Global experience of regional policy instruments to reduce socio-economic disparities

Introduction. Modern globalisation and integration processes offer an opportunity to evaluate new conditions for the formation of effective mechanisms of economic development management at the interstate level, including, on the one part, interrelated and, on the other, rather contradictory trends (for example, the growing interdependence of national economies as a result of intensified international division and cooperation of labour; unequal distribution of positive effects as a result of regional economic integration, etc.).

It should be noted that the scale and speed of these trends are themselves evidence of the uneven development of global economic trends, which amount to one-step processes of convergence of different socio-economic systems and their divergence in the absence of established flexible mechanisms for mutually beneficial cooperation. At the same time, the transformation of geopolitical and geo-economic interests of trade groupings and alliances is undergoing a serious test for viability and strategic expediency of their existence and development. For example, strategic initiatives of Eurasian economic integration are aimed at bringing together the levels of socio-economic, technological, innovative and environmental development of member states. Despite the fairly successful experience of implementing joint efforts to harmonize the goals and priorities of policies in the field of industrial development, energy, trade cooperation, etc., the effectiveness of such interaction is constrained by a number of mutually influencing external and internal factors (geopolitical conditions; level of economic development; condition and possibility of infrastructure development, including innovation; competitiveness in the domestic and foreign sales markets; conditions for attracting financial resources, etc.).

In general, we believe that socio-economic development should be aimed at:

- development and implementation of progressive technologies that enable the involvement of new, previously unused resources in the production process or a deeper and more efficient use of existing ones, in terms of economic feasibility;

- creation of conditions conducive to an increased degree of concentration of capital within national economies, enabling the expansion of the scale and scope of production, investment in new scientific and technological developments and in human resources;

- development of human capital as an important “second nature” factor according to P. Krugman's classification [14];

- balanced spatial development (reduction of the level of territorial regional differentiation, formation of new territorial centres of economic growth, high level of interregional integration and territorial mobility of population, etc.).

The purpose of this article is to systematise the global experience of regional policy instruments aimed at reducing disparities in the levels of socio-economic development.

The scientific originality of the study lies in the substantiation of the significance of non-financial instruments to stimulate economic growth and reduce existing disparities in the levels of socio-economic development of territories.

The author's hypothesis is based on the scientific assumption that it is possible to assess the degree of efficiency of various instruments for stimulating economic growth and reducing the existing differences in the levels of socio-economic development of territories, based on the systematisation of international best practices.

Theoretical and methodological basis was formed by fundamental works of domestic and foreign academic economists in the field of: modelling the impact of endogenous and exogenous factors on economic inequality of integration associations under uncertainty; reducing differences in economic development and income levels of regional integration associations [1-10].

The information base includes the results of previous studies by domestic and foreign scholars, presented in monographs, periodicals, electronic resources of the Internet, etc.

Research findings. The analysis of global experience in the implementation of instruments to reduce inequality in socio-economic development has revealed that in the current geopolitical conditions, the priority is to strengthen the role of inter-regional social inequality, and it is particularly important to reduce the gap between economically less developed and more developed regions. For this purpose, in the context of neo-globalization, we consider it appropriate to divide the most successful practices of regional policy implementation in the above-mentioned subject-objective area into three basic directions: ensuring inclusive economic development, including mechanisms of convergence of development levels of member states of regional integration associations; interregional trade and economic cooperation; convergence of member states by economic development and income levels of the population (Figure 1).

Figure 1. Global experience in implementing regional policy instruments aimed at reducing disparities in the socio-economic development of territories

Source: compiled by the authors according to: [1, 2, 5-7, 11]

In the post-soviet countries that are members of the WTO, the regional policy in most member countries (Latvia, Estonia, Lithuania, etc.) ^[1] is aimed at reducing disparities in economic disparities and income levels by consolidating mainly social assistance programmes and reforming social policies in a direction that would stimulate employment of the unemployed and level out income disparities among the population.

In order to create a comprehensive comparative database on certain parameters for the EU member states, contributing to the development of new evidence-based and quantifiable solutions to assess the impact of policies, a 'European Spatial Planning Observatory Network' was created, in which the information needed for systematic analysis of territorial development was distributed on three levels: European, national (country) and regional. Information was provided on a number of topical issues, such as the formation of a polycentric urban structure, strengthening urban-rural relations, ensuring spatial accessibility, innovation, addressing demographic and environmental issues [13].

The European Union's Territorial Agenda 2020, which was developed on the basis of the Europe 2020 strategy, outlined the main goal – smart, sustainable and inclusive growth of EU countries. The document aims to ensure territorial cohesion, which is a set of principles for harmonious, balanced, efficient and sustainable territorial development that gives equal opportunities to citizens and businesses, wherever they are located, to maximise their territorial potential. Territorial cohesion reinforces the principle of solidarity in order to promote convergence between the economies of better-off and lagging territories, which requires continued cooperation and integration between the different EU regions at all territorial levels [15].

The European Regional Development Fund (ERDF) ^[2], the Cohesion Fund (CF) ^[3] and the European Social Fund (ESF) ^[4] are regional funding mechanisms aimed at reducing disparities in the socio-economic development of the European Union member states. Between 2014 and 2020, the funds have a total budget of around € 351.8 billion. In addition to the Structural Funds, the EU uses “soft” mechanisms aimed at smoothing differences – countries are encouraged to consider measures leading to the smoothing of differences in the socio-economic development of member states when drafting strategic planning documents.

When regulating spatial development in EU countries, it is customary to rely on in-depth analysis of various processes taking place in the environmental, economic, technological and social spheres. The more representatives of different spheres of activity and layers of society participate in the development and examination of spatial planning documents, the higher the probability of effective implementation of projects [15, 16]. Thus, spatial planning systems are becoming open, moving towards a deliberative and interactive form, encompassing both vertical and horizontal linkages.

Using the tools of global practices of countries belonging to regional integration associations in relation to reducing socio-economic inequalities should have a positive impact on the development of regional infrastructure, deepening cooperation processes, increasing the volume of international trade, and solving systemic problems. For example, the EAEU member states are developing and implementing joint scientific, technological, innovation, economic and other programmes for the development of economic sectors.

Thus, integration processes within the framework of forming a balanced and sustainable market for the products of the member states' agro-industrial complex are aimed at improving competitiveness and ensuring food security. For example, in 2013, the agro-industrial complex of the member states of the Customs Union and the Single Economic Space ^[5] adopted the Concept of a Coordinated (Coordinated) Agro-Industrial Policy ^[6]. At the same time, the implementation of policies in other areas of integration interaction, including in the sphere of ensuring sanitary, phytosanitary and veterinary (veterinary and sanitary) measures in relation to agricultural products and food, is carried out taking into account the goals, objectives and directions of a coordinated agro-industrial policy. Also, in order to implement a coordinated agro-industrial policy, develop cooperation and import substitution in the agro-industrial complex, member states cooperate on sensitive agricultural commodities ^[7] (meat and meat products, milk and dairy products, vegetables, fruits, melons, rice, sugar, tobacco, cotton, etc.).

In the energy sector, a number of Concepts for the Formation of common electricity, gas, oil and petroleum products markets have been developed and are currently being implemented.

As part of the development of a coordinated transport policy of the EAEU member countries, a number of programmes are being implemented to gradually liberalise the performance by carriers of road transport of goods from the territory of registration to the territory of the union state ^[8].

Increased investment activity, modernisation of the EEU member states' economies, their equal harmonious cooperation, as well as transition to a new level of social and technological development are carried out through the implementation of a digitalisation action plan:

- development of a “single window” mechanism in the system of regulation of foreign economic activity ^[9];

- creation of a Eurasian technology transfer network ^[10];

- implementation of the Main directions of the Eurasian Economic Union's digital agenda until 2025 ^[11], through the use of information and communication technologies, digital models and assets, new business processes, etc.

In the macroeconomic policy and finance sphere, the main directions of economic development have been approved between the EAEU member states and a number of agreements on the formation of a common financial market are being implemented. In 2019, an agreement was signed between Armenia and the Republic of Kyrgyzstan on the elimination of double taxation of income, which to a certain extent will increase mutual investment flows and strengthen trade and economic relations.

In addressing the task of accelerating the economic integration of the EAEU member states, the significant contribution of the Eurasian Development Bank (hereinafter, the EDB) ^[12], which carries out project activities based on partnership, implements integration projects that create a sustainable and harmonious economic framework of the Eurasian space of its member states, cannot be overlooked. It should be noted that at present the EDB's main shareholders are Russia and Kazakhstan: their share in the authorized capital is about 66% and 32% respectively.

In selecting applications, the EDB gives preference to projects in the sectors with the strongest multiplier and integration effect. Thus, in the current investment portfolio prevail initiatives in transport (24.6%), energy (17.3%), finance (14.5%), the chemical industry (13.7%), as well as in the mining sector (8.8%) and mechanical engineering (4.4%) ^[13].

In 2020, an agreement was signed on a coalition of national development banks of Kazakhstan, the Russian Federation and Belarus. As part of the coalition, the EDB provided a RUB 5 billion loan to the Development Bank of Kazakhstan and opened several lines to the Development Bank of Belarus for a total of USD 50 million. Several major joint infrastructure deals have been successfully implemented with Russia's VEB, including those outside Russia ^[14].

Overall, the EDB plays a significant role in deepening integration of the EAEU member countries through the implementation of a number of functions: investment, financial, analytical, awareness-raising and humanitarian. However, their implementation is hindered by a number of systemic internal and external problems of economic, financial and political nature. For example, the bank is poorly represented in the smaller EAEU member states (Armenia, Kyrgyzstan), which in turn limits their ability to fully integrate into integration processes. The EDB's financing of projects with high integration effects is hampered by the acute lack of liquidity in national currencies, especially in Russian roubles and Kazakh tenge. Recently, there has been a steady increase in competition from large commercial banks.

There are also some problems in cooperation with companies in Belarus. For instance, in 2017-2019, the Belarusian steel works violated the terms of the EDB loan agreement every year by failing to meet the bank's requirements for the company's financial performance. The Belarusian Steel Works annually violated the terms of the loan agreement with the EDB by failing to meet the bank's requirements for the company's financial performance. According to the parties' agreement, such actions of the borrower may result in the EDB's demand for immediate repayment of the loan provided, but the bank refrained from imposing penalties ^[15].

The instruments of the Eurasian Fund for Stabilisation and Development are financial and investment loans on the principles of repayment, maturity and payment and grants to finance social projects of member states on a non-repayable and non-repayable basis.

Financial credits ^[16] are provided to support anti-crisis and stabilisation programmes, including measures to achieve macroeconomic stability and improve the business climate, fiscal sustainability, and the development of financial and economic cooperation between member states. Investment loans ^[17] are allocated to support interstate investment projects that are of an integration nature and large national investment projects. The maximum possible amount of grants to finance social projects in education, healthcare and social welfare of the population of the EEU member states is set by the Council of the Eurasian Fund for Stabilisation and Development for each member state in proportion to the size of GNI per capita.

Thus, the common financial market will increase the availability, quality and range of financial services for companies and will also contribute to strengthening the economies of the member states, ensuring their stable and harmonious development, convergence in the interests of improving the living standards of the population, increasing business activity and fair competition. Creation of mechanism for protection of rights and legitimate interests of investors and consumers of financial services will contribute to increase transparency of financial markets of the member states and ensure information accessibility.

Conclusions. The analysis of the world experience in the use of regional policy instruments aimed at reducing differences in the levels of economic development has shown that the financial instruments are mainly used aimed at: acceleration of economic growth of lagging regions within countries; improvement of the tax system (reduction of tax rates for citizens with lower nominal incomes at the expense of increase of rates for the wealthiest citizens); attracting investments; realization of production potential; improvement of social and housing conditions of the population. Reducing income differentiation and poverty in general is achieved by redistributing income through social transfers, on the one hand, and a progressive personal income tax scale, on the other. The effectiveness of such measures in many member states of integration alliances is quite high.

The non-financial instruments to stimulate economic growth and reduce existing disparities in the levels of socio-economic development are also significant and relevant. Their essence consists in the coordination of equalisation policies with the development programmes of member states (vertical regulation) and other directions of supranational policies (horizontal regulation). This group of instruments is represented in the form of development strategies and individual areas of interaction of member states, the implementation of which is carried out through the achievement of target indicators, organization of meetings of representatives of national and supranational authorities.

[1] Current problems of economic development in Central and Eastern Europe. Official website of the Personal Finance University [Electronic resource]. – URL: https://finuni.ru/sovremennye-problemy-razvitiya-ekonomiki-stran-tsentralnoy-i-vostochnoy-evropy/ (accessed 01.02.2023)

[2] European Regional Development Fund (ERDF) funding priorities: innovation and research, digital economy, support for small and medium-sized enterprises (SMEs), reducing economic, environmental and social problems in urban areas, support for remote areas).

[3] Areas of activity: trans-European transport networks; environment, energy and transport.

[4] Financing areas of the fund: promoting employment and supporting labour mobility, promoting social inclusion and fighting poverty, investing in education, skills and lifelong learning, strengthening institutional capacity and good governance.

[5] The common economic space is a project of economic and political integration of three states: Russia, Kazakhstan and Belarus.

The concept of formation of the Common Economic Space [Electronic resource]. – URL: http://old.economy.gov.ru/minec/activity/sections/integration/formuep/

[6] On the Concept of coordinated (coordinated) agro-industrial policy of the Customs Union and the Common Economic Space member states. Electronic fund of legal and regulatory documents [Electronic resource]: Decision of the Supreme Eurasian Economic Council of 29 May 2013 № 35. – URL: https://docs.cntd.ru/document/499024613 (accessed 01.02.2023)

[7] Agricultural goods whose production and mutual trade are of social and economic importance for the sustainable development of the agro-industrial complex and rural areas of the EAEU member states.

On the list of sensitive agricultural goods in respect of which the member states of the Eurasian Economic Union mutually provide production development plans (programmes) and implementation of Article 95.2 of the Treaty on the Eurasian Economic Union of 29 May 2014. The official website of the company "Alta-soft" [Electronic resource]: Decision of the Eurasian Economic Commission Council of 12 February 2016. №66. – URL: https://www.alta.ru/tamdoc/16sr0066/ (accessed 01.02.2023)

[8] On the Main areas and stages of implementation of a coordinated (harmonised) transport policy of the Eurasian Economic Union member states. Electronic fund of legal and regulatory documents [Electronic resource]: Decision of the Supreme Eurasian Economic Council of 26 December 2016 №19– URL: https://docs.cntd.ru/document/456056120 (accessed 01.02.2023)

[9] On the Action Plan for the Implementation of the Basic Guidelines for the Development of the Single Window Mechanism in the System of Foreign Economic Activity Regulation of 12 May 2017 №561. Official website of the Government of the Russian Federation [Electronic resource]. – URL: http://government.ru/docs/27701/ (accessed 05.02.2023)

[10] On the Concept of Creation and Functioning of the Eurasian Technology Transfer Network. The official website of the legal system "ConsultantPlus" [Electronic resource]: Decision of the Council of the Eurasian Economic Commission of 30.03.2018 №23. – URL: http://www.consultant.ru/document/cons_doc_LAW_294643/ (accessed 05.02.2023)

[11] Main areas of implementation of the Eurasian Economic Union's digital agenda until 2025. Electronic fund of legal and regulatory documents [Electronic resource]: Decision of the Supreme Eurasian Economic Council of 11 October 2017 №12. – URL: https://docs.cntd.ru/document/555625953?marker=6560IO (accessed 05.02.2023)

[12] The EDB was established in 2006 at the initiative of the presidents of Russia and Kazakhstan to promote the development of market economies in the member states and finance major regional projects in the real sectors of the economy. In 2009 Armenia and Tajikistan joined the structure. In 2010, Belarus became a full member, and in 2011, Kyrgyzstan became a full member.

[13] Figures and facts [Electronic resource]: official website of the Eurasian Development Bank. – URL: URL: https://eabr.org/about/facts-and-figures/ (accessed 06.02.2023)

[14] International cooperation. Official website of the state corporation VEB [Electronic resource]. – URL: https://вэб.рф/o-banke/mezhdunarodnoye-sotrudnichestvo/ (accessed 06.02.2023)

[15] Financial statements [Electronic resource]: Belarusian steel mill. – URL: https://belsteel.com/about/finansovaya-otchetnost.php (accessed 06.02.2023)

[16] The minimum amount of financial credit is $10 million.

[17] The minimum amount of the EFSD investment credit is: for countries with GNI per capita above USD 5,000, it is set at USD 30 million (Russia, Kazakhstan, Belarus, Armenia). The minimum amount of the EFSD investment credit is set at USD 30 million (Russia, Kazakhstan, Belarus, Armenia), for countries with GNI per capita below USD 5,000 (Kyrgyzstan) – USD 10 million,