Economics/15.Government management of economy

Dr.sc.oec., Professor Khodos D.V., Ph.D. candidate Stepanova L.V.

Institute of Economics and Finance of Agribusiness industry FSBEI HPO «Krasnoyarsk state agrarian university», Russia

The role of public private partnership in the development of innovations

According to the neoinstitutional theory, for any new relationship system certain institutes should be established. They can be formed either spontaneously or deliberately by legalizing existing informal relationships or by creating new institutes that are specifically aimed at the development of essential initiatives.

The set task of economic modernization of the country demands careful attention to the support of innovations.

In terms of the forming so-called “new economy” based on innovations the global practice clearly demonstrates the need to form a national innovation system (NIS) [1], which is the unity of state, private and social institutions and methods of their interaction and within which technical science knowledge and technologies are created, stored, distributed and reproduced. The national innovation system forms such a relationship system of science, manufacturing industry and society where innovations are the basis of economic development and the demands for innovation development, in their turn, greatly determine and stimulate the direction of scientific work development.

In most general aspect the structure of NIS of any country includes the complex of interrelated organizations engaged in the production and realization of scientific knowledge and technologies within national borders (small and big enterprises, universities, laboratories, technoparks and incubators), as well as the complex of legal, financial and social institutes that provide for innovation processes and have national background, traditions and political and cultural peculiarities [2].

One of the remaining, most arguable points is the role balance of the state and private businesses in the realization of these new tendencies. Scientific disputes on the role of the state in the economy are not over yet, because they start from time to time and mainly in turning points of a country’s development. And this is especially typical for the conditions modern Russia is in, where the modernization of the economy is taking place.

However, these general disputes should become more specific. It is important to answer the following question: what mechanism should be created to ensure the correlation of state and market levers in the process of innovation economy development? The answer to this question has been found: one of such institutes in the world is private public partnership – PPP, which represents the complex of forms of mid-term and long-term collaboration of the state and businesses aimed at the solution of tasks of social importance on mutually beneficial conditions. In Russia private public partnership gained attention only in 2002 and, unfortunately, these issues are not yet well elaborated either theoretically or in practice. Russia still lags far behind in using this institute although the government has always taken active part in economic activities and despite the urgency of this issue in the vital process of Russian economy modernization. Any national-level investment project based on both state priorities and individual interest of private businesses is bound to be more successful in comparison with ordinary large-scale investment projects in tough conditions of present-day Russian economy.

The UN gives the following definition of PPP: “voluntary cooperation of the representatives of social (state) and private (non-state) sectors in course of which all the participants agree to collaborate in order to reach mutual goals and to solve set tasks” [3].

What are the objective framework and the necessity to create private public partnership? It is undoubtedly the partnership with private businesses that will let the state:

— attract extra resources, and, first of all, investments to the public sector of economy,

— abate pressing budget problems,

— shift the major part of risks to business sector and,

— at the same time, keep shared facilities in state ownership.

Such a relationship system makes it possible to unite the resources and potentials of the two economic agents. Although it is really so, such a practical vision of the issue leads to a rather narrow understanding of the idea and the reasons for the appearance of PPP. A number of authors claim the following: “the reasons for the invention of this institute, the main idea of which still remains vague to a lot of people, are in the lack of budget funds for the development of a number of socially important spheres of economy, the problems connected with further tax rise, the increasing government borrowings and, at the same time, the growing popular frustration about the quality of services provided by the government” [4]. That is why the formation of PPP is mostly planned in the industry sectors that provide public goods and are close to natural monopolies. These are usually such service industries as road construction, railway, airport and power station modernization where it is possible to lower the pressure on state budget without privatization process. This is to say that the development of PPP is considered as an alternative for privatization.

The development of infrastructure is undoubtedly vital for the modernization of our economy as it is infrastructure that creates conditions for all other production. However, we believe, that the idea of PPP, as a modern institute, should be considered far broader. We should more fully consider the opportunities to use the benefits of the united efforts of the state and businesses not only in traditional branches that are managed by the state, but also in the newest branches of industries, in venture projects, etc., which will make for a quicker and more efficient transition to the innovation development of the country. It is the combination of the benefits of public accountability and private initiative that gives a bigger output thanks to the synergy of their efforts in innovative processes and higher efficiency and greater proficiency in the decision-making processes.

As a general conclusion it should be noted that private public partnership is really an effective mechanism that increases the level of competitiveness of national economy by attracting substantial investments for the modernization of existing and the creation of new production capacities and for the development of new technologies including management technologies. The key direction in the solution of problems connected with the creation of private public partnership as an institute of modernization of Russian economy is the elaboration of a consistent federal concept of PPP development where the government should clearly state its plans and projects as well as the conditions of their realization, and which should be supplemented by a number of more specified programmes with detailed actions, and where risk sharing, responsibility sharing and clear regulations of the partners’ actions will be clearly determined.

List of reference

1. Maksimov A.A. Forms of private public partnership in modern Russian conditions / Maksimov A.A. // Politics and society. – 2011. – No 1. – p. 22-27.

2. Osipenko O.V. Russian holding companies. Expert problems of the formation and maintenance of development. Publishing house Statut, 2008. p. 367.

3. Institutional measures of realization of regional development strategy: international practice review // region: economics and sociology. – 2007. - No 3. – p. 259-277.

4. Kabashkin A.V. Private public partnership in regions of Russian Federation/ A.V. Kabashkin – М.: Publishing house “Delo” the Academy of National Economy, 2010. – 120 p.