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3BALANCED SCORECARD OF NATIONAL ECONOMIC SECURITY AS A
COMPETITIVENESS PREREQUISITE
Marina L. Alpidovskaya
Financial University under the Government of the Russian Federation, Russia E-mail: morskaya67@bk.ru
Aleksei M. Tsilkin
Financial University under the Government of the Russian Federation, Russia E-mail: AMTsikin@fa.ru
Abstract. Enhancing national economic security is a key prerequisite for stable social and economic development of countries under turbulent internal and external factors. The purpose of this paper is to develop a balanced scorecard of national economic security, including competitiveness and self-sufficiency factors of the national economy. Hierarchy analysis and scoring-index method are used to achieve the objective. In the developed system, competitiveness indicators determine the efficiency of the national economic system, while self-sufficiency acts as a guarantee of sustainable development with minimal dependence on foreign partners.
Keywords: balanced scorecard, economic security, competitiveness, self-sufficiency, national economy. JEL codes: E01, А52
For citation: Alpidovskaya, M. L., & Tsilkin, A. M. (2021). BALANCED SCORECARD OF NATIONAL ECONOMIC SECURITY AS A COMPETITIVENESS PREREQUISITE. JOURNAL OF REGIONAL AND INTERNATIONAL COMPETITIVENESS, 2(1), 4-13. Retrieved from http://jraic.com/index.php/tor/article/view/13
Introduction
Modern factors of chaotization of the global economic system lead to a continuous improvement of the national economic security within the appropriate state economic policy (Tsikin, Alpidovskaya, 2019). National economic security in this case reflects «the state of the national economy, which ensures guaranteed protection of national interests, sustainable social development of the country and sufficient defense capabilities even under the most adverse conditions of internal and external processes» (Gelvanovskiy, 2016). The stated purpose of the study dictates to represent national economic security as a set of competitiveness and self-sufficiency of the economy. The competitiveness of the national economy determines the efficiency of the economic system, while self-sufficiency determines the ability to develop under the conditions of negative external and internal factors. It should be noted that the issues of sustainability of the national economy have not previously appeared in other studies, but have become particularly important in the context of the COVID-2019 pandemic, which also affected risk management systems (Alpidovskaya, Savel'eva, 2020).
The state policy to stimulate the development of national economic security should be based on quantitative parameters of the country's development level and defined by group indicators and detailed to individual indicators, which is a balanced scorecard. These approaches are used, in particular, to calculate the integral competitiveness index proposed by the World Economic Forum and used as the basis for the annual Global Competitiveness Reports (WEF, 2020). The integral index proposed by the World Economic Forum is justified both from the point of view of accumulated retrospective data (World Economic Forum reports are being published since 1979), and the research scale (the analysis covers more than 140 countries). At the same time, it should be further developed in terms of taking into account factors of stability of national economies and including micro- and mesolevel indicators based on the details of national economic security in modern economic realities.
Here is the general mathematical formulation of the problem (Formula 1):
U*={ u[ | u¡ >T Uj ; V Uj e U; j = 1, n (1)
where
U* is the setof ranked national economies;
U is the set ofstudied nationaleconomies;
u. = {a. } is an element U of thesetof national economies,i=1,n;
m is the number of considered indicators of economic security of the i-th national economy;
n is the total numberof national economies under consideration;
>P is the system of preferences P in the set of vector estimates of the element — national economy.
To solve thestudiedtask,it is necessary to go through the following stages:
1) form a list ofnationaleconomic security indicators;
2) convert economicsecurityindicatorsintoscores;
3) determinethe weights of economicsecurity indicators;
4) calculatethe integralindex ofnational economicsecurity.
Forming a consolidated list of nationaleconomicsecurity indicators
The indicators of nationaleconomic security arechosen dependingonthe basic models of formation of competitive advantagesandsustainabilityofthe nationaleconomy.Itis advisable to consider the neo-industrial model of developmentas astrategicbenchmarkfortheRussianeconomy. Researchers all over the world define the essence of neo-industrialism as using electronics and informatics across the entire manufacturingindustry — theindustrial InternetofThings(Gubanov,2014).
The most important aspect of the new industrialization is the automation and computerization of the manufacturing, whichleads tothedigitization of thenational economy,thereplacement of resource-and labor-intensive work with the products of information and communication technologies. The basis of competitiveness in neoindustrialism is digital technologies, nanotechnologies, biotechnologies, eco-friendly technologies. Their development is accompaniedbytheemergenceof network effects(Alpidovskaya et al., 2018).
If thebalancedscorecardofnationaleconomicsecurity aidsthedevelopment ofcompetitivenessand self-sufficiencywithinthe neo-industrialdevelopmentmodel, theintegralindicatorof economic security of the nationaleconomywill reflectcompetitiveness and self-sufficiency dynamically and will be cleared of momentary factors.The existingapproaches should beassessedcritically tocompile thelist ofprivate indicatorsofthemainidentifiedgroups.Todate, theWorld EconomicForum(WEF, 2020) andlnternational Institute for ManagementDevelopment (IMD, 2020)approachesare considered tobethemost developed methodologies, although not perfect. In particular, R.A. Fathutdinov points out the shortcomings of common practices which arise from ignoring the parameters of the quality of goods, depreciation of fixed assets, the level of highereducation, innovationactivityof organizations,qualityoflife andother elements(Fathutdinov, 2003).
Socialindicators areamongthemostsignificantinmoderninterpretationsof national competitiveness. Today the classical GDP per capita indicator does not allow for a full assessment of the competitiveness of countries in a social context. Considering the indicators adopted in the Russian statistics, four indicators directly related to the population's income were selected for the balanced scorecard of the national economic security: average income per capita and real disposable income of the population, the ratio of average income per capita to the minimum wage and the share of the population with incomes below the poverty line. This group of indicators makes it possible to fully assess the material component of social indicators of national competitiveness, and is sufficiently well represented both in the methodology of major international competitiveness rankings and in various studies. A similar approach for competitiveness analysis, in particular, was used in a number of papers (Belyakova, Sumina, 2010).
Money, environmental, health, housing, and safety factors have a direct impact on the standard of living of the population. These indicators are particularly important because they allow us to fully assess the standard of living of the population, which is impossible when analyzed solely in money sums. For the
population, housing, medicine, and low crime rate form a favorable environment, which is beneficial for the development and full use of national human capital. The environmental indicator of production and consumption waste generation in the structure of the developed system of economic security indicators also seems relevant along the current trends of most global national competitiveness rankings.
The fundamental role of social factors of competitiveness and their conditioning on environmental security are described in many studies (Drobot, 2014). At the same time, the authors tend to limit themselves to a rather narrow area of other competitiveness indicators and include resource indicators (natural and climatic conditions, geographical location and others), the development of which is difficult to implement.
Without belittling the importance of resource factors, we should rather discuss the fullest use of national resources, which ensures self-sufficiency of the economy and should act as one of the main development directions of the Russian economy. Probably, it is important to consider the resource resource to select individual regional programs of competitiveness development, which can be based on the formation of spatial and temporal reproduction clusters (Sokolov, 2017).
What is included in the list of innovation indicators of competitiveness of the national economy is equally important — it is possible to analyze both in terms of prerequisites formed by the state economic policy (shares of state budget expenditures on research and average salaries of researchers), and in terms of results obtained in the innovation process (the number of organizations performing research and development; the number of employees engaged in research and development, and the share of innovative enterprises in the total structure). The performance of innovative enterprises should additionally be assessed (an indicator called «the number of issued patents and other copyright documents»), which makes it possible to include indicators of the meso-economic level into the list of national competitiveness indicators. Also as part of the system of indicators of national economic security, we propose the microeconomic characteristics (the share of products of innovative enterprises in the overall structure). They can be used to comprehensively assess the innovative competitiveness at all levels, which is consistent with the standing of R.A. Fathutdinov (Fathutdinov, 2003).
Technological indicators of national competitiveness are among the main ones needed for new industrialization and have properties of the generalized amount of fixed assets (cost of fixed assets), their condition (depreciation of fixed assets), and prospects for renewal (investment in fixed capital). In addition, the prospective model assesses the compliance of production assets with the modern technological level and digitalization of technological processes (indicators «number of advanced technologies used» and «number of personal computers per 100 employees», respectively). Technological indicators of national competitiveness represent fundamental elements of economic development in A.V. Ishhanov's study (Ishhanov, 2004). However, its author directly associates technological development with foreign direct investment, which does not seem quite justified in Russia. Relying on domestic sources of investment and economic growth seems more promising nowadays.
Labor indicators of the promising model of national development include macroeconomic factors of the overall level of employment and unemployment, as well as the prospective national labor force (the number of students of higher and secondary vocational educational institutions per 10,000 people). The last indicator characterizing the state economic policy in labor is the share of state budget expenditures on education. It can be used in a qualitative forecast of the development level of the Russian population. A similar set of private indicators of this group is proposed in the thesis work of N.N. Obrezkov: unemployment rate, the number of students in higher and secondary vocational education, wages (Obrezkov, 2006). However, it seems necessary to draw a line between social and labor indicators, as well as to assess the prospects of Russian education through the indicator of the share of state budget expenditures on education. The four groups proposed by the author also should not limit the assessment (natural resource potential, labor resources, scientific, technical, and technological potential, money and property).
Infrastructural indicators of national economic competitiveness contain indicators of physical development (density of railways and roads), secondary indicators of population mobility (number of passengers transported), and indicators that allow to indirectly assess business prospects in the country
(number of commodity exchanges and banks). Infrastructural factors of national competitiveness contribute to the favorable environment for business, the level of development of which (associations, networks, clusters) is the main factor of growth of competitiveness of Russian economy (Kundius et al., 2013). Despite the obvious importance of infrastructure for the development of the Russian economy, the Russian researchers usually do not include the indicators of this group in the models of national development.
The final group of indicators of national development are self-sufficiency indicators which let the researchers determine the country's dependence on import supplies. The indicators of this group include the export quota, import quota, foreign trade quota, ratios of elasticity of imports and exports to GDP. The indicators of this group have not been previously analyzed in the scientific and methodological literature and are introduced in the national economic development model for the first time. As noted earlier, national self-sufficiency acts as an indicator of economic sustainability, which seems a more promising approach than the allocation of financial indicators and factors to describe this indicator of economic security considering the specific aspects of Russia (Grishin, 2005).
It should be noted that the set of the presented indicators is not complete, it only includes the most significant of them. Their estimates can be obtained from the official reports of Rosstat (Russian State Statistics Agency). However, if necessary (due to the new statistics and/or knowledge of the modern society and the Russian social and economic system), the groups and individual indicators within the developed model can always be adjusted.
Thus, Table 1 presents the recommended list of indicators for the balanced scorecard of national economic security. It is based on the critical analysis of world rankings and publications devoted to assessing the competitiveness of the national economy and issues related to the development of sustainability of the national economic system. It also considers the approaches and recommendations discussed earlier, as well as the availability of the proposed indicators in the Russian state statistics.
Table 1 - Recommended indicators of national economic security
Group Indicators
Society average per capita income
real disposable income
ratio of average per capita income to minimum wage
the share of the population with incomes below the poverty line
housing security
physician availability
crimes reported
generation of production and consumption waste
Innovations organizations performing research and development
employees engaged in research and development
share of state budget expenditures on scientific research
patents and other protective documents issued
share of innovative enterprises in the total structure
share of products of innovative enterprises in the total structure
average salary of researchers
Technology fixed assets cost
fixed assets depreciation
fixed assets investments
personal computers per 100 employees
advanced technologies in use
Group Indicators
Labor employment rate
students of secondary vocational educational institutions per 10,000 people
higher education students per 10,000 people
unemployment rate
the share of state budget expenditure on education
Infrastructure railroad density
automobile road density
passenger traffic
number of commodity exchanges
banks
Digitization percentage of organizations that have Internet access (narrowband, fixed broadband, and mobile broadband)
share of organizations using cloud services
share of organizations offering customer communication, data protection, online shopping and other services on the corporate website
share of organizations using the Internet to interact with authorities and accounting, staff management
share of organizations using ERP systems
Self-sufficiency export quota
import quota
foreign trade quota
ratio of elasticity of imports to GDP
ratio of elasticity of exports to GDP
Source: composed by authors
Point conversion of economic security indicators of national economies
The analysis of indicators of economic security of national economies, which were adopted to form an integral indicator of national economic security in ranking, and their values showed that these indicators are heterogeneous and defined by assessments of different measurement scales. For this purpose, it is necessary to bring the values of indicators to a unified measurement scale.
This is why the study (figure ) uses an algorithm of transformation of competitiveness and self-sufficiency indicators (and their ranges) into point estimates. A scale of 1 to 9 is used to convert national economic security indicators. This scale applies 9 as the maximum and 1 as the minimum value.
123456789
A Xi X2 ... xK-2 XK—1
Figure 1. Scale of conversion of actual indicator values into points
Source: composed by authors
Here is the algorithm used to convert the national economic indicators (or their ranges) into the point system.
Let there be a set of objects {O. } with dimension x.. Let A be the minimum of all values in x., B — the
maximum of all values in x_j.
To build a scale with K gradations, calculate K-1 the value (i=1,.. .,K-1) as per Formula 2:
1 2(i—l)
" = A • w • (B) (2)
For a nine-point scale, where the K=9 calculation would look as follows (Formulas 3-10).
l
B\ l"
=A-{j) (2)
3
B\ 16
x! = A • (2)
'B\ 16
X 3 =MAj (2)
7
B\ 16
X! = A-[A) (2)
9
B\ 16
X! =A &A( (2)
13
B\ 1$
X! =A{A) (2)
x 8
15
= A • (2)
If the value of the indicator is x.<xv it gets 1 point, all x. <x.<x2+1 (i=2,.. .,K-1) get i points and all x.>xK: get 9 points.
This algorithm can be used to establish the link between the values of competitiveness and self-sufficiency indicators and their point estimates for each indicator of national economic security.
Figure shows the scheme of the scoring algorithm depending on the indicator values.
Calculation of weights of economic security indicators of national economies
To determine the weights of indicators of economic security of national economies, we propose the hierarchy analysis. It is based on the system of principles introduced by T. Saati. The system relies on the well-developed theory of representation of judgement weights by eigenvalues of matrices (Saati, 1993). The hierarchy analysis method makes it possible to switch the complex task of choosing between several alternatives with solving a set of simple factors pairwise comparison problems. The first step is to compile a matrix of pairwise comparisons. The alternatives (indicators) to be compared are put in the rows and columns of the matrix in the same order. The main diagonal is filled with 1s. The expert makes a pairwise comparison of the alternatives against each other. The results are recorded in the corresponding cells of the matrix. The choice depends on the answer to the following question: «How much preferable is the alternative presented
in the row of the matrix to the alternative presented in the column»? The superiority of one alternative over another is expressed by a number (the higher the superiority, the higher the number). Absolute superiority is equivalent to 9 on the Saati scale, and equal importance is 1 (Table 2). Intermediate and inverse values are also allowed in the matrix of pairwise comparisons. In the latter case, this means that the alternative in the column of the matrix is more significant than the alternative in the row.
Граница
Баллы
баллов
Figure 2. Scheme of the scoring algorithm depending on the indicator values
Source: composed by authors
Table 2 - Saati scale
Preference rates Quality preference level Explanation (the expert believes that...)
1 Equal Two indicators are equally important
2 Intermediate value
3 Slight superiority The first indicator in the pair being compared is somewhat more important than the second one
4 Intermediate value
5 Considerable superiority The first indicator in the pair being compared is considerably more important than the second one
6 Intermediate value
7 Clear superiority The first indicator in the pair being compared is clearly more important than the second one
8 Intermediate value
Preference rates Quality preference level Explanation (the expert believes that...)
9 Total superiority Undoubtedly, the first indicator in the pair being compared is absolutely more important than the second one
Source: Saati, 1993
Let us introduce a matrix of pairwise comparisons A, which consists of n rows and n columns corresponding to the alternatives chosen for comparison. Multiply the elements in each row and extract the root of the n-th degree (geometric mean method). The obtained values will be approximate eigenvectors of the matrix (Formula 11):
! w± w± ■H 5 ■H 5
w2 w3 w4
! W-L
w± W2 W# w4
! w± w± w± w±
A W" w# w4
! tH 5 ■H 5
■H 5 W2 w# w4
S= -a+b+c+
where
wi/wj is an expert assessment of the degree of superiority of alternative i over j. The column of numbers (a, b, c, d) is normalized by dividing each number by the sum of all numbers (Formula 12):
The values a1, ...a4 are local priorities of the matrix of pairwise comparisons and reflect the weights of indicators of economic security of national economies.
Next is the algorithm used to assess the weights of indicators of economic security of national economies.
Step 1. Compile a matrix of pairwise comparisons of economic security indicators.
Step 2. The expert performs a pairwise assessment of all indicators of the matrix. The expert answers the following question: «What proportion of the total increase in national economic security resulting from improved values of all indicators of competitiveness and self-sufficiency does this indicator provide compared to another»?
Step 3. After filling in the matrix of pairwise comparisons as per the previous algorithm, calculate the weights of indicators of economic security of national economies.
Calculation of the integral index of national economic security
The integral indicator of economic security of the national economy is calculated as a weighted sum of point estimates of indicators of competitiveness and self-sufficiency, taking into account their importance (the weight of the economic security indicator), which is determined by Formula 13:
F! = ##*"(13)
where
Fz is the integral indicator of national economic security;
a is the weight of the i-th group of indicators,
p. is the weight of the j-th indicator of the group of indicators,
W is the point estimate of the i-th significance indicator of the j-th group
Some of the advantages of this method are:
- national economic security is determined not only by the technological and economic development of the country, but also by political, social, environmental, and other indicators that correspond to modern concepts of social and economic development of countries;
- the national economic benefits are properly aligned with the competitiveness and self-sufficiency, as well as national economic security in general;
- there is an opportunity to develop measures within the state economic policy to ensure sustainable social and economic development considering the turbulent internal and external factors.
The last point also directs that one of the main principles of the proposed balanced scorecard of national economic security is its relative nature, i.e., it is possible to compare the performance of the national economy with that of other countries. Obviously, no state has the best values of all indicators in the world, but the lag of indicators, considering the weight from the norm (world best practices), gives an idea about the problems of the national economy and promising directions of social and economic development of countries.
References
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© Marina L. Alpidovskaya, Aleksei M. Tsilkin, 2021
Received 18.01.2021 Accepted 20.02.2021
