Improvement of concession agreement mechanism to increase investment attractiveness of the utilities sector of a region (In the case study of Perm Krai)

Abstract

Currently the share of the utilities sector of economy in the GDP of Russia is approximately 10%. Meanwhile, the fixed capital of the sector is highly deteriorated. Besides the greater part of enterprises and organizations operating in the sector are municipal that significantly restricts the opportunities for investment attraction in order to improve public utilities. To solve the problem a mechanism for the transition of municipal property to private investors through concession agreements has been developed. The procedure is regulated by the Federal law No. 115-FZ "On concession agreements" dated on July 21, 2005 (ed. on December 27, 2018). However, there are many problems that restrain the development of the utilities sector of the Russian Federation and their solution will increase investment attractiveness of a region. The object of the article is to substantiate the trends of concession agreement mechanisms using the analysis of factors that increase the investment attractiveness of infrastructural branches in the case study of utilities sector. Another object of the article is to develop ways that will optimize the mechanism of concessions in the economy of a region. The hypothesis of the study concerns the fact that the understanding of the nature of the public sector of the economy and the analysis of its functioning from the view point of economic and political efficiency require changes and additions to the concession mechanism. It means that possible effects for a municipal entity, that asks for investments, for an investor, and a consumer who pays for utilities should be specified. As a result we have specified the utilities sector concept in investment context; we have revealed controversial elements of concession mechanism that are associated with the lack of agreement procedure with the head of a region as a guarantor of the fulfillment of tariff commitments of concession agreements and the lack of a regulated procedure for agreeing on a concession at a regional level; we have proved that the satisfaction of the basic needs of each participant of economic relations in the municipal sector contributes to the achieving a synergetic effect from the implementation of the mechanism of concession agreements, which means the formation of prerequisites for the growth of investment attractiveness of a particular region. We have suggested the trends for concession mechanism improvement in the utilities sector of Perm krai. Our recommendations for the development of the interaction procedure of executive authorities are based on the trends. The recommendations include the algorithm of interaction between the participants of concession agreement reconciliation at regional level and they also include a list of documents providing the reconciliation procedure. The research results are important for regional public authorities responsible for the development of the utilities sector. Our further studies will be devoted to the development of methodological tools for the assessment of integral effect caused by the implementation and development of concession agreements into the infrastructural regional projects. We will also determine investment attractiveness growth points of Russian regions. The tools will be based on the analysis of individual effects of concession for municipalities, investors and consumers. The consideration of their interests will help to develop trends for further strategic adjustment of the concession agreement mechanism and will develop a set of measures that will increase the efficiency of investment programs aimed at the development of the infrastructural branches of regional economy.

Keywords

regional economy, investment attractiveness, utilities, utilities sector, management efficiency, concession agreement, concession implementation mechanism, concession effects, public-private sector, corporate structures, tariff regulation, harmonization of interests

For citation

Tiutyk O.V., Malysheva E.A. Improvement of concession agreement mechanism to increase investment attractiveness of the utilities sector of a region (In the case study of Perm Krai). Perm University Herald. Economy, 2019, vol. 14, no. 2, pp. 332–348. DOI 10.17072/1994-9960-2019-2-332-348

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