ISSN 0798 1015

Vol. 41 (Issue 01) Year 2020. Page 15

State regulation of territorial development of agro-industrial region of southern Russia

Regulación estatal del desarrollo territorial de la región agroindustrial del sur de Rusia

BUNCHIKOV, Oleg N. 1; SHMATKO, Larisa P. 2; YAKOVENKO, Zoya M. 3; 4RIABCHENKO, Anastasia V. 4 & UDOVIK, Elena E. 5

Received: 15/07/2019 • Approved: 11/01/2020 • Published 15/01/2020

Contents

1. Introduction

2. Methodology

3. Results

4. Conclusions

Bibliographic references

1. Introduction

Rural territories as the crucial component of the agricultural and socio-economic sphere in Russia passed through certain stages of their development. Over the past nearly three decades, changes in the conditions and factors impacting the type (quality) and nature (dynamics) of rural territorial development were extensive and largely radical. The main effect on these changes exerted by active and passive public policy measures and the initiative of the rural population that was able to preserve the identity and territorial integrity of their settlements despite a system-based protracted crisis.

Analysis of retrospective studies on the evolution of rural territories revealed the circumstances resulting in either development or stagnation of the rural socio-economic sphere. It is also important to consider the baseline resource capacity and the implemented directions of the state support (Sychanina & Shichiyakh, 2013) (Shedko, 2015) (Tsareva, Bardetskaya & Kostenko, 2016) (Sørensen, 2018) (Shucksmit, 2018).

In Russia, different levels of authority (federal, regional, local) mostly use a target-based programme approach for the development and implementation of rural support measures. The program-targeted planning process consists of the following steps:

• coherent setting and systematizing of goals with a strict hierarchical structure;
• the transition from a set of systemically organized goals and objectives to a system of targeted actions and measures aimed at reducing or eliminating the problem;
• defining funds and resources needed to implement programme activities within a set time as well as income revenue supply resources;
• implementation of organizational and economic management mechanisms, control over supply and implementation of activities.

The study of issues regarding program-targeted management of territorial units in Russia is carried out by modern authors objectively assessing the necessity for a program-targeted approach due to the complexity of inter-industry and interregional industrial, extending economic and social problems beyond an individual industry of the region (Polushkin, 2017) (Ishmuratov & Samigullina, 2016) (Anthopoulou,  Kaberis  & Petrou, 2017)

To date, the state-supported development directions (measures) implemented in rural areas are as follows:

• State support for agricultural producers and processing facilities through federal and regional budgets regarding subsidy payouts;
• Payments of State aids to support certain industries and agricultural products;
• Grants
• Special preferential tax treatment (unified agricultural tax) for agricultural producers and tax holidays for family farms;
• State customs regulation protecting domestic producers;
• Implementation of federal and regional programmes on the social development of rural areas:
• Construction of paved roads to each rural settlement;
• Gasification of rural settlements and residential buildings;
• Drinking-water supply for the rural population;
• Repair and construction of power lines and transformer substations;

Subsidies for constructing and purchasing houses in rural areas.

2.1. Institutional context

At the level of the Krasnodar territory, a sufficient legal framework for regulating the agro-industrial complex using program-targeted approach was developed including such legal acts as: the long-term regional target programme "Agriculture development and market regulation for farm products, raw materials and food in Krasnodar territory for 2013-2020" outlining the subprogramme "Sustainable rural territorial development"; the law of the Krasnodar territory "Agricultural development in Krasnodar territory" No. 1690- КЗ dated 28-January-2009.

As an instrument of regional development at the legislative level, a program-targeted approach was approved allowing to prevent negative trends, to define priorities and their phased implementation in the agro-industrial production, to make rational use of limited material and financial resources, and to intensify investment activities. This approach contributes to the choice of sound mechanisms for implementing the approved priorities and shaping new management and decision-making system.

One particular feature of this method is not just forecasting the future states of the system, but compiling a specific programme to achieve the expected results. The program-targeted approach allows not only to observe the situation, but also to influence its outcome. That distinguishes it from other methods (Kiyanova & Litvinova, 2014).

Table 1
State programmes is in
force in Krasnodar territory

Source: Official data from the website of the Ministry of
agriculture and processing industry of the Krasnodar territory

After analyzing provisions of the programmes, the following conclusions on the direct or indirect relation of activities to rural territories were reached.

The direct relation was identified according to the following characteristics:

links to issues related to rural territories (reference in the text, in the analytical part or specific subprogrammes);

scheduled funding from local budgets;

experience of similar activities’ implementation in rural areas.

The indirect relation was identified according to the following characteristics:

general formulating points that are identical for all subjects of the Krasnodar territory without administrative division;

possible funding for several activities from local budgets (funding is under consideration by the local budget).

This approach allows to narrow the list of programmes to the actually implementable ones in rural areas and rank them further in the following directions:

productive-economic; it includes measures aimed at the development of the manufacturing sector of the economy (agriculture, food industry) and, accordingly, at increasing the competitive advantages of the territory (investment attraction, improving reputational characteristics, intensification of integration processes, etc.)

social; it includes environmental improvement works, social support of the population, addressing infrastructure issues with all the results aimed at improving the quality of life of the population;

Socio-economic; programmes contain a combination of activities aimed at tackling problems in the social spheres with increasing the capacity of certain types of economic activities.

Apparently, the universal composition of the directions is contained in the State programme "Agriculture development and market regulation for farm products, raw materials and food in Krasnodar territory for 2013 – 2020". For this reason, we will take a closer look at it. The activities of the programme are distributed under productive-economic and social directions. As for the social direction in its pure form, there is the "Sustainable rural territorial development" subprogramme implemented since 2013.

Measures of the State support are:

State support for constructing and purchasing houses in rural areas;

State support for building gas pipelines and water supply systems;

State support for strengthening the medical personnel in rural areas;

State support for construction of sports facilities, cultural and leisure centers;

State support for construction of educational institutions.

Analyzing the subprogramme provisions, we can make a conclusion that support measures are insufficient. Measures for improving demographic and social conditions are the main objectives and prerequisites for sustainable rural territorial development. However, without efficient production and economy to provide rural people with livelihoods there can be no sustainable development of rural territories. Due to this, the subprogramme implementation should be carried out simultaneously with other directions of the State support. Rescheduling implementation periods and delays in funding will reduce the effectiveness of the results.

As for shortcomings, it is worth mentioning that a comprehensive approach is not ensured regarding the development and financial support of the necessary activities to create additional employment in rural settlements.

The programme offers virtually nothing for the establishment of a distribution system for agricultural products from small forms of management. In our opinion, this is an important issue restraining the increase in horticultural production and the sustainable development of rural territories.

Within the productive-economic direction, there are 10 basic subprogrammes planned.  Their list is adaptive. Depending on the size of the financial allocations and the targets, the list is reviewed and adjusted for each consecutive year.

The program-targeted planning of the agro-industrial complex (AIC) of the Krasnodar territory is based on the following principles: the principle of systemicity, the principle of complexity, the principle of development prioritization, the principle of proportionality, the principle of the programme efficiency in general.

2.2. Empirical approach

The total scheduled funding of State programmes to stimulate rural territories from budgets of all levels is 94174757.3 thousand rubles. Table 2 presents the data on actual financing and application of funds in terms of specific activities of the programme.

Under economic sanctions, strengthening of the import substitution programme and ramping-up food security, state support for agricultural workers will be increased by 1.1 billion rubles in the Krasnodar territory.

Analyzing the data, the following points are worth highlighting:

a number of routines have not been implemented because of a lack of funding;

-  since 2015, a sub-programme "Development of rice production in Krasnodar territory" was included in the list of programmes; the sub-complex is actively developing requiring additional incentives; no funding for these activities came from the regional budget;  resources were actively attracted to extra-budgetary funds;

Table 2
Funding for subprogrammes and State support areas in terms of
productive-economic and social directions of Krasnodar territory, million rubles

1. Subprogramme "Development of crop production, processing and selling of crop products sub-industry"
2. Subprogramme "Development of animal breeding, processing and selling of animal products sub-industry"
3. Subprogramme "Support for small forms of management"
4. Subprogramme "Development of winemaking and cognac manufacturing "
5. Subprogramme "Development of agricultural land melioration in Krasnodar territory".
6. Subprogramme "Development of fisheries industry in Krasnodar territory" 
7. Subprogramme "Provision of epizootic and veterinary-sanitary well-being in Krasnodar territory and development of State veterinary service of Krasnodar territory"
8. Subprogramme "Development of rice production in Krasnodar territory" 
9. Subprogramme "Development of selection and seed breeding"
10. Subprogramme "Investment promotion in agro-industrial complex"
11. Subprogramme "Development of agro-industrial complex industries"
12. Subprogramme "Sustainable rural territorial development" including:
- 12.1. Improvement of housing conditions for people living in rural areas
- 12.2. Development of social and engineering infrastructure in rural areas.

Source: Official data from the website of the Ministry of agriculture and processing industry of the Krasnodar territory

- significant allocations from the regional budget were directed to the following subprogrammes: "Development crop production, processing and selling of crop products sub-industry", subprogramme "Development animal breeding, processing and selling of animal products sub-industry";

there are cases of incomplete fund utilization for a number of activities detected.

In terms of sources, the financing structure for subprogrammes varies considerably. Figure 1 shows general information on the State programme funding. However, it should be noted that local budget funds are not significant thus not reflected in the chart.

Figure 1. Funding for measures under State programme "Agriculture development and market regulation for farm products, raw materials and food in Krasnodar territory for 2013 – 2020" by types of sources.

Source: (2017). Krasnodar territory in numbers-2016. Statistical collection. Krasnodar: Krasnodarstat.

In 2013, the bulk of total financing was held by the federal budget, but ratios changed in favour of extra-budgetary funding sources in the following years 2014-2015. Since 2016, the federal budget funds have prevailed again. Yet the overall trend is negative.

We highlighted the case of incomplete fund utilization. It is advisable to analyze the causes for these processes. According to the official reports of the Ministry of agriculture and processing industry on the State programme progress, we systematized issues arising during the implementation of activities and preventing the final funding implementation.

Among the most common reasons, these are as follows:

  - the absence of applicants meeting the subsidization requirements (mostly for the subprogramme "Development animal breeding, processing and selling of animal products sub-industry");

non-compliance with the subsidization requirements (having tax liabilities). This reason is common for the implementation of "Sustainable rural territorial development" and "Support for small forms of management" subprogrammes. Generally, rural people apply for these support measures having no previous experience of interaction with the authorities regarding receiving subsidies, grants and other forms of support. Due to this, there are situations when participants are not prepared for control-and-auditing activities revealing the presence of arrears in tax payments and surcharges;

lack of timely funding from budgets at different levels;

no applications for participation in events. This is the most common reason during the initial stage of the State programme implementation due to the general passive attitude of the rural population and low level of trust in the authorities.

Identification and rationale of the causes form an information block on potential issues that may arise later on. Assessing their frequency and trends for subprogrammes allows to organize a set of measures to avoid these problems at the later stages of the State programme implementation.

3. Results

The most important step of the research is to analyze the results of support for rural territories. In this regard, of particular interest is the information on how closely linked the funding amounts of separate subprogrammes with the achieved target indicators for the development of production and social segments.

Table 3 presents a correlation analysis data for the following subprogrammes:

"Support for small forms of management» subprogramme. As the resulting indicator, we highlight «Financial turnover of small enterprises" for the corresponding type of economic activity. The modelling revealed a significant degree of impact of the State financing factor (correlation is 0.75). The resulting indicator is also strongly influenced by the average number of employees (correlation ratio is 0.83).

"Development of crop production, processing and selling of crop products sub-industry" subprogramme. An indicator of crop production output in monetary terms was selected as the resulting one. The correlation analysis revealed a high dependence between the planting acreage for all cultures and the summarized factor, as well as a negative correlation with the transportation factor. There is also a negative dependence between the resulting factor and the amount of the State support. The obtained results can be explained by the short period of implementation of the State support measures on the one hand, and the high rate of inflationary growth. The amount of the State support regarding a separate commercial entity is not sufficient.

"Development of animal breeding, processing and selling of animal products sub-industry" subprogramme. Linkages between the animal product output in monetary terms and the contributing factors (livestock, basic funds, funding of the State support activities) were analyzed. The closest link identified was the one with the supply level of basic funds. The State support does not have a significant impact on the production of animal product output. This is due to the long manufacturing cycle of animal products as well as insufficient funding.

Table 3
Correlational analysis of impact from State incentive
measures on selected socio-economic indicators

Source: calculated by the authors’ team

"Development of fisheries industry in Krasnodar territory" subprogramme. The sub-complex is in a state of crisis. The lack of systematic and sufficient support measures prevents from increasing production volumes and improving the profitability of the products. This, in turn, causes a low level of the sub-complex competitive power.

The correlation analysis revealed a high dependence between the resulting indicator and the level of the State support.

"Sustainable rural territorial development" subprogramme. A negative link revealed between the State support measures and the housing stock condition, as well as the level of comfort. The income of the rural population has a high degree impact on the result.

Table 4
Indicators of State programme "Agriculture development and market regulation
for farm products, raw materials and food in Krasnodar territory for 2013-2020"

Source: Report on results and main activities of the Ministry of Agriculture and Processing Industry of the Krasnodar territory for 2014-2016. and for the planned period of 2017-2020. 

Analyzing the results of the State support measures implementation, we selected the data from official reports on the work operation of the Ministry of Agriculture and Processing Industry of the Krasnodar territory regarding the support of socio-economic areas of rural development.

The information contained in these documents shows a significant increase almost in all areas of support, whereas an actual implementation for separate indicators exceeds the planned level.

Such results encourage potential investors and incite an influx of entrepreneurial economically active population into rural areas.

The State incentive mechanism of socio-economic processes is based on the program-targeted approach wherein a series of activities of different directions and effects was elaborated. However, a review of the State programmes in the Krasnodar territory revealed a shortage of direct incentives for socio-economic development of rural territories.

There is the State programme "Agriculture development and market regulation for farm products, raw materials and food in Krasnodar territory for 2013-2020" acting as a universal document. Significant investments from the regional budget were directed to the following subprogrammes: "Development of crop production, processing and selling of crop products sub-industry" (67% of all funds), " Development of animal breeding, processing and selling of animal products sub-industry" (24%).

In 2013, the bulk of total financing was held by the federal budget, but ratios changed in favour of extra-budgetary funding sources in the following years 2014-2015. Since 2016, the federal budget funds have prevailed again. Yet the overall trend is negative.

We identified and systematized the causes of incomplete fund utilization for subprogrammes that allowed to determine the most common ones. That will enable building up measures to eliminate them in the future.  The correlation analysis of the interdependence closeness between the target indicators and funding amounts for separate subprogrammes of the State programme revealed a positive linkage between the financial results of small forms of management and the target subprogramme implementation.  Implemented directions of the State support does not have a direct impact on the growth of housing stock in rural areas, but a positive correlation with the growth in income of the rural population was detected.

Identification of the main determinants of the State support for rural territories enabled forming an information block on the quality and effectiveness of the implemented measures.

The results of the research were critically correlated with the opinion of the scientific community at scientific-practical conferences and discussions (Andersson,  Höjgård  & Rabinowicz, 2017) (Ternovykh, Agibalov & Markova, 2017) (Menconi, Grohmann & Mancinelli, 2017) (Songa  & Liu, 2014) . Analysis of the research findings associating with the available empirical data allows to confirm a number of hypothetical assumptions.  In this context, we should note that comprehensive incentives are needed to reduce the socio-economic development asymmetry in rural territories considering the specifics nature of the territories, their industry affiliation, and development prospects. Adaptability and precise implementation of the State support measures will allow to improve the quality of life of the rural population and preserve the cultural heritage of the rural continuum.

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1.Don State Agrarian University, Village Persianovsky, Russian Federation and Rostov State University of Economics (RINH). Contact email: bunchikov123@gmail.com

2. Rostov State University of Railway Eng. (FSBEI IN RSTU)

3. Rostov State Transport University, Rostov-on-Don, Rostov Shooting Regiment of the People's Militia

4. FGBOU VO Kuban State University Krasnodar

5. Kuban State Technological University, Krasnodar