While in 2015 the share of developed countries in the structure of the global direct foreign investments constituted 61.54%, and developing countries – 35.90%, in 2017 the gap between them became minimal, with their shares constituting 46.67% and 43.33%, accordingly (UNCTAD 2018a). The third tendency consists in growth of the inﬂuence of the factor of development of digital technologies on the movement of global investment ﬂows. While in 2010 this factor was not taken into account due to insigniﬁcance of its inﬂuence, in 2017 it was distinguished as the most important factor of attraction of direct foreign investments into economy (this factor is given as technological changes including digital economy). The recent UNCTAD report on global investments (for 2017) head the title “invest‐ ment and digital economy” and contained a part devoted to peculiarities of investing in the conditions of the digital economy. This emphasizes the growing signiﬁcance and priority of modernization of modern economic systems on the basis of digital

Shift of the Global Investment Flows

1219

Volume of direct foriegn investments

technologies for attracting direct foreign investments. This fact is conﬁrmed by the results of the performed regression and correlation analysis (Fig. 1). y = 17.904x - 36.264 R² = 0.7818

2000 1500 1000 500 0 0

20

40 60 80 Number of strategies of digital development

100

120

Fig. 1. Regression curve that reﬂects dependence of the volume of direct foreign investments into aggregated economic system in the modern global economy on the number of strategies of digital development that are adopted and implemented in the system in 2017. Source: Compiled by the authors.

As is seen from Fig. 1, increase of the number of strategies of digital development in aggregated economic system in the modern global economy by 1, the volume of direct foreign investments in this system grows by $17.904 billion. Correlation of indicators constitutes 78.18%. This shows strong direct connection between these indicators and large dependence of the volume of direct foreign investments in aggregated economic system in the modern global economy on the level of digital development of this system. Thus, global investment ﬂows shift in favor of the economic systems that show visible progress in formation of the digital economy, oﬀer and implement perspective innovational projects in the sphere of information and telecommunications. As a result of studying statistical data of the Federal State Statistics Service, we determined the following characteristics of modern Russia from the positions of global investment ﬂows in the conditions of the digital economy formation: • reduction of the volume of global investment ﬂows in economy: in 2017 ($26,951 million) by 34.45%, as compared to 2010 ($41,116 million) (OECD 2018). • low share of investments in the telecommunication sphere: in 2017, they were assigned to such direction of investments into ﬁxed capital as modernization, and its share constituted 16.3% in the total structure of investments into the Russian economy (Federal State Statistics Service 2018). These characteristics show that economic system of modern Russia does not fully conform to actual criteria of investment attractiveness for international investors, as it does not possess domination in formation of the digital economy as compared to other economic systems. That was probably the reason for Russia’s not being included into the list of countries with high index of direct foreign investments in 2017. We think that for gaining sustainable competitive advantages in the innovational sphere and increasing the investment attractiveness, modern Russia has to follow the developed authors’ concept of attraction of direct foreign investments in the conditions of the digital economy formation (Fig. 1).

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As is seen from Fig. 2, for increasing the investment attractiveness of modern Russia within the oﬀered concept, it is oﬀered to implement a complex of measures for forma‐ tion and development of the digital economy. One of the recommended measures is modernization of the system of statistical accounting of economic development by starting and supporting the process of statistical accounting of progress in formation of the digital economy in Russia. This measure is to ensure full-scale information support for international investors on the peculiarities of digital development of modern Russia’s economy. Goal: increase of investment attractiveness of modern Russia’s economy

starting and supporting the process of statistical accounting of progress in formation of the digital economy in Russia

creating favorable conditions for development for public-private partnership in the spheres of digital technologies

Modernization of the system of statistical accounting of economic development

Activation of innovational development of the spheres of digital technologies

Complex of implemented measures Promotion of State support for Russia’s digital investment economy at the projects in the international sphere of digital level technologies

Stimulation of R&D in the sphere of digital technologies for technological support for digital economy

national territorial marketing of Russia as a country with developing and perspective digital economy

Result: creation of perspective innovational projects in the sphere of digital technologies, which are peculiar for low risk and high profitability

Fig. 2. The concept of attraction of direct foreign investments into Russia’s economy in the conditions of the digital economy formation. Source: Compiled by the authors.

Another recommended measure is activation of innovational development of the spheres of digital technologies by stimulation of R&D in the sphere of digital technol‐ ogies for technological support of the digital economy (including tax & credit stimuli for companies and state co-ﬁnancing of projects). This measure is aimed at provision of scientiﬁc and technological platform for further implementation of investment projects (with attraction of direct foreign investments) for implementing the leading digital tech‐ nologies and manufacture of new digital products. Another recommended measure is state support for investment projects in the sphere of digital technologies, by creating and supporting favorable conditions for development of public-private partnership in the spheres of digital technologies. Implementation of this measure will allow reducing the risk component of investing into innovational projects in the spheres of digital technologies due to participation of state as a guarantor of stability and return of investments.

Shift of the Global Investment Flows

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One of the measures is promotion of Russia’s digital economy at the international level by implementation of national territorial marketing of Russia as a country with developing and perspective digital economy. With the help of this measure, Russia’s digital economy will attract attention of international investors, which will allow including it into international rankings of the countries characterized by high investment attractiveness (e.g., ranking of the countries with high index of conﬁdence of direct foreign investments). As a result, creation of perspective innovational projects in the sphere of digital technologies, characterized by reduced risk and high proﬁtability, is expected. There‐ fore, the developed concept allows combining the measures for improvement of tradi‐ tional investment characteristics of economic system and measures for bringing it in accordance with actual tendencies of development of the global economy at the current stage, ensuring its successful adaptation to interests and requirements of international investors and supporting the country’s investment attractiveness at the high level.

4

Conclusions

Thus, it is possible to conclude that digital economy is one of the largest and most perspective global investment projects of modern times. The level of development of digital technologies is an important factor that inﬂuences the movement of global investment ﬂows. Under the inﬂuence of this factor, there are such tendencies of the shift of global investment ﬂows as large increase of the volume of direct foreign investments in the sphere of information and telecommunications, change of direction of global investment ﬂows, which consists in their re-orientation from countries with developed economy to countries with developing economy, and growth of inﬂuence of the factor of develop‐ ment of digital technologies on movement of global investment ﬂows. In the course of the research, the authors determined the characteristics of modern Russia from the positions of global investment ﬂows in the conditions of the digital economy formation: reduction of the volume of global investment ﬂows into economy and low share of investments into the telecommunication sphere, which lead to low attractiveness of the Russian economy for international investors. For solving this problem, the authors oﬀer a concept for attraction of direct foreign investments into Russia’s economy in the conditions of the digital economy formation, which envisages implementation of such measures as modernization of the system of statistical accounting of economic development, activation of innovational development of the spheres of digital technologies, promotion of the digital economy of Russia at the international level, and state support for investment projects in the sphere of digital technologies. Following this concept will allow ensuring the shift of global investment ﬂows in favor of the digital economy of modern Russia.

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References Bathelt, H., Li, P.F.: Global cluster networks-foreign direct investment ﬂows from Canada to China. J. Econ. Geogr. 14(1), 45–71 (2014) Bogoviz, A.V., Ragulina, Y.V., Komarova, A.V., Bolotin, A.V., Lobova, S.V.: Modernization of the approach to usage of region’s budget resources in the conditions of information economy development. Eur. Res. Stud. J. 20(3), 570–577 (2017a) Bogoviz, A.V., Ragulina, Y.V., Kutukova, E.S.: Ways to improve the economic eﬃciency of investment policy and their economic justiﬁcation. Int. J. Appl. Bus. Econ. Res. 15(11), 275– 285 (2017b) Bogoviz, A.V., Ragulina, Y.V., Sirotkina, N.V.: Systemic contradictions in development of modern Russia’s industry in the conditions of establishment of knowledge economy. Adv. Intell. Syst. Comput. 622, 597–602 (2018a) Bogoviz, A.V., Sozinova, A.A., Ostrovskaya, V.V.: Approaches to managing economic growth of socio-economic systems. Stud. Syst. Decis. Control 135, 131–137 (2018b) Chakpitak, N., Maneejuk, P., Chanaim, S., Sriboonchitta, S.: Thailand in the era of digital economy: how does digital technology promote economic growth? Stud. Comput. Intell. 753, 350–362 (2018) Cheng, M., Foley, C.: The sharing economy and digital discrimination: the case of Airbnb. Int. J. Hosp. Manag. 70, 95–98 (2018) Giuseppina, T.: Foreign direct investment ﬂows and the global economic crisis. Corp. Ownersh. Control 13(4), 266–274 (2016) Goldstein, H.: Editorial: the digital economy act and statistical research. J. R. Stat. Soc. Ser. A Stat. Soc. 180(4), 945–946 (2017) Hlaing, S.W., Kakinaka, M.: Global uncertainty and capital ﬂows: Any diﬀerence between foreign direct investment and portfolio investment? Appl. Econ. Lett. 2(1), 1–8 (2018) Kravets, A.G., Gurtjakov, A.S., Darmanian, A.P.: Enterprise intellectual capital management by social learning environment implementation. World Appl. Sci. J. 23(7), 956–964 (2013) Kuznetsov, S.Y., Tereliansky, P.V., Shuvaev, A.V., Natsubize, A.S., Vasilyev, I.A.: Analysis of innovate solutions based on combinatorial approaches. ARPN J. Eng. Appl. Sci. 11(17), 10222–10230 (2016) OECD: FSI Flows: Russia (2018). https://data.oecd.org/fdi/fdi-ﬂows.htm. Accessed 04 Sep 2018 Popova, L., Litvinova, T., Ioda, E., Suleimanova, L., Chirkina, M.: Perspectives of the growth of economic security by clustering of small innovational enterprises. Eur. Res. Stud. J. 18(Special Issue), 163–172 (2015) Przhedetskaya, N.V., Akopova, E.S.: Imperative of state in the process of establishment of innovational economy in the globalizing world. Eur. Res. Stud. 19(2), 79–85 (2016) Ragulina, Y.V., Bogoviz, A.V., Alekseev, A.N.: Modeling the management of innovational processes in regional economy. Adv. Intell. Syst. Comput. 622, 568–573 (2018) Sibirskaya, E.V., Shestaeva, K.A.: The contents of innovative in the Russian Economy. In: Lula, P., Pojer, T. (eds.) KNOWLEDGE-ECONOMY-SOCIETY. Contemporary Aspects of Economic Transformation, pp. 27–37. Cracow University of Economics, Krakow (2016) Sukhodolov, A.P., Popkova, E.G., Kuzlaeva, I.M.: Internet economy: existence from the point of view of micro-economic aspect. Stud. Comput. Intell. 714, 11–21 (2018) Teoh, C.S., Mahmood, A.K.: National cyber security strategies for digital economy. J. Theor. Appl. Inf. Technol. 95(23), 6510–6522 (2017) Federal State Statistics Service: Russia in Numbers: Short Statistical Bulletin (2018). http:// www.gks.ru/free_doc/doc_2017/rusﬁg/rus17.pdf. Accessed 04 Sep 2018

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UNCTAD: Investment Trends Monitor: Global FDI Flows Slipped Further in 2017 (2018a). http:// unctad.org/en/PublicationsLibrary/diaeia2018d1_en.pdf. Accessed 04 Sep 2018 UNCTAD: World Investment Report: Investment and the Digital Economy 2017 (2018b). http:// unctad.org/en/PublicationsLibrary/wir2017_en.pdf. Accessed 04 Sep 2018 UNCTAD: World Investment Report: Investment in Low-Carbon Economy (2018c). http:// unctad.org/en/Docs/wir2010_en.pdf. Accessed 04 Sep 2018

The Cost and Value of Human Capital in the Modern Digital Economy Aleksei V. Bogoviz1 ✉ (

1

)

, Svetlana V. Lobova2 , and Julia V. Ragulina1

Federal State Budgetary Scientiﬁc Institution “Federal Research Center of Agrarian Economy and Social Development of Rural Areas – All Russian Research Institute of Agricultural Economics”, Moscow, Russia [email protected], [email protected] 2 Altai State University, Barnaul, Russia [email protected]

Abstract. The purpose of the work is to determine the current cost and value of human capital in modern Russia and to develop recommendations for increasing them in the interests of quick formation of the digital economy. For that, the authors use the methods of regression and correlation analysis. As a result, it is concluded that low level and instability of development of human capital in modern Russia, as well as absence of entrepreneurial culture of highly-eﬀective usage of human capital, lead to its low cost and value, which slows down the process of formation of the digital economy. This is a typical “market failure”, which could be overcome with targeted state regulation. The authors present the algorithm of increasing the cost and value of human capital in Russia in the inter‐ ests of quick formation of the digital economy. This algorithm is a succession of four stages, which reﬂect the logic of natural course of the process of digital development of entrepreneurship with the usage of human capital. Also, authors’ recommendations for successful implementation of measures at all stages of this algorithm are oﬀered. The performed research contributes into solving the global problem of disproportions of the modern global economy by leveling develop‐ ment of countries of the world. Keywords: Cost and value of human capital · Digital economy Modern Russia

1

Introduction

The digital economy is the key landmark of development of modern economic systems. Its conceptual provisions are based on experience of the leading developed countries (countries of the OECD) and are brought down to the key role and high value of human capital for formation of the digital economy. Evolutional direction of the digital economy, which is the highest (at present) level of development of economic systems, predetermines the necessity for a certain base, which is prepared in the conditions of the post-industrial economy and is necessary for successful formation of the digital economy.

© Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 1224–1230, 2019. https://doi.org/10.1007/978-3-030-00102-5_129

The Cost and Value of Human Capital in the Modern Digital Economy

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While in developed countries this base is already formed, in developing countries and countries with transitional economy – e.g., Russia – this base could be absent or be insuﬃciently strong for formation of the digital economy, slowing down this process and stimulating further increase of diﬀerentiation of developed and developing coun‐ tries, which is one of the most important global problems of modern times. In addition to this, unlike the developed countries, which have been forming the digital economy over a certain period, Russia adopted the national program “The digital economy of the RF” only on July 28, 2017, which does not allow expecting cardinal changes and visible results of implementation of this program. The working hypothesis of the research consists in the fact that in modern Russia digital economy is just forming, and incompletion of the processes of socio-economic transformations of the Russian economic system leads to insuﬃciently high cost and value of human capital, which hinders its development and opening of its potential. The purpose of the work is to determine the current cost and value of human capital in modern Russia and to develop recommendations for increasing them in the interests of quick formation of the digital economy.

2

Materials and Method

Foundations of the concept of the digital economy, which emphasize high cost and value of human capital in the conditions of the digital economy, are given in the works of such scholars as Boojihawon and Ngoasong (2018), Curran (2018), Elder-Vass (2018), Martin-Shields and Bodanac (2018), Popkova et al. (2017a), Sandeep and Ravishankar (2018), Veselovsky et al. (2018a, b), Bogoviz et al. (2018a, b, c), and Popkova et al. (2017b). At that, practical aspects of formation of the digital economy and real (factual) cost and value of human capital in the modern digital economy – especially in developing countries – are studied insuﬃciently and require further scientiﬁc elaboration. For that, this work uses the methods of regression and correlation analysis, with the help of which the authors study the following dependencies: – dependence of the cost of human capital, which indicator is average accrued wages of employees according to the Federal State Statistics Service, on the level of devel‐ opment of the digital economy, which indicator is the corresponding index according to the IMD World Competitiveness Center; – dependence of development of the digital economy, which indicator is the corre‐ sponding index, GDP per capita according to the IMF, and the index of global competitiveness of economy according to the World Economic Forum, on the level of development of human capital, which indicators are the index of human develop‐ ment according to the United Nations Development Programme, and the education index (5th pillar: Higher education and training), index of labor market eﬃciency (7th pillar: Labor market eﬃciency), and innovations index (12th pillar: Innovation) according to the World Economic Forum.

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Dynamics of values of the above indicators in 2013–2017 in Russia are shown in Table 1. Table 1. Dynamics of the values of indicators development of human capital and the digital economy in Russia in 2013–2017. Indicator Average accrued wages of employees, RUB Index of human development, points 5th pillar: Higher education and training 7th pillar: Labor market eﬃciency 12th pillar: Innovation GDP per capita, $ Index of global competitiveness, points (position) Index of the digital economy, points

2013 28,702

2014 31,572.2

2015 32,911

2016 36,202.1

2017 38,609

0.801

0.856

0.892

0.804

0.798

4.7

5.0

5.0

5.1

5.1

4.3

4.4

4.4

4.4

4.3

3.1 3.3 3.3 15,558.802 14,388.004 9,521.081 4.2 (64) 4.4 (53) 4.4 (45)

3.4 8,928.697 4.5 (43)

3.5 10,885.484 4.6 (38)

46

40

42

42

41

Source: compiled by the authors based on: Federal State Statistics Service (2018), United Nations Development Programme (2018), IMD World Competitiveness Center (2018), World Economic Forum (2018), International Monetary Fund (2018).

3

Results

Average wages

The results of the performed analysis are reﬂected by regression curves in Figs. 1 and 2. 60000 40000 20000 0 38

y = -1159x + 82508 R² = 0.4623 40 42 44 46 Digital economy index

48

Fig. 1. Regression curve that reﬂects dependence of the cost of human capital on the level of development of the digital economy in Russia. Source: compiled by the authors.

4.6

4.8 5 Education index

5.2

y = -13894x + 81050 R² = 0.5943 15000

GDP per capita

GDP per capita

20000

10000 5000 0 4.6

4.8 5 Education index

5.2

Digital economy index

y = -12.778x + 105.83 R² = 0.8478

47 46 45 44 43 42 41 40 39

47 46 45 44 y = -30x + 173 R² = 0.5192 43 42 41 40 39 4.25 4.3 4.35 4.4 4.45 Index of labor market efficiency 20000 15000

GDP per capita

47 46 45 44 43 42 41 40 39

Digital economy index

Digital economy index

The Cost and Value of Human Capital in the Modern Digital Economy

15000

0 4.25 4.3 4.35 4.4 4.45 Index of labor market efficemnc

0

10000 y = -22762x + 111099 5000 R² = 0.1772

1227

y = -11.591x + 80.682 R² = 0.5684

3

3.2 3.4 Innovations index

3.6

20000

10000 y = -13948x + 58164 5000 R² = 0.488

3

3.2 3.4 Innovations index

3.6

Fig. 2. Regression curve that reﬂects the value of human capital in the conditions of the digital economy in Russia. Source: compiled by the authors.

Based on the data from Table 1 and Figs. 1 and 2, it is possible to conclude the following. Firstly, the cost of human capital in modern Russia is rather low – average level of wages in 2017 constituted RUB 38,609 ($622). According to the ILO, average wages in the UK are 2,202 pounds ($2,972), and in the USA - $3,746 (ILO 2016). In addition to this, the cost of human capital in Russia decreases with development of the digital economy (Fig. 1). Thus, growth of the value of the digital economy index by 1 point leads to reduction of the level of average wages by RUB 1,159 (correlation 46.23). Secondly, the value of human capital in the conditions of the digital economy in Russia is low, and its development performed the reverse eﬀect on this process, slowing down the rate of formation of the digital economy and economic growth and reducing the level of global competitiveness of economy, which is shown by reverse dependencies in Fig. 2. It is probably predetermined by low capacity of human capital in the Russian entrepreneurship and its foundation on other forms of capital – material and ﬁnancial. Thirdly, the process of human development in Russia is unstable, which is shown by high variation of the corresponding index (Table 1). This leads to ﬂuctuations in the level of development of the digital economy – which does not allow achieving sustain‐ able results. Therefore, low cost and value of human capital in modern Russia are a serious problem, as they are caused by insuﬃcient development of the digital economy (the initial stage of its formation) and hinder its formation, thus forming a closed cycle, which leads to increase of Russia’s underrun from developed countries as to the level and rate of formation of the digital economy, economic growth, and global competitiveness. In order to solve this problem, it is necessary to raise the cost and value of human capital in modern Russia (to the level that could be compared to developed countries), which is shown by the following algorithm (Fig. 3).

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Stage 1. Provision of sustainable and intensive development of uman capital Stage 2. Stimulation of growth of the value of human capital

Stage 3. Stimulation of highly-effective usage of human capital for raising its value in entrepreneurship and economy

Stage 4. Further development of human capital, growth of its cost, and increase of its value *quick formation of the digital economy

*growth of global competitiveness of entrepreneurship and Results economy

*acceleration of rate of economicg

Fig. 3. Algorithm of increase of cost and value of human capital in Russia for quick formation of the digital economy. Source: compiled by the authors.

As is seen from Fig. 3, the developed algorithm includes four stages. At the ﬁrst stage, sustainable and intensive development of human capital is ensured. For that, it is recommended to increase the volume of state order for provision of services in univer‐ sities in higher education and training of specialists in the sphere of digital technologies, as well as optimization of work of the labor market on the basis of digital technologies by digital modernization of employment bureau’s activities. At the second stage, growth of the cost of human capital is stimulated. For that, it is recommended to establish higher lower limits of wages and adoption of norms of labor payment depending on employees’ qualiﬁcation. At the third stage, highly-eﬀective usage of human capital for increasing its value in entrepreneurship and economy is stimulated. For that, it is recommended to provide stimuli (e.g., tax and credit prefer‐ ences, etc.) for manifestation of high innovational activity by companies, and to establish development and implementation of leading digital technologies as a top-priority direc‐ tion of innovational activity of companies. At the fourth stage, under the inﬂuence of the market mechanism (without targeted state regulation), further development of human capital, growth of its cost, and increase of its value take place. As a result, this stimulates quick formation of the digital economy, acceleration of economic growth rate, and growth of global competitiveness of entre‐ preneurship and Russia’s economy

4

Conclusions

Concluding the above, it is possible to state that the oﬀered hypothesis is proved; it is substantiated that low level and instability of development of human capital in modern Russia, as well as absence of entrepreneurial culture of highly-eﬀective usage of human capital lead to its low cost and value – which slows down the process of the digital economy formation. It is a typical “market failure”, which could be overcome with targeted state regulation.

The Cost and Value of Human Capital in the Modern Digital Economy

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For that, the authors’ algorithm of increasing the cost and value of human capital in Russia for quick formation of the digital economy is presented. This algorithm is a sequence of four stages, which reﬂect the logic of the process of digital development of entrepreneurship with the use of human capital. Also, authors’ recommendations are given for successful implementation of measures at all stages of this algorithm. The developed algorithm possesses the following advantages: – minimum level of state interference with the action of market mechanism during formation of the digital economy in Russia: this interference is necessary only at initial three stages, and starting from the fourth stage, market self-regulation of the process of development of human capital and the digital economy is achieved; – cyclic character of the algorithm, which maximizes positive eﬀects: the stages of the algorithm logically transform into one another, and its cyclicity is seen in the longterm – due to which development and optimization of usage of human capital will stimulate larger increase of its cost and value; – complex nature of gained positive eﬀects: in addition to quick formation of the digital economy, acceleration of the rate of economic growth and increase of the level of economy’s global competitiveness will be reached. Practical implementation of the oﬀered recommendations and observation of the succession of stages of the oﬀered algorithm will allow (by 2024) overcoming the current Russia’s underrun from the leading developed countries in the aspect of the level of development of the digital economy. This predetermines the contribution of the performed research into solving the global problem of disproportions of the modern global economy by leveling development of countries of the world.

References Bogoviz, A.V., Lobova, S.V., Saveleva, N.A., Lysak, I.V., Makarenko, S.N.: Highly-eﬀective management of the process of innovations commercialization as a basis of development of modern human society. Adv. Intell. Syst. Comput. 622, 298–304 (2018a) Bogoviz, A.V., Ragulina, Y.V., Alekseev, A.N., Anichkin, E.S., Dobrosotsky, V.I.: Transformation of the role of human in the economic system in the conditions of knowledge economy creation. Adv. Intell. Syst. Comput. 622, 673–680 (2018b) Bogoviz, A.V., Ragulina, Y.V., Alekseev, A.N., Lavrov, M.N., Kletskova, E.V.: Economic stimuli for creation of highly-eﬃcient jobs for a modern human. Adv. Intell. Syst. Comput. 622, 624–630 (2018c) Boojihawon, D.K., Ngoasong, Z.M.: Emerging digital business models in developing economies: the case of Cameroon. Strateg. Change 27(2), 129–137 (2018) Curran, D.: Risk, innovation, and democracy in the digital economy. Eur. J. Soc. Theory 21(2), 207–226 (2018) Elder-Vass, D.: Lifeworld and systems in the digital economy. Eur. J. Soc. Theory 21(2), 227– 244 (2018) IMD World Competitiveness Center: IMD World Digital Competitiveness Ranking 2017 (2018). https://www.imd.org/wcc/world-competitiveness-center-rankings/world-digital-competitivenessrankings-2017/. Accessed 11 May 2018

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International Monetary Fund: Dynamics of Russia’s GDP in constant and current prices in 2013– 2017 (2018). http://www.imf.org/external/pubs/ft/weo/2017/01/weodata/weoselgr.aspx. Accessed 11 May 2018 Martin-Shields, C.P., Bodanac, N.: Peacekeeping’s digital economy: the role of communication technologies in post-conﬂict economic growth. Int. Peacekeep. 25(3), 420–445 (2018) Popkova, E.G., Bogoviz, A.V., Lobova, S.V.: Vacuum in the structure of human capital: a view from the position of the theory of vacuum. In: Lawrence, M., Murray, F. (eds.) Human Capital: Perspectives, Challenges and Future Directions, pp. 163–181. Nova Science Publishers, Inc., New York (2017a) Popkova, E.G., Morozova, I.A., Litvinova, T.N.: New challenges for human capital from the positions of its infrastructural role in the system of entrepreneurship. In: Lawrence, M., Murray, F. (eds.) Human Capital: Perspectives, Challenges and Future Directions, pp. 257–275. Nova Science Publishers Inc., New York (2017b) Sandeep, M.S., Ravishankar, M.N.: Sociocultural transitions and developmental impacts in the digital economy of impact sourcing. Inf. Syst. J. 28(3), 563–586 (2018) United Nations Development Programme: Human Development Indicators: Russian Federation (2018). http://hdr.undp.org/en/countries/proﬁles/RUS#. Accessed 11 May 2018 Veselovsky, M.Y., Izmailova, M.A., Bogoviz, A.V., Lobova, S.V., Ragulina, Y.V.: System approach to achieving new quality of corporate governance in the context of innovation development. Qual. Access Success 19(163), 30–36 (2018a) Veselovsky, M.Y., Pogodina, T.V., Ilyukhina, R.V., Sigunova, T.A., Kuzovleva, N.F.: Financial and economic mechanisms of promoting innovative activity in the context of the digital economy formation. Entrep. Sustain. Issues 5(3), 672–681 (2018b) World Economic Forum: The Global Competitiveness Report 2017–2018 (2018). https:// www.weforum.org/reports/the-global-competitiveness-report-2017-2018. Accessed 11 May 2018 International Labor Organization: Wages in the world in 2016–2017. Inequality in wages at companies (2018). http://www.ilo.org/wcmsp5/groups/public/—dgreports/—dcomm/—publ/ documents/publication/wcms_544096.pdf. Accessed 11 May 2018 Government of the RF: The program “The digital economy of the RF”, adopted by the Decree dated July 28, 2017, No. 1632-r (2018). http://static.government.ru/media/ﬁles/ 9gFM4FHj4PsB79I5v7yLVuPgu4bvR7M0.pdf. Accessed 11 May 2018 Federal State Statistics Service: Average accrued wages of employees as to the level of education (2018). http://www.gks.ru/wps/wcm/connect/rosstat_main/rosstat/ru/statistics/wages/ labour_costs/#. Accessed 11 May 2018

Distortions in the Theory of Costs in the Conditions of Digital Economy Aleksei V. Bogoviz1 ✉ (

1

)

, Svetlana V. Lobova2 , and Julia V. Ragulina1

Federal State Budgetary Scientiﬁc Institution “Federal Research Center of Agrarian Economy and Social Development of Rural Areas – All Russian Research Institute of Agricultural Economics”, Moscow, Russia [email protected], [email protected] 2 Altai State University, Barnaul, Russia [email protected]

Abstract. The purpose of the research is to determine distortions in the work of the theory of costs in the conditions of digital economy and to develop the opti‐ mized formula of evaluation of cost of beneﬁts that allows achieving high preci‐ sions and objectivity of evaluations results and balancing interests of all interested parties. The work uses the method of regression, correlation, and logical analysis. The authors determine regression and correlation dependence of non-inﬂation growth of GDP on the volume of digital economy in Russia in 2013–2017 and conclude that in the conditions of digital economy the role of market factor in economy and their inﬂuence on real cost of beneﬁts grow. Four distortions of the theory of costs in the conditions of digital economy are determined; they are related to diﬀerence between cost and price for beneﬁts, due to modernization of production on the basis of digital technologies, gaining the “scale eﬀect”, expan‐ sion of possibilities for foreign economic activities, and development of digital products. The optimized formula of evaluation of beneﬁts’ cost is oﬀered, which takes into account peculiarities of digital economy, allows achieving high preci‐ sion and objectivity of results of evaluation and balancing interests of all inter‐ ested parties. This formula is recommended for practical application as a concep‐ tual basis for modernization of the system of ﬁnancial accounting in modern Russia. Keywords: Distortions · Theory of costs · Financial accounting Digital economy · Modern Russia

1

Introduction

Financial accounting is very important in modern economy. It is used for evaluating the cost of goods at the corporate (for evaluation of eﬀectiveness of entrepreneurial activi‐ ties), state (for determining the level and rate of economic growth), and international level (for international comparisons). Financial accounting in modern Russia is based on the theory of costs. This practice is rooted in the traditions that were set in the period of planned economy.

© Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 1231–1237, 2019. https://doi.org/10.1007/978-3-030-00102-5_130

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It diﬀers from practice of developed countries (e.g., from the International standards of ﬁnancial accounting), as it does not take into account market factors of economic activities (e.g., does not reﬂect goodwill, etc.). Due to this, the Russian practice of ﬁnancial accounting is criticized in the aspect of its insuﬃcient adaptation to the condi‐ tions of market economy and, therefore, non-optimality of application in modern Russia. The key arguments are imbalance of accounting of interests of interested parties (emphasis on interests of entrepreneurial structures with damage to interests of consumers) and abstracting from the level of competitiveness of business (foundation on costs of production with insuﬃcient attention to possibilities of product sales in the market). This actualizes the scientiﬁc and practical problem of modernization of the Russian practice of ﬁnancial accounting. However, its optimization requires complex consideration of all factors that inﬂuence the cost of goods in the modern economic conditions. The authors oﬀer a hypothesis that one of these factors is digital economy, in the conditions of which an unprecedented scale of market mechanism action is achieved, and distortions in the work of the theory of costs appear, which make it impossible to use for evaluation of cost of goods. The purpose of the work is to determine distortions in the work of the theory of costs in the conditions of digital economy and development of the optimized formula of evaluation of the cost of goods, which allows for high precision and objectivity of evaluation results and for balance of interest of all interested parties.

2

Materials and Method

Modern scientiﬁc provisions of the theory of costs are studied in the works Delarmelina and Salles (2016), Prestamburgo and Prestamburgo (2016), Shephard (2015) and Zeng et al. (2014). According to these provisions, in the theory of costs the cost of a beneﬁt is determined by summing up the costs of its production – wages (labor costs in a wide sense), land rent (including capital), and average proﬁt norm (including norm of proﬁt on capital and cost of entrepreneurial talent). Transformation processes that take place in modern economic systems in the condi‐ tions of formation, establishment, and development of digital economy are reﬂected in the works of such experts as Boojihawon and Ngoasong (2018), Curran (2018), ElderVass (2018), Martin-Shields and Bodanac (2018), Sandeep and Ravishankar (2018), Sukhodolov et al. (2018a, b), Veselovsky et al. (2018a, b), Bogoviz et al. (2017, 2018a, b, c), Osipov et al. (2017) and Ragulina et al. (2018). At the same time, the inﬂuence of digital economy on the process of determining the cost of goods on the bases of the theory of costs is a new and poorly studied phenomenon in the modern economic science. In order to ﬁll this gap in the system of scientiﬁc knowledge, this work uses the methods of regression and correlation (in case of avail‐ ability of suﬃcient statistical data) and logical (in case of insuﬃciency of statistical data) analysis. The oﬀered hypothesis is veriﬁed by studying the volume and dynamics of noninﬂation growth of GDP, which shows that the level of GDP (cost of aggregate goods,

Distortions in the Theory of Costs

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manufactured in the economy) largely depends on market factors (competition is the key one), not only on traditionally acknowledged factors – the volume of production and inﬂation. For that, diﬀerence between GDP in current (market) prices and GDP in constant prices is found. Inﬂation growth of GDP is calculated, which is a product of GDP in constant prices and inﬂation (in shares of 1). Non-inﬂation growth of GDP is determined by ﬁnding the diﬀerence between diver‐ gence and inﬂation growth of GDP. The higher the non-inﬂation growth of GDP, the stronger the inﬂuence of market factors on cost of goods in economy. For determining the inﬂuence of the digital economy on cost of gods in economy, dependence of noninﬂation growth of GDP on the volume of digital economy is calculated. The initial data and authors’ calculations are given in Table 1. Table 1. Dynamics of GDP of Russia in constant and current prices, their diﬀerence, inﬂation, inﬂation, and non-inﬂation growth of GDP, and volume of digital economy в 2013–2017. Indicators GDP in constant prices, RUB billion GDP in current (market) prices, RUB billion Inﬂation, % Divergence (diﬀerence between GDP in current prices and GDP in constant prices), RUB billion Inﬂation growth of GDP (product of GDP in constant prices and inﬂation in shares of 1), RUB billion Non-inﬂation growth of GDP (diﬀerence between divergence and inﬂation growth of GDP), RUB billion Volume of digital economy, RUB trillion

2013 62,588.9

2014 63,038.4

2015 61,249.4

2016 61,097.5

2017 61,952.89

71,016.7

79,199.7

83,232.6

85,880.6

92,050.49

6.763 8,427.8

7.824 16,161.3

15.532 21,983.2

7.045 24,783.1

4.463 30,097.6

4,232.887 4,932.124 9,513.257 4,304.319 2,764.957

4,194.913 11,229.18 12,469.94 20,478.78 27,332.64

0.86

2.30

2.56

4.20

4.30

Source: compiled and calculated by the authors based on: International Monetary Fund (2018), Ministry of Communications and Mass Media of the Russian Federation (2018)

3

Results

The performed regression and correlation analysis based on the data from Table 1 allowed receiving the following results (Fig. 1).

Non-inflation growth of GDP

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y = 5998.1x - 1913.8 R² = 0.9312

10000 0 0.00

1.00

2.00 3.00 Volume of digital economy

4.00

5.00

Fig. 1. Regression curve that shows dependence of non-inﬂation growth of GDP (y) on the volume of digital economy (x) in Russia in 2013–2017. Source: calculated and built by the authors.

As is seen from Fig. 1, growth of the volume of the digital economy by RUB 1 trillion stimulates the increase of the level of inﬂation growth of Russia’s GDP by RUB 2,998.1 billion; high level of correlation (93.12%) shows statistical signiﬁcance of the received model of paired linear regression. This allows concluding that in the conditions of the digital economy, the role and value of market factors in economy grows and their inﬂuence on the real (factual) cost of beneﬁts increases. As a result of logical analysis, we determine the following distortions in the work of the theory of costs, which appear in the conditions of the digital economy. 1st distortion: implementation of digital technologies into the production process in the mid-term allows reducing production costs, providing the modernized (based on digital technol‐ ogies) companies with the pricing (technological) advantages, as compared to rivals who produce the same goods. Therefore, the cost of goods, calculated according to the theory of costs, will diﬀer for the goods that are created with the usage of digital technologies, and the goods created without the usage of digital technologies. At that, it is obvious that from the market point of view, the companies that do not use digital technologies will have lower competi‐ tiveness and will have to leave the market or to balance at the break-even point, setting the prices below total aggregate costs (by means of reducing the proﬁt norm). In this case, the cost of goods of the companies that do not use digital technologies will diﬀer from the prices for which they are sold in the market, which contradicts the basic provi‐ sions of the theory of costs. 2nd distortion: digital technologies allow the company to collect order from the whole world and achieving unprecedented “scale eﬀect” in production. This eﬀect allows reducing production costs, thus oﬀering goods in the market for lower prices. In this case, cost of the goods of companies that do not use digital technologies and the compa‐ nies that use digital technologies but achieve lesser “scale eﬀect” will diﬀer from the market prices for which they sell these goods. 3rd distortion: With development of digital entrepreneurship (doing business in the Internet), global competition grows and wider possibilities open for international labor division and foreign economic activities. They include purchase of resources, materials, components, etc. (in B2B markets) for lower prices abroad and purchase of ﬁnished imported products (in B2C markets) for lower prices. That’s why the companies that do not optimize chains of supply and sale on the basis of digital technologies, will have to

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sell their products (goods) for the price that is lower than its cost (cum of production costs), reducing the proﬁt norm. 4th distortion: in the conditions of digital economy, as an alternative to traditional goods (with material form), digital goods (which do not have a material form) appear and become more popular, with lower cost (aggregate costs), which allow achieving unlimited “scale eﬀect” and satisfy target needs even better than traditional goods. The examples include remote education, E-books, etc. With growth of accessibility and demand for digital goods, the cost and price for traditional goods will be more diﬀerent. The determined distortions are caused by two tendencies, peculiar for economic systems that are in the conditions of formation of digital economy: – growth of the role of unclear costs: increase of the number of accessible alternative goods for consumers and growth of lost proﬁt of companies that do not use digital technologies; – increase of participation and role of the new production factor that is not taken into account in the basic provisions of the theory of costs – technology – and increase of importance of technological costs (costs of creation, purchase, and usage of digital technologies in production). Based on the above, it is possible to conclude that in the conditions of the digital economy foundation on traditional provisions of the theory of costs does not allow for authentic and objective evaluation of the cost of goods. For solving this problem, we developed an optimized formula of evaluation of the cost of goods that allows achieving high precision and objectivity of evaluation results and balancing the interests of all interested parties: CG = CP ∗ Cvgc ∗ Camp,

(1)

where CG – cost of good that coincides with their market price; SC – totality (sum) of costs of production of good, which include proﬁt norm and costs for purchase and usage of not only labor, land, and capital, but also the technology as one of the key production factors; Cvgc – coeﬃcient of value of goods for consumers, calculated as ratio of average price that consumers are ready to pay for the good to costs for its production (CP); Camp – coeﬃcient of alternative market price, calculated as a ratio of minimum price for which alternative goods in the market could be purchased to costs for production of this good (CP); The advantages of the developed optimized formula of determining the cost of good, as compared to the traditional formula, applied within the theory of costs, are as follows: – consideration of not only the cost of production but also the possibilities of selling it in the market (alternative market price), which allows leveling it with the price for which it is sold in the market; – fuller consideration of production factors (including capital), which allows for more precise determination of production costs;

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– simultaneous consideration of costs for production of good and its value for consumers, which allows balancing interests of all interested parties in determining the cost (and price) of a good.

4

Conclusions

Thus, the oﬀered hypothesis is proved and it is substantiated that in the conditions of digital economy there are four distortions of the theory of costs, related to divergence between the cost and price for goods, for which they are sold in the market, due to modernization of production on the basis of digital technologies, gaining “scale eﬀect”, expansion of possibilities for foreign economic activities, and development of digital products. The oﬀered optimized formula for evaluation of the cost of goods, which takes into account peculiarities of the digital economy, allows achieving high precisions and objectivity of the results of evaluation and balancing interests of all interested parties. That’s why this formula is recommended for practical application as a conceptual basis for modernization of the system of ﬁnancial accounting in modern Russia. During further research, it is expedient to focus the eﬀorts on development of prac‐ tical recommendations for increasing the cost of goods for raising eﬀectiveness of entrepreneurship and accelerating the rate of economic growth. According to the oﬀered formula, these recommendations should be aimed at reduction of costs and increase of alternative market prices (by modernization of production technologies), increase of value of goods for consumers (with the help of marketing).

References Bogoviz, A.V., Bolonin, A.I., Lobova, S.V.: State audit as a mandatory condition of budget policy eﬀectiveness. Adv. Intell. Syst. Comput. 622, 65–70 (2018a) Bogoviz, A.V., Prokoﬁev, M.N., Yaroshchuk, A.B.: Recommendations for conduct of state audit of the budget policy in modern Russia. Espacios 38(57), 2017 (2017) Bogoviz, A.V., Ragulina, Y.V., Sirotkina, N.V.: Systemic contradictions in development of modern Russia’s industry in the conditions of establishment of knowledge economy. Adv. Intell. Syst. Comput. 622, 597–602 (2018b) Bogoviz, A.V., Sozinova, A.A., Ostrovskaya, V.V.: Approaches to managing economic growth of socio-economic systems. Stud. Syst. Decis. Control 135, 131–137 (2018c) Boojihawon, D.K., Ngoasong, Z.M.: Emerging digital business models in developing economies: the case of Cameroon. Strateg. Change 27(2), 129–137 (2018) Curran, D.: Risk, innovation, and democracy in the digital economy. Eur. J. Soc. Theory 21(2), 207–226 (2018) Delarmelina, N., Salles, A.O.T.: A study about the commercialization of production from agribusiness cooperatives under the view of transaction costs theory. Custos e Agronegocio 12(4), 34–71 (2016) Elder-Vass, D.: Lifeworld and systems in the digital economy. Eur. J. Soc. Theory 21(2), 227– 244 (2018)

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International Monetary Fund: Dynamics of GDP of Russia in constant and current prices in 2013– 2017 (2018). http://www.imf.org/external/pubs/ft/weo/2017/01/weodata/weoselgr.aspx. Accessed 11 May 2018 Martin-Shields, C.P., Bodanac, N.: Peacekeeping’s digital economy: the role of communication technologies in post-conﬂict economic growth. Int. Peacekeeping 25(3), 420–445 (2018) Osipov, V.S., Bykanova, O.A., Akhmadeev, R.G., Bogoviz, A.V., Smirnov, V.M.: External debt burden and its impact on the countries’ budgetary policy. J. Appl. Econ. Sci. 12(2), 342–355 (2017) Prestamburgo, S., Prestamburgo, M.: Agricultural business strategy: theory and methods for costeﬀectiveness investment analysis in agro-energy production. Energies 9(4), 273–275 (2016) Ragulina, Y.V., Bogoviz, A.V., Alekseev, A.N.: Modeling the management of innovational processes in regional economy. Adv. Intell. Syst. Comput. 622, 568–573 (2018) Sandeep, M.S., Ravishankar, M.N.: Sociocultural transitions and developmental impacts in the digital economy of impact sourcing. Inf. Syst. J. 28(3), 563–586 (2018) Shephard, R.W.: Theory of Cost and Production Functions, pp. 1–308. Princeton University Press, Princeton (2015) Sukhodolov, A.P., Popkova, E.G., Kuzlaeva, I.M.: Internet economy: existence from the point of view of micro-economic aspect. Stud. Comput. Intell. 714, 11–21 (2018a) Sukhodolov, A.P., Popkova, E.G., Kuzlaeva, I.M.: Modern foundations of internet economy. Stud. Comput. Intell. 714, 43–52 (2018b) Veselovsky, M.Y., Izmailova, M.A., Bogoviz, A.V., Lobova, S.V., Ragulina, Y.V.: System approach to achieving new quality of corporate governance in the context of innovation development. Qual. Access Success 19(163), 30–36 (2018a) Veselovsky, M.Y., Pogodina, T.V., Ilyukhina, R.V., Sigunova, T.A., Kuzovleva, N.F.: Financial and economic mechanisms of promoting innovative activity in the context of the digital economy formation. Entrep. Sustain. Issues 5(3), 672–681 (2018b) Zeng, J.-Q., Pan, Y.-F., Wang, L.-P., Liang, M., Li, S.-Q.: Further understanding of theories and practice for low-cost and high-eﬃcient clean steel production by combined blowing converter. Kang T’ieh/Iron and Steel 49(10), 1–6 (2014) Ministry of Communications and Mass Media of the Russian Federation: The volume of digital economy in Russia grew by ﬁve times over ﬁve years (2018). http://tass.ru/ekonomika/ 5106827. Accessed 11 May 2018

Information and Communication Technologies as a New Vector of Development of the Modern Economy Natalia Y. Kozhanchikova1 ✉ , Anna A. Polyakova1, Marina K. Chistyakova1, Maria A. Vlasova2, and Irina V. Ushakova2 (

)

1 Orel State Agrarian University named after N. V. Parakhin, Orel, Russia [email protected], [email protected], [email protected] 2 Orel State University, Orel, Russia [email protected], [email protected]

Abstract. Information and communication technologies change the ideas and expand the possibilities of humanity in the issues of collection, processing, storing, transfer, and usage of the existing information base – at the same time, they set a range of requirements to humanity – acquisition of skills of working with an innovational products and improved software and formation of new thinking. Expansion of the list of information capabilities stimulates the fact that possession of information, increase of its quality and content, and its skillful usage in business and life become the most important advantage in the modern society and provides a chance for self-implementation and self-development. Distribu‐ tion and popularization of information and communication technologies take place very quickly under the condition of minimization of cots, which stimulates reduction of price for products. Hence the possibility of obtaining larger eﬀect with minimum expenditures and quicker – unlike the generally accepted means. The eﬀect from their application has its own speciﬁcs due to interconnection to processing and usage of information sources, which, in the modern economic conditions, are at the ﬁrst position as to the level of signiﬁcance. The research methods include analysis and synthesis, induction and deduction, historical and logical methods, abstraction and formalization, and comparison. The scientiﬁc novelty of the article consists in studying the information and communication technologies as a new vector of development of modern economy. Keywords: Communication technologies · Information technologies Priority of spheres · Internetization · E-commerce · Digital economy

1

Introduction

Economy of the post-industrial society undergoes spontaneous changes, acquiring communicative basis – which are information and communication technologies – so the issues of inﬂuence of information and communications on the modern society are discussed more often.

© Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 1238–1245, 2019. https://doi.org/10.1007/978-3-030-00102-5_131

Information and Communication Technologies as a New Vector

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The main direction of inﬂuence – the structure of national economy, political struc‐ ture, culture, science, and education. Hence the formation of the new communication economy, based on knowledge and information (Lakhter 2016). Thus, the modern society is information society. Inﬂuence of information and communication technologies on development of economy takes place in stages – as with classical, traditional technologies. Their appli‐ cation is evaluated from the point of view of qualitative improvement of production means, transformation of generally accepted principles of development, which usually stimulates growth and change of the qualitative foundation of capital, increase of eﬃ‐ ciency, and formation of positive eﬀect from improvement and restructuring. The next stage of evaluation of the level of eﬀectiveness of implementation of information and communication technologies is the result of their inﬂuence on external environment – primarily, on ﬁnancial markets. Another stage in the process of increase of innovations in economy is determining the factors that stimulate quick distribution of new technol‐ ogies, under which inﬂuence changes in all economic sectors are observed. At this stage, the most vivid result of application of information and communication technologies is minimization of costs. The purpose of the article is to evaluate the level of eﬀectiveness of the measures that are oﬀered by the state within the Strategy of development of the sphere of infor‐ mation technologies in the RF for 2014–2020 and until 2025, and to determine the most signiﬁcant – from the point of view of obtaining the positive eﬀect from application of innovations – directions of implementation of information and communication tech‐ nologies in the modern economic environment. It is necessary to set the tasks that stimulate achievement of the purpose – these are conduct of the research in the sphere of genesis of development of priorities in infor‐ mation and communication technologies, proclaimed in the Strategy of development of the sphere of information technologies in the Russian Federation for 2014–2020 and until 2025; oﬀering the system and program of application of information and commu‐ nication technologies from the point of view of own vision of this aspect.

2

Materials and Methods

Theoretical signiﬁcance of studying the role of information and communication tech‐ nologies is elaborated in the works Mitchell and Clark (1999), Mohan and Lal (2010), Seninger (2001), Thamodaran and Ramesh (2010). Due to these works, it was possible to generalize the best practices in the sphere of implementation of information and communication technologies into economy of the European countries and to specify the spheres that are of top-priority for implementation of these technologies. Practical pecu‐ liarities of new information and communication technologies in modern economy are studied in the works Carlaw et al. (2006), Millan (2003), Roztocki and Weistroﬀer (2015), Santarelli (2001), Townsend et al. (2001). The results of the research are based on the general scientiﬁc methods of analysis and synthesis, induction and deduction, systemic approach, historical and logical methods, and abstraction. The methods and approaches, used for solving the formulated

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tasks of the performed research, are determined by logic and the method of formaliza‐ tion. Also, the methods of analysis of hierarchy and multi-aspect comparisons were used.

3

Results

Information and communication technologies and the process of their implementation – as compared to traditional means and technologies of development – has a range of peculiarities as to the level and consequences of the inﬂuence on improvement of national economy and the economic environment on the whole. Their distribution is more global and covers all sphere, at the level of which the initial purpose is increase of labor eﬃciency and eﬀectiveness of work – especially in managerial structures. It is necessary to consider the fact that the level of development and the state of technology are diﬀerent in diﬀerent countries – as well as infrastructure – so it is neces‐ sary to take into account the level of information readiness of society to implementation and active application of information and communication technologies, as well as other factors that become the reason for unequal development and application of information innovational approaches at the level of the sphere, region, state, or the world. The top-priority directions of application of information and communication tech‐ nologies include service sphere in business (banking services, ﬁnance, marketing, etc.), which is very popular in Western Europe. In the Russian practice, copying the experience of the countries of South-East Asia, which development is based on 100% import of Western technologies and import of capital, will become fatal. Russia possesses well-developed scientiﬁc and production sphere, which may ensure full-scale transition to the communication economy and minimize the gap as compared to developed states. This could be proved by the example of implementation of socially signiﬁcant national projects with active application of information and communication technologies. Using them stimulates not only the reduction of Russia’s underrun from developed countries in the sphere of social devel‐ opment but also creates favorable conditions for implementation of the most leading and progressive means of social services. The role and position of modern communications cannot be overestimated – they stimulate transformation of traditional economy into communicative economy, which conforms to the requirements and tendencies of the global society. Russian IT companies use information and communication schemes that were approbated in practice by the Western countries – this reducing the terms of their imple‐ mentation and application and increasing eﬃciency of distribution of services in the communication sphere. Active distribution of information and communication technologies in the economic community stimulates qualitative transformations in the traditional economic system and appearance of completely new economic spheres - e.g., E-commerce. Analyzing the global statistics, it is possible to see that growth rates of Internet commerce, as well as development of the whole system of information and communication technologies, in Russia are higher, constituting 50% per year. Specialists state that such positive tendency

Information and Communication Technologies as a New Vector

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will preserve for 3–4 years. Experience of the Russian companies, involved in Ecommerce, proves eﬀectiveness and perspectives of this type of business. Thus, consequences of comprehensive distribution of information and communica‐ tion technologies have positive economic eﬀect and social favorable results. In the issue of application of information technologies and improvement of approaches of develop‐ ment of the modern economic society, the problems of development and strengthening of business, eﬀective organization of labor, issues of well-being of family, and society’s prosperity are solved at the same time. However, this interaction could be evaluated as mutual dependence, as the problems in these spheres become complicated due to highspeed communication transformation; at that, these information and communication transformations in the sphere of processing, storage, and consumption of information are caused by quickly changing values, principles, and interests of the economic community.

4

Discussion

The necessity for application of information and communication technologies in various economic spheres is caused by striving for constant improvement and adap‐ tation to external conditions of the management system, including the state policy (Palchuk 2014). At the level of the state the projects are developed and programs are implemented for creation of information and communication systems that are neces‐ sary for development of the spheres. For analysis of the level of elaboration and applicability of the existing projects in this sphere, the normative and legal basis of information and communication development of economy is studied. Based on the performed analysis, it is possible to distinguish the widest and most global project – the Strategy of development of the sphere of information technologies in the RF for 2014–2020 and until 2025 (Strategy of development of the sphere of information technologies, 2013). Studying the main directions of the Strategy, the top-priority spheres were distinguished, in which it is necessary to use information and commu‐ nication technologies. The most perspective directions of development and applica‐ tion of information and communication technologies include the sphere of finance, insurance, system of education, the sphere of healthcare, small and medium busi‐ ness, industry, military sphere, and the system of state management. The necessity for application of information and communication means is caused by constant changes of external environment, the factors that provoke the processes of transfor‐ mation, adaptation, and reformation for the purpose of supporting confident leading positions in the global society and correspondence to the global standards. The purpose of implementation of innovational means of information and commu‐ nication interaction is to minimize the losses, the level of economy risk, absence of sustainability and underrun, organization of more eﬃcient state control over eﬀective‐ ness of measures aimed at development of the sphere, region, society, and the state (Stroeva et al. 2015). Analyzing the project of the Strategy of development of the sphere of informa‐ tion technologies in the RF for 2014–2020 and until 2025, it is necessary to pay

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Teaching through IT and intellectual products

Education

Program modeling at the level of the whole production

Industry

healthcare

Neuro computer interfaces and bio-information programs

Insurance

Implementing of Big data technologies

Finances

attention to the basic directions. The main measure that is fundamental for any trans‐ formation is the necessity for transition to the system of electronic document turn‐ over in all state structures. The top-priority spheres were distinguished in which it is necessary to use informa‐ tion and communication technologies (Fig. 1).

Military sphere

Software for provision of information security

State management

Electronic document turnover

Transfer to cloud technologies

Small and medium business

Priorities of usage of information and communication technologies

Fig. 1. Priorities of usage of information and communication technologies according to the Strategy of development of information technologies in the RF for 2014–2020 and until 2025.

Creation and development of centers of data processing on the territory of the country. Such structures envisage implementation of technologies of large-scale anal‐ ysis of large volumes of information – global data bases. Increase of the level of openness of state data. This direction in the Strategy of development of the sphere of information technologies in the RF for 2014–2020 and until 2025 is just outlined – which causes certain doubts and questions. Which state data

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should be opened due to implementation of information and communication technolo‐ gies into top-priority spheres? Are personal data meant here? Will the interests of individuals be damaged? Will the access to information be used illegal? Transition to “cloud technologies” for small and medium business. Transition to this type of new information and communication technologies from the position of the state is related to increase of control over the subjects of small and medium business of trade companies. At present, state structures face the problems related to insuﬃcient trans‐ parency of doing business and impossibility for tracking violations. According to the Federal law No. 54 “Regarding the application of cash register equipment during conduct of cash payments and (or) payments with application of electronic methods”, by July 1, 2017 all subjects of small and medium business that deal with trade has to start using online cash registers with the prototype of information storage via “cloud technologies”. As a result, subjects of small and medium business, due to increase of cash register discipline, have to install elements of “cloud technologies” – which many of them do not need – at their own expense. At present, modern conditions dictate the necessity for transformation of the system of functioning of the sphere of economy and their interaction in the economic space. Under the necessity for global reforms, it is expedient to distinguish top-priority spheres: innovational sphere, IT, industrial and production sphere, education, healthcare, housing and communal sphere, budget and ﬁnance, business and managerial sphere. Determining these spheres of socio-economic development is due to their inﬂuence on macroeconomic processes. At that, it is a paradox that their share in GDP is small – which is related to resource dependence of economy of the RF. Interdependence of a range of spheres to these spheres of activities allows increasing the scale of selected top-priority directions. The modern progress of society is evaluated by the level of usage of information technologies, based on active process of collection, processing, and application of highquality information. Not only material wealth and natural resources but also the infor‐ mation and communication infrastructure with information resources are the “wealth” of population (Mustaﬁna and Sharafutdinov 2016; Letova and Freyman 2016). The information sphere is evaluated from the point of view of certain parameters, which include society’s access to “old” information sources and ratio between the “old” and new innovational technologies. Obviously, the number of Internet users grows, as it is a universal information space. Online communication is multifunctional – it is a possibility to save time, combine work and leisure, communication and business activities. The necessary conditions of application and eﬀective usage of communication inno‐ vations include a skill to use them – i.e., innovational literacy. The obstacles on the path of implementation of innovational approaches in devel‐ opment of economy and informatization of economic space include physical access of users – so called technological aspect. Also, there is a ﬁnancial aspect – guarantees level of ﬁnancial provision, which allows for purchase of necessary equipment and technology for users as an intermediary between innovations and ordinary people. If ordinary people

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have no possibility to pay for services individually, it is necessary to expand the possi‐ bilities of public access to information and communication innovations - which could be seen as a social aspect. Of course, active users of innovations should have the corresponding level of knowl‐ edge, in order to understand importance of the current processes and the possibilities of using them – it is the educational aspect of information and communication develop‐ ment. The fact that information space has a lot of rivals is obvious, so fair competitive struggle is very important – it is a condition of favorable economic micro-climate in business society.

5

Conclusions

Information and communication systems erase the borders of the “national”, ensuring the level of the “global”. The main problems of implementation of information, commu‐ nicative, and innovational aspects into the economic society include ﬁghting “digital fracture” – i.e., prevention of division of society according to access to the Internet. At present, there is a tendency for stable growth of the number of users in the USA, Canada, West Europe, and the Asian-Paciﬁc region. At that, a paradox is that economically developed Europe has certain problems with information and communication innova‐ tions. This proves the existence of technological “North” and “South” both within powerful political unions and within separate countries. Appearance and implementation of information and communication technologies into the modern economy is an inevitable and constant process. The performed analysis of technologies in the aspect of economic development of the RF led to the conclusion that change of the technological paradigm leads to reduction of the terms of prioritized usage of information and communication technologies in the modern economy. Thus, economic development should be “fed” by new intellectual and information technolo‐ gies. Transition to post-industrial path of development of the Russian economy caused interest to creation and implementation of information and communication technologies into the ﬁnancial, infrastructural, educational, and managerial sphere. The changes that take place in the conditions of economic development, including in the issues of application of information technologies, are caused by formation of totally new ideology and expansion of knowledge, which stimulate creation of economy of the future – the digital economy. Russia actively participates in all transformations of the modern economic space and actively adapts to innovations. Implementation of various projects and programs of development stimulates creation of new perspective spheres of economy. Due to the above circumstances, we think that the topic of priority of usage of new information and communication technologies in the modern economy is signiﬁcant and actual.

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References Lakhter, M.D.: Transition to the knowledge economy with the help of information technologies. Bus. Educ. Knowl. Econ. 2(4), 60–65 (2016) Letova, M.S., Freyman, E.N.: Application of information technologies in the modern economy. Innov. Dev. Econ. Tend. Perspect. 1, 492–497 (2016) Mustaﬁna, N.M., Sharafutdinov, A.G.: The role of information technologies in economy. NovaInfo. Ru. 1(47), 261–263 (2016) Palchuk, E.I.: Economy of the age of information technologies. Threats and perspectives. Reg. Econ. Manag. 2–2(02), 52–57 (2014) Strategy of development of the sphere of information technologies in the RF for 2014–2020 and until 2025. Decree of the Government of the RF dated November 1, 2013. No. 2036-p. http:// minsvyaz.ru/ru/documents/4084/ Carlaw, K., Oxley, L., Walker, P., Thorns, D., Nuth, M.: Beyond the hype: intellectual property and the knowledge society/knowledge economy. J. Econ. Surv. 20(4), 633–690 (2006). https:// doi.org/10.1111/j.1467-6419.2006.00262.x Millan, J.D.R.: Adaptive brain interfaces. Assoc. Comput. Mach. Commun. ACM 46(3), 74 (2003) Mitchell, S., Clark, D.: Business adoption of information and communications technologies in the two-tier rural economy: some evidence from the South Midlands. J. Rural Stud. 15(4), 447– 455 (1999) Mohan, A., Lal, S.: Achieving supply chain management (SCM): customer relationship management (CRM) synergy through information and communication technology (ICT) infrastructure in knowledge economy. Enterp. Inf. Syst. Implement. IT Infrastruct. Chall. Issues 304–322 (2010). https://doi.org/10.4018/978-1-61520-625-4.ch020 Roztocki, N., Weistroﬀer, H.R.: Information and communication technology in transition economies: an assessment of research trends. Inf. Technol. Dev. 21(3), 330–364 (2015). https:// doi.org/10.1080/02681102.2014.891498 Santarelli, R.: Information technology, the world of work, and training. Rev. Econ. Cond. Italy (2), 289 (2001) Seninger, S.F.: The information economy. Mont. Bus. Q. 39(1), 2 (2001) Stroeva, O., Shinkareva, L., Lyapina, I., Petruchina, E.: Optimization of approaches to the management of investment projects in regions of Russia. Mediterr. J. Soc. Sci. 6(3), 87–94 (2015) Thamodaran, V., Ramesh, M.: Eﬀectiveness of information communication technology in rural insurance. Bus. Econ. Horiz. 2(2), 98–105 (2010) Townsend, A.M., DeMarie, S.M., Hendrickson, A.R.: Information technology, unions, and the new organization: challenges and opportunities for union survival. J. Labor Res. 22(2), 275– 286 (2001)

A Study of the Effects of Technological Innovations on the Performance of Commercial Banks in Developing Countries A Case of the Zambian Banking Industry Lubinda Haabazoka(&) Copperbelt University, Box 21692, Kitwe, Zambia [email protected]

Abstract. Zambia’s ﬁnancial sector has undergone signiﬁcant transformation in the last few years. Commercial banks have continued to use huge investments in technology based innovations and training of man power to handle new technologies. The purpose of this study was to determine the effect of technological innovations on the ﬁnancial performance of commercial banks in Zambia. The study used consolidated data for all the commercial banks in Zambia i.e. 19 banks. This study aimed to: (1) determine the relationship between mobile banking transactions and the ﬁnancial performance of commercial banks in Zambia; (2) ﬁnd out the relationship between internet banking transactions and the ﬁnancial performance of commercial banks in Zambia; and (3) determine the relationship between ATM transactions and the ﬁnancial performance of commercial banks in Zambia. Monthly data for a period of four years was used in this study. The study looked at innovations in the area of Internet Banking, Mobile Banking and Automated Teller Machines (ATMs). The innovations were studied in relation to their effect on the commercial bank’s performance as measured by the income. A descriptive research design was used in this study. Secondary data was collected from the Bank of Zambia and various audited ﬁnancial and other statements of individual commercial banks. SPSS as software was used for data analysis. The ﬁndings revealed that bank technological innovations had a positive effect on the ﬁnancial performance of commercial banks in Zambia. It was also established that mobile banking transactions had a strong positive influence on the ﬁnancial performance of commercial banks in Zambia whilst Internet banking transactions had a weak relationship with the ﬁnancial performance of commercial banks in Zambia. Automated Teller Machine transactions also had a strong positive effect on the ﬁnancial performance of the ﬁnancial performance of commercial banks in Zambia. Keywords: Bank technological innovations Bank performance JEL Classiﬁcation Codes: O12

Developing countries

O30 O55

© Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 1246–1260, 2019. https://doi.org/10.1007/978-3-030-00102-5_132

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1 Introduction The international banking industry has gone through rapid transformation caused by increased globalization and deregulation. This transformation has increased competition in the banking industry. In order to remain competitive and enhance proﬁtability, banks have increased the use of ﬁnancial innovations such as ATMs, mobile banking, internet banking, debit cards, credit cards, agency banking, and smart card among others. The Zambian banking sector has undergone tremendous change in the last two decades. A lot of reforms have been undertaken in the sector. While the essential functions performed by commercial banks have remained relatively constant over the past several decades, the structure of the industry has undergone dramatic change. The emergency of new banks especially those with foreign ownership on the Zambian banking industry has not only increased competition but also facilitated the inflow of highly advanced technological innovations. Advances in technology and changing economic conditions have created impetus for this change. All these developments coupled with changes in the international ﬁnancial environment and the increasing integration of domestic and international ﬁnancial markets have led to rapid ﬁnancial innovation. 1.1

Statement of the Problem

Over the last two decades, Zambia has seen the opening up of new banks especially those with foreign ownership. This situation has seen banks including indigenous ones introducing new products and services to remain proﬁtable. Commercial banks are also increasingly using new information technology to provide services in a bid to increase efﬁciency, cut costs and therefore enhancing proﬁtability. This study therefore seeks to establish the effects of technological innovations on the performance of commercial banks in Zambia. 1.2

Research Objectives

This study aimed to establish the relationship between bank innovations and ﬁnancial performance of commercial banks in Zambia between 2011 and 2014. Speciﬁcally, the study aimed to: (1) determine the relationship between mobile banking transactions and the ﬁnancial performance of commercial banks in Zambia; (2) ﬁnd out the relationship between internet banking transactions and the ﬁnancial performance of commercial banks in Zambia; and (3) determine the relationship between ATM transactions and the ﬁnancial performance of commercial banks in Zambia. 1.3

Scope of the Study

This study was based on aggregate data for all the 19 commercial banks operating in Zambia. The period covered was 2011 to 2014. The study was based on monthly data.

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2 Review of Literature 2.1

Financial Innovation

According to Lawrence (2010), ﬁnancial innovation involves the design, the development, the implementation of innovative ﬁnancial instruments and processes, and the formulation of creative solutions to problems in ﬁnance. Beaver (2002) believes that innovation is an essential element for economic progress of a country and competitiveness of an industry. Sandvik (2003) argues that innovation is one of the most important competitive weapons and generally seen as a ﬁrm’s core value capability. Financial innovation has not only opened up new opportunities for sector participants, but also increased the number of market players arising from new products in the ﬁnancial market (Noyer, 2007). 2.2

Bank Performance

Financial performance can be explained as the degree to which ﬁnancial objectives are being or have been accomplished (Al-Hussein et al., 2009). Financial performance is a process of measuring the results of a ﬁrm’s policies and operations in monetary terms. According to Al-Hussein, the proﬁtability of commercial banks depends heavily on the net of income generating activities and the related activities expense. Alam et al. (2011) say that ﬁrm performance is a multidimensional construct that consists of four elements: Customer-focused performance, including customer satisfaction, and product or service performance; ﬁnancial and market performance, including revenue, proﬁts, market position, cash-to-cash cycle time, and earnings per share; human resource performance, including employee satisfaction; and organizational effectiveness, including time to market, level of innovation, and production and supply chain flexibility. Using organizational goals as a basis, different methods can be used by ﬁrms to measure their performance. This performance indicator can be measured in ﬁnancial or nonﬁnancial terms (Bagorogoza and Waal, 2010; Bakar and Ahmad, 2010). Most ﬁrms, however, prefer to adopt ﬁnancial indicators to measure their performance (Grant et al., 1988). Return on assets (ROA), average annual occupancy rate, net proﬁt after tax and return on investment (ROI) are the commonly used ﬁnancial or accounting indicators by ﬁrms (Tavitiyaman et al., 2012). Some other common measures are proﬁtability, gross income, growth, stakeholder satisfaction, market share and competitive position (Bagorogoza and Waal, 2010). However, ﬁnancial elements are not the only indicator for measuring ﬁrm performance. It needs to combine with non-ﬁnancial measurement in order to adapt to the changes of internal and external environments (Krager and Parnell, 1998). Supporting this opinion, Rubio and Aragon (2009) divided business performance into four dimensions, that is internal process, open system, rational goal and human relations, where each dimension is measured by any changes in its own variables.

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Financial Innovation and Bank Performance

Korir et al. (2014) examined the relationship between ﬁnancial innovations and performance of commercial banks in Kenya. This study relied on secondary data. It adopted a census where all the 44 banks were used in the study and there was no sampling since the population size was small. The study found out that there is a strong relationship between ﬁnancial innovations and ﬁnancial performance. The study concludes that ﬁnancial innovations positively affect ﬁnancial performance. Mutisya (2012) carried out a research on the relationship between mobile banking and ﬁnancial performance of banks in Uganda. In this study, they conclude that the introduction of mobile banking has contributed positively to the ﬁnancial performance of commercial banks in Uganda. They further state that the introduction of mobile banking has influenced the ﬁnancial performance of the banking sector in Uganda positively. Wachira (2010) examined the relationship between customer independent technology and bank performance. This study employed a descriptive cross sectional design and targeted all the commercial banks in Kenya. The study was based on secondary data collected from annual ﬁnancial statements. The data was analyzed using IBM, SPSS and involved computation of frequencies, descriptive statistics and multiple regression analysis. In the study, it is concluded that there is a positive and signiﬁcant relationship between proﬁtability and customer independent technology. Joshua (2005) also assessed the relationship between technological innovations on banking services in Ghana. In this study the independent variables used included banking products and services such as Automated Teller Machines (ATMs), Telephone Banking, PC Banking and Electronic Funds Transfer. The dependent variable was the banks performance in terms of proﬁt. The study focused on customers with banks that have at least one form of technological innovation. The results of the study generally indicated that technological innovation or electronic delivery channels have contributed positively to the provision of banking services and the growth of the Ghanaian Banking industry. Guseynova (2012), examined the competitive positioning of commercial banks on the base of innovative banking services and technologies. In the study, it was discovered that the widespread introduction of new technologies provides credit institutions with signiﬁcant increase in efﬁciency, expands the range of its services, brings improvement in service quality and helps to inform the widest possible range of consumers. Bresenahan et al. (2002) examined the effect of technological innovations on the organizational workplace by analyzing 300 responses from bank clients. The study showed that technological innovation has the potential to affect bank processes and hence skill levels. This implies that the adoption of technological innovations has implications on how a bank communicates internally and externally with their clients. Dos Santos and Peffers (1993) empirically studied the effects of early adoption of Automated Teller Machine (ATM) technology by banks on employee efﬁciency using a sample of 3,838 banks covering the period 1970 to 1979 by applying multiple regression models. The ﬁnding revealed that the introduction of ATM technology improves the bank’s performance.

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Malhotra and Singh (2009) examined the implications of Internet banking on the Indian banking industry using information drawn from a survey of 85 scheduled commercial banks’ websites, during the year 2007, by applying multiple linear regression model. Results revealed however, that proﬁtability in the banking industry while offering internet banking does not have any signiﬁcant association with their overall performance. In this age of innovation and development, a study by Kamau (2009) on the efﬁciency of the banking sector indicated that banks need to be more innovative in their product and service offering to increase their share in the millions of consumers. Haumer and Peris (2005) stated that automated teller machines, telephone banking, Internet banking and e-money as being among the signiﬁcant innovations affecting the banking distribution system that influence banking performance signiﬁcantly. DeYoung, Lang and Nolle (2007) report that Internet adoption improved U.S community bank proﬁtability primarily through deposit related charges. Hernando and Nieto (2007) found out that online banking was associated with lower costs and higher proﬁtability for a sample of Spanish banks. Hayashi and Klee (2003) showed that technologies provide a number of information beneﬁts as businesses use the internet and other information communication technology (ICT) channels to provide information about product speciﬁcations, price and service delivery methods. Innovation has been conceptualized to bring beneﬁts to the innovation organization and the economy as a whole. According to Unger (2005), one of the major contributions of Internet based service is the reduction in transaction costs. Tufano (2003) found that web technology provides situation speciﬁc or personalized communication. Heffernan (2005) found that when Irish banks provided service via the web to their corporate customers, customers demanded many types of support from banks such as after sales service support for customer training in using the internet banking system. Shu and Strassman (2005) conducted a survey on 12 banks in the US for the period of 1989-1997. They noticed that even though information technology has been one of the most essential dynamic factors relating all efforts, it cannot improve banks’ earnings. Kozak (2005) investigates the influence of the evolution in information technology on the proﬁt and cost effectiveness in the US banking sector during the period of 19922003. The study indicates optimistic relationship among the executed information technology and together productivity and cost savings. Brynjolfsson and Hitt (2000) indicate that information technology contributes signiﬁcantly to ﬁrm level output. Nader (2011) analyzed the proﬁt efﬁciency of the Saudi Arabia Commercial banks during the period 1998-2007. The results of the study indicated that availability of phone banking, number of ATMs and number of branches had a positive effect on proﬁt efﬁciency of Saudi banks. On the contrary he found that the number of point of sale terminals (POSs), availability of PC banking and availability of mobile banking did not improve proﬁt efﬁciency assets. Shirley and Sushanta (2006) studied the impact of information technology on the banking industry and analyzed both theoretically and empirically how information

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technology such as internet banking, electronic payments, security investments and information exchanges affect bank’s performance. Berger (2003) argues that information technology can affect bank proﬁts via competition in ﬁnancial services that are offered by the banks. Using a panel of 68 US banks for a period of over 20 years to estimate the impact of IT on proﬁtability of banks, they found out that though IT might lead to cost saving, higher IT spending can create network effects lowering bank proﬁts. They further contend that the relationship between IT expenditures and bank’s ﬁnancial performance is conditional to the extent of network effect. They say that if network effect is too low, IT expenditures are likely to; reduce payroll expenses, increase market share, and increase revenue and proﬁt. 2.4

Overview of Zambia’s Banking Sector

The Zambian banking industry comprises of the Bank of Zambia and 19 commercial banks. 15 banks are foreign owned, 3 owned by local private investors and 1 jointly owned by the Zambian and Indian governments. The Banking industry is regulated by the Bank of Zambia under the Banking and Financial Services Act. Apart from commercial banks, the banking sector consists of building societies, leasing companies, savings institutions, credit unions and bureau de change.

3 Theoretical and Conceptual Framework 3.1

Theoretical Framework

There exist a number of theories that explain the relationship between innovation and bank performance. This study however is based only on two theories: 3.1.1 Schumpeter Theory of Innovation Schumpeter (1928) argues that entrepreneurs, who could be independent inventors or engineers in large corporations, created the opportunity for new proﬁts with their innovations. In turn, groups of imitators attracted by super-proﬁts would start a wave of investment that would erode the proﬁt margin for the innovation. However, before the economy could equilibrate a new innovation or set of innovations, conceptualized by Schumpeter would emerge to begin the business cycle over again. Schumpeter emphasized the role of entrepreneurship and the seeking out of opportunities for novel value generating activities which would expand and transform the circular flow of income, but it did so with reference to a distinction between invention and discovery on one hand and innovation, commercialization and entrepreneurship on the other. This separation of invention and innovation marked out the typical nineteenth century institutional model of innovation, in which independent inventors typically fed discoveries as potential inputs to entrepreneurial ﬁrms. The author further saw innovations as perpetual gales of creative destruction that were essential forces driving growth rates in a capitalist system. Schumpeter’s thinking evolved over his lifetime to the extent that some scholars have differentiated his early thinking where innovation was largely dependent on exceptional individual/entrepreneurs willing to take on exceptional

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hazards as an act of will. His later thinking recognized the role of large corporations in organizing and supporting innovation. This resulted in his emphasis on the role of oligopolies in innovation and which later was falsely viewed as the main contribution of his work (Freeman, 1994). Schumpeter drew a clear distinction between the entrepreneurs whose innovations create the conditions for proﬁtable new enterprises and the bankers who create credit to ﬁnance the construction of the new ventures (Schumpeter, 1939, quoted in Wachira, 2010). He emphasized heavily that the special role of credit-creation by bankers was ‘the monetary complement of innovations’ (Schumpeter, 1939). As independent agents who have no proprietary interest in the new enterprises they ﬁnance, bankers are the capitalists who bear all the risks (none is borne by the entrepreneurs). That requires having the special ability to judge the potential for success in ﬁnancing entrepreneurial activities. Schumpeter emphasized that it is just as important to deny credit to those lacking that potential as it is to supply credit to those having it. 3.1.2 Transaction Cost Innovation Theory Hicks and Niehans (1983) advanced the transaction cost innovation theory in a research done on the role of innovation in businesses. They thought that the dominant factor of ﬁnancial innovation is the reduction of transaction cost. The reduction of transaction cost can stimulate ﬁnancial innovation and improvement in ﬁnancial services. This theory studied the ﬁnancial innovation from the perspective of microscopic economic structure change. The transaction cost theory plays an important role with respect to innovation. It posits that the primary reason of ﬁnancial innovation in ﬁnancial institutions is proﬁt maximization. 3.2

Conceptual Framework

A conceptual framework is a diagrammatic presentation of variables, showing the relationship between the independent variable and dependent variables. In this study, the independent variables were: Number of ATM transactions, number of internet banking transaction and number of mobile banking transactions. The study sought to investigate how the independent variables influence ﬁnancial performance of commercial banks in Zambia. Financial performance was measured using commercial bank gross income. The relationship between the independent variables and dependent variable is presented schematically in the conceptual framework in Fig. 1 below:

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Fig. 1. Conceptual Framework

3.3

Model Speciﬁcation

The model for this study was generated from literature reviewed and backed theory. The model is as shown below: Y ¼ a þ b1 X1 þ b2 X2 þ b3 X3 þ € Where Y Financial performance of First National Bank as measured by its income a Coefﬁcient of intercept b1…b4 Coefﬁcients of the 3 independent variables X1 Number of Automated Teller Machines (ATMS) Transactions X2 Number of Internet Banking Transactions X3 Number of Mobile Banking Transactions € Error term 3.4

Research Hypotheses

The study was based on the following research hypotheses: Ho1: The number of ATMs has no positive effect on the ﬁnancial performance of commercial banks in Zambia. Ha1: The number of ATMs has a positive effect on the ﬁnancial performance of commercial banks in Zambia. Ho2: The number of mobile banking transactions has no positive effect on the ﬁnancial performance of commercial banks in Zambia. Ha2: The number of mobile banking transactions has a positive effect on the ﬁnancial performance of commercial banks in Zambia. Ho3: The number of Internet banking transactions has no positive effect on the ﬁnancial performance of commercial banks in Zambia.

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Ha3: The number of Internet banking transactions has a positive effect on the ﬁnancial performance of commercial banks in Zambia. 3.5

Operationalisation of the Hypotheses

For the purpose of this study Mobile banking is the term used to describe ﬁnancial services delivered via mobile networks using mobile phones. Automated Teller Machines; also known as cash points, are cash machines that are computerized telecommunication devices that provide clients of ﬁnancial institutions with access to ﬁnancial transactions in a public space without the need for a cashier, human clerk or bank teller. Internet Banking is an electronic payment system that enables customers of a ﬁnancial institution to conduct ﬁnancial transactions on a website operated by the institution such as a retail bank, virtual bank, credit union or building society. For ﬁnancial performance, the study used consolidated income of all commercial banks in Zambia.

4 Research Methodology 4.1

Data Collection and Analysis

The study used secondary data obtained from the Bank of Zambia as well as audited ﬁnancial and other statements published by various commercial banks. Other sources of data collected included academic and professional journals, books and magazines. The research was based on monthly data collected from 2011 to 2014. In total, data from 48 periods was studied. Data collected was analysed using SPSS. 4.2

Testing the Assumptions of the Regression Analysis

Diagnostic tests were conducted to establish the correctness of data that was analysed. A normality probability plot was done. The results showed that data analysed was gravitating along the diagonal line. Thus we concluded that the data was normally distributed. The distribution of the error terms was also conducted. The results showed that the error terms above and below the line were evenly and randomly distributed. This was in line with the assumptions of homoscedasticity and independence of error terms. Since regression analysis is more concerned with the relationship between two or more variables, it is helpful to use graphical inspection to see the nature and direction of the relationship. The results of this test showed that, the scatter plot for mobile banking and income shows a positive linear relationship. This is demonstrated by an upward slope indicating a positive strong relationship between the two variables. This means that an increase in the number of mobile banking transactions lead to an expected increase in income. The scatter plot for Internet banking volume and income did not show any relationship. This means that the two variables are independent of each other. Therefore, an increase in the number of Internet banking volume does not lead to a corresponding increase in the income.

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5 Discussion of Research Results 5.1

Correlation Matrix and Regression Analysis

The correlation matrix was used to establish the nature, strength and direction of the relationship between the four variables in the study as shown in Table 1 below. Table 1. Correlation Matrix Income Income volumes

Internet volumes 0.246

Pearson 1 correlation Sig (2 tailed) 0.092 N 48 48 Internet Pearson 0.246 1 volumes correlation Sig (2 tailed) 0.983 N 48 48 Mobile Pearson 0.964 0.336 volumes correlation Sig (2 tailed) 0.000 0.020 N 48 48 ATM Pearson 0.75 0.404 volumes correlation Sig. 0.042 0.004 N 48 48 Two tailed: Correlation is signiﬁcant at the level of 0.05

Mobile volumes 0.964

ATMs volumes 0.587

0.020 48 0.336

0.000 48 0.404

0.020 48 1

0.004 48 0.649

48 0.649

0.000 48 1

0.000 48

48

The test results showed a weak positive relationship between Internet banking and income with r = 0.246, p value = 0.983 which is not supported at 0.05 because the pvalue is greater than 0.05. The results also showed that there is a positive relationship between the number of ATMs and income with r = 0.75 and p value of 0.042 which is signiﬁcant at 0.05 level of signiﬁcance. The test results also show a strong positive relationship between mobile banking and income with r = 0.964 and p = 0.000 which is signiﬁcant at 0.05.

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Multiple Regression

A multiple regression was performed. The output for the analysis is shown in Table 2 below: Table 2. Multiple Regression Results Model R R Square Adjusted R Square Std. Error of the Estimate Durbin-Watson a 0.958 250500.863 1.291 1 0.980 0.961 a. Predictors: (Constant), ATM volumes, Internet volumes, Mobile volumes b. Dependent Variable: income values Source: Author (2016)

We can see from the table above that there was a very strong positive relationship between income and the explanatory variables with a correlation coefﬁcient of 0.980. R2 of 0.961 show that 96.1% changes in commercial bank income was due to ATM transactions, Internet banking transactions and mobile banking transactions. A coefﬁcient matrix was also tabulated and is presented in Table 3 below: Table 3. Coefﬁcient Matrix Model

Unstandardized coefﬁcients B Std. Error Constant 27768.188 164504.245 Internet volumes 0.134 6.233 Mobile volumes 11.032 0.570 ATMs volumes 0.335 0.160

Standardized coefﬁcients T

Sig

Beta 0.001 0.908 0.094

0.169 0.022 19.361 2.100

0.867 0.983 0.000 0.042

From Table 3 we can see that unstandardized coefﬁcients for independent variables are all positive with internet banking, mobile banking and ATMs at 0134, 11.032 and 0.335 respectively while the constant is 27768.188. This indicates the percentage increase of unstandardized coefﬁcient of the independent variable. The results imply that when internet banking and ATM is controlled or constant, a one percentage increase in mobile banking will lead to 11.032 increase in income. When mobile and internet banking is held constant, a one percent increase in ATM transactions will lead to a 0.335 increase in income. When mobile banking and ATM transactions are held constant, a one percent increase in internet banking will lead to 0.134 increase in income. From these results, the multiple regression equation is tabulated as shown below. Y ¼ 27768:188 þ 0:134X1 þ 11:032X2 þ 0:335X3

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Hypothesis Testing

Hypotheses test results are shown in Table 4 below: Table 4. Hypotheses Test Results Hypothesis Ha1: The number of ATMs has a positive effect on the ﬁnancial performance of commercial banks in Zambia Ha2: The number of mobile banking transactions has a positive effect on the ﬁnancial performance of commercial banks in Zambia Ha3: The number of Internet banking transactions has a positive effect on the ﬁnancial performance of commercial banks in Zambia

t-value 2.100

p-value 0.042

Comment Supported

19.361

0.000

Supported

0.022

0.983

Not supported

The test results show that hypothesis 1 i.e. there is a relationship between number of ATM transactions and income was supported. The test indicates a positive strong relationship between ATM transactions and income, t-value is 2.100, p-value at 0.042 which was signiﬁcant at 0.05. The test did not support the hypothesis that there is a relationship between Internet banking and income, t-value = 0.022, p value = 0.983 which is greater than 0.05. The test results show that the hypothesis that there is a relationship between mobile banking and commercial bank income was supported at p value of 0.000 which was signiﬁcant at 0.05 and the t value of 19.361. The relationship between mobile banking transactions and commercial bank income was found to be signiﬁcant. The results in the table above indicate a positive strong relationship between mobile banking transactions and commercial bank income. The t-value is 19.361 and p-value is 0.000 which is very signiﬁcant at 0.05 level of signiﬁcance leading to the acceptance of the alternative hypothesis that there is a positive relationship between mobile banking transactions and commercial bank income. The correlation matrix shows that the relationship was very strong with a correlation coefﬁcient of 0.964. The partial plot for mobile banking transactions and commercial banks income showed an upward positive slope indicating a positive. The relationship between Internet banking transactions and commercial bank income was not signiﬁcant. The test attempted to examine the extent to which Internet banking transactions contribute to commercial bank income. The test results indicate that there was a weak positive correlation between Internet banking transactions and bank income. The correlation coefﬁcient was 0.246, the t value was 0.022 and the p value of 0.983 which was greater than 0.05. Therefore, the alternative hypothesis which states that there is a relationship between Internet banking transactions and bank income was not supported leading to rejection. The partial plot for Internet banking and income shows a weak relationship. The relationship between ATM transactions and bank income was signiﬁcant. The results indicate a positive relationship between the two variables. The t-value was found to be 2.100, the p-value was found to be 0.042 which is reasonably signiﬁcant at

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0.05 level of signiﬁcance leading to the acceptance of the alternative hypothesis that there is a relationship between ATM transactions and commercial bank income. The correlation matrix shows that there is a positive relationship with a correlation coefﬁcient of 0.75.

6 Conclusion From the study ﬁndings, the following recommendations are proposed. First, banks as well as the regulatory bodies should strive to innovate for better and cheaper ways of serving customers. With shorter transaction turnaround times, transaction volumes can be signiﬁcantly increased and by extension commission charges there from. Government through the ﬁnancial sector regulatory authorities, Bank of Zambia, should encourage banks to engage in ﬁnancial innovation but at the same time closely regulating such developments to ensure on the integrity of the payment systems. Financial innovation is the engine of sustainable economic growth. Mobile banking was found to be a key driver in the income of banks. It is recommended to commercial banks that there is need to ensure that the systems are well maintained to avoid system error and failures to avoid major downtimes of the banks. It is also recommended that the ICT department should always be up to date on the system upgrade and changes so as to alert customers in advance and avoid putting customers under unnecessary stress and pressure. It is also recommended that the bank management ensures that mobile banking is fully secured with encrypted passwords to avoid hacking of important information for the clients. It was found that number of ATMs transactions drives bank’s income. It is recommended to the bank management to regularly conduct system checks to avoid breakdown of the ATM machines which helps decongest the banking halls.

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Innovational Projects as a Basis of Progress of the Global Financial System Tatiana L. Bezrukova1(&), Elena V. Popova2, Boris A. Bezrukov1, and Valery A. Spesivtsev3 1

3

Voronezh State University of Forestry and Technologies named after G.F. Morozov, Voronezh, Russia [email protected], [email protected] 2 Plekhanov Russian University of Economics, Moscow, Russia [email protected] Financial University Under the Government of the Russian Federation, Lipetsk Branch, Lipetsk, Russia [email protected]

Abstract. The purpose of the work is to substantiate the basic role of innovations on provision of progress of the global ﬁnancial system and to develop recommendations for optimization of innovational development of this system in the modern economic conditions in view of experience of the recent global ﬁnancial crisis. For veriﬁcation of the offered hypothesis and determination of the innovations’ influence on development of the global ﬁnancial system, the authors use the methods of regression and correlation analysis. The research objects are countries from various categories that are grouped according to GDP per capita based on the data of the International Monetary Fund for 2017. Developed countries include Luxembourg, Switzerland, Norway, the USA, and Germany; developing countries include Russia, Brazil, Turkey, China, and Mexico; underdeveloped countries include Madagascar, Mozambique, Congo, Burundi, and Malawi. The information and analytical basis of the research include the materials of the global competitiveness report for 2017–2018 that was presented at the World economic forum in 2018. As a result, it is concluded that innovational projects are the basis of progress of the global ﬁnancial system, but they require a serious state control over provision of social responsibility and security in the long-term. The authors’ recommendation for anti-crisis management of the process of innovational development of this system in the modern economic conditions consists on the optimization algorithm of implementing innovational projects in the ﬁnancial sphere. Keywords: Innovations Global ﬁnancial system

Development Progress Innovational projects

1 Introduction At the beginning of the new millennium, the global economic progress was viewed through the prism of innovational development of the global ﬁnancial system, which is one of the key vectors of growth of the global economy. According to the classic ideas © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 1261–1269, 2019. https://doi.org/10.1007/978-3-030-00102-5_133

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of economic growth of economic systems and separate sectorial markets in them, based on the provisions of the Theory of economic cycles, it was considered that innovational projects stimulate improvement (e.g., through growth of efﬁciency, etc.) and growth of business activity in the global ﬁnancial system, this stimulating its progress. However, the recent global ﬁnancial crisis, which started in 2008 and is still observed in a lot of countries, showed the other side of innovational development of the global economic system. Innovational projects accelerate the growth rate of this system and increase the risk component of this process, thus reducing sustainability of the global ﬁnancial system and causing its instability and high susceptibility to crises. This led to expectations of new crises and to critical decline of interest to innovational projects in the ﬁnancial sphere, increasing the depression of the global ﬁnancial system. Thus, the scientiﬁc and practical problem of restoration of progress of the global ﬁnancial system as one of the most important components of growth and development of the global economy actualized. The working hypothesis of the research is that innovational projects are the basis of progress of the global ﬁnancial system – however, accompanied by high risk component, they require anti-crisis management. The purpose of the work is to substantiate the basic role of innovations in provision of progress of the global ﬁnancial system and to develop recommendations for optimization of innovational development of this system in the modern economic conditions in view of experience of the recent global ﬁnancial crisis.

2 Materials and Method The authors use fundamental and applied studies in the sphere of progress of the global ﬁnancial system (Bogoviz et al. 2018), (Popkova et al. 2018), (Shaskhovskaya et al. 2013), (Arkhipova 2016), (Bilorus 2014), (Lund and Härle 2017), (Kaya 2017), (Zhou and Chen 2017), (Nozdrev 2016), (Porﬁr’ev 2016) and (Morozova and Sahabutdinova 2013) and implementation of innovational projects in the ﬁnancial sphere (Ramanathan et al. 2018), (García-Quevedo et al. 2018), (Yao et al. 2018) and (Li et al. 2018). For veriﬁcation of the offered hypothesis and determination of the influence of innovations on development of the global ﬁnancial system, the authors use the methods of regression and correlation analysis. The authors determine dependence of various indicators of the global ﬁnancial system on innovational activity in the countries of the world with the help of the models of paired linear regression (y(x)) and calculation of determination coefﬁcients (R2). The research is performed in view of separate countries due to absence of detailed global statistics in the sphere of innovations and in the sphere of the global ﬁnancial system. The objects of the research include countries from various categories, grouped according to GDP per capita based on the data of the IMF for 2017. Developed countries include Luxembourg, Switzerland, Norway, the USA, and Germany; developing countries include Russia, Brazil, Turkey, China, and Mexico; underdeveloped countries include Madagascar, Mozambique, Congo, Burundi, and Malawi (International Monetary Fund 2018).

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The information and analytical basis of the research includes materials of the global competitiveness report for 2017–2018, presented at the IMF in 2018. The dependent variables (y) are the following indicators: – indicator of macro-economic environment (3rd pillar: Macroeconomic environment), which considers balance of state budget, total national savings, inflation, national debt, and national credit ranking; – indicator of development of national ﬁnancial market (8th pillar: Financial market development), which reflects accessibility and quality of ﬁnancial services and effectiveness of the works of securities sector and the banking sector of national ﬁnancial market; – indicator of direct foreign investments (9.03 FDI and technology transfer), which shows direction of intensity of the flows of direct foreign investments into national economy. Independent variables (x) are the following indicators: – indicator of technological readiness (9th pillar: Technological readiness), which reflects accessibility of new technologies and intensity of their usage in national economy; – indicator of innovational activity of economy (12th pillar: Innovation), which shows national activity in the sphere of R&D and implementation of their results. The initial statistical data are shown in Table 1. Table 1. Indicators of innovational activity and development of ﬁnancial system in the countries of the world in 2017. Countries of the world according to main categories

3rd pillar: Macroeconomic environment

9.03 FDI and 8th pillar: Financial market technology transfer development

9th pillar: Technological readiness

12th pillar: Innovation

Points Position Points Position Points Position Points Position Points Position Developed

Developing

Underdeveloped

Luxembourg

6.3

7

5.0

15

5.8

3

6.5

1

5.0

15

Switzerland 3.3

127

3.8

85

3.8

105

2.6

124

2.4

135

Norway 6.6

1

5.2

9

5.1

23

6.1

11

5.0

14

USA 4.5

83

5.7

2

5.6

5

6.2

6

5.8

2

Germany 6.1

12

5.0

12

5.4

11

6.2

8

5.6

5

Russia 5.0

53

3.4

107

3.7

109

4.5

57

3.5

49

Brazil 3.4

124

3.7

92

4.6

53

4.6

55

3.2

85

Turkey 5.1

50

3.8

80

4.5

61

4.4

62

3.3

69

China 6.0

17

4.2

48

4.7

49

4.2

73

4.1

28

Mexico 5.2

43

4.5

36

5.0

26

4.2

71

3.4

56

Madagascar 4.1

99

3.1

123

3.9

100

2.5

126

3.1

97

Mozambique 1.9

137

2.8

131

3.8

106

2.9

117

2.8

117

Congo 3.5

123

3.0

127

3.4

124

2.5

127

2.8

116

Burundi 3.6

119

2.8

130

3.3

125

2.1

135

2.8

122

Malawi 2.2

136

3.5

102

3.2

129

2.3

131

2.7

124

Source: compiled by the authors based on: (World Economic Forum 2018).

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3 Results In the course of regression and correlation analysis, the following results were obtained (Table 2, Figs. 1, 2 and 3). Table 2. Results of regression analysis. Dependent variables (y)

Indicators Regression dependence on independent variables (x) 9th pillar: Technological 12th pillar: Innovation readiness 3rd pillar: Macroeconomic Model y = 0.7126x + 1.5174 y = 0.64620 + 1.0377x environment 0.5910 0.8348 R2 8th pillar: Financial market Model y = 0.5173x + 1.8354 y = 0.7378x + 1.2369 development R2 0.7789 0.7926 9.03 FDI and technology Model y = 0.5038x + 2.3112 y = 0.6712x + 1.9032 transfer R2 0.8496 0.7545 Source: compiled by the author.

6

7

y = 0.7126x + 1.5174 R² = 0.591

3rd pillar: Macroeconomic environment

3rd pillar: Macroeconomic environment

7

5 4 3 2 1 0

6 5

y = 0.6462x + 1.0377 R² = 0.8348

4 3 2 1 0

0

2

4

6

9th pillar: Technological readiness

8

0

2

4

6

8

12th pillar: Innovaon

Fig. 1. Regression curves that reflect dependence of the macro-economic environment on technological readiness and innovational activity of economy

The data of Table 2 and Figs. 1, 2 and 3 show that growth of the value of the indicator of technological readiness by 1 points leads to increase of the value of the indicator of macro-economic environment by 0.71 points (correlation – 59.10%), indicator of development of ﬁnancial market – by 0.52 points (correlation – 77.89%), and indicator of direct foreign investments – by 0.50 points (correlation – 84.96%). Growth of the value of the indicator of innovational activity of economy by 1 point will stimulate the increase of the value of the indicator of macro-economic environment by 0.6462 points (correlation – 83.48%), the indicator of ﬁnancial market development – by 0.7378 points (correlation – 79.26%), and the indicator of direct foreign

Innovational Projects as a Basis of Progress of the Global Financial System

5

6

y = 0.5173x + 1.8354 R² = 0.7789

8th pillar: Financial market development

8th pillar: Financial market development

6

1265

4 3 2 1 0

y = 0.7378x + 1.2369 5 R² = 0.7926 4 3 2 1 0

0

2

4

6

8

0

9th pillar: Technological readiness

2

4

6

8

12th pillar: Innovaon

Fig. 2. Regression curves that reflect dependence of development of ﬁnancial market on technological readiness and innovational activity of economy

6 5

7

y = 0.5038x + 2.3112 R² = 0.8496

9.03 FDI and technology transfer

9.03 FDI and technology transfer

7

4 3 2 1 0

y6 = 0.6712x + 1.9032 R² = 0.7545 5 4 3 2 1 0

0

2

4

6

9th pillar: Technological readiness

8

0

2

4

6

8

12th pillar: Innovaon

Fig. 3. Regression curves that reflect dependence of direct foreign investments on technological readiness and innovational activity of economy.

investments – by 0.6712 points (correlation – 75.45%). The results of regression analysis showed high dependence of progress of the global ﬁnancial system on innovations. This proves the offered hypothesis on the basic role of innovations in development of the modern global ﬁnancial system and conﬁrms the necessity for restoration of innovational activity in this system, which, in view of the current global economic situation, requires optimization. Experience of the recent global ﬁnancial crisis allowed determining new requirements to innovational development of the global ﬁnancial system: – social responsibility: positive influence on society and absence of negative consequences for society; – security: technical support for opposing the negative influence of external factors (especially topical for ﬁnancial innovations based on application of new information and communication technologies); – long-term orientation: consideration of short-term and long-term consequences of implementation of ﬁnancial innovations.

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For observing the above requirements, the authors recommend using the optimization algorithm of implementing the innovational projects in the ﬁnancial sphere (Fig. 4).

Fig. 4. Optimization algorithm of implementation of innovational projects in the ﬁnancial sphere. Source: compiled by the authors.

As is seen from Fig. 4, the offered algorithm of implementation of innovational projects in the ﬁnancial sphere differs from the traditional algorithm, which has been applied until now and which was a reason of the recent global ﬁnancial crisis. The developed authors’ algorithm emphasizes not commercial attractiveness of created and implemented ﬁnancial innovations but social consequences of this process. That is, innovational activity of economic subjects in the ﬁnancial sphere is based not only on the idea of maximization of proﬁt but also on the idea of corporate social responsibility. The beginning of the innovational process preserved from the traditional algorithm of implementation of innovational projects, including in the ﬁnancial sphere; the ﬁrst

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stage envisages conduct of marketing studies that are aimed at determining public needs for ﬁnancial innovations (determining commercially attractive innovational projects). The second stage envisages conduct of scientiﬁc research aimed at satisfaction of the determined needs for ﬁnancial innovations – i.e., creation of ﬁnancial innovations. Further process of implementation of the innovational project is modiﬁed in the interests of its optimization. Thus, at the third stage, new or existing technologies of provision of security of created ﬁnancial innovations are created or adapted. Thus, instead of traditional post-fact creation and implementation of the systems of security of ﬁnancial innovations by the state, it is offered that developers of ﬁnancial innovations create them. The fourth stage envisages veriﬁcation of effectiveness and reliability of the security system by the state. If security control is not passed, it is necessary to temporarily refuse from implementing the ﬁnancial innovation. If security is ensures, transition to the ﬁfth stage takes place – at which the state assesses possible short-term and long-term social consequences of implementation of ﬁnancial innovation. The sixth stage is related to state’s decision on expedience of implementing innovation from the social point of view. If ﬁnancial innovation is socially irresponsible (it my potentially lead to negative social consequences), it is necessary to refuse temporarily from its implementation. Only if the ﬁnancial innovation is socially responsible (there are no potential negative social manifestations of its practical implementation), at the seventh stage the state provides a permit for its practical implementation. The eighth stage envisages systemic monitoring of the results of implementing the ﬁnancial innovation by its creator and solving the emerging social problems.

4 Conclusions Thus, the offered hypothesis is proved – it is shown that innovational projects are the basis of progress of the global ﬁnancial system, but they require a serious state control for provision of social responsibility and security in the long-term. The authors’ recommendation for anti-crisis management of the process of innovational development of this system in the modern economic conditions is the optimization algorithm of implementation of innovational projects in the ﬁnancial sphere. This algorithm envisages active involvement of the state into the process of innovational development in the ﬁnancial sphere after implementation of innovational projects for regulating their negative consequences and during implementation of these projects, for preventing possible negative consequences. In the developed algorithm, the state is assigned with authorities for decisions on implementation of ﬁnancial innovations, the criterion of evaluation of which is not only commercial attractiveness of innovational projects in the ﬁnancial sphere but their social consequences.

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Therefore, the future of the global ﬁnancial system should be in harmony with effective innovational projects. The recent global ﬁnancial crisis showed new treatment of this effectiveness, supplementing it with requirements to security and positive influence on society. Conceptual character of recommended optimization algorithm of implementing innovational projects in ﬁnancial sphere is a limitation of the performed research, and further scientiﬁc efforts should be focuses on creation of methodological provision that allows performing evaluation of security, social responsibility, and longterm social consequences of ﬁnancial innovations and that provides support for state decisions on expedience of implementing ﬁnancial innovations in view of these criteria.

References Arkhipova, V.V.: World ﬁnancial system: Globalization or deglobalization? World Econ. Int. Relat. 60(5), 40–49 (2016) Bilorus, O.: World structural crisis and transformations of the global ﬁnancial system. Econ. Ann. XXI 7–8, 4–7 (2014) Bogoviz, A.V., Ragulina, Y.V., Morozova, I.A., Litvinova, T.N.: Experience of modern Russia in managing economic growth. Stud. Syst. Decis. Control 135, 147–154 (2018) García-Quevedo, J., Segarra-Blasco, A., Teruel, M.: Financial constraints and the failure of innovation projects. Technol. Forecast. Soc. Chang. 127, 127–140 (2018) International Monetary Fund: GDP per capita in the countries of the world in 2017 (2018). http:// www.imf.org/. Accessed 9 Mar 2018 Kaya, H.D.: The impact of the global crisis on the stability of the ﬁnancial system. J. Appl. Econ. Sci. 12(3), 698–708 (2017) Prochniak, M., Wasiak, K.: The impact of the ﬁnancial system on economic growth in the context of the global crisis: empirical evidence for the EU and OECD countries. Empirica 44 (2), 295–337 (2017) Li, X., Subrahmanyam, A., Yang, X.: Can ﬁnancial innovation succeed by catering to behavioral preferences? Evidence from a callable options market. J. Financ. Econ. 2(1), 34–42 (2018) Lund, S., Härle, P.: Global ﬁnance resets: The decline of cross-border capital flows signals a stronger global ﬁnancial system. Financ. Dev. 54(4), 42–45 (2017) Morozova, I.A., Sahabutdinova, L.R.: Financial stability concept: main characteristics and tools. World Appl. Sci. J. 22(6), 856–858 (2013) Nozdrev, S.V.: China in global ﬁnancial system. World Econ. Int. Relat. 60(10), 29–40 (2016) Popkova, E.G., Vovchenko, N.G., Epifanova, T.V., Pogorelenko, N.S.: Did competition help to achieve positive effects of privatization. Espacios 39(1), 18 (2018) Porﬁr’ev, B.N.: Green trends in the global ﬁnancial system. World Econ. Int. Relat. 60(9), 5–16 (2016) Ramanathan, R., Ramanathan, U., Bentley, Y.: The debate on flexibility of environmental regulations, innovation capabilities and ﬁnancial performance – a novel use of DEA. Omega U.K. 75, 131–138 (2018) Shaskhovskaya, L.S., Dzhindzholiya, A.F., Morozova, I.A., Volkov, S.K.: Extended commercial concession agreements in education as a perspective form of public private partnership. World Appl. Sci. J. 28(11), 1561–1566 (2013) World Economic Forum. The Global Competitiveness Report 2017–2018 (2018). http://www3. weforum.org/docs/GCR2017-2018/05FullReport/TheGlobalCompetitivenessReport2017– 2018.pdf. Accessed 9 Mar 2018

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Yao, M., Di, H., Zheng, X., Xu, X.: Impact of payment technology innovations on the traditional ﬁnancial industry: a focus on China. Technol. Forecast. Soc. Chang. 2(1), 22–29 (2018) Zhou, B., Chen, L.: Going global: Internationalizing & localizing a legacy ﬁnancial system. Cutter IT J. 30(4), 15–21 (2017)

Russian Bank Association as a Driver Force of Institutional Changes I. N. Shapkin ✉ (

)

Financial University Under the Government of the Russian Federation, Moscow, Russia [email protected], [email protected] Abstract. As lobbying organizations, Russian Bank Associations are designed to articulate and convey the wishes of the banking business to the authorities. Nowadays they have become an important subject of institutional changes not only in the ﬁnancial segment, but also in the economy as a whole. The purpose of the article is to identify directions, mechanisms of impact and inﬂuence of the banking associations on ﬁnancial and banking environment. It is based on open data: the materials of two major banking unions of the country. Keywords: Banking associations · Institutional environment Institutional changes · Lobbying JEL: 14 · E02

1

Introduction

The eﬀective functioning of a modern market economy cannot be achieved without permanent and systematic interaction between market actors, legislative and executive authorities. A modern State assumes the functions of arbitrator and regulator of market, inﬂuences the nature, pace, direction of development of the economy by means of regu‐ lation, bureaucratic administration, planning, legislation, judicial decisions, prohibitions and commands (Roseﬁelde 2004). It aﬀects the economy through ﬁscal policy, subsidies, controlling and regulatory mechanisms, transfers, payments from the State budget. But one must not forget that the State remains the largest actor in the market. It produces a signiﬁcant proportion of the GNP. Therefore, business sees the State as a vital partner, a potential customer and consumer of products and services. Business is interested in the application of material, ﬁnancial, scientiﬁc and technical, information resources of the State, its external and internal policy opportunities. This potential may be involved in the economic turnover through market mechanisms. Infrastructure projects carried out by the authority are of particular interest to busi‐ ness. Without advanced transport network, energy and water supply communications, secondary and higher education, health, science, culture, it is rather diﬃcult to exercise eﬀective economic activities. In turn, the State cannot function normally without interaction with business. The issues of ensuring macroeconomic stability, resource allocation and enhancing their © Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 1270–1281, 2019. https://doi.org/10.1007/978-3-030-00102-5_134

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eﬀectiveness, thus promoting equitable income distribution, cannot be fully addressed only at the expense of public funds. The multi-variety and the uncertainty of economic challenges, numerous internal and external risks, adherence of the oﬃcials to certain views, impact of various social groups - all these factors can lead to the authorities’ unilateral decision-making. To avoid ﬁnding oneself hostage to these risks, a constant dialogue between the Government and business is required. This interaction involves the establishment of a legislative framework to build strong and constructive relationships based on the search for compromise, dialogue, mutual respect and cooperation. These relationships should be equal, be based on historical experience, national and cultural traditions, i.e. “conditioned development” (North 1997). The absence of legitimate forms can be substituted by unlawful, corruptive mechanisms.

2

State and Business Alliances in Modern Market Economy

In order to build partnerships, the State required a contracting party. It can be represented by businesspersons in possessing of economic power, major corporations, ﬁnancial and industrial groups and business associations. Unlike the other actors of the political process, business unions do not express individual or group preferences, but represent and articulate the interests of entire communities. That is why they are of interest to the authorities. Business Association is an association of business representatives seeking to ensure their interests and advancement through a mutual support. Their members do not abdi‐ cate their individuality in favor of a community, but express loyalty towards it, which is based on their own interests. Such solidarity reduces fragmentation, contributes to the maintenance of order, the conservation of qualiﬁcation, strengthens the authority and soothes conﬂicts in society (Roseﬁelde 2004). Business Association is a lobby organization. They are designed to impact legislative and executive authorities with the aim to make the latter adopt solutions, required by the lobbyists. This process is carried out through speciﬁc mechanisms, technologies, forms and methods. The eﬀectiveness criteria of such activities are the promotion of the interests of the community. But the State responsible for the economic and social poli‐ cies, is also interested in cooperation with the most inﬂuential alliances. The relationship between the States and organizations for collective action, therefore, is not a “one-way street” (Pawroz 2009; 2016).

3

Russian Business Association. Russian Banking Association

As a result of transformation changes of the beginning of the 1990-s Russian business established non-proﬁt organizations, among them the leading positions are occupied by Chamber of Commerce and industry of the Russian Federation, the Russian Union of industrialists and entrepreneurs, “Opora Russia”, «Business Russia» , Association of Russian banks, The Association of banks of Russia.

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Banking associations are the oldest and the most powerful business unions of the country. They are the main subject of dialogue between the state and the banking community. Created as public non-proﬁt structures, association perform representative tasks, fulﬁl lobbying functions, addresses tasks for institutional change of business environment. This article is to analyse the directions and mechanisms of banking associations for ensuring institutional changes in the business space. The process of formation of the modern Russian banking system began in the late 1980s. The diﬃcult economic and political situation in the country, the absence of State authority, the weakness of the legislative base pushed the banking community to unite. Moscow Banking Union, Leningrad Association of commercial banks, later transformed into the Association of the banks of the Northwest, were established in 1989. In 1990, the Russian banking union (Association of Russian banks, ARB) appeared. (General information on ARB). The ﬁrst wave of the foundation was accompanied by the emer‐ gence of the following regional structures: Altai Bank Union, Perm Bank Union, Omsk Bank Union, etc. In December 1990, managers of 37 commercial banks created on the base of the territorial branches and 13 provincial ﬁliations of Promstroybank of the USSR, signed the Treaty on establishment of the Association “Russia” for the protection of the rights of its members and representation of the interests in the public bodies. In 1999, it was renamed to be “Association of Russian regional banks”, and in 2017 - “Association of Russian banks (ARB). The Association of Russian banks is the largest banking union. It currently counts more than 300 members. Among them there are those systemically important: credit institutions of the federal level, banks with foreign capital participation, small and medium-sized regional banks and non-bank credit institutions, social organizations, mass media. The Association sees its mission in promoting stability and liquidity of the banking system in Russia; in formation of constructive relationship between the banking community and Government at all levels - federal, regional, municipal, involving all its branches -legislative, executive, and judicial; in the development of a legislative and regulatory framework for the activity of credit institutions. Today the ARB considers the following to be its top priorities: increasing the capitali‐ zation of banks and the creation of conditions for the formation of long-term investment resources; strengthening of the confidence in the national banking sector of the investors and depositors; reducing the cost of banking services and enhancing the efficiency of banking business; ensuring equal conditions of competition for all credit institutions, including State-controlled banks (Association “Russia”. About The Association). In March 1991, at the initiative of Bank unions a Congress of commercial and coop‐ erative banks of Russian Federation was held. One of its decisions was to establish the Association of Russian banks (ARB). The Association of Russian banks cooperates with regional banking associations in 52 subjects of the Federation and with 18 ARB repre‐ sentatives in other regions of Russia. On January 1, 2018 Association of Russian banks counts 656 members, including 440 credit institutions. Associate members counted, ARB is composed of 762 participants, including 526 credit organizations. They

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accounted for 80% of the banking institutions in Russia, which owns more than 90% of the assets of the Russian banking system. The ARB includes the largest Russian banks, the “big four” of audit ﬁrms, 19 representative oﬃces of foreign banks, 65 banks with foreign participation in the authorized capital. (General information on ARB). The mission of this lobby organization is to improve legislation, including tax one, through promotion of draft laws and amendments to the legislation in the State Duma, the Government, the Bank of Russia and other bodies of The Executive and Legislature. The main tasks of ARB are the following: development of banking in the Russian Federation; participation in the activities of State bodies and administration, as well as Central Bank of Russia to stabilize the economy, monetary circulation and implemen‐ tation of monetary policy; protection of interests of credit institutions in the legislative and executive organs of State power and administration, CBRF, judicial, law enforce‐ ment, ﬁscal and other State bodies; consolidation of resources of credit institutions to address major economic programmes; provision of credit organizations with informa‐ tional and analytical, methodical, legal and other assistance in their work on the basis of foreign and domestic experience; support of mutual conﬁdence, business partnership in the relationship between credit institutions themselves and with clients; cooperation of Russian credit organizations with foreign banks, their unions and associations, inter‐ national ﬁnancial organizations. (General information on ARB). Currently, these associations remain the most inﬂuential and powerful unions in the banking industry. Despite some diﬀerences, they have similar goals: protecting corpo‐ rate interests and rights of the members of the banking community by all means, allowed by the legislation of the Russian Federation; promoting the development of interbank cooperation in Russia and in the world; ensuring mediatory function between credit organizations and Government authorities; preparation of banking specialists and improvement of their qualiﬁcations, etc.

4

The Activities of Banking Organizations Over the Forging of Institutional Environment

Banking associations are devoting their prior attention to development and improvement of institutional space. “Institutional framework has a decisive inﬂuence on what kind of organizations emerge, and on how they evolve, - states D. North. But in their turn organizations have an impact on the process of changing the institutional framework” (North 1997). There are two institutional platforms on which associations operate. External institutional (formal) environment is a set of rules, restrictions, which outline the acceptable boundaries of modern credit organizations’ activity. It is designed through various laws, regulations and administrative documents. It is usually created in the process of interaction of State bodies with an organized banking business. Internal institutional (formal and informal) environment is a mandatory set of rules, generated by the banking community, informal restrictions, voluntarily assumed by its members to ensure the activities of banks to be carried out in compliance with uniﬁed rules, so that it was more predictable, understandable, transparent, and thus more eﬀec‐ tive and of higher quality.

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Internal institutional environment includes a number of structural elements. Banking unions aﬀect the uniﬁcation of a “corporate” space through standardization, regulation of Bank activities, the transfer of the latest experience of doing business. “… To ensure the functioning of the system, as D. North noted, within the Community rules should be supplemented by standards and penalties.” (North 1997). This space is created through the adoption of a code of conduct for banks and bank employees, development of internal standards and normative documents, regulation of the banking operations, maintenance of a common accounting and ﬁnancial reporting, etc. These speciﬁc, standardized rules and regulations narrow the uncertainty. Establishing ﬁxed rules, standards of conduct, business conduct standards, based on best practices, narrow the ﬁeld for conﬂicts within the community, as well as with other actors of the market and the State. Internal institutional environment is the result of long and considerate work. All the activity of the banking associations in all these areas, ultimately, aimed at adapting to constantly changing business conditions.

5

The Activities of Banking Associations Over the Forging of an External Institutional Contour

Nowadays ﬁnancial and banking spheres are facing persistent institutional problems. Development and improvement of external institutional environment is carried out through cooperation of banking alliances with power to implement existing ones and create new rules and regulations. Banking associations seek to establish long-term bounds with public institutions at all levels. They collaborate with the presidential administration, the Government, the State Duma, the Federation Council, regional and local authorities, with the structures regulating ﬁnancial markets, primarily with the Central Bank of Russia. Lobbying structures, they use methods of “direct” and “indirect” inﬂuence and pres‐ sure on the Government to create a ﬂexible and eﬃcient national ﬁnancial and credit system, to enhance its reliability and independence, to reduce bank risks by improving the regulatory and legal framework of ﬁnancial and credit sector. The Association take an active part in the meetings with the leaders of the largest Russian companies and business alliances, which are held by the country’s President and Prime Minister. In addition to the direct contact, Association uses such form as a direct written application to the legislative or executive power. Generally, this form of association is used in case of wrong decision threatening the stability of the banking sector. There are few examples of such application in the history of banking unions, because at the preparatory stage Associations are already seeking to withdraw or amend the documents, disadvantageous to them. Banking associations widely and actively cooperate with the legislature - the State Duma and the Federation Council, which form the legal basis for the country’s banking system. Representatives of the Associations take a very active and eﬀective participation in the parliamentary hearings of both chambers of the Federal Assembly, in the work of interregional Bank Council, which is chaired by the head of the upper House of the Russian Parliament (the Association of Russian banks. Annual report-2016).

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Representatives of the banking associations participated in the work of specialized committees of the two chambers, in parliamentary hearings, in the work of the Expert Council on the law of Committee of the State Duma on ﬁnancial market, the State Duma Committee on constitutional legislation and State construction. They have initiated a large number of amendments to laws concerning the banking system. The Association has established close relations with the management of the Central Bank. The practice of regular meetings between the leadership of the Central Bank and members of the Banking Association was developed. They are held to discuss the prob‐ lems of country’s economic development and the banking sector, to elaborate mecha‐ nisms to resolve them. Before the adoption of important decisions a regulator, as a rule, consult with the banking unions. For the development of normative documents regu‐ lating the activities of banks, large expert-analytical work is held, the establishment of joint working groups is widely practiced. Banking Associations actively collaborate with the Executive power-ministries, departments, regional authorities. These relationships are built on the basis of treaties and agreements on cooperation. The ﬁrst such document “On cooperation in the ﬁeld of ensuring banking security” was signed by ARB in December 1995 with the Ministry of Internal Aﬀairs of the Russian Federation, in 1997 - with the Federal Agency for Government communications and information under the President, in 2001 -with Governments of Moscow and Moscow region, in 2004- with the Federal Antimonopoly Service (FAS), etc.1 These agreements allow the Union to build partnership relations with authorities, have a direct inﬂuence on the development and adoption of decisions, including those of an institutional nature. The main forms of work of Associations with the power are the following: meetings, talks, participation in conferences, work in various temporary and permanent commis‐ sions and working groups to prepare draft decisions on speciﬁc economic issues. They are in constant communication with representatives of the proﬁle Ministry, they meet with the Minister of Finance. Among the discussed topics are the issues of increasing capitalization and expanding the resource base of banks, reducing of their operating costs, ensuring fair competition of market participants, tax collection and banks taxation. Proposals are included in the regulations, orders and instructions issued by the ministries. Interregional meetings organized by departments widely engage regional banking unions, the partners of ARB and ABR. Establishing of personal contacts with the heads of federal bodies does not preclude formal appeals to him to explain laws and regulations, preparing solutions.

6

The Activities of Banking Associations Over the Forging of an Internal Institutional Contour

Internal institutional environment formation is done by the business itself by creating temporary working groups, permanent economic situation monitoring committees, the 1

The Association of Russian banks. The report is based on the ARB Annual report for 2010-2016 years.

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conjuncture of ﬁnancial and credit spheres, legal status of banks; by preparation of analytical reports, certiﬁcates with their recommendation on the improvement of the legislation and normative documentation of banking institutions; by holding various organizational activities, etc. ARB has formed specialized committees on monetary policy and banking supervi‐ sion; banking law and practice; payment systems and organization of settlements; regional policy; international activities; mortgage lending; information policy and public relations; IT; taxation, accounting and reporting, etc. The Association created: Coordi‐ nating Committee on quality standards of banking activities; 6 working groups: on debts and promissory notes, on the establishment of a mechanism for addressing collateral vehicles, on preparing proposals on the organization of interaction of banks-members of the Association working at the market of precious metals, on the improvement of legislation on pledge and the improvement of foreign exchange legislation, etc. (The Association of Russian banks. Committees). Within the framework of the ARB have been established: Council on monetary policy, Committee on banking law, Committee on the development of mortgage lending programs, Committee on improving settlement and payment system, Committee on banking and information technology, Committee on small and medium-sized businesses, etc. Along with them working groups on securitization, new payment technologies, etc. were created. The activities of the specialized committees and working groups of the Association aim at developing recommendations and specific action programmes, at the provision of practical assistance to its members (Association «Russia». About The Association). Banking unions face various professional tasks. The most important of them is the prompt response to the needs of the banking community. To accomplish this mission, the Associations created an organization to perform speciﬁc tasks. In some cases, they rely on aﬃliates. Legal assistance to credit organizations is provided by the established under the ARB in 2006 Law Oﬃce “21 century”. Its primary areas of activity are: the involvement in the legislative work of the union; preparation of drafts of normative and legal acts; consulting members of the union; organization of deals to acquire banks by the Russian and foreign investors, A&M consulting; organization of pre-sale audit; representation of interests of banks in arbitration courts and courts of general jurisdiction, economic and administrative disputes; opposition to hostile takeovers; consideration of claims of citizens, etc. (The Association of Russian banks. (General information on ARB). Since 2000s, the Association has paid great attention to professional assistance to banks. It has taken a number of steps to promote innovations and innovation activity. A project of EvaBeta is one of them. ARB has created a company that possesses advanced technology in the ﬁeld of certiﬁed risk management. EvaBeta provides an opportunity for managers and investors to assess the quality of assets that they own or manage, oﬀers methods and techniques for measuring and evaluating the ﬁnancial and non-ﬁnancial risks (the Association of Russian banks. ARB Projects). The most important activity of the ARB is modernization of the institutional business environment on the basis of the application of best global practices. Drawing upon the law “on international commercial arbitration” of 1993 and Federal law of 2002 “On arbitration courts in the Russian Federation”, the Association created an arbitration court

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for conciliation of the parties and settlement of disputes arising in the bank environment Legal status, the order of organization and functioning of the arbitral tribunal, the rules of the proceedings are deﬁned by Provisions and Regulations of the arbitral tribunal. The arbitration court has a right to settle civil disputes involving Russian and foreign legal entities and physical persons. Over the twenty years of work the court has consid‐ ered nearly 2000 cases. To resolve disputes between banks and customers, a new structure of out-of-court dispute resolution was created. It was headed by the Financial Ombudsman or public mediator. Currently the head of it is P. Medvedev (Association of Russian banks. The Court of arbitration). To ensure security, the Association has established Interbank security service “AMULET”. Its creation was motivated by the need to consolidate the eﬀorts of the banking units that provide security and counteraction to criminal attacks on credit insti‐ tutions. Not being a substitute for the security services to banks, it optionally helps to solve emerging problems. “AMULET” exercises: facilities protection, cargo escort, transport of valuables, personal protection; technical security, consultation of clients in matters of safety and security management in organizations, banks: security audits; legal services; informational and analytical support; provides computer security of business (Association of Russian banks. The security service “AMULET”; The Association of Russian banks. About company “AMULET”). With the direct participation of ARB, in 2005 on the basis of the Federal law on credit histories” there was established a joint-stock company “National Bureau of credit histories (NBCH). Today the database of credit histories of individuals and legal entities established by NBCH is formed as a result of cooperation with over 3000 organizations from all regions of the country, which is many times higher than the performance of the rest of the credit Bureaus in Russia altogether. Bureau works with the largest ﬁnancial organization. The success of its activity is ensured by a wide range of services. NBCH attributes great importance to the development of partnerships, the joint search for solutions to issues in the ﬁeld of technological development of business processes. The Bureau develops long-term mutually beneﬁcial relationships with its partners, TransUnion (United States), CRIF (Italy) and Fair Isaac (United States), world leaders in the development of information solutions, oﬀering clients the most modern, advanced and coordinated technology. Thanks to this cooperation, NBCH is ahead of other credit bureaus on the quality of services that meet the highest international stand‐ ards (the Association of Russian banks. National Bureau of credit histories). The interest of the banks to this structure is conﬁrmed by the growth in demand for the calculation of the scoring assessment. Credit organizations show great interest in checking on the customers with the usage of databases of vehicles and FMS passports database. Attaching great importance to the quality of the information provided, the Bureau developed new algorithms for detecting errors and improve the accuracy of the information provided. One of the activities of the ARB is a search for business partners for credit organi‐ zations. Agency relations is an agreement between large and medium-sized banks with ﬁnancially stable regional credit organizations to move to bank products and programs on a commission basis into the regions, to develop the interbank market and other forms

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of cooperation. These measures allow banks to mitigate the ﬁnancial ﬂows on the terri‐ tory of Russia and saturate the regions with Bank services. Regional banks, while keeping autonomy, gain an opportunity to develop new technologies and to increase the resource base and capitalization (the Association of Russian banks. Interbank business cooperation. Agency relations). Banking unions have made signiﬁcant eﬀorts in the area of harmonization and standardization of work of banks, exchange of modern experience of doing business. RBA formed a Coordinating Committee on quality standards of banking activity, which developed several projects of quality standards. Now, on a voluntary basis, credit insti‐ tutions can use 17 quality standards. To assess the quality of banking services according to the criteria of the accepted standards and standards of the European Foundation of quality management, the Asso‐ ciation, in conjunction with the all-Russian quality organization started the implemen‐ tation of the program “Best banks of Russia”. Without comparing credit institutions, this program establishes two levels of management of the banks: an excellent manage‐ ment and a good management. The Bank, whose management evaluation matches one of the listed requirements receives a certiﬁcate and the right to use the program label. Participation in the program provides a credit organization with an opportunity to eval‐ uate the management system on the basis of modern banking practices evaluation criteria, to promote its reputation and increase customer conﬁdence (the Association of Russian banks. “Best banks of Russia” Program). Enhancing the skills of managers and specialists of credit organizations is carried out through the organization of retraining of bank personnel, training of specialists in Russia and abroad. Under the ARB a non-governmental educational institution of addi‐ tional professional education is created, namely an Institute of banking, which is a member of the European Banking & Financial Services Training Association (EBTN). This Institute provides educational services to banks, holds seminars with experts on a regular basis, organizes corporate programs to improve their skills (the Association of Russian banks. Institute of banking). In modern conditions all credit institutions ace the challenge of transition to a customer-oriented strategy, which assumes that bank products become so comprehensive and technologically advanced that they could be flexible to adapt to the needs of the clients. The determination of banks to improve the quality of work with clients shows that even under conditions of low growth pace in the Russian economy, credit organizations continue to evolve at the expense of consumer credit and steadily improving products. The Association pays considerable attention to the implementation of automated banking systems in everyday work, including the areas of planning and management, specialized information and Internet technologies, protection of personal data, eﬀective functioning of national payment system, creation of a corporate system to counter the growth of fraud in the systems of remote banking service, etc. Banking associations lead rich conference activities. Various solutions to problems banks face in everyday practice are oﬀered at national and international conferences, round tables, presentations, meetings of the representatives of banking community with Government and political leaders. Among the most frequently discussed topics of recent times are the following: quality standardization of banking, credit and operational risk

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management, harmonization of banking activities in the ﬁeld of banking and ﬁnancial reporting, consideration of innovative forms and methods of bank work, in particular in the ﬁeld of IT, combating money laundering and ﬁnancing of terrorism, etc. The successful development of ﬁnancial and credit sphere depends on improvement of the ﬁnancial literacy of citizens. With the help of the ARB an Internet tv channel of ﬁnancial literacy and Banking tv television company were created. The aim of the project is to raise awareness of the society about ﬁnancial products and services, economic and entrepreneurial activity of banks, to ensure eﬀective business information exchange between regions, to contribute to the growth of social responsibility of ﬁnancial insti‐ tutions, etc. The Association attach great importance to the information and PR activities. They organize conferences, symposia and exhibitions on the questions of the improvement of banking sector, carry out publishing activities. The Association of Russian banks publishes: “National Bank magazine”, “ARB annual report”. “ARB Herald” (“Vestnik ARB”) is a magazine covering the activities of the Associa‐ tion and its partners. It contains materials of congresses, the minutes of the meetings of the Association Council and the Bureau of the Board of ARB, information on participation of bankers in parliamentary hearings and meetings of the committees of the State Duma, the Federation Council, meetings and negotiations with the heads of the legislative and exec‐ utive authorities, foreign guests, the texts of treaties and agreements. Particular attention is paid to the business correspondence of the Association with organizations, regulators and government bodies: the President, the Federal Assembly, the Government, the Bank of Russia, the Russian Ministry of Finance of Russia, the highest arbitral tribunal and others. In each issue new normative documents in the field of banking activities are announced, issues of banking regulation and taxation are covered, bills and regulations are assessed. Readers are invited to get acquainted with the information in the field of security, banking technology, staff training and retraining, public relations and advertising, including announcements of specialized conferences, seminars, symposiums and training courses (The Association of Russian banks. ARB Publications). “Herald of banking” of ABR has an electronic version. It can be found on the portal “banks.ru”. With the participation of Associations specialized literature - books, brochures, guides, etc., - are issued in order to help in the day-to-day work of employees of banks, auditors and experts. On its oﬃcial website the ARB publishes materials of the Ministry of ﬁnance, Central Bank and other regulators, information on the representatives of Union participation in parliamentary hearings and meetings of the committees of the State Duma and the Federation Council, their meetings and talks with the leaders of the legislature and the Executive, the texts of treaties and agreements with foreign partners, etc., The website has an own search engine and news feed. It also gives an opportunity to submit a complaint to the Financial Ombudsman. Banking associations support the on-line Edition, using TV, participate in the discus‐ sion of pressing issues at RBC channel. Listed activities aim at increasing the level of trust of the Russian society to the banking community. The Association works closely with regional business associations, regional units of the Central Bank and the territorial bodies of the Executive and legislative branches.

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The work with regional Associations is carried out in two directions: through direct contacts with the leadership of the constituent entities of the Russian Federation and through a systematic cooperation with regional banking institutions. Regional policy of the Associations is conducted in the constituent entities of the Federation in accordance with their characteristics and aims at strengthening the ﬁnan‐ cial sustainability of regional banks, increasing their role in the implementation of socioeconomic programmes, assistance in ﬁnding additional resource base and the growth of capitalization of banks, providing them with legal protection, expansion of credit activity etc. Banking unions are concentrated on a stable and eﬀective functioning of regional banks. A large number of workshops, conferences and meetings they hold with departure to the regions. Representatives of the administration of the constituent entities of the Russian Federation necessarily take part in these activities, as well as local ﬁliations of the Central Bank and other structures responsible for economic development of the region and its ﬁnancial and credit sector. The activity of banks-members and their branches covers the whole territory of the Russian Federation. In 2002, at the initiative of the Association of an all-Russian banking Council was created for consolidation of the banking community, strengthening regional banking associations and their role in the places of their location Currently, the union includes Bank Communities from 69 regions of Russia -from Kaliningrad to Kamchatka. Thanks to the Council’s activities interaction between banking institutions at all levels has intensiﬁed in the sphere of tackling the pressing problems of regional banks, bank costs optimization, improving banking supervision, eﬃcient measures to reduce interest rates, credit expansion of production, management of problem loans, etc. Interbank cooperation allows capital banks to divide ﬁnancial ﬂows on the territory of Russia on the basis of agreements, to promote modern banking products and programs in the regions, ﬁll them with new banking services. Interbank cooperation allows regional banks to get access to new technology, and, keeping independence, to increase the resource base and capitalization. Independent direction implies the development of partnerships with international ﬁnancial institutions and organizations with a view of the examination of modern foreign practices and innovations and their subsequent implementation on national market and in the activity of national banks, search for business partners, establishing personal relationships and bounds with the heads of international ﬁnancial institutions and banking associations. Since 1997 ARB has been an associate member of the European Banking Federation, which brings together nearly three thousand European banks. In 2010 The Association received the “associate” status in the International Banking Federation, representing the interests of the largest banking associations of United States, European Union, Australia, Canada, Japan, India, China, South Africa, South Korea, (Association of Russian banks. (General information on ARB). The Russian banking association study and learn the experience of their foreign counterparts on cooperation with international, governmental and ﬁnancial institutions, attract foreign banks to work on the ﬁnancial market of Russia, acquaint them with the Russian ﬁnancial system, participate in international forums and conferences outside

Russian Bank Association as a Driver Force of Institutional Changes

1281

the country, organize international meetings and meetings with representatives of inter‐ national banks and banking associations, etc. Unfortunately, international activities of the Association is severely limited because of the adoption of so-called “sanctions”.

7

Conclusions

The modern market economy exists in close relationship with the State. It implies an active involvement of business in the process of improvement of the market, market structures, mechanisms and institutions. A certain load in fulﬁlling these tasks falls on the shoulders of business alliances. In the context of high levels of risk, uncertainty and instability, banking associations pronounce in favour of institutional transformation.

References The Association of Russian banks. Annual report (2016). https://arb.ru/upload/iblock/810/ GO_2016_PDF.pdf The Association of Russian banks. ARB publications. https://arb.ru/arb/journals/ The Association of Russian banks. Institute of banking. https://ibdarb.ru/about/ The Association of Russian banks. Committees. https://arb.ru/arb/bureaux-and-committees/ The Association of Russian banks. Interbank business cooperation. Agency relations. https:// arb.ru/arb/projects/383/ The Association of Russian banks. National Bureau of credit histories. https://www.nbki.ru/ company/ The Association of Russian banks. About “Amulet group”. http://www.amulet-group.ru/ The Association of Russian banks. General information on ARB. https://arb.ru/arb/about/ The Association of Russian banks. Program “Best banks of Russia”. http://arb.ru/arb/bureauxand-committees/29634/andwww.cepvok.ru The Association of Russian banks. ARB projects. https://arb.ru/arb/projects/ The Association of Russian banks. The security service “Amulet”. https://arb.ru/arb/projects/ 815961/ The Association of Russian banks. Court of arbitration. https://arb.ru/b2b/judge/ The Association of Russian banks. Management Associations. https://arb.ru/arb/management Association «Russia». About Association. http://www.asros.ru North, D.: Institutions, institutional change and economic performance. Moscow, “Nachala”, 189 p. (1997) Pawroz, A.V.: Theory of Political Pluralism: Essence, Contradictions, Alternative, 178 p. Publishing House of Petersburg University, St. Petersburg (2009) Pawroz A.V.: Lobbying: the Institutional Framework and Practice of Political Power in a Democratic Society, 172 p. Russian Christian Humanitarian Academy, St. Petersburg (2016) Roseﬁelde, S.: Comparative Economic Systems: Culture, Wealth, and Power in the 21st Century Russ, 430 p. Rosspen, Moscow (2004)

Author Index

A Abutalimova, Saﬁa S., 516 Ageeva, Galina E., 545 Akhmetzhanova, Galina V., 813 Akimova, Olga E., 871 Akimova, Olga, 962 Alekhina, Larisa L., 219 Alekhina, Tatiana A., 765 Alekseev, Alexander N., 341, 578 Alferova, Tatyana V., 407, 1013 Alieva, Natalia Z., 1020 Aliyeva, Natalia Z., 236 Alpidovskaya, Marina L., 432 Alpidovskaya, Marina, 61 Andryashina, Nataliya S., 741, 748 Anisimova, Julia A., 813 Anopchenko, Tatyana Y., 414 Artemov, Alexander Y., 161 Artemyeva, Marina V., 947, 1138 Astafeva, Nonna, 836 Avdeyuk, Oksana A., 673 Avlasenko, Ilona V., 774 Avlasenko, Lyudmila M., 774 Azamatova, Gyuldzhan K., 176 B Baizulayev, Salikh A., 666 Barashyan, Liana R., 505 Barashyan, Liana, 622 Barcho, Mariana K., 1200 Bardovskii, Viktor P., 896 Bazhenov, Alexander A., 309 Belayeva, Irina, 241 Belokon, Lyudmila V., 803 Belousova, Anastasiya V., 774

Berezhnaya, Elena S., 364 Bezrukov, Boris A., 1261 Bezrukova, Tatiana L., 461, 1261 Bitarova, Maria A., 183 Bogoviz, Aleksei V., 154, 334, 578, 789, 1200, 1208, 1216, 1224, 1231 Bokov, Yuriy A., 126 Bolgova, Victoria V., 553 Bondarev, Vladimir A., 364 Borisenko, Irina V., 69 Boriskina, T. B., 537 Bormotova, Tatiana M., 195 Bormotova, Tatiana N., 142 Borshcheva, Alla V., 273 Borzenko, Ksenia V., 357 Brizhak, Olga, 1181 Budilova, Elena, 487 Budovich, Yuliya, 97, 734 Bugai, Yury A., 789 Bugrova, Olga S., 1145 Bujor, Evgeniya, 1169 Buklanov, Dmitry, 294 Burtseva, Margarita N., 219 Burtseva, Tatiana A., 1085 Buryakova, Olga S., 236, 783, 1020 C Chaikina, Zhanna V., 1193 Charykova, Olga G., 273 Chepurko, Galina V., 862 Cherney, Olga T., 1193 Chernorizova, Nina V., 757 Chernyshev, Mikhail A., 1036 Chistyakova, Marina K., 1238 Chugumbaev, Roman R., 922

© Springer Nature Switzerland AG 2019 E. G. Popkova (Ed.): ISC 2018, LNNS 57, pp. 1283–1287, 2019. https://doi.org/10.1007/978-3-030-00102-5

1284 Chugumbaeva, Nina N., 922 Chugurova, Tatiana V., 545 Chumachenko, Svetlana G., 1036 Churakova, Ekaterina N., 545 D Danilova, Olga, 241 Davydova, Marina L., 126 Degtyaryova, Tatyana V., 69 Denshchik, Marina N., 1094 Dneprovskay, Irina, 962 Dneprovskaya, Irina V., 972 Dolgorukova, Irina V., 142, 195 Dolgova, Olga, 487 Donichev, Oleg A., 251 Dubova, Yulia I., 213 Dugina, T. A., 3 Dybina, Olga V., 1124 E Efremova, Anastasia D., 947 Egorova, Elena N., 167 Endovitskaya, Elena V., 229 Evdokimov, Konstantin N., 495 Evtushenko, Oxana, 260 F Fedotova, Gilyan V., 908, 922, 1043, 1104 Fetisov, A. V., 537 Fetisova, Olga V., 1013 Filatova, Natalya, 836 Fokina, Olga V., 1085 Fomicheva, Tatiana V., 142 Fomicheva, Tatyana V., 195 Fraymovich, Denis Y., 251 G Garin, Alexander P., 726, 748, 987 Garina, Ekaterina P., 309, 726, 741, 748 Gashenko, Irina V., 932 Gavrilov, Alexander I., 309 Genzyuk, Eduard E., 20, 505, 622, 637 Getmantsev, Konstantin V., 105, 183, 348 Glinskaya, Olga S., 829 Godina, Olga V., 1094 Gogoleva, Tatiana N., 10 Golikov, Vyacheslav V., 213 Golubeva, Olga V., 1193 Gontar, Anastasia A., 1104 Gorbunova, Valentina V., 795 Gordeev, Valeriy, 61 Gornostaeva, Zhanna V., 213 Goryacheva, Tatyana V., 1113 Goykher, Oleg L., 1145

Author Index Grabar, Anna A., 1085 Grachev, Sergey A., 251 Grazhdankina, Lilianna Y., 795 Grechenkova, Oksana Y., 612 Grigorieva, Lyubov V., 371 Grigoryev, Aleksey I., 947 Grigoryeva, Gulmira B., 69 Gruzdeva, Marina L., 1193 Gundorova, Marina A., 251 Guryanov, Nikolai, 836 Guryanova, Anna, 836 H Haabazoka, Lubinda, 32, 1246 I Ilin, Ivan V., 896 Ilminskaya, Svetlana A., 219 Ilyasov, Ruslan K., 908 Ilyasova, Elena V., 183 Ilyukhina, Irina B., 883 Ivanov, Alexey A., 114, 987 Ivanova, Natalia A., 516 Ivanova, Natalia, 1027 Ivanova, Tatiana B., 954 Ivanova, Tatyana N., 77, 813 Ivushkina, Elena B., 236, 783, 1020 K Kachur, Oksana, 487 Kakushkina, Marina A., 325 Kanapukhin, Pavel A., 10 Katkova, Marina, 1130 Ketko, Natalia, 962 Khachaturyan, Mikhail V., 718 Khaﬁyatullina, Elmira, 836 Khanova, Marina N., 176 Khavzhokova, Z. B., 572 Khryseva, Anna A., 871 Khubulova, Veronika V., 443 Kichalyuk, Olga N., 421, 473 Kilinkarova, Soﬁya G., 803 Kireev, Egor Y., 195 Kirilenko, Viktoria S., 20, 473, 622, 637 Kirillova, Svetlana S., 461 Kirina, Lyudmila S., 399 Kladova, Anna, 61 Kleitman, Aleksandr L., 954 Klochko, Elena, 1181 Kokova, D. A., 572 Koloskova, Natalya V., 364 Konina, Olga V., 205 Konobeeva, Elena E., 765 Konobeeva, Oksana E., 765

Author Index Korabelnikov, I. S., 3 Korablev, Ruslan A., 161 Korda, Nadia I., 461 Korlyakova, Alla F., 384 Koshelev, Egor V., 114, 987 Kovalenko, Oksana A., 908 Kovanova, Ekaterina S., 666 Kovazhenkov, Mikhail A., 1043 Kozhanchikova, Natalia Y., 1238 Kozhanova, Tatiana E., 673 Kozhukhova, Margarita T., 316, 871, 972 Kozlova, Elena P., 987, 1138 Kozlova, Marina Y., 563 Krylova, Ekaterina M., 183 Kudryakov, Roman I., 1145 Kudryashova, Inna V., 282 Kuksova, Irina V., 461 Kulikova, Anna A., 473, 505, 586, 622 Kurbanov, Timur K., 1043 Kurilova, Anastasia A., 813 Kushnir, Irina B., 783, 1020 Kuzina, Elena, 1169 Kuzmenko, Yulia A., 612 Kuzmina, Emma V., 922 Kuznetsov, Victor P., 114, 947 Kuznetsov, Viktor P., 309, 741, 748, 844 Kuznetsova, Svetlana N., 741, 1138 L Lang, Petr P., 545 Lanskaya, Daria V., 105, 348 Lapaev, Dmitry N., 1138 Lapteva, Ekaterina A., 1113 Lapygin, Yuri N., 528 Lebedev, Konstantin, 97, 734 Lebedeva, Anna, 734 Lesnikova, Elvira P., 273 Lesnikova, Elvira, 852 Levchuk, Valery V., 726 Ligidov, Ramazan M., 862 Likholetov, E. A., 3 Lipinsky, Dmitry A., 495, 553, 603 Litvinova, Tatiana, 205 Lobova, Svetlana V., 341, 1208, 1216, 1224, 1231 Lokova, Mariana Y., 176 Lomakin, Nikolai I., 1104 Loshkarev, Andrei V., 545 Lyashenko, Irina Y., 10 Lysochenko, Alla A., 1036 M Magomedov, Magomedgabib, 294 Makarov, Pavel Y., 528

1285 Maksimenko, Liudmila S., 1094 Makusheva, Julia A., 844 Malofeev, A. V., 3 Malova, Tatiana, 683 Malyavkina, Ludmila I., 883 Malyutina, Tatiana D., 908 Marchenkova, Liliya M., 883 Mayboroda, Tatyana A., 803 Mazaev, Yuri N., 142 Medvedeva, Nina I., 795 Melnik, Margarita V., 10 Melnikova, Natalia S., 708 Menshchikova, Vera I., 325 Minenko, Aleksey V., 789 Mitrofanova, Inna V., 708 Mitrofanova, Svetlana V., 795 Mizikovsky, Igor E., 309 Momotova, Oksana N., 803 Mordvintsev, Ivan A., 205 Morozova, Irina A., 871, 972 Morozova, Irina, 205 Morozova, Nelli I., 236, 783 Morozova, Oksana A., 421, 473 Mosalev, Anton I., 167 Mramornova, Olga V., 516 Mukhomorova, Irina V., 167 Musaeva, Aynulkhat Z., 516 Musatkina, Aleksandra A., 495, 553, 603 Myasnikova, Tatiana A., 105 Myasnikova, Tatyana A., 348 Mytareva, Leyla A., 371 N Nalchadzhi, Tatiana A., 862 Nazarova, Natalia A., 399 Nazvanova, Karina V., 1155 Nechaeva, Svetlana N., 273 Nechaeva, Svetlana, 852 Nizovaya, Irina, 852 Novoselova, Natalia N., 443 O Oshkina, Alla A., 135 Ostrovskiy, Vladislav I., 414 Otstavnova, Liliya, 1027 P Panﬁlova, Olga V., 774 Parakhina, Valentina N., 939 Parshina, Anna A., 726 Pchelintseva, Irina N., 1113 Peskova, O. S., 537 Pivneva, Svetlana V., 813 Pivovarova, Marina, 683

1286 Plotnikov, Arkadiy P., 1113 Podkolzina, Irina M., 862 Polyakova, Anna A., 1238 Popkova, Elena G., 407, 939, 1013 Popov, Elena V., 718 Popova, Elena V., 1261 Popova, Larisa V., 3 Posazhennikov, Artur A., 1155 Potashnik, Yaroslav S., 1138 Pozdnyakova, Ulyana A., 316 Pozdnyakova, Viktoria V., 357 Prokopova, Olga V., 829 Prom, Natalya, 260 Przhedetskaya, Natalia V., 357 Przhedetskaya, Viktoria Y., 357 Przhedetsky, Yuri V., 357 R Ragulina, Julia V., 154, 341, 578, 1200, 1208, 1216, 1224, 1231 Razgonyeva, Vera V., 161 Reshetnikova, N. N., 572 Reshetnikova, Natalia, 294 Reshetnikova, Natalya N., 176 Risin, Igor E., 229 Romanovskaya, Elena V., 741, 748 Rostovshchikov, Igor V., 563 Rudkovsky, Viktor A., 563 Rumyantsev, Pavel A., 603 S Sadykova, Ksenia, 852 Samorodova, Elena M., 883 Sandu, Ivan S., 334 Sankova, Larisa, 1027 Santalova, Marianna S., 273, 852 Savina, Anna G., 219 Sazonova, Svetlana L., 451 Semenova, Elena I., 154, 334 Shaker, I. E., 819 Shaker, N. S., 819 Shakhovskaya, Larisa S., 705 Shalneva, Maria S., 1002 Shapkin, I. N., 1270 Shapovalova, Irina B., 325 Shchukina, Natalia A., 673 Shepeleva, Yulia L., 649 Shishkin, Aleksei A., 586, 637 Shkarupa, Ekaterina A., 371 Shokhnekh, Anna V., 657, 829 Shpilevskaya, Elena V., 726 Shurdumova, Elmira G., 666 Shustova, Svetlana V., 384 Sidunova, Galina I., 657

Author Index Simonova, Evgenia V., 765 Sintsov, Eduard V., 947 Sinyavsky, Nikolai G., 1054 Skobliakova, Irina V., 219 Skorikova, Irina S., 829 Skuba, Roman V., 1145 Slavnetskova, Lyudmila V., 1094, 1113 Slepakov, Sergey S., 443 Smirnova, Elena V., 795 Smirnova, Zhanna V., 1193 Sokolova, Natalia N., 896 Sokolova, Olga Y., 516 Sozinova, Anastasia A., 1085 Spektor, Lyudmila A., 20, 421, 586, 637 Spesivtsev, Valery A., 1261 Starikova, Liubov I., 883 Starostin, Aleksandr M., 649 Stel, Yevgeniy V., 126 Stepanova, Maria A., 765 Strelkov, Vladimir E., 1145 Strelkova, Lyudmila V., 844 Strichko, Anna V., 364 Stroi, Galina V., 803 Strukov, Yuriy V., 161 Sukhanov, Aleksandr V., 20, 421, 505, 586 Sukhanov, Evgeny V., 325 Sukhinin, Alexander V., 922 Sysoeva, Elena, 487 T Tappaschanova, Elizaveta O., 666 Tarasov, Dmitriy I., 844 Tarasova, Irina A., 673 Timacheva, Elena V., 954 Timofeeva, Elena A., 1075 Timonina, V. I., 705 Tkachenko, Denis D., 908, 1104 Toporkova, Olga, 260 Tovanchova, Elena N., 649 Tregubov, Vladimir, 1130 Treschevsky, Yuri I., 348 Treshchevsky, Yuri I., 183, 229 Treshevsky, Yuri I., 105 Troﬁmov, Oleg V., 844 Troshina, Elena V., 896 Tsikin, Alexey M., 432, 692 Tskhadadze, Nelli V., 757 Tufyakova, Ekaterina S., 1085 U Uchurova, Elena O., 1043 Urova, O. V., 537 Ushakova, Irina V., 1238 Ushvitsky, Lev I., 1094

Author Index V Vindizheva, Albina O., 176 Vitaleva, Helen, 962 Vlasova, Maria A., 896, 1238 Volchanskaya, Alena N., 563 Volobuev, Alexey, 1169 Vorontsova, Galina V., 862 Vysotskaya, Inna, 260 Y Yalmaev, Rustam A., 708 Yalmaeva, Makka A., 708 Yanchenko, Elena, 1027 Yaryshina, Valeriya N., 10 Yashin, Sergey N., 114, 987 Yavon, Snezhana V., 77 Yovanovich, Tamara, 260 Yudina, Tatiana N., 142, 195

1287 Z Zabaznova, Tatyana A., 1013 Zakharchenko, Elena, 294 Zakharov, Pavel N., 1155 Zakharova, Yuliya V., 114 Zakharova, Zhanna A., 87 Zakirova, Maria I., 251 Zazulina, Yevgeniya V., 364 Zelikov, Vladimir A., 161, 1036 Zemlyanukhina, Svetlana, 1027 Zerenova, Baira I., 1043 Zhidkov, Vladimir, 213 Zhirova, Saida A., 666 Zhukova, Tatyana V., 774 Zima, Yulia S., 932 Zinchenko, Yuliya V., 1002 Zolotovskiy, Vladimir A., 126 Zumakulova, Z. A., 572

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