Regulation of regional industrial development (on the example of the Murmansk region)

I n the article the features of the Murmansk region’s industrial development from the point of view of the regional regulation are considered. Both negative and positive factors influencing the regional industrial branch of the Murmansk region’s economy are revealed. The system of indicators for the characteristic of the industrial complexes’ development in the regions of the similar type is generated. The measures of state regulation of the development are considered. The modern condition of the industrial complex of the Murmansk region is presented.

Industrial complex, regional policy, state regulation, the Murmansk region.

Natalia I.

ZERSHIKOVA

Ph.D. in Economics, Senior lecturer at the Institute of economic issues of the Kola SC of the RAS

In the conditions of the Russian federal arrangement the role and the importance of the regions – subjects of the Russian Federation in the social developing has become stronger. The relations between the state and the regions in the systems of forecasting, planning and financing, while the regions got considerable independence, result in the necessity of their interests’ coordination that is especially necessary under the conditions of the financial crisis; it is important for the regions which economy has a considerable share of the branches connected with extracting and processing raw materials’ resources. A lot of mineral resources’ kinds have strategic value and create necessary conditions for providing human ability to live.

The industrial complex is the economic basis of the structurally functional regional organization. The success of the regional economic development is provided by the scientific positions of the regional policy which is focused on the territories’ development, mitigation of the regional disproportions and the economy’s rise.

In the wide sense industrial policy usually means a component of the economic policy, i.e. the economic policy carried out in relation with industry. Such understanding is characteristic for the state regional industrial policy which is formed and carried out by the federal center (both in the industry as a whole and in its branches in particular). However the state does not form the regional industrial policy in relation to the other branches of production, such as construction, transport, etc.; as the industrial policy is a specific element of the economic policy. This specificity is determined, first, by the importance of the industry as the bases for the real economic sector’s development, secondly, by the multigraded character of the economic development and, thirdly, by a variety of the regional industrial potential at the qualitative and the quantitative levels [1]. Hence, the condition and the development of the industrial complex is closely connected with the national economy and with the formation of economic relations, and it also carries territorial features.

The regional industrial complex is a territorial production complex, which consists of two big groups of the production branches; the first group (extractive and processing industry) which forms the regional economy’s structure and functions, and the second group (integration of the production branches making both means of production and consumer goods) which acts as the subject of the program management.

Regulation within the state’s framework is carried out in the directions of the market regulation (market prices’ dynamics) of the corporate balanced development (studying of the firms’ demand structure); of the state regulation by means of the official bodies’ and organizations’ purposeful influence and of the government work’s increase.

The forms of the governmental regulation include planning, programming (first of all as complex purposeful programs) and forecasting. The economy of the European North is highly monopolized and it is not diversified enough; that brings certain specificity into strategic planning. Concrete strategic alternatives’ development demands the deep analysis of the perspective macro technologies and marketing researches [2]. Regional authorities express the interests of the native population through the system of the purposeful references of development for enterprises and production branches.

The regulation methods include economic, legal and administrative ones. Legal regulation is carried out by legal base’s adoption and enhancement. Administrative regulation is based on the use of such measures as statutory prohibition, permission, and compulsion. Both the Russian and the world experience of the regional policy is provided with the correct choice of the regional policy’s purposes for the effective regional economic development; with supporting administrative decisions by the act of legislation that forms stability in the capital’s attraction; with the formation of institutional bodies and integration processes; with the active application of regulation mechanisms for the economy’s development.

The state regulation methods of the economic structure’s development should represent the system of promotional and restrictive measures (normative-legal acts, laws), allowing to balance the interests of all population’s sections, to achieve stability in the economic development and to receive the greatest possible incomes of economic activities. The economic instruments of regulation should be the basis of this system. Among them it is necessary to distinguish taxes, tariffs, credits, grants, subventions, land prices, payments for natural resources, grants, and penal sanctions.

The process of regulation of the industrial complex’s development is directed to providing the regional economic situation’s stabilization, to structural transformations and economic growth. The realization of investments’ formation for the territorial development is connected with the regional programs’ realization and with participation in federal programs. The development regulation at the program’s level is carried out by the priority investment projects’ selection, and by the adoption and the development of the program.

Among the financial sources of the investment projects’ realization we can mention the means of both Russian and foreign investors, the budget means distributed within the Federal address investment program’s framework; the off-budget sources of financing; the project applicant’ own sources of financing; the means under the Russian Federation Government’s guarantees; the enterprises’ profit attraction on the returnable basis. The administrative regulation functions’ strengthening and enhancement will prove and realizes the industrial complex’s development. Time determines the elements of the regulation priority directions. At the period of the financial crisis both regulation and support of the industrial enterprises’ financial sphere will smooth the obstacles and will create the opportunity for survival and further development.

The Murmansk region is situated in the Northern part of Russia’s territory. It is necessary to note, that the industrial functioning and development in the conditions of the North imposes the certain specificity, creating additional expenses and rigid restrictions for the territory’s development. All these factors determine the necessity of development and carrying out corresponding socio-economic policy and regulation of the regional economic development.

The following measures of the regional policy will provide the effective industrial development in the Murmansk region:

• 1.    Strategic elaboration of the matter, leading to the creation of the programs of the industrial complex’s development.

• 2.    Normative-legal support.

• 3.    Creation of the development fund in the Murmansk region.

• 4.    Attraction of the federal means (participation in the Federal purposeful programs).

• 5.    Attraction of private investments (including foreign ones) for the investment situation’s improvement.

• 6.    Granting privileges under the impartial northern rises in price (taxes, credits, points of “growth”, etc.).

• 7.    Tariff policy.

• 8.    Northern delivery, etc.

While forming the regional industrial policy of the Murmansk area it is necessary to take into account its territorial and structural features. It is possible to refer to the favorable and the negative factors of the regional industrial development the following ones (tabl. 1) [3].

Table 1. Factors influencing the industrial complex’s development in the Murmansk region

Factors	Favorable influence	Negative influence
Economic and geographical position	•    Adjunction to the sea and transport ways’ borders •    Presence of the nonfreezing port at the city of Murmansk •    Use of the northern sea way	• Arrangement of the Murmansk region in the Northern territories, the rise of the production expenses’ price
Natural resource potential	• Unique natural resource potential. Extraction and processing (ores: apatite-nepheline, cupro-nickel, iron, nonferrous metals) (fish and water resources) hydrocarbons	• There is no account of the additional income’s formation at the enterprises with the best geological conditions
Economic structure	• Advanced industrial base.
Specialization	Branches: •    Electric power industry •    Chemical •    Ferrous metallurgy •    Nonferrous metallurgy •    Food (fish)	• Raised production expenses of the heavy branches of specialization
Integration processes (export)	• Steady tendency of the solvent foreign consumer’s demand for the production: metals, mineral products, fish and sea products	•    Dependence on the world prices •    Loss and insolvency of the internal consumption
Infrastructure	•    Existing transport ways in the Murmansk area •    Advanced power system •    System of the social infrastructure	• Discrepancy to the world’s level of production
Financial security of region	• Advanced banking system	Being insignificant: •    Own means of enterprises •    Budgetary in-payments •    Credit resources •    Crediting risks are high •    Dependence on the rate of the Russian Federation Central Bank’s refinancing
Manpower resources	•    Qualified labor potential •    System of the northern extra charges	1.    Decrease in: •    Number of the resident population •    Population capable of working •    Population’s lifetime. 2.    Reduction in: •    Arriving specialists •    Number of qualified experts and workers 3.    Imbalance between demand and supply
Intellectual potential	•    The Kola scientific centre •    System of educational establishments and their staff •    Base of the investment projects	Absence of administrative body which could: •    Coordinate manpower’s supply and demand •    Form the base of the investment projects

Adjunction to the sea and transport ways’ borders; presence of the nonfreezing port at the city of Murmansk; use of the northern sea way are the positive factors of the regional economic and geographical position. The Northern seaway which is open for foreign courts, for cargoes’ transportation between Southeast Asia and Japan is the important factor of the Northern regions’ attractiveness foreign investors. During the transition to the market relations there was transformation of separate parts of economic subjects into various patterns of ownership. Sea shipping companies, except for the Arctic, were divided among shareholders. At the years of reforms transportations’ volumes were reduced twice and still remain at a very low level. In the prospect “SevMorPut” will remain the key element of transportation in the Arctic areas. Its role can essentially increase, first of all, in connection with the development of hydrocarbons’ deposits on the coastal areas and on the Arctic shelf [4].

One of the most significant negative factors is that the territory of the Murmansk region is situated in the North that leads to the price rise of the industrial expenses. However the unique natural resources’ presence on its territory is the impartial precondition of its development. In the area extracting and processing ores (apatite-nepheline, cupric-nickel, iron, and nonferrous metals), fish and water resources, and hydrocarbons is carried out. The industrial potential of the area is based on the large-scale enterprises (Public Corporation “Apatite”, “Sever nickel”, “Pechenganickel”, “Sevred-met”, “Olenegorsky GOK”, “Kovdorsky GOK”, Kandalaksha aluminum factory, the enterprises of forestry and fishery; also the Kola atomic power station operates in the area. The advanced industrial base of the area, specializing such branches as electric power industry, chemical industry, ferrous metallurgy; nonferrous metallurgy; food production is the basis of the industrial development of the Murmansk region as a whole.

The Kola federal mining center provides 100% of the all-Russian production of the apatite concentrate, 14% of the refined copper, about 40% of nickel, about 10% of iron ores; its contribution to the gross regional product of the Murmansk area makes about 30% at the rate of employment more than 300 thousand people for a full cycle. The prospects of the Kola center’s development are connected with the development of the new deposits of platinoids, titaniferous magnetite and chromite ores, and also with the expansion of aluminium production at the Kandalaksha aluminum factory [5].

On the one hand, the existing transport ways of the Murmansk region, the advanced power economy and the social infrastructure system positively characterize the area; however on the other hand, the regional infrastructure does not meet the world’s requirements.

Along with the significant intellectual potential (the Kola scientific centre, the system of educational establishments and their staff, the base of the investment projects), in the region, as well as in the country, there is the lack of coordination between manpower’s supply and demand, that negatively influences the economy.

The analysis of the factors of influence on the industrial development of the Murmansk area allows to generate the system of parameters for of such type (tabl. 2) [3].

The industrial complex of the Murmansk region based on the consumption of natural resources creates impartial preconditions for the steady economic growth. The Murmansk area has all the opportunities for transformation into one of the “areas of economic growth” in Russia [6].

The policy of the market managing formation demands a rather close connection with the regional life. Economic order is determined by the federal, regional and municipal authorities’ competence. The regional industrial development’s regulation depends on the kinds of the industrial activity. The stable work of the base enterprises of the Murmansk region (cuprum-nickel, iron ore, mica, apatite-nepheline and the rare-metal industrial branches) can be provided by the enhancement of the payment system for using natural resources depending on

Table 2. System of parameters, characterizing the conditions of the industrial complex development

Parameters

• 1.    Presence of natural resources.

• 2.    Economic level of the industrial complex development:

• •    factor of individual share at the country’s level;

• •    factor of the industrial production at the regional level.

• 3.    Industrial potential:

• •    volume of the industrial production;

• •    gross regional product;

• •    level of the average annual use of the industrial enterprises’ capacities;

• •    deterioration of the basic resources;

• •    number of the unprofitable enterprises.

• 4.    The basic kinds of the industrial product.

• 5.    Dynamic qualities of the industrial complex:

• •    indexes of the industrial production’s volume (chain, base);

• •    structure of the industrial outputs in branches;

• 6.    Regional factor of the industrial production.

• 7.    Investments into the fixed capital.

• 8.    Volume of the foreign investments.

• 9.    Investments’ multiplier.

• 10.    Functional structure, its connection with the local, the national, and the world markets.

• 11.    Adequate provision with manpower resources:

• •    number of the industrial and the production potential, including branches;

• •    volume of the industrial production per capita;

• •    number of the recorded unemployed persons.

their quality, arrangement of minerals’ deposits and stages of their development, differentiation of the prices for the extracted production. In the Russian Federation the state is the resources’ proprietor, hence, it possesses the right to give the rent. However the managing bodies of the Murmansk region have the additional expenses connected with special conditions of managing. Regulation of the transition from a standard tax system to rent payments for the key economic branches is one of measures for keeping balance of federation’s, region’s and businessmen’s interests.

Thus the mechanisms of the industrial complex development’s regulation of the region are: strengthening and enhancement of the administrative order’s functions, acts of legislation, mutual relations between the center and the regions, planning, enhancement of the partnership’s principles for authorities and enterprises, prices’ policy, taxes, enterprise activity, address support, tariff policy. Nowadays all these directions attract the attention of the regional governmental bodies.

The questions of the regional industrial complex’s development considered on the basis of territorial and economic features can be characterized by the following conditions. In 2002 the index of the industrial production made 96.9%, and in 2007 the situation in the area considerably improves, the growth of the industrial production 2006 made 107.9%, including the extraction of minerals (102.7%).

As the region serves as one of the basic mining production’s suppliers, it is necessary to note, that in 2007 the regional enterprises made 9.9 million tons of the iron ore concentrate (98.4% by 2006), 4.2 million tons of the apatite concentrate (100% P2O5), that is 3% higher than the level of the year of 2006. The production of nepheline, vermiculite and other types of concentrates has increased. The production of nonmetallic building materials and the iron ore concentrate was reduced [7].

While analyzing the branch’s activity on some parameters, we can note, that by using the regulation’s mechanisms for the industrial complex’s development and by developing the state-private partnership, the regional authorities achieved the stable work of the industrial enterprises.

The government of the Murmansk region concluded agreements with the largest industrial companies of Russia directed to the efforts’ association for providing the stable regional socio-economic development. In 2007 the agreements were concluded with the Public Corporation “Kola”, Public Corporation “Olkon”, Public Corporation “Apatite” and Public Corporation “Evrohim”. In 2007 the agreement “About the interaction on the power industry’s development in the Murmansk area” (which is the realization of the project “The programs of providing the power industry’s reliability and development in the Murmansk area for 2007 – 2012”) was made with the chairman of the Board of Directors of the Russian Public Corporation “UPG” A. Chubays. The total amount of the investments within the Program’s framework will exceed 64 billion rubles.

The Government of the Murmansk region made agreements with the Public Corporation “Sevmorneftegas” (in which the top-priority directions of the realization of the project “The integrated development of the Shtokmanovsky gas-condensate field” are determined); with the Public Corporation “TGK-1” (“About the economically effective conditions’ creation for the realization of the project Murmansk Thermal Power Station-2”); and with “Sovkomflot” about a long-term cooperation [8].

The development of the Shtokmanovsky gas-condensate field became the priority investment project for the Murmansk region. Along with the other projects’ realization it will be followed by political, economic and social national and regional advantages, including the conversion of the defense enterprises. The major parameters of the project’s social importance, especially under the conditions of the financial crisis, are the creation of the defensive complex enterprises’ platforms in Severodvinsk, Murmansk, Saint Petersburg, etc.; preservation and creation of the new workplaces; increase of the population’s employment; gasification of the

Murmansk and the Arkhangelsk regions, the Republics of Karelia; providing additional gas deliveries to the central regions of Russia. The important direction of the project’s realization is Russia’s research-and-production potential use for the solution of scientific and technical problems [9].

On October, 15 – 17, 2009 the I Murmansk International Economic Forum took place. Within the Forum’s framework the Association of the oil-and-gas industry suppliers “Murman-shelf” held the II International Conference “The shelf development: step by step”. The participants of the Conference noted that the realization of the Shtokmanovsky project made all the necessary preconditions for the creation on the territory of the Murmansk region the inter-branch industrial cluster, including the advanced international and Russian technological companies. The Murmansk area is considered to become the base for the Arctic shelf’s development.

The important result of the conference’s work became the officially signed agreements on cooperation between the Association “Mur-manshelf” and the Association of the oil-and-gas companies in Newfoundland and Labrador NOIA (Canada) and the Association Subsea UK (Great Britain).

The Conference Participants positively estimated the Murmansk region legislative and executive authorities’ actions, directed to the creation of the favorable investment situation in the Murmansk region [10].

We believe that the effective usage of the state regulation’s mechanisms will allow achieving stable work of the industrial enterprises, to find ways out from the crisis situations and to provide the regional industrial production’s efficiency. The raw mineral potential of the land and the shelf territories of the Murmansk region along with the regional authorities’ efforts will provide the creation of the highly effective technological branch of economy.