Contemporary Problems of Social Work
Public-private partnership in the system of social and economic relations of modern Russia
Автор/Author: Korolyova A.Y, Lobanov P.A.,
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Nowadays sustainable development of the social and economic spheres in Russia is largely determined by the degree of establishment of the system of mechanisms and institutions, which can coordinate the actions of the State, business and civil society institutions at the practical level. The major factors of innovative acceleration related to the comprehensive modernisation of the social and economic spheres in Russia include building transparent and constructive relationships between entrepreneurs and government itself as well as creating an effective system to finance socially important projects.
Public-private partnership (PPP) plays a special part in solving the tasks, which are presented by the Russian Government within the Concept of the long-term social and economic development of the Russian Federation for the period up to the year of 2020. In accordance with this Concept, usage of the public-private partnership mechanisms makes the leading economic areas more competitive, provides diversification of economic system on the bases of the innovation-driven technological development, reduction of the risks associated with investment and entrepreneurial activities, modernization of the public transport, energy and communal infrastructure, improves the economic, legislative and organizational arrangements for the development of the social and economic sphere as well as strengthens the liberalization of the economic environment.
In the scientific literature the term public-private partnership is increasingly defined as the factor of the innovation-driven technological development related to the social and economic areas and it is considered as a necessary condition to solve the challenges that are connected with the fast comprehensive modernization [1, p.3].
According to the fact, that the notion «public-private partnership» is increasingly used in legal sphere, there is a lack of theoretical, methodological and legislative developments, which are covering regional, municipal, sartorial and institutional peculiarities of the public-private partnership and business structure development. Moreover, the legal form as well as social and economic essence of the public-private partnership are still not properly specified. At the same time, considerable number of the legislative and regulatory acts draws attention to the need for relevant government authorities to implement the public-private partnership as a form of cooperation with the private actors and to use its mechanisms.
Therefore, the theoretical background for the cooperation between the Government and business as well as any form of its partnership and identification of the ways of the public-private partnership development tools in the Russian Federation represents a significant issue, as in the long term it can become the most important form to implement large-scale modernization and infrastructure development projects and one of the most effective and powerful tools to promote better public administration.
The refinement of the notion «public-private partnership» should define its main peculiarities as well as its places in the system relating to the social and economic relations. The following specific factors of the public-private partnership should be noticed:
- the parties, taking part in this relations, are government, private business and civil society;
- the form of cooperation is a partnership, which addresses the interests and needs of all parties;
- the cooperation between the parties is within the legal framework;
- the efforts of all interested parties are joined up during the implementation of the projects;
- the implementation of the public interests, coordination of the shared interests and purposes in accordance with aims, useful for the society and government;
- the allocation of financial and political risks, costs and impact assessment in proportions generally consistent with the legal mutual agreements.
Accordingly, the public-private partnership requires a legal relationship between the governmental authorities, entrepreneurs and civil society in respect of objects within the jurisdiction of the State, which are based on compulsory risk-sharing, considering the interests and coordination of efforts among the parties. Such relations are necessary for the effective implementation of the projects of significant public importance.
When considering legal and practical importance of the public-private partnership it should be noticed that even among the founders of PPP in Europe and USA there isn’t any single and clear opinion of what the public-private partnership is, in what spheres it should be implemented and where it can lead to the particular positive impact. In accordance with the definition provided by the international association «Economic and social Commission of the United Nations for Asia and the Pacific», the public-private partnership is «a cooperation between the State and the private sector to provide quantitative as well as qualitative infrastructure improvements. The partners generally agree to share liability for implementation and/or operation and management of the infrastructure projects through the conclusion of a legally binding agreement or any other legal document.
Such cooperation is based on the competence of each partner, who addresses clearly defined State interests through rational allocation of resources, risks, liability and payments» .
Given the considerable different opinions among Russian scientists and practitioners we can single out two groups: the supporters of adoption of law «On participation of public authority and local bodies in public-private partnership» and their opponents, some of which think that it is possible to go without the development of industry legislation in the sphere of PPP and that it can be limited by the most common, conceptual notions.
The analysis of Russian legislation makes it possible to conclude that PPP is a complex legal institute that has elements of both public and private law. However, the legislation on PPP is not systematized and is on initial stage. It often follows hands-on experience. And the low development of legislation on PPP is stipulated by the lack of developed theoretical scientific approaches on understanding of PPP, its place in legal and political system of Russia.
It seems that the state and private subjects must be equal partners in creation and realization of different socially important projects; they must have equal rights and responsibility for execution of strategic decisions. This, in turn, stipulates the necessity of generated institutional infrastructure for ensuring the functioning of public-private partnership on practice. The results of implementation of public-private partnership in Russian social-economic reality can assess the degree of readiness of Russian state to evolution, its real maturity.
We can single out several directions of cooperation between state and business. Each one has its own specificity, problems and solutions:
- preparation of strategic documents, concepts, programs and normative legal act;
- formation of national, regional and personnel policy;
- realization of regulating, control and supervisory functions of state towards business;
- joint implementation of specific projects including infrastructure projects.
However, the question arises inevitably on forms of cooperation i.e. on forms of participation of business community in elaboration and adoption of decisions of state authority.
In international practice institutional (as joint ventures of state and private participants as well as mobilization of financing and management of the projects by selling shares of state-owned companies to privately-owned company) and contract forms of PPP are distinguished. At the same time contract forms are implemented in the form of concession, contract for services, contracts for management, building, exploitation and maintenance.
It is well-known that state and business are united by connections of not only economic, but also social partnership which has its effect on activity of Russian Trilateral Commission for the Regulation of Social and Labour Relations in adoption of general agreements between government, trade unions and entrepreneurs as well as intraindustry agreements, in development of projects of legal acts in the sphere of social welfare, labour, employment of population, migration of labour force and other important tasks.
And in domestic legislation (Art. 23 of Labour Code of Russian Federation) the term “social partnership” is defined quite firmly as a system of interrelations between employees (the representatives of employees), employers (the representatives of employers), public authority and local bodies that aimed at ensuring the concordance of interests of employees and employers on regulation of labour relations and other directly connected relations .
Social partnership is the sphere of cooperation between the State, business and society in which the positive social role of business is implemented. At that the one of the most delicate questions is the question on social responsibility of entrepreneurs.
Russian legislation also stipulates the minimum of social responsibility required from every enterprise. The fulfillment of these obligatory conditions allows company to act on legal basis. These conditions include the compliance with the Labour Code and creation of normal work conditions, tax payments, product inspection, and compliance with the legislation of environmental protection. At the same time if it is interested in active improvement of its business environment, any company has the right to invest additional resources in social sphere.
The Federal Law «On association of employers» № 156-FZ that came into force on 1 November 2007 scrutinized the important provisions of Labour Code and confirmed the right of employers to establish on voluntary basis without prior permission of public authority, local bodies and other bodies the associations in order to represent legitimate interests and to protect the rights of their members in the sphere of social-labour relations and connected to them economic relations with professional unions and their associations, public authority and local bodies.
Over the last years the system of public and political representation of business community has been built: «representative pyramid» of Russian business functions actively and effectively. It is represented by the Russian Union of Industrialists and Entrepreneurs (the representative of large business), «Business Russia» (the representative of medium-sized business), «Opora Rossii» (the representative of small business), Chamber of Commerce and Industry and industry associations.
Organization of industry grounds under ministries and agencies, social-advisory councils, can be another direction of partnership development between state and business. Among such grounds there are Councils under the President of Russian Federation (on realization of priority national projects and population policy, on development of information society, on modernization etc), Councils under Government of Russian Federation and branch ministries (Council on competitiveness and entrepreneurship under the Government of Russian Federation, Council on foreign economy activity under the Ministry for Economic Development of Russian Federation, Public Council under the Ministry for Industry and Trade of Russian Federation etc), public councils under law-enforcement bodies and others.
Participation in advisory and deliberative councils under the public authority is one of the tested and effective interaction channels of state and business. The mechanism of parliamentary hearing, round table and other grounds of State Duma and Federation Council of Federal Assembly of Russian Federation are not of less importance. The interaction of business representatives, legislative and executive authority in parliamentary committees often assists in finding the solution that suits all the interested parties.
Business as political authority participates in work of advisory and deliberative bodies, cooperates with political parties as a partner and is represented in The Civic Chamber.
You shouldn’t forget about the forums, conferences, round tables and other forms of collective discussion. Often due to the proposals made in the public space, it is possible to solve many problems of governance, and the actual cooperation between government and business.
One of the preliminary results of constructive cooperation between different interest groups was the signing of quadripartite agreement on cooperation between the Russian public organization «Business Russia» (LLC «Business Russia»), the Ministry of Economic Development of the Russian Federation (Russian Ministry of Economic Development), State Corporation “ Bank of Foreign Economic Activity (Vnesheconombank)” and the independent non-profit organization «Agency of strategic initiatives to promote new projects» on 21st of December, 2011.
The coordination in order to support the public-private partnerships in non-primary sectors of the national economy is the subject of the agreement. The parties, following the principles of social partnership, as well as part of the development of the negotiation process jointly developed the main directions of the industrial modernization and economic well-being of the country.
It was made the decision to work together to form the mechanisms and strategy principles of industrialization of the Russian economy, which involves: the development of procedures and criteria for the selection and examination of projects; development of proposals for the shape, volume and sources of financing; identification of the approaches, facilitating principles of the implementation of the selected projects and more.
Currently one of the most sharp problems of innovative development of our country is to strengthen the struggle for the factors that determine the competitiveness of innovation systems, primarily for highly skilled labour force and the so-called 'smart' money (investments, attracting projects in new competencies, technologies and knowledge ). Lack of effective national innovation system causes an accelerated «drain» from the competitive potential of the country (technologies, ideas, frames). Russia's transition to a group of countries who are unable to achieve leadership positions in key technology areas and production of new knowledge, and securing the raw nature of the Russian economy seem to be the most negative.
The most challenging aspect in this case is to identify the qualitative characteristics and parameters of state policy in the field of innovation and value the efforts of state and private business in their development and implementation.
The strategy of innovative development of the Russian Federation for the period up to 2020 sets the long-term objectives of innovation subjects, including government authorities at all levels, the science and the business sector, as well as guidelines to support commercialization of innovations. This strategy is based on the results of a comprehensive evaluation of innovative potential and to become a reference point for the development of concepts and programs of social and economic development of Russia, certain sectors and regions.
The basic principles of innovative development of the country give the priority to the directions, based on a partnership between government agencies and private businesses, including:
- The concentration of efforts of the state in areas where the level of entrepreneurial activity is not sufficient;
- Active cooperation of government, science and business in the process of identifying priority areas of technological development, as well as in their implementation;
- Transparency of the budget allocation mechanisms and evaluation of results;
- Focus on the highest international standards in evaluating the effectiveness of innovative businesses, organizations, science as well as education and innovation infrastructure;
- Overcoming monopolies and encourage competition in the sector of production of new knowledge.
The especially important fact is that the strategy acknowledges the problem of immunity to business innovation, and it is noted that it entails an inadequate innovation infrastructure in fact or any of its activities on behalf of foreign companies engaged in the commercialization of Russian development.
However, the extent and effectiveness of the participation of private capital in the implementation of national investment and innovation projects mainly depends on the level of development of the institutions and mechanisms that regulate under specific forms of public-private partnership property relations. General regime of management allows private entities the conditions necessary for the realization of their full economic ownership, involving primarily the possibility of making a profit return on invested capital.
During the long period of time Russia attempts to create areas with a special mode of management, the configuration is changed, but the main point is, it is to find the most profitable part of public-private partnership mechanisms for the implementation of their interests. Special regime of property relations aims to create favorable conditions for private subjects in the implementation of state and municipal projects, making it thus more attractive to private capital. This regime is a characteristic of a particular type of institutions of public-private partnership implementing the cluster approach, including special economic zones, innovation clusters, «Innovation Zone» in Skolkovo, etc. Special legal regime that minimizes administrative barriers and tax burden for resident companies formed a system of laws and regulations of the authorities at various levels.
Despite the significant difference, these institutions as public-private partnerships have common features (preferential legal and economic regime for domestic and foreign investors), and can be considered as a subsystem formed by the national innovation system. They regulate the interaction between the state and businesses in the areas of economic activity of the transport, industrial and innovation infrastructure of the lease, and others. Also the projects are considered experimental and give the opportunity to trace practically the effect of different preferences for organizations for large, medium and even small businesses.
The ownership structure in the territories with a special regime does not differ from their structure, the traditional rest of the country (state, municipal, private and mixed). At the same time there is a specificity of property relations in these areas. The most significant manifestations may be noted as following:
- rights restrictions disposition of the property, which reduces their ability to maximize profits for the residents;
- formulation of the specific commitments residents for capital expenditure;
- limitation of the part of ongoing activities by residents;
- residents are forbidden to have offices and subsidiaries outside the selected area (with the exception of geographically isolated complex innovation center «Skolkovo»).
As a result, the configuration property rights of residents and non-residents are transformed on the territory of special economic zones. Private owner- residents are legally restricted to disposal of the property, but they receive tax and other incentives from the State.
Also in accordance with the activity and territory type, there is a limit of minimal fundamental investments. Private nonresident owners do not have preferences of the state, but they are not limited to the proprietary rights. These principles are fixed at the legislative level (The Tax and Customs Codes).
The additional form of offsetting risks for residents of the territory with special management state is a special customs state establishment that provides them the cancelation of some limitations under the Customs legislation if they perform foreign economic transactions. Thus, foreign goods are located and used on the territories with special economic status without payment of customs fees and value-added tax. Russian goods are also being exported abroad without payment of customs fees.
All territories with special management state have tax concessions that take into account a specialization. Residents are exempted from the real estate tax and the tax on wealth, as well as the tax on income and transportation within the part provided for the local budget.
The fact, that already established and stable elements of innovative infrastructure try to approve themselves as the single system elements, is a particularly positive development. However, legislative formulation of the above principles of ownership relations organization doesn’t mean their automatic practical realization.
Thus, on April 6th, 2010 the agreement of interaction was signed up by the crucial Russian Development Institutes and involved organizations in order to provide the continuous funding of innovative projects on all stages of the innovative period. The participants of the present agreement are RUSNANO, Vnesheconombank (Bank of Foreign Economic Activity), Russian Venture Company, Russian Development Bank, Fund for the Promotion of the Development of Small Forms of Enterprises in the Scientific and Technical Sphere, Russian Venture Capital Association, Moscow Interbank Currency Exchange (MICEX), «Opora Rossii» (Support for Russia) and Federal Agency for Youth Affairs. Under the agreement parties have negotiated to coordinate their efforts to provide the most favorable terms for realization prospective innovative projects of the one part, and to make the information about the presence and the status of their projects available for all Development Institutes of the other part. This will allow saving resources and avoiding overlapping the same stages of their consideration. The participants of the agreement have also decided to define jointly mounting needs of innovation companies and state of their provision with all tools, services and conditions for effective activity on the territory of the Russian Federations and in the world market.
It should be pointed out that the experience in the cooperation between business and authorities is always more complex and varied than the theoretical development, it is laden with different problems connected with corruptness of state machinery part, protectionism of taking management decisions and other weak points of the state administration, but eventually the legal ways of such cooperation are always more effective, because they are a foundation to form and define real and balanced public interests and to work out priorities of social and economic long-term development of the country.
 Government Order No. 1662-r of 17 November 2008 // Collected Legislation of the Russian Federation, 24.11.2008, N 47, art. 5489.
 The Federal Law of 17.05.2007 № 82-FZ «On Bank for Development», the Budget Code of the Russian Federation of 31.07.1998 г. № 145-FZ, Resolution by the Government of the Russian Federation N 978 dated 29.12.2007 «On Approval of Rules about Decision-Making on Long-Term State (Municipal) Contracts for Performance of Work (Provision of Services) with a Long Production Cycle» and others.
 Labour Code of Russian Federation from 30.12.2001 N 197-FZ // Legislation Bulletin of Russian Federation, 07.01.2002, N 1 (p. 1), art. 3.