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Section 13. Economics and management
Section 13. Economics and management
Aleksandrov Gennady Arkadyevich, Tver state technical university, Doctor of Economic Sciences, Professor, E-mail: profaga@inbox.ru;
Yakonovskaya Tatiana Borisovna, Tver state technical university, Candidate of Economic Sciences, Associate Professor, E-mail: pavel-gmo@yandex.ru; Vyakina Irina Vladimirovna, Tver state technical university, Candidate of Economic Sciences, Associate Professor, E-mail: vyakina@yahoo.com; Skvortsova Galina Gennadyevna, Tver state technical university, Candidate of Economic Sciences, Associate Professor, E-mail: gala-skvortsova@yandex.ru.
Rent relations and investment attractiveness of peat extraction: nature of interrelation*
* The article is prepared in the order of establishment of the problem with the financial help of the Russian humanistic
scientific fund and the government of Tver region, grant № 14-12-69007 a(p^)/Ц. Abstract: The article discusses the general history of development of views on the concept of rent and rent relations. The analysis of the economic condition of the peat industry is presented. It is proposed to use the mechanism of rent relations in the peat industry to increase its investment attractiveness.
Keywords: rent, peat industry, efficiency, investment climate.
Russia has the largest peat reserves in the world and, according to different estimates, takes the first-second place in the world. According to the presented data, its share in total world reserves accounts for 40 to 60%. Balance peat reserves in Russia are estimated 30.8 billion tons, 40% of arbitrary moisture or over 10.7 billion tons of arbitrary fuel. Around 60% of total peat reserves are evaluated as potentially extractable, according to technological factors [1]. Accordant with this indicator, Russia takes a leading position in the world and the peat extraction is concentrated in more than 20 regions of the Russian Federation. By the end
of eighties of the previous century, 50 million tons of peat for fuel and agricultural needs were annually extracted in Russia [2]. However, in the last years there has been a reduction in volume of extracted peat. The biggest drop fell for 2002-2003, when the peat production accounted for only 37.8% of the level of 2000, and, further, by 2009, the production volume was only 1.2 million tons [1]. In 2013 Russia produced 2.65 million tons of peat of different industrial purpose.
Same tendencies are observed in peat extraction regions, for instance, Tver region (see Table 1).
Table 1. - Peat extraction in Tver region from 1971 to 2013
Year of extraction Tver region
Total, thousand tons Fuel Sod Agricultural
thousand tons thousand tons thousand tons
1 2 3 4 5
1971-1975 25764 15676 114 9974
1976-1980 20720 10837 16 9857
1981-1985 21732 6998 18 14716
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Rent relations and investment attractiveness of peat extraction: nature of interrelation
1 2 3 4 5
1986-1990 21019 5621 24 15374
1991-1995 6539 2952 24 3563
1996 807 762 15 30
1997 325 259 5 61
1998 219 120 7 92
1999 534 421 13 100
2000-2009 210 90 20 100
2010 132 50 42 40
2011 155 63 55 37
2012 162 71 58 33
2013 176 77 63 36
As it can be seen in Table 1, already in the seventies and i. e. state enterprises. Until 1990s, the peat industry in the
eighties there was some reduction in the rates of peat production. Herewith, together with the reduction of total volume of extracted peat, including fuel peat, the production of peat of agricultural purposes increased. However, in the early nineties, peat production decreased by 3,2 times, including the drop of peat production for agricultural purposes by 4,3 times. The higher reduction rate of peat production was typical for the further period, especially for the first decade of the new century. Thus, the average annual peat production in 1999 decreased by almost 2,5 times, including fuel peat by 1,1 times and agricultural peat by almost 7 times, and by 2010, there was a respective drop by over 25 times compared to 1999 etc. In 2013 there was a slight increase in the volumes of peat extraction and, according to forecasts, the volume of peat extraction will reach the level of 265 thousand tons by only 2020. Therewith, if in the nineties of the last century over 300 peat enterprises were functioning actively in the peat industry in Russia (over a dozen of enterprises were engaged in the peat business in Tver region), henceforth there was a tendency for reduction of their number. As of the beginning of 2014, there are 105 enterprises in the peat industry, i. e. their number decreased by almost three times (see Table 2).
This situation is largely explained by the fact that the conditions of economic management have changed. During the pre-reform period the peat extraction was mainly performed by agricultural entities and industrial organizations of the Ministry of peat industry of the Russian Federation,
The transition to market economy that began in the country in the early nineties was accompanied by the collapse of economic relations formed in the conditions of command and control economy, the end of financial support of peat industry enterprises, the loss of market outlets, all the more so, because
conditions of then management system referred to planned loss-making, subsidized industries and was supported by the state. The volumes of extraction were established by the state plan. It was divided between the republics and their ministries passed planned indicators to the enterprises. Herewith, in practice, the production cost of extraction and delivery of products to consumers exceeded the normative figures. The excess was compensated at the expense of net income received both by means of production and realization of goods of national consumption (alimentary and household products) and supplies of peat fuel to boiler houses designed to burn peat [2; 4]. Additional activity of peat enterprises brought them up to 50% of profit, which helped many of them meet the planned figures.
During the pre-reform period, peat enterprises were large organizations. They had over 100 units of trunk tractors with a set of attachable equipment for peat extraction, machinery repair shops, warehouse sites and depots, engineering and social infrastructure facilities, residential buildings, boiler houses etc. Their mean annual production volume amounted for more than 500 thousand tons.
The number of production staff at a peat industry enterprise was over 150 people at average.
Today, the major part of peat entities is in private possession and only 16 of operating enterprises have a share of federal or municipal ownership, which fluctuates between 20 to 100 percent [2; 3; 4].
the main consumers of peat products, agricultural enterprises, became insolvent and most of them went bankrupt. Almost all orders for the supply of fuel peat stopped as, with a switch to gas, most boiler houses were reequipped and stopped the usage of peat as fuel.
Table 2. - Number of peat industry entities
Organizational and legal form Number Industry structure, %
2010 2012 2014 2010 2012 2014
LLC 144 123 58 64,0 63,1 55,2
CTSC 28 21 17 12,4 10,8 16,2
OTSC 37 45 30 16,4 23,1 28,6
State company, Municipal company 16 6 - 7,1 3,1 -
Total 225 195 105 100 100 100
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Section 13. Economics and management
The drastic decrease in the volumes of peat extraction, constant non-payments by municipal entities for communal and household fuel, credit indebtedness of power stations for the supplied peat that exceeded 100 million rubles put the peat industry to the edge of bankruptcy. The condition was deteriorated by the fact that almost all peat enterprises had 100% rundown fleet of machines, mechanisms and equipment; hence, there was a need for investment in the fixed assets. Territorial remoteness of enterprises and their hard economic condition created a personnel problem — lack of qualified staff for all positions. And, this is with the assumption that in the 1980-1990s, operating at full capacity, the peat industry enterprises kept a then normal salary level, which determined the absence of personnel problems [4].
The entities developing peat raw material are characterized by less effectiveness, outdated material and technical base and loss of qualified staff. They carry a hard tax and rent burden. Compared to other enterprises of the mining sector, they are not attractive for investors.
As a result, the process of withdrawal of a considerable number of peat deposits, which are well explored and potentially productive, from the economic turnover continues.
Thus, such financial and economic situation in the country’s economy in the whole and in the peat industry in particular as well as passing of peat enterprises into private ownership accompanied by the loss of the state support have led to significant reduction of the industry in all parameters.
In addition, as the foreign practice shows, peat business is a quite marketable and promising kind of economic activity.
Some countries didn’t only reduce the volumes of peat production, which is a common worldwide tendency in the last 25 years, but, on the contrary, elevated its production. The volumes of peat extraction in the 2000s rose: in Latvia by 68%, in Sweden by 44%, and in Poland by 25%, in Belarus by 23%. Herewith, in the first decade of this century approximately 70% of the world peat produce was intended for the production of heat and electric energy, and the rest 30% was intended for the needs of agriculture. Finland is the world leader in peat production with 36.4% of total world production; the second place is taken by Ireland with 17.2% and the third place is kept by Belarus with 10.4%. According to the volume of peat extraction, Russia takes the 4th place with only 4.8% of world production [1]. And, it is so given the world leadership in the peat reserves, as it was mentioned earlier.
Moreover, as the practice shows, in certain conditions enterprises can reach a high level of efficiency of production factors and, in the end, marketability, which fluctuates between 30 to 40 percent. Some do not have a marketability level higher than 3-10 percent. Such sharp fluctuations in marketability can be explained by differences in natural resources and, primarily, resources, which determine the quality characteristics of deposits such as, for instance, types, capacity, dampness and stumpy characteristic of a peat deposit, the level of peat decomposition, its botanical composition etc. [5; 2].
On the basis of the above stated, it follow that the rebirth and development of the peat industry is prevented by the pendency of problems, such as:
— absence of understanding of the role and place of peat and peat deposits in the country’s economy;
— absence of clear and effective economic policy with regard to the peat industry and enterprises, including the distribution of the received profit between the owner of deposits and entrepreneurs;
— presence of highly rundown and almost non-renewable fleet of machines;
— absence of an opportunity of investment, motivation and incentives for investment attraction;
— constantly growing prices on fuel, combustive and lubricating materials, spare parts for machines and equipment;
— low demand for products caused by the lack of new opportunities of peat produce realization;
— actual degradation of peat machine engineering and, consequently, the lack of supply in equipment, let alone innovations;
— lack of professional staff at peat enterprises due to reduction of their training as well as the drain of employable population to more stable and highly paid industries;
— lack of investment into scientific researches and project construction solutions;
— overcharged, often unreasonably, rent and rent-related payments, which is a factor preventing investment.
In order to solve the outlined problems, a reformation of the economic policy with regard to the peat extraction industry is required. One cannot say that nothing is done in this area.
The issue about the need to support the industry and expand its investment and innovation potential is actively discussed. In some regions of the country the programs of the peat industry development are developed as priority [6-9]. The propositions on creation of peat and bio-energetic clusters are explored. However, there are no convincing grounds for economic efficacy of concrete cluster forms of organization of the peat business. Furthermore, the issue about passing of several Federal laws, such as: «About some measures of stimulation of peat application in energy development», «About the peat», «About extraction, transportation and usage of peat» is still at the stage of discussion.
It appears that the pendency of most practical issues of rebirth and development of the peat industry is primarily explained by the insufficient development of theoretical problems of economic relations formed between the participants of the process of production of mineral resources and, particularly, peat extraction in the process of transition to the market economy. Hence, the concept of interrelations between business subjects in the given type of activity that is reliable and accepted by scientists and experts as well as a concrete economic mechanism meeting the changed business conditions haven’t been worked out yet.
It should be noted that activation in researches, conduction of scientific and practical conferences, forums and exhibi-
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Rent relations and investment attractiveness of peat extraction: nature of interrelation
tions dedicated to economic problems of the peat business have been observed for quite a long time. Particularly, the attention is called to the growth of dissertation researches on mining rent [4]. However, in the last 20 years the theory of rent relations is considered and developed predominantly in the industrial aspect. Herewith, the attention is mainly paid to the peculiarities of manifestation of rent relations in concrete mining industries such as coal, oil and gas, ore and so called nature exploited industries. Specifically, in non-ore, peat or forest procurement. However, firstly, the flow of dissertation researches on the problems of the first group of industries is more intense, and the intensity of dissertation researches of the second group is significantly lower and there are few dissertation works. Secondly, there is an evident deficit in the development of theory and methodology of rent relations, i. e. general regularities of functioning and development of productions, in which land is one of the most important production factors.
Drawbacks in the methodological projects considerably explain the irrationality of the formed organizational and economic relations and methods of profit distribution from mining activity. Thus, for instance, from January 1, 2012 till date the differential mining rent I (it is unclear how it is defined and there is a question if it is so) is collected in favor of the state (as a land’s owner) in the form of a tax on extraction of mineral resources (TEMR). Although, the confusion in the law «About the mineral resources» and established fiscal methods of TEMR collection and division of incomes from the entrepreneurial profit make many mining industries, including the peat industry, ineffective and even loss-making [3, 10].
This being said, the issues of rent relations of the second matter considerably affecting the investment attractiveness of the given type of activity have not yet become the objects of attention, let alone their deep scientific work-out, and are quite current from the scientific point.
In this respect, it appears that primary solution of a triunique task is required with regard to the mining rent of the second matter:
Firstly, work out methodological basics of reformation of economic, primarily rent, relations between the subjects of business activity in the mining industry and the specific of their manifestation in the peat industry;
Secondly, validate the economic mechanism ensuring motivation and incentives of investment attractiveness in the sphere of exploration of mineral deposits; and
Thirdly, define and involve concrete measures on rebirth and development of the peat extraction industry during the working out of industrial and investment policy.
Essentially, that entails the creation of an appropriate mechanism of agreement and realization of interests of all
subjects of the mineral raw material complex and, primarily, owners of deposits and directly business subjects (entrepreneurs) ensuring motivation and interest of the latter to invest.
It should be noted that these tasks were undertaken by us during the pre-reform period (see also [5]). Although, the investigations of the indicated problems in the conditions of command and administrative economy had, as a rule, academic character, because rent relations are fully typical only for market system of business by definition. Hence, new approaches are required in the new economic conditions and our initial positions in the consideration of the established problems lie in:
— the establishment of an interrelation between the level of attractiveness of the investment climate and reduction of the investment risks on the one side, and rent relations on the other side; and on the basis of that -the development of ensuring measures on motivation and incentives for investment;
— the usage of new approaches [11] towards the structuring and analysis of groups of factors determining the nature of investment attractiveness as well as development of concrete propositions and recommendations on the improvement of investment attractiveness resulting from the analysis, which should be performed at all hierarchy levels of management;
— the usage of the original algorithm and method developed by the authors based on « AVS — matrix» (see, for instance [11]) for the analysis of the investment climate in the peat industry, the rights on which, as a result of an intellectual activity, are protected by the Certificate of the Russian Authors Society (RAS) [12];
— the validation and application of a theoretical provision about the fact that the value of a mining rent should be established as interest from the cost estimation of a unit of square of a deposit site, because, it is in the form of payment for land resources by definition, and the price of a deposit site takes a form of a capitalized mining rent;
— the development of an algorithm and method of division of net profit into two parts, one of which (entrepreneurial income) is created under the influence of such factor as capital, and the other one (rent) is created under the effect of another factor — deposit of a mineral resource;
— the validation of method of definition of terms of a rent agreement and size of a rent payment built on the basis of adherence to the balance of interests of the owner of a deposit and entrepreneur-rent holder;
— the author’s approach towards the formation of an investment strategy taking into account the rent component in the profits of enterprises of the peat extraction industry.
References:
1. Plakitkina L. S. Peat extraction in Russia and the world: Analysis of development of peat industry in Russia and the world from 2000 to 2009/L. S. Plakitkina, P. A. Apukhtin [Electronic resource]. - Mode of access: http://www.mining-media. ru/ru/article/ekonomic/159-dobycha-torfa-v-rossii-i-mire-analiz-razvitiya-torfyanoj-promyshlennosti-v-rossii-i-mire-v-period-s-2000-po-2009-gody
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2. Yakonovskaya T. B. Improvement of economic mechanism of industrial enterprise management: Author’s summary of the dissertation for application for the degree of a Candidate of economic sciences. - M.: Russian part-time institute of textile and consumer industry. Tver, 2009. 19 p.
3. Yakonovskaya T. B., Romanova L. V. Peculiarities and problems of normative and legal management of peat industry in the Russian Federation [Text]/T. B. Yakonovskaya, L. V. Romanova, A. I. Zhigulskaya//Mining information and analytical bulletin. M.: MGGU, 2014. № 06. P.392. - Dep. in MGGU as of18.02.2014. № 1012/06-14.
4. Zhigulskaya A. I. Economic and engineering aspects of equipment and technology of complex non-waste extraction and processing of peat deposit resources (Educational manual) [Text]/A. I. Zhigulskaya, T. B. Yakonovskaya; MGGU. - M., 2013. - 160 p. - Bibliogr.: p. 300-301. - Dep. in MGGU as of 30.01.2013. № 953/04-13
5. Aleksandrov G. A., Kalachaev Yu. V. «Increase of efficacy of peat production». М.: Nedra, 1980, 151 p.
6. About regional target program «Development of peat industry in Kirov region» for 2008-2013»: Law of Kirov region as of December 24, 2008. N 325-ЗО [Electronic resource]. - Mode of access:
7. http://www.garant.ru/hotlaw/kyrov/189215/#ixzz3CdQBnmQG
8. About regional target program «Development of peat industry Nizhny Novgorod region» for 2009-2011»: Law of Nizhny Novgorod region as of May 5, 2008. N 179 [Electronic resource]. - Mode of access: http://docs.cntd.ru/docu-ment/944934477
9. «Concept of development of peat industry in the republic of Udmurtia»: Law of the republic of Udmurtia as of May 7, 2002. N 399 [Electronic resource]. - Mode of access: http://docs.cntd.ru/document/960005673
10. About regional target program «Development of application of peat and other local types of fuel in Pskov region till 2015 (2010-2014)»: Law of Pskov region as of December 20, 2009. N 313 [Electronic resource]. - Mode of access: http://in-vest.pskov.ru/istrategy/plan-ip
11. Zhigulskaya A. I., Yakonovskaya T. B. Analysis oflegal base ofpeat industry management in the Russian Federation/A. I. Zhigulskaya, T. B. Yakonovskaya, B. F. Zyuzin//Mining information and analytical bulletin. M.: MGGU, 2014. - № 07. - P. 276-281.
12. Aleksandrov G. A., Skvortsova G. G., Vyakina I. V. Formation of an attractive investment climate of a region: concept, diagnostics, innovations. - Moscow: CJSC «Izdatelstvo EKONOMIKA.», 2014. - 302 p.
13. AVS-matrix for analysis of factors determining investment attractiveness [Text]/G. A. Aleksandrov, I. V. Vyakina, G. G. Skvortsova; p. 7. - Dep. in RAS as of 18.04.2013, № 20558.
Alhanaqtah Omar Jraid Mustafa, Tafila Technical University, Assistant professor, the Head of Business Economics Department
E-mail: omarhanaqtah@yahoo.com
Tragedy of the commons relative to waste disposal in Jordanian Al-Tafilah
Abstract: The tragedy of the commons relative to waste disposal in Al-Tafilah is examined in the article. It is constructed so as to answer overarching questions: what do we know? why do we care? what can we do? To solve waste disposal problem in Al-Tafilah the author suggests implementing two projects: deposit-refund system for packaging; and composting and biogasification of biological waste.
Keywords: commons, waste, pro-social behavior.
The tragedy of the commons, discussed by Garrett Hardin in his famous article reappears in problems of pollution.
Here it is not a question of taking something out of the commons but of putting something in sewage; chemical, radioactive and heat wastes into water; noxious and dangerous fumes into the air; and distracting and unpleasant advertising signs into the line of sight. The rational man finds that his share of the cost of the wastes he discharges into the commons is less than the cost of purifying his wastes before releasing them.
Since this is true for everyone we are locked into a system of “fouling our own nest”, as long as we behave only as independent, rational, free-enterprisers [1].
What do we know? Here I’m focused on the problem of dropping litter and waste disposal in a Jordanian city Al-Tafilah. The problem arises from low level of ecological culture and lack/weakness of institutions which might force to care about clean city. Jordan is the country with mostly private ownership of lands which are handed down. These lands are very clean and accurate because they have been cared about by private owners. The lands in state ownership, waste lands, as well as waysides, streets are polluted with different kinds of litter (packages, plastics bottles, paper, glass, etc.); even you might see dead cats or biological waste from slaughter sheep. So sanitarian conditions as well as the look are not
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