DEVELOPMENT OF COOPERATION OF STATE AND BUSINESS IN TRANSPORT INFRASTRUCTURE OF THE REPUBLIC OF BELARUS

 

25/13. Breakup group Economics of economic sectors.

Khmel V.

Ph.D. student 

School of Transportation and Logistics

Dalian University of Technology, China

 

DEVELOPMENT OF COOPERATION OF STATE AND BUSINESS IN TRANSPORT INFRASTRUCTURE OF THE REPUBLIC OF BELARUS

 

Transport communications Branch is one of the largest and basic sectors of economy, an important part of the industrial infrastructure, and a primary element of the state development. The maintenance of transport facilities as well as their development are usually capital-intensive and produce low return. Consequently, the main source of funding for the industry is the state budget. Experience of many countries, including Belarus, shows instability of cash flows from the budget for the development of the transportation sector. This situation compels the authorities to attract private sector investment. In such a case, a variety of extra-budgetary funds, individual private investors, a few investors and various investment companies can serve the partners of the state.

In considering development activities for transport infrastructure they can be divided into profit-making, low-profit and loss-making. The profit-making projects are attractive for investors. If authorities together with low-profit projects give investors additional sources of benefit these projects can also be interesting for investors. The released funds can be directed to the implementation of the loss-making projects which are socially and economically necessary for regional development. As a result, the state will receive well-functioning objects, and participants of an agreement will receive profits or other benefits.

Trends of the economies of developing and developed countries reflect an endeavor to use market mechanisms of economic management in the areas that were previously subject of public administration. One of the objects of the state is to ensure uninterrupted operation of such facilities. And this task should be done most effectively: with profit, while maintaining the stability of state power and with performance of entrusted social obligations upon them. The last twenty years of public-private partnership has proved to be as effective mechanism for management of public infrastructure facilities. Public-Private Partnership (PPP), and in some countries, the private finance initiative (PFI) is a modern form of state procurement, aimed at achieving financial gain. The common definition of public-private partnership does not exist, but as a rule it is meant a form of interaction or the holding of joint efforts between the public and private sectors to implement large infrastructure projects where the benefits and opportunities of each sector complement each other. The effectiveness of the mechanism provided by the private financing of the project, the transfer of management functions to the private sector, and risk-sharing to that side of cooperation which can manage them most effectively.

The representatives of Belarusian government build its own economic development strategy of the state. Belarusian national economy has cultural and economic peculiarities. According to the EBRD in 2009, the private sector share in GDP was 30%. Compared with other countries in the region, in Belarus the private sector is underdeveloped. One way to raise additional funds is the PPP.

According to the Private Participation in Infrastructure (PPI) Project Database, the directions of private sector participation in infrastructure development in Belarus were distributed on the same priorities as in countries with low or middle income (tabl.1 [1]). However the value of the relationship of parts to a whole is different. The investors unfairly neglect with the sphere of transport communications in Belarus still. The Republic of Belarus is situated at the crossroads of major transport routes linking the states of Western Europe with East, the Black Sea regions with the countries of the Baltic Sea. There are two trans-European transport corridors on the territory of Belarus: No. 2 – West-East direction (Berlin –Warsaw –Brest –Minsk –Moscow -Nizhniy Novgorod); No. 9 – North-South direction (Helsinki – Saint-Petersburg – Vitebsk –Mogilev – Gomel –Kiev –Kishinev –Bucharest –Dmitrovgrad -Aleksandrupolis .

The strategy of Belarus in the transit area is aimed at creating favorable conditions and more efficient use of transit and transport capacity in the country and on the international arena.

According to the state program of development of transit potential of Belarus on the 2011 - 2015, and the state program of "Roads of Belarus" on the 2006- 2015, as well as information about the implementation of these programs, the transport sector is one of the most urgent need of development and financing [2].

Thus, the economic attractiveness of the Republic of Belarus, including its transport sector for investors and the need to attract funding in the economy, particularly in the sphere of transportation, as well as effective management at the facilities pose a prerequisite for effective application of such form of investment as public-private partnership in the Republic of Belarus.

Despite the long-term experience of PPP using there is a significant number of uncoordinated issues between the partners. The reason of the differences becomes the partners' pursuit to their different objectives of such cooperation. The private partner seeks to maximize their profits and other benefits. A state which does not carry the largest part of risk, seek to maximize the support the social aspects of region development. The issues of procedure for selection and evaluation of projects, risk allocation between the partners,       property rights and private capital protection in borders of such cooperation and after the expiration of the contract, monitoring of the project implementation are the most discussed in the scientific literature and the best practice. Scenario for each disputed item is recognized in the legal framework of the state. This may be common law "On public-private partnership" or the appropriate additions to the existing legislative framework.

PPP projects in the sphere of transportation services have their own specific features related to the nature of activities in this area. It is a question of regulating the private partners’ income derived from user charges. The problem of additional costs associated with the facility due to physical wear and obsolescence is also worth discussing. Transport infrastructure projects could include a number of options. The difficulty lies in a correct assessment of the option. Its implementation is accompanied by increased costs. Consequently, forecasting costs and revenues associated with the implementation of options, significantly influence on making and implementation of a managerial decision about option. The problem is the lack of generally accepted and recognized method of assessing options and qualified specialists in this field.

The European Commission has identified four main areas of impact of PPP on infrastructure [3]: to provide additional capital, to provide alternative management and implementation skills, to provide value added to the consumer and the public at large, to provide better identification of needs and optimal use of resources. Within PPP the government and business are seen as partners that jointly realize the corresponding projects. One of the areas, where by experience of many countries the PPP has proved its effectiveness, is the sphere of transport communications. Belarus has created a large part of the prerequisites for the PPP implementation in transport infrastructure. The synthesis of international and own experience of the PPP let to create the optimal national model of PPP which implementation will be highly effective in the Belarusian economy.

 

 

Table 1.

Investment in infrastructure development in low-and middle-income countries for the 1991-2011

 

Primary Sector

Countries, at all

Including Belarus

Number of projects

Structure,%

Number of projects

Structure,%

Energy

3254

30,9

5

12,8

Telecom

4986

47,4

34

87,2

Transport

1500

14,2

1

2,6

Water and sewerage

787

7,5

-

0,0

All Sectors

10527

100,0

39

100,0

 

References

  1. World Bank and PPIAF, PPI Project Database. ). - Mode of access: http://ppi.worldbank.org/explore/Report.aspx - Date of access 14.05.2012.
  2. Korol, N. Road, road, you signify so much .../N/ Korol// Respublika [Electronic resource]. - 2012. - № 253 (5416). - Mode of access: http://www.respublika.info/5416/region/article51944/ - Date of access: 01.04.2012.
  3. Davies, S., Fairbrother, P. Paper 39 – Private Finance Initiative (PFI) and Public Private Partnerships (PPPs): Definitions and Sources/ S. Davies, P. Fairbrother//School of Social Science, Cardiff University [Electronic resource]. – 2003. – Mode of access: http://www.cf.ac.uk/socsi/research/publications/ workingpapers/paper-39.html – Date of access: 29.11.2011.